ABSTRACT
Interest is a premium on present over future purchasing power. This premium has several causes. Interest on consumptive loans is a case in point. Interest on capital is a permanent net income that flows to a definite category of individuals. The existence of interest constitutes a problem because we know that in the normal circular flow the whole value product must be imputed to the original productive factors, that is to the services of labor and land; hence the whole receipts from production must be divided between workers and landowners and there can be no permanent net income other than wages and rent. The function of capital comes in, and it becomes evident that nothing corresponding to it can exist either in a communist or even in a noncommunist but “stationary” society. In practice the entrepreneur allows for interest on his own capital — this appears as an incontestable sanction if such is necessary at all.
