chapter  67
5 Pages

PRODUCTIVE INTEREST

In the money economy productive interest may be drawn as natural or as contractual interest. As in the case of agricultural rent, so here the natural form is the original one. From it the contractual one is derived. This natural interest is that share of the yield which the producer attributes to the capital employed. We have explained the law of its formation in detail in the theory of the simple economy. It is unnecessary to add to our earlier remarks. Unless additions to the productive capital are accompanied by advances in the technical

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arts, they reduce the productive interest since they decrease the marginal contribution of capital. Improvements in technique at first increase this interest; but at the same time they foreshadow its reduction at a later day since, by increasing the yield, they enlarge the fund from which capital savings can be made.