SUMMARY

last pair may be said to cover prima facie supply and^jlepand. ^

'"(A) The market must be cleared—and cleared withrespect to every interval of time. (B) The debts must bepaid.

The other two pairs represent the two sets of forces,one objective and the other subjective, behind supplyand demand. The subjective pair expresses the influencea, 'jof human impatience or time preference.

(A) The rate of time preference depends on the charac-ter of the various individuals concerned and on each indi-vidual’s prospective income, its size, time-shape and risk.(B) Each individual’s rate of time preference tends, atthe margin of choice, to harmonize with the market rateof interest. Human impatience to spend and enjoy incomeis crystallized into the market rate.

<P^j^~pThe objective pair expresses the influence of invest-ment opportunities.

(A) Each individual is encompassed about by oppor-tunities to change the character of his prospective incomestream. (B) At the margin of choice, any additions to anindividual’s future income at the cost of more immediateincome constitutes a return over that cost, the rate ofwhich return over said cost is also crystallized into themarket rate of interest.

So the rate of interest is the mouthpiece at once ofimpatience to spend income without delay and of oppor-tunity to increase income by delay.

Thus both from the subjective and the objective fieldappear prototypes, one of each for every individual, of themarket rate of interest.

That rate, i, is equal to every individual’s degree ofimpatience or rate of time preference, /, and also to his

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