Page:The Economic Journal Volume 1.djvu/701

 THE NEW THEORY OF INTEREST 67 production, increase in value to a sum greater than their own original value ? Thus the Use theory ends in raising all the difficulties of the Productivity theories. The third theory makes interest the compensation for the non- consumption of goods. Instead of consuming wealth selfishly, the capitalist lends it to those who will by means of it produce more. The strength of the Abstinence theory is that the facts it rests on really give the explanation how capital comes' into being in primitive conditions and in new countries. The first efforts to accumulate capital must be attended by sacrifice; not, of course, moral sacrifice, as it is at best a temporary sacrifice to secure a permanent gain; but, in the first instance at least, material sacrifice. It is with the beginnings of national capital as it is with the beginnings of individual capital; there is need of foresight, effort, perhaps even curtailment on necessaries. But to account for the origin of capital by abstinence from consumptive use is one thing; to account for interest is another. In all production labour sacrifices life, and capital sacrifices immediate enjoyment; it seems natural to say that one part of the product pays wage and another interest, as compensation for the respective sacrifices. But labour is not paid because it makes a sacrifice, but because it makes products which obtain value from human wants; and capital does not deserve to be paid because it makes sacrifices.--which is a matter of no concern to any one but the capitalist but because of some service rendered by its co- operation. Thus we are landed in the old question of what capital does that the abstinence which preserves and accumu- lates it should get a perpetual payment. And if, as we saw, productivity cannot account for interest, no more can abstinence. These short criticisms of other theories of interest may allow us to give the new theory in fewer words. The centre of BShm- Bawerk's theory of interest is the fact that present goods are worth more than future goods of like kind and number. The fact itself will probably be admitted. Nearly all our industrial and commercial relations are based. on the expectation that to-morrow will be as this day. Most economic transactions are concerned with providing for future wants. Whatever be the psychological explanation, we know' that we anticipate wants; that these anticipated wants are comrnensurable with each other, and with present wants; that thus we make future, and as it were unfelt feelings, motives for present economical provision; and that, as the feelings are commensurable, so are the goods which we provide to satisfy them. The continuity of our life in