THE THEORY OF INTEREST

which a spendthrift will react to an income stream isvery different from the manner in which the shrewdaccumulator of capital will react to the same incomestream. We have seen that the time preference of anindividual will vary with six different factors: (1) hisforesight; (2) his self-control; (3) habit; (4) the pro-spective length and certainty of his life; (5) his love ofoffspring and regard for posterity; (6) fashion. It isevident that each of these circumstances may change.The causes most likely to effect such changes are: (1)training to foster a realization of the need to provideagainst the proverbial “rainy day”; (2) education in self-control; (3) formation of habits of frugality, avoidingparsimony on the one hand and extravagance on theother; (4) better hygiene and care of personal health,leading t-o longer and more healthful life; (5) incentivesto provide more generously for offspring and for thefuture generations; (6) modification of fashion towardless wasteful and harmful expenditures for the purposeof ostentatious display.

These various factors may act and react upon eachother, and may affect profoundly the rate of preferencefor present over future income, and thereby influencegreatly the rate of interest. Where, as in Scotland , thereare educational tendencies which instill the habit of thriftfrom childhood, the rate of interest tends to be low.Where, as in ancient Rome, at the time of its decline,there is a tendency toward reckless luxury, competitionin ostentation, and a degeneration in the bonds of familylife, there is a consequent absence of any desire to pro-long income beyond one’s own term of life, and therate of interest tends to be high. Where, as in Russia ,under the Czars, wealth tended to be concentrated and

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