THE THEORY OF INTEREST

its resources were of such a character as to favor futureincome. This is true, for a time at least, in every unde-veloped country, and, as we have seen, gives the chiefexplanation of the fact that the rate of interest in suchlocalities is usually high. The same is true of countriesrecovering from war. Today, for instance, Germany resembles a pioneer country. Her present income is neces-sarily low, but her prospect of a higher and increasingincome in a few years is very great. The range of choiceis dominated by “low today and high tomorrow.”

The range of choice in any community is subject tomany changes as time goes on, due chiefly to one or moreof three causes: first, a progressive increase or decreasein resources; second, the discovery of new resources ormeans of developing old ones; and third, change inpolitical conditions.

Under the first head may be noted the impendingexhaustion of the coal supply in England, as noted byJevons and other writers. This will tend to make theincome stream from that island decrease, at least in theremote future, and this in turn will tend to keep the rateof interest there low. Under the second head, the con-stant stream of new inventions, by making the availableincome streams rich in the future, at the sacrifice ofimmediate income, tends to make the rate of interesthigh. This effect, however, is confined to the period ofexploitation of the new invention, and is succeeded laterby an opposite tendency. During the last half centurythe exploitation of Stephenson’s invention of the loco-motive, by presenting the possibility of a relatively largefuture income at the cost of comparatively little sacrificein the present, tended to keep the rate of interest high.As the period of extensive railroad building is drawing to

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