SUMMARY

a close, this effect is becoming exhausted, and the tend-ency of the rate of interest, so far as this particularinfluence is concerned, is to fall.

On the other hand, the invention of the automobile,and the inventions and discoveries in electricity andchemistry have succeeded the railroads as a field forinvestment and have required new sacrifices of immedi-ate income for the sake of future income. Thus, as fast asthe first effect of any one invention, tending to raise in-terest, wears off and is succeeded by its secondary effectin lowering interest, this secondary effect is likely to beoffset by the oncoming of new inventions.

As to the third head, political conditions which affectthe rate of interest, such as the insecurity of propertyrights which occurs during political upheaval, as inRussia recently, tend to make the pure or riskless rate ofinterest low. At the same time it adds an element of riskto most loans, thereby diminishing the number of safeand increasing the number of unsafe loans. Hence thecommercial rate of interest in ordinary loans duringperiods of lawlessness is likely to be high. Reversely, dur-ing times of peace and security, the riskless rate of inter-est is comparatively high, while the commercial ratetends to be low.

§5. Time Preference

We turn now to the remaining factor, namely, thedependence of time preference of each individual on hisselected income stream. We have seen that the rate ofpreference for immediate as compared with remote in-come will depend upon the character of the incomestream selected, but the manner of this dependence issubject to great variation and change. The manner in

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