692 AGRICULTURAL ECONOMICS 



other words, why should capital not be furnished for productive pur- 

 poses if those who furnish the capital get back the exact equivalent 

 (in value) for the amount of capital they have supplied ? Why should 

 an extra payment, in the form of interest, be necessary to induce 

 saving? 



The answer to these questions is found in the difference between 

 present and future values. Our present wants are more intense than 

 our present estimates of our future wants of a similar kind. We 

 visualize the present more vividly than we do the future; we yield 

 sometimes to the temptation of satisfying the more trivial wants of 

 the present, even when we know that we are thereby rendering uncer- 

 tain the satisfaction of more important wants in the future; and when 

 we take considerable periods of time into account, we may reasonably 

 say that the uncertainty of life itself gives us some ground for pre- 

 ferring present to possible future satisfactions. Notwithstanding the 

 vast difference between civilized men and savages in this respect 

 for many of the latter seem to have absolutely no regard for future 

 needs the fact still remains that waiting is a sacrifice, and in order 

 to induce the saving that is a prerequisite to the use of capital in 

 industry, a premium or reward for waiting has to be paid in the form 

 of interest. This fact is the most fundamental thing in the explana- 

 tion of interest. 



To be sure, some savings would doubtless be made even if interest 

 were not paid, owing to men's natural desire to provide for old age, 

 for their families in case of the death of the breadwinner, or for the 

 mere pride of accumulation. None of these motives would in them- 

 selves induce men to invest or lend their saved funds in productive 

 undertakings if no interest at all were paid. In fact, this would be 

 a matter of indifference, for savings might just as well be hoarded. 

 But a very low interest premium would suffice to overcome this indif- 

 ference and to bring about their investment in productive under- 

 takings. Even this low interest rate, however, would be sufficient to 

 balance, in some additional cases, the difference between the intensity 

 of present wants and the intensity of future wants, so that in these 

 cases, in turn, spending and saving would be a matter of indifference 

 an indifference that would be in its turn overcome by a slight increase 

 in the interest rate. In a similar way every increase in the interest 

 rate would induce more persons to save and would induce many 

 of those who were already saving a part of their incomes to save 

 a larger proportion of them. At any given time, accordingly, the 



