ABSTRACT
The market in advances follows the law of other markets, One man could administer his resources f or a given period more economically if he could quicken their flow for the first part of the period at the expense of slackening it in the last; and the case is reversed to another. Or both may be in the same case, hut to one the advantage of anticipation may be relatively greater than to the other. Between these two the conditions of exchange exist; and if, when equilibrium is reached, there is a premium on anticipation, that constitutes one source of the phenomenon of interest. Current savings of perishable things may he paid by one man to another who is accumulating wealth in more permanent forms, that may afterwards be paid back in compensation. Hence each individual may transform perishable present into more permanent future possessions, or permanent present into more perishable future possessions; or may transmute more into less perishable commodities, or vice versa. Effort may also be diverted from the immediate production of desired things into the production of tools, or the acquiring of skill that, when obtained, will make effort more fertile; and out of that increased fertility a premium may be paid to one who advances tools or apparatus. Land may be regarded as yielding either a revenue of commodities or a revenue of directly enjoyable services, and in either case it may be regarded as partly given by nature and partly manufactured. A man may desire to hire it (i.e. to have it without buying it) for the same reasons for which he may desire to hire a house or a tool, viz. either in order 267to distribute his resources more to his advantage or in order to increase them. Both these advantages of anticipation obey the general law of declining significance as the margin advances; and they both, together with the mere prodigal's desire to anticipate future resources, constitute a claim on the total resources at present available, and find their place of equilibrium amongst other claims. The resultant premium on advances constitutes interest. Some cannot help saving; but it is not always wise to save for a distant future. Saving beyond a certain point is never wise. The existence of interest as a normal phenomenon reacts upon the distribution of personal resources, and also has its analogues in things not in the circle of exchange. The rate at which a society accumulates exchangeable things depends upon its wealth, upon the distribution of its wealth, upon the providence of its members, and upon the wisdom and honesty of those that direct its industries. Hire and rent contain elements in common with interest, and hire deals with a problem of fractional purchase analogous to that with which insurance is concerned.
