INTEREST 33 



even compute the probable rate, being content with the general 

 prospect of a future value greatly in excess of present investment. 



53. Comparison of Interest Rates in Forestry with Other 

 Investments. Proper rates for forest investments can only be 

 judged on the basis of comparison with other forms of enterprise. 

 If the scope of the comparison is confined to forest production 

 and the account covers the period requisite for growth, a com- 

 parison between forestry and business producing annual income 

 is impossible. The goal of forest management is the forest 

 which will yield annual returns, but each crop represents the 

 accumulated outlay throughout its life and must be so judged 

 in comparing interest rates. 



The only enterprises familiar to the public, which are reckoned 

 on a basis of compound interest, are savings banks and life 

 insurance companies. The former have paid an average of 

 3 per cent, but of late years 4 per cent is common. Most banks 

 do not permit the accumulation of compound interest on accounts 

 to run more than 20 years without some sign of active interest 

 on the part of the owner, manifested either by withdrawals or 

 additional deposits. If the owner is alive and can refrain from 

 depleting his account for fifty years and the bank remains 

 solvent, he can obtain compound interest for that period. Such 

 cases practically never occur. 



The average period covered by the risk of a life insurance policy 

 is not over 13! years,* and most companies calculate that they 

 can earn compound interest at about 4 per cent on the money 

 invested in policies for this average period. 



For periods longer than fifty years there is no basis for com- 

 parison by which the rates reasonably applicable to forest 

 investments can be judged. Based upon the economic laws 

 outlined in Articles 47 to 50, it must follow that those rates 

 will be less than 4 per cent provided the investment offers equal 

 security with life insurance and savings banks. Should the 

 security be considered less safe, the increased rate demanded 

 would offset the reduction in rate called for by the length of 

 the period of investment, and the investment should not require 



* The Brown Book of Life Insurance Economics. Edition of 1911-12, p. 13. 



