Baird.] Ibo [Nov. 20, 



comments as follows: "On these preliminary facts, then, Carey builds his 

 great law of interest; that, with advancing economical civilization, the 

 rate of profit on capital — that is, the rate of interest — falls, while the abso- 

 lute quantity of profit rises" (the interjected words, "that is, the rate ot 

 interest," being Dr. Bohm-Bawerk's, not Carey's). Carey distinctly and 

 emphatically says: "Interest is the compensation paid for the use of the in- 

 strument called money, and for that alone." And again: "When a man 

 negotiates a loan, he obtains money for which he pays interest; when he 

 borrows the use of a house, he pays rent; when he hires a ship he pays 

 freight." 



This dictum of Carey's is not merely clear and to the point, but it is in 

 accordance with the common understanding of mankind. To change it 

 as Dr. Bohm-Bawerk has attempted to do, is to bemuddle and confuse the 

 subject. Before he and his translator obtain the right to arraign Carey as 

 "a confused and blundering writer, " it is incumbent on them both to 

 show that his definition is wrong, and that Dr. Bohm-Bawerk's definition 

 is correct, and the only correct one. Until they have clone so, their de- 

 nunciations obviously prove their own incapacity properly to criticise a 

 man of Carey's originality, lucidity, power, and far-reaching influence 

 upon mankind. 



Of the numerous economists whose doctrines Dr. Bohm Bawerk has 

 attempted to criticise, none has he denounced in terms so opprobrious as 

 those applied to Carey and his distinguished disciple, E. Peshine Smith, 

 and yet of all these men, the philosophy of none but Carey and Smith is 

 capable of explaining the real cause of interest, or of clearing up the con- 

 fusion into which Dr. Bohm-Bawerk has become involved regarding 

 value. 



Interest owes its existence to precisely the same cause and conditions 

 as does money — the necessity under which man stands for association and 

 combination with his fellow-men. But for this necessity there would be 

 no interest, no money, indeed no political economy. Any system, or 

 pretended system, of political economy which is not grounded on this 

 great principle of association, this overmastering condition of man's 

 nature, is false and misleading, a delusion and a snare — a system of con- 

 fusion leading not only to further confusion, but to the wreck of the 

 hopes, the rights, the civilization of mankind. The system ot Dr. Bohm- 

 Bawerk does not even remotely recognize it; he has not even the faintest 

 glimmer of it, although all political economy is and must be concerned 

 about it. He has dropped out of his system the great fundamental law, 

 the great dominating fact as to the existence of man in society. His 

 system is therefore of necessity not only useless, but worse than use- 

 less. 



The second treatise of Dr. Bohm-Bawerk, "The Positive Theory of 

 Capital," gives us, as a net result, the old and exploded wage-fund theory 

 of the economists, with, as an annex and as a result of his interest theory 

 of present goods possessing an agio in future goods, the effects of extension 



