LITERARY NOTICES. 



705 



advanced by economists to account for in- 

 terest have been reviewed and subjected to 

 criticism by the author in his previous work, 

 Capital and Interest. This destructive criti- 

 cism he now follows by a positive construc- 

 tion of his own, in which he seeks to find a 

 lasting basis for the phenomenon of interest, 

 in a theory which does not necessitate the 

 resort to questionable hypotheses to support 

 it. This basis he finds in considering inter- 

 est, not as a bonus paid for the use of capi- 

 tal, but as a surplus arising from the greater 

 value of present goods over future ones. He 

 regards the transaction, say, of the loan of a 

 sum of money and the payment of interest 

 for it, as a case of the exchange of goods — 

 the exchange of present goods for future 

 ones. 



As present goods are more desirable than 

 future ones of the same face value, they 

 command a premium, and this premium is 

 interest. The following extract from the 

 author's discussion of the sources of interest 

 Bets forth clearly his own views, as well as 

 his estimate of previous explanations : 



" In the previous book I have tried to 

 show, and account for, the natural difference 

 that exists between the value of present and 

 the value of future goods. I have now to 

 show that this difference of value is the 

 source and origin of all interest on capital. 

 But, as the exchange of present commodities 

 for future commodities takes various forms, 

 the phenomenal forms of interest are as vari- 

 ous, and our inquiry must necessarily deal 

 with them all. In the following chapters, 

 therefore, I intend to take up, in succession, 

 all the principal forms of interest, and I 

 shall endeavor to show that, notwithstanding 

 all differences in shape and appearance, the 

 active cause in them all is one and the same 

 — namely, the difference in value between 

 present and future goods. 



" By far the simplest case of this differ- 

 ence in value is presented in the loan. A 

 loan is nothing else than a real and true ex- 

 change of present goods for future goods ; 

 indeed, it is the simplest conceivable phe- 

 nomenal form, and, to some extent, the ideal 

 and type of such an exchange. The ' lender,' 

 A, gives to the ' borrower,' B, a sum of pres- 

 ent goods — say present pounds sterling. B 

 gets full and free possession of the goods, to 

 deal with as he likes, and, as equivalent, he 

 VOL. XL. — 48 



gives into A's full and free possession a sum 

 of entirely similar, but future, goods — say, 

 next year's pounds sterling. Here, then, is 

 a mutual transfer of property in two sums 

 of goods, of which one is given as recom- 

 pense or payment for the other. Between 

 them there is perfect homogeneity, but for 

 the fact that the one belongs to the present, 

 the other to the future. I can not imagine 

 how an exchange in general, and an ex- 

 change between present and future goods in 

 particular, could be expressed more simply 

 and clearly. Now, in the last chapter we 

 proved that the resultant of the subjective 

 valuations which determines the market price 

 of present and future goods is, as a rule, in 

 favor of present goods. The borrower, 

 therefore, will, as a rule, purchase the money 

 which he receives now by a larger sum of 

 money which he gives later. He must then 

 pay an 'agio' or premium (Aufgeld), and 

 this agio is interest. Interest, then, comes, 

 in the most direct way, from the difference 

 in value between present and future goods. 



" This is the extremely simple explanation 

 of a transaction which, for hundreds of years, 

 wa.«i made the subject of interpretations very 

 involved, very far-fetched, and very untrue." 



Prof. Bohm-Bawerk considers the profit 

 of capitalist undertakings as a case of inter- 

 est, and explainable by his formula, on the 

 ground that the " owners of capital are mer- 

 chants in present goods, such goods being 

 more valuable than the " future goods " — 

 labor, uses of land, and capital — which the 

 capitalist buys. While this work is primari- 

 ly addressed to economists, it is quite within 

 the range of the general reader who is inter- 

 ested in economic questions. 



Electricity and Magnetism. Translated 

 from the French of Amepee Guillemin. 

 Revised and edited by Silvanus P. 

 Thompson. Macmillan & Co. 1891. Pp. 

 967. Price, $8. 



The industrial applications of electricity 

 have been so many and so varied, and they 

 have increased at so great a rate in recent 

 years, that the subject of the uses and possi- 

 bilities of this marvelous agent possesses an 

 interest for the general public shared by 

 none of the other great agencies which have 

 contributed so largely to our material ad- 

 vancement. This interest has been both 

 sustained and augmented by the many popu- 



