THE THEORY OF INTEREST

selves do not explain it. Institutions and conventions, likebusiness, have been created by men, not from some inex-plicable purpose unconnected with their living and feel-ing, but in order to add to the gratifications they obtainfrom living. Institutions cannot make men act or thinkother than as men. These man-made, man-operated insti-tutions are merely tools devised by man to create for himgratifications more readily and more abundantly.

In my analysis, I find man’s impatience to enjoy todayand his desire to grasp the opportunities to invest so asto provide future enjoyments the fundamental causeswhich account for the emergence of incomes and ofinterest. To start with business institutions and attemptto explain the existence of interest as a phenomenoncreated by banks is like trying to explain value as some-thing created by produce markets and stock exchanges.

Impatience and opportunity are working themselvesout in the activities of business institutions, and men can-not avoid the dominance of these impulses and situationswhen engaged in any activity that demands a choice be-tween present and future income. Interest, therefore,cannot be restricted to an explicit or contractual phenom-enon but must be inherent in all buying and selling,and in all transactions and human activities whichinvolve the present and the future.

While I cannot accept the view which would cast over-board theory because it is theory, I am keenly aware ofthe fact that theory as such does not tell the whole storyabout an actual rate of interest. Pure theory is not calledupon so to do.

But after pure theory has said its last word, there is abroad field for empirical study of omitted factors. Whilewe assumed that the unstable dollar remained stable and

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