The Online Library of Liberty

A project of Liberty Fund, Inc.

• Translator's Preface
• Author's Preface
• Introduction
• Book I: The Nature and Conception of Capital
• Book I, Chapter I: Man and Nature
• Book I, Chapter II: The Nature of Capital
• Book I, Chapter III: Historical Development of the Conception
• Book I, Chapter IV: The True Conception of Capital
• Book I, Chapter V: The Competing Conceptions of Capital
• Book I, Chapter VI: Social and Private Capital
• Book II: Capital As Instrument of Production
• Book Ii, Chapter I: Introductory
• Book Ii, Chapter II: Capitalist Production
• Book Ii, Chapter III: The Function of Capital In Production
• Book Ii, Chapter IV: The Theory of the Formation of Capital
• Book Ii, Chapter V: Formation of Capital In a Community
• Book Ii, Chapter VI: Possible Objections
• Book III: Value
• Book Iii, Chapter I: The Two Conceptions of Value1
• Book Iii, Chapter II: Nature and Origin of Subjective Value
• Book Iii, Chapter III: The Amount of Value
• Book Iii, Chapter IV: The Marginal Utility
• Book Iii, Chapter V: Complications
• Book Iii, Chapter VI: What Determines Marginal Utility
• Book Iii, Chapter VII: Alternative Uses
• Book Iii, Chapter VIII: Subjective Exchange Value
• Book Iii, Chapter IX: The Value of Complementary Goods
• Book Iii, Chapter X: The Value of Productive Goods. Value and Costs.
• Book IV: Price
• Book Iv, Chapter I: The Fundamental Law
• Book Iv, Chapter II: Isolated Exchange
• Book Iv, Chapter III: One-sided Competition
• Book Iv, Chapter IV: Two-sided Competition
• Book Iv, Chapter V: The Law of Supply and Demand
• Book Iv, Chapter VI: The Individual Determinants of Price
• Book Iv, Chapter VII: The Law of Costs
• Book V: Present and Future
• Book V, Chapter I: Present and Future In Economic Life
• Book V, Chapter II: Differences In Want and Provision For Want
• Book V, Chapter III: Underestimate of the Future
• Book V, Chapter IV: The Technical Superiority of Present Goods
• Book V, Chapter V: Co-operation of the Three Factors
• Book VI: The Source of Interest
• Book Vi, Chapter I: The Loan and Loan Interest
• Book Vi, Chapter II: The Profit of Capitalist Undertaking. Principles of Explanation.
• Book Vi, Chapter III: The Profit of Capitalist Undertaking. Complications.
• Book Vi, Chapter IV: The Profit of Capitalist Undertaking. the Labour Market.
• Book Vi, Chapter V: The Profit of Capitalist Undertaking. the General Subsistence Market.
• Book Vi, Chapter VI: The Profit of Capitalist Undertaking. the General Subsistence Market—(continued)
• Book Vi, Chapter VII: Interest From Durable Goods
• Book Vi, Chapter VIII: Interest From Durable Goods—(continued)
• Book Vi, Chapter IX: Results
• Book Vi, Chapter X: Interest Under Socialism
• Book VII: The Rate of Interest
• Book Vii, Chapter I: The Rate In Isolated Exchange
• Book Vii, Chapter II: The Rate In Market Transactions
• Book Vii, Chapter III: The Rate In Market Transactions—(continued)
• Book Vii, Chapter IV: The Market For Capital In Its Full Development
• Book Vii, Chapter V: The Market For Capital In Its Full Development—(continued)
• Appendix to Page 327 [book Vi, Chapter V]: Amount of Subsistence Fund Necessary Before Entering On a Production Period of Given Length

BOOK V

PRESENT AND FUTURE

Book V, Chapter I

Present and Future in Economic Life

Present goods are, as a rule, worth more than future goods of like kind and number. This proposition is the kernel and centre of the interest theory which I have to present. All the lines of explanation, by which I hope to elucidate the phenomena of interest, run through this fact; and round it, both essentially and superficially, is grouped the whole of the theoretical work we have to do. The first part of our explanation will try to prove the truth of the proposition; the second will then show that, out of the fact, spring, naturally and necessarily, all the manifold forms which the phenomena of interest take. In the present book we have to take up the first part, and I shall try to go into it with that minuteness which is due to the cardinal importance of such a proposition. To this end we shall, first of all, make a general survey of the relations between present and future in human economy—a subject, obviously, of the highest importance, but one which, strangely enough, has up till now attracted but scanty scientific attention.1

In the present we live and move, but our future is not a matter of indifference to us, and our desires are, with reason, directed towards a wellbeing not limited by the present. It is only as the logical carrying out of this general principle that we set before us, in our economical arrangements, the larger object of providing for our future as well as for our present wellbeing. As a fact, the future has a great place in our economical provision; a greater, indeed, than people usually think. It is, of course, a commonplace, but, all the same, it is a truth seldom seen in all its bearings, that our economical conduct has exceedingly little reference to the present, but is, almost entirely, taken up with the future.

Let us clearly understand what this latter statement means. It means that our anxiety in the present is to have at our disposal, in the future, means for the satisfaction of wants that will not emerge till the future. In other words, it means that pleasures or pains, which we will only experience in the future, determine as now to provide goods or services, which, again, will only assert their use in the future. But how is it possible that feelings which are not yet felt, and therefore feelings which, essentially, do not exist, can be motives to will and deed?

Now, as a suggestive writer has said, we do not indeed possess the gift of feeling future sensations, but we possess the other gift of anticipating them in imagination,2 Either it is that we have already in the past, once or many times, experienced the same want as we expect in the future, and retain a picture of it in our memory; or, at least, we have already experienced wants or feelings that bear a certain resemblance to the feelings we are expecting, and can, from such analogous reminiscences, construct for ourselves an imaginative picture which is more or less true. On such pictures of memory and imagination we base our economical calculations and our economical decisions. Certainly, as many a one will be apt to object, it is an unsafe and deceptive foundation, but, all the same, it is almost the only one that we have. It is the rarest possible thing for us to base a valuation of goods, or an economical decision, on a pain that we are feeling at the very moment. It is, indeed, one of the characteristics of a civilised community that it anticipates want by providing for it, and does not allow the pain of emptiness, which the unsatisfied want would involve, to get to its full height. We do not begin to prepare our meals when hunger has reached its highest point of torment: we do not wait till the flood has overwhelmed house and home before we think of putting up the dam: we do not delay building the fire-engine till the flames have broken over us. At the moment when we decide on an economical action, the wants which cause us to make the decision are, almost always, in the future, and so, however near that future may be, they are acting on us, not as actual feelings, but as simple anticipations. How many a man has never, even in the past, fully felt the want which makes him value the goods he daily uses! How many rich people know only from hearsay what real hunger is!

Hence it is obvious that, however deceitful and unsafe this gift of anticipation may be, and however far astray it may lead us in individual cases, we still have every cause to be heartily thankful that we have it. Otherwise, neither actually feeling the future wants, nor yet forewarned of them by anticipation, we could not, of course, provide for them in advance; once want had made itself felt, any measures we could take would be miserably inadequate to provide for it; and, poorer than the poorest savages, we should drag out a hazardous hand-to-mouth existence.

But economical action means something more than thinking generally about the wants which are to be provided for. As, indeed, all economising arises from the quantitative insufficiency of the means of satisfaction as compared with the wants requiring satisfaction, so it demands a constant selection, a constant choosing between those wants which can and should be provided for, and those others which cannot be provided for. The selection naturally proceeds on a comparison of the importance and urgency—or, as we may say, the intensity—of the feelings of pleasure and pain which are associated with individual wants and their satisfaction. Now, if it is seldom that, in the moment of an economical decision, we actually feel that one want to which it refers, it is much more seldom that, on the moment of our choice, we experience, as actual feelings, all those sensations of pleasure and pain between which we have to choose. Our comparisons must, almost invariably, be, partially and very often completely, made on imaginative anticipations which we make of future feelings. And this leads us to a fact which I should like to emphasise: The future feelings we imagine are commensurable. They are commensurable with present actually-felt sensations, and they are commensurable with one another, and that too without reference to whether they belong to the same or to different levels of time. It is as easy for me to choose between a pleasure which seems desirable at the moment and another pleasure which I can obtain in eight days, as between two different pleasures which are both obtainable in eight days, or, again, as between two pleasures of which the one is obtainable in eight days, the other in eight months, or eight years.

The fact that we borrow from future sensations the motive for our present actions, is one side of our connection with the future. Another side is that, by our present actions, we prepare goods or material services3 for the benefit of the future. If we analyse the totality of goods which constitutes our wealth we shall find that by far the greater part has the character of what, for want of a better name, we may call "future goods" (Zukunftsgüter). All productive goods, without exception, are destined altogether to the service of the future. Durable consumption goods give off only a fraction of their material services in the present, and all the remainder in the future. If a dwelling-house, for instance, remains occupied for a hundred years, and affords shelter and comfort all that time, only an infinitesimal fraction of these services is rendered today; a still very small fraction is rendered in the present year; the great bulk of the service is spread over remote future periods. Even in the case of those perishable goods, such as meat and drink, wood and candles, which we keep ready for immediate consumption in our domestic economy, only one portion of their use is, strictly speaking, devoted to the service of the moment; the greater part is carried over into the future, although it may be the immediate future. As, among our motives, future feelings are the dominant ones, so, among the goods we possess and use, "future goods" occupy the larger place.

And there is yet another important analogy. As future feelings, whether they belong to the near or to the far future, are commensurable, alike with one another and with present feelings, so are future goods commensurable, alike with one another and with present goods. We can compare the value of a camellia which fades in an hour, with that of a ticket for a next week's concert, or with that of a bunch of next year's roses; or we can give one of these goods for the other. It makes no difference to the matter whether the "future good," which we compare or barter, is at hand and ready for delivery now, or whether it is represented in bodily shape by nothing more than the means of production out of which it will come, or whether, at the moment, it is neither itself ready nor is capable of being palpably represented—is, that is to say, a "future good," in the narrowest and strictest sense of that word. Thus we give present money in exchange, not only for the present consumption good Bread, but also for the present productive good Meal, in which the future good, bread, lies concealed. But just as easily can we buy from a farmer, for money down, his next year's harvest. In "reserved seats" we buy the future services of actors and singers. In buying Consols we give our present money for a series of future payments. Future goods and services are to us—I have cause to emphasise this—entirely familiar objects of economic dealing, just as future feelings are entirely familiar economic motives. Both have their ultimate ground in the continuity of our personal life. What we shall experience in a week or a year hence affects us not less than what we experience to-day, and has, therefore, equal claims to be considered in our economic arrangements. Both arrangements have for their end our wellbeing.

Whether this theoretically similar claim of future and present is always fully recognised in practical life, is another question which will require much consideration.

Provision for the future makes no inconsiderable demands on our intellectual strength; makes some demands, even, on our moral strength; and these demands are not equally met by men at all stages of civilisation. The present always gets its rights. It forces itself upon us through our senses. To cry for food when hungry occurs even to a baby. But the future we must anticipate and picture. Indeed, to have any effect in the future, we must form a double series of anticipations. We must be able to form a mental picture of what will be the state of our wants, needs, feelings, at any particular point of time. And we must be able to form another set of anticipations as to the fate of those measures which we take at the moment with a view to the future. Our knowledge of causal processes must enable us beforehand to form an adequate picture of the forms which goods will take, of the quantity of them, and of the time when they will come to maturity as result of those productive or commercial activities which we are now commencing. To make this double work of anticipating a comparatively remote future clear and true to fact, is not possible to the infant, and not much more than possible to the child and the savage. Civilisation of course teaches us this difficult art gradually. But, even among the most advanced peoples, the art is still very far from being perfect, and the practical economic provision for the future is correspondingly inadequate. But, be the degree of anticipation and provision for the future what it may, wherever it exists in the most general way—and that is even among the most barbarous tribes—future goods and future services are as much actual objects of economical dealing as present goods. We strive to get them; we produce them; we value them; we buy and sell them.

I say, we value them; and this is a point that must be looked more closely into. On what principles do we estimate the value of future goods? The answer is: On the same principles as we estimate the value of goods in general: that is, according to the marginal utility which they will bring us in the circumstances, of Want and Provision for want. But here, naturally, we have not to deal with the relations of want and provision that obtain at the moment, but with the want and provision of that future period when the goods in question will be at our disposal. To the inhabitants of a besieged town, threatened with starvation, grain that was promised for delivery a year after the raising of the siege would certainly not be valued and paid according to the standard of the moment's need; while, on the contrary, a brewer who, in January, concludes a purchase for a hundred cubic feet of ice to be delivered in July of the coming summer, will, just as certainly, not measure the value of the ice according to the over-supply that obtains at the moment when the bargain is concluded, but according to the scarcity which is likely to come with the summer.4

Very frequently, however, there enters into the valuation of future goods an element which causes us to value them a little—or even a great deal—under their future marginal utility, but which—as I shall show presently—has no connection with the phenomenon of interest. This is the element of Uncertainty. To us nothing future is absolutely certain. However closely we may have bound present and future together in economical connection, and however much reason we may have to expect the future to bring certain goods into existence, or put them at our disposal, still the actual fulfilment of our expectations is never, in the strict sense of the word, certain: it is always more or less probable. Of course, the probability is often so great that, practically, it amounts to certainty: as, for instance, the expectation that payment will follow an acceptance by the Rothschilds. In such cases we do neglect the infinitely small amount that is wanting of full certainty, and deduct nothing from the valuation we put upon the acceptance on the ground of uncertainty. But, frequently, the probability falls considerably short of full certainty. The farmer, for instance, may have done everything in his power to obtain a harvest by ploughing, manuring, sowing, and so on: but the harvest may be destroyed, wholly or in part, by hail, frost, flooding, or insect ravages. Sometimes, indeed, the probability sinks to the level of a very faint possibility, as, for example, when a man holds one of a hundred tickets in a lottery where there is only a single prize.

Cases like these cause a certain amount of hesitation to economic men. Are they to value uncertain future sums of goods exactly as if they were certain? Impossible! For then every lottery ticket that carried the chance of winning £100 would be valued at £100, and every claim, even the most doubtful, at its full nominal amount;—a course which, obviously, would land the men who tried to do business on these lines in the bankruptcy court in the shortest possible time. Or are the uncertain future sums of goods not to have any value put upon them? is no importance whatever to be attached to them with respect to our wellbeing? As impossible, and as ruinous! For then no man would give the smallest price for a chance in a lottery, or even for nine hundred and ninety-nine chances out of a thousand; no one would dare to make the slightest sacrifice to sow when harvest was uncertain. From this dilemma there is only one escape: we must ascribe to uncertain future sums of goods an importance as regards our wellbeing, but, at the same time, we must take account of the uncertainty of their acquisition according to the degree of that uncertainty. But, practically, this cannot be done otherwise than by transferring the gradation from where the gradation exists, but cannot be expressed—that is, from the degree of probability,—to where the gradation is not, but where alone it can be expressed—that is, the degree of the expected utility: thus equalising a greater, but less probable utility, to a less, but more probable utility, and this again to a still less but absolutely certain utility. In a word, we reduce all possibilities of utility to certainty, and restore the balance by deducting from this utility or value the amount we must add to the probability of the expected utility to raise it to certainty. Thus we reckon a claim on the Rothschilds at its full nominal value (disregarding for the moment the discount, as belonging to an entirely different sphere of phenomena), while one lottery ticket of a thousand, where the chance is a prize of £100, we value perhaps at 2s., one of a hundred at 20s., and one of ten, perhaps, at £10.

Strictly looked at, this kind of valuation—except where the certainty of the anticipated future utility is practically assured—is always incorrect.5 For, to recur to our illustration, the ticket will either draw the prize or it will draw a blank. In the former case it will have been, as the events show, worth a hundred pounds; in the latter, worth nothing at all. In no case will it have been worth 2s., or 20s., or £10. But, however false this method of valuation is in the individual case, it comes at least approximately right, according to the law of averages, over a great many cases; and, in the absence of any better method of valuation—which is denied us by the dulness of our imaginative forethought—it is well justified as a practical make-shift.6

I repeat that the element of uncertainty, which is the cause of a lesser value being put upon particular classes of future goods, has no causal connection with the phenomenon of interest. The lesser valuation which is its effect is a special one, and extends to one class of future goods only,7 and there it bears the character of a deduction as premium for risk.

With the exception of this peculiarity, the valuation of present and future goods is made on identical principles. But, to conclude from this that the amount of value of present and future goods must be identical, would be too hasty. On the contrary, since present goods are available at a different time from future ones, and therefore come under different actual circumstances, and are intended for the service of a different set of wants, it is to be argued, from all we know about value, that the value of such goods must, as a rule, be different. And so it is in fact. We arrive thus at a proposition which is a fundamental one in our inquiry: As a rule present goods have a higher subjective value than future goods of like kind and number. And since the resultant of subjective valuations determines objective exchange value, present goods, as a rule, have a higher exchange value and price than future goods of like kind and number.

This phenomenon is the result of the co-operation of a number of causes; causes which, individually, are of very different natures, but which, as it happens, work in the same direction. These causes we shall consider in order.

Book V, Chapter II

Differences in Want and Provision for Want

The first great cause of difference in value between present and future goods consists in the different circumstances of want and provision (Bedarf und Deckung) in present and future. Present goods, as we know, receive their value from the circumstances of want and provision in the present: future goods from the same circumstances in those future periods of time when they will come into our disposal. If a person is badly in want of certain goods, or of goods in general, while he has reason to hope that, at a future period, he will be better off, he will always value a given quantity of immediately available goods at a higher figure than the same quantity of future goods. In economic life this occurs very frequently, and may be considered as typical in the two following cases. First, in all cases of immediate distress and necessity. A peasant who has had a bad harvest, or sustained loss by fire, an artisan who has had heavy expenses through illness or death in his family, a labourer who is starving; all these agree in valuing the present shilling, which lifts them out of direst need, ever so much more than the future shilling,—the proof being the usurious conditions to which such people often submit in order to raise money at the moment.8 Second, in the case of persons who have reason to look forward to economical circumstances of increasing comfort. Thus all kinds of beginners who have no means, such as young artists, lawyers, officials, budding doctors, men going into business, are only too ready, in return for a sum of present goods which assists them to start in the vocation they have chosen, and acts as foundation of their economical existence, to promise a considerably larger sum on the condition that they do not require to pay it until they are in receipt of a decent income.9

Of course the contrary also occurs not unfrequently in economical life. There are persons who are comparatively well off at the moment, and who are likely to be worse off in the future. To this category belongs, among others, that very considerable number of people whose income is obtained, mostly or altogether, by personal exertions, and will, presumably, fall away at a later period of life when they become unfit for work. A merchant's clerk, for instance, who is in his fiftieth year, and has an income of £100, cannot expect to have anything better ten years later than, perhaps, a small retiring allowance of £30, or an annuity which he may secure by purchase at an assurance office. It is evident that to such people the marginal utility that depends on a shilling spent now is smaller than that depending on a shilling available in the more badly secured future. It would seem that, in such cases, a present shilling should be less valued than a future one. And so it would be if present goods were necessarily spent in the present, but that is not the case. Most goods, and among them, particularly, money, which represents all kinds of goods indifferently, are durable, and can, therefore, be reserved for the service of the future. The case, then, between present and future goods stands thus. The only possible uses of future goods are, naturally, future, while present goods have the same possibility of future use, and have besides—according to choice—either the present uses, or those future ones which may turn up in the time that intervenes between the present moment and the future point of time with which the comparison is being made.

Here then are two possibilities. Either it is the case that all those uses of the present and near future, which are generally taken into consideration as regards the good in question, are less important than the future uses; and in this case the present good will be reserved for these future uses, will derive its value from them,10 and will be just equal in value to a future good similarly available. Or it is the case that one of the earlier uses is more important; and then the present good gets its value from this use, and has, therefore, the advantage over the future good, which can only obtain its value from a less important future employment. But, usually, one never knows that some unforeseen occurrence in the near future may not give rise to some more urgent want. At any rate such a thing is possible, and it gives a chance of profitable employment to a good already on hand, such as, naturally, a good that will only come into our possession in the future has not got:—a chance which, as we have seen, is calculated in the amount of the value, and assessed, according to practical although incorrect methods, as an increment graduated according to its probability. To put it in figures. With £100 which will come into my hands at the end of five years, I can only aim at a marginal utility determined by the situation of things in the year 1896; we shall put this utility down at 1000 ideal units. With £100 at my disposal now, I can, at the least, realise the same marginal utility of 1000 units, but if an urgent want, arising in the meantime, gives me an opportunity of obtaining a marginal utility of 1200, I may, possibly, realise it. Say, now, that the probability of such an opportunity occurring equals one-tenth, I shall estimate the value of the present £100 at 1000 units certain, and, beyond that, at one-tenth of the possible surplus of 200: that is, in all, at 1020 units.11 Present goods are, therefore, in the worst case, equal in value to future goods, and, as a rule, they have the advantage over them in being employed as a reserve. The only exception occurs in those comparatively rare cases where it is difficult or impracticable to keep the present goods till the time of worse provision comes. This happens, for instance, in the case of goods subject to rapid deterioration or decay, such as ice, fruit, and the like. Any fruit merchant in harvest time will put a considerably higher value on a bushel of grapes to be delivered in April than on a bushel of grapes in his store at the time. Or say that a rich man is anticipating a long period of arrest, during which his living will be conformed to the hard fare of prison regime, how willingly would he give the price of a hundred present luxurious meals if he could ensure ten such meals during his captivity!

We may, then, draw up the balance-sheet which shows the influence of the different circumstances of Want and its Provision in present and future as follows. A great many persons who are not so well provided for in the present as they expect to be in the future, set a considerably higher value on present goods than on future. A great many persons who are better provided for in the present than they expect to be in the future, but who have the chance of preserving present goods for the service of the future, and, moreover, of using them as a reserve fund for anything that may turn up in the meantime, value present goods either at the same figure as future, or a little higher. It is only in a fractional minority of cases, where communication between present and future is hindered or threatened by peculiar circumstances, that present goods have, for their owners, a lower subjective use value than future. This being the state of things, even if there was nothing else co-operating with this difference of want and provision in present and future, the resultant of the subjective valuations, which determines the objective exchange value, would obviously be such that present goods must maintain a proportionate advantage, a proportionate agio over future. But, besides this, there are other co-operating circumstances which work, even more distinctly, in the same direction.

Book V, Chapter III

Underestimate of the Future

It is one of the most pregnant facts of experience that we attach a less importance to future pleasures and pains simply because they are future, and in the measure that they are future. Thus it is that, to goods which are destined to meet the wants of the future, we ascribe a value which is really less than the true intensity of their future marginal utility. We systematically underestimate future wants, and the goods which are to satisfy them.

Of the fact itself there can be no doubt; but, of course, in particular nations, at various stages of life, in different individuals, the phenomenon makes its appearance in very varying degree. We find it most frankly expressed in children and savages. With them the slightest enjoyment, if only it can be seized at the moment, outweighs the greatest and most lasting advantage. How many an Indian tribe, with careless greed, has sold the land of its fathers, the source of its maintenance, to the pale faces for a couple of casks of "firewater"! Unfortunately very much the same may be seen in our own highly civilised countries. The working man who drinks on Sunday the week's wage he gets on Saturday, and starves along with wife and child the next six days, is not far removed from the Indian. But, to a smaller extent, and in more refined form, the same phenomenon is, I venture to assert, not quite unknown to any of us, however prudent, or cultured, or highly principled. Which of us has not been surprised to find that, under the pressure of momentary appetite, he was not able to refuse some favourite dish or cigar which the doctor had forbidden—knowing perfectly that he was doing an injury to his health, which, calm consideration would tell him, was much more considerable than the pleasure of that trifling indulgence? Or, which of us has not, to avoid a little momentary embarrassment or annoyance, plunged headlong into a much greater? Who is there that has never postponed some troublesome but unavoidable call, or business, or work which had to be done within a certain time, till the day was past when it could be done with little trouble, and has had to do it in more difficult circumstances, in haste and hurry, with overexertion and ill-humour, to the displeasure of those who were injured or wounded by the delay? Any one who knows himself, and keeps his eyes open to what is going on around him, will find this fact of the underestimate of future pleasures and pains exhibited under a thousand forms in the midst of our civilised society.

Of the fact, then, there is no doubt. Why it should be so is more difficult to say. The entire psychological relations, indeed, through which future feelings in general act on our judgments and our actions, are still very obscure, and it will be understood that the same obscurity covers the reasons why future feelings act with greater weakness on our judgments and actions than present feelings. Without meaning to forestall the pronouncement of the psychologists, who seem to me more competent to decide on both questions than the economists, I venture to think that this phenomenon rests, not on one ground, but on the joint action of no less than three different grounds.

The first ground seems to me to be the incompleteness of the imaginations we form to ourselves of our future wants. Whether it be that our power of representation and abstraction is not strong enough, or whether it be that we will not take the necessary trouble, the consideration we give our future and, particularly, our far-away future wants, is more or less imperfect. Naturally, then, all those wants which we have not considered remain without influence on the valuation of such goods as are destined to serve those future wants, and, consequently, the marginal utility of such goods is put too low.

While this first ground is very much a peculiar defect in estimate, the second seems to me to rest on a defect in will. I believe it frequently occurs that a man, called on to make choice between a present and a future pleasure or pain, decides for the present pleasure although he knows perfectly, and is even conscious while choosing, that his future loss will outweigh his present gain, and that, taking his welfare as a whole, the choice is unprofitable. How well many a "good fellow" knows the painful embarrassments and privations he is bringing on himself, by running through his salary on the day he gets it, and yet has not the strength to resist the temptation of the moment! Or, how often does a man, "from weakness," let himself be hurried into taking some step, or making some promise, which he knows at the moment he will rue before twenty-four hours are over! The cause of such defects in conduct, I say, appears to me, in distinction from the former case, to rest, not on want of knowledge, but on defect of will. I should not be surprised, however, if the psychologists were to explain this case also as only a variation of the former: it may be that the weaker feeling of the moment prevails over the stronger feeling of the future only because the latter, while present in consciousness in a general way, is not lively enough and strong enough to take possession of the mind. For our purpose, however, it is a matter of no consequence.

Finally, as third ground, I am inclined to name the consideration of the shortness and uncertainty of life. In the case of future goods, their objective acquisition may be practically certain,12 and yet it is possible that we may not live to acquire them. This makes their utility a matter of uncertainty for us, and causes us—in perfect analogy with the case of objectively uncertain goods—to make a deduction from their value corresponding to the degree of uncertainty.13 A utility of 100, as to which there is 50% of probability that we shall not live to see it, we certainly do not value so highly as a present utility of 100; probably we value it as we do a present utility of 50; and I am convinced that any of us who was promised, to-day, a cheque for œ10,000 on his hundredth birthday, would be glad to exchange this large, but somewhat uncertain gift, for a very small sum in present money! To determine correctly the practical influence of this factor, however, we must make a somewhat more accurate calculation, both of the extent to which it prevails, and the way in which it works.

As regards this I think we shall be able to establish what follows. The factor in question is directly active only in a minority of cases: in most cases its action is indirect. It works in the most direct and powerful way in those not very numerous cases where men have the thought of death forced on them by peculiar circumstances; for example, among very old men, people suffering from fatal diseases, those placed in dangerous situations or engaged in very perilous callings, such as people in times of plague or soldiers before an engagement, and so on. The disregard of a future so uncertain not seldom finds drastic expression in the mad extravagance which seizes people in such circumstances; a fact in the history of civilisation which has often been noted—by Adam Smith among others. On the other hand, the thought of the uncertainty of life seems to me to exert no direct influence at all in that vast majority of cases where we are dealing with men in normal circumstances, and dealing, at the same time, with the valuation of goods belonging to a time not very far in the future; say, goods that would come into their possession in a couple of days, or months, or even years. I am convinced that a healthy middle-aged man, to whom a payment of œ100 next year was due for certain, would not value it a single penny less on the ground that he might not live to see next year. It is only where very long periods of time are concerned that this factor, among normally situated men, obtains fully and directly. Payments which fall due in a hundred, fifty, or even twenty years, lose in value from the consideration of the uncertainty of life as regards all payees: payments which fall due in ten years lose in value as regards a great many.

And here finally we have the point from which this third motive may rise to universal indirect efficiency—although, at the same time, a very much weakened efficiency. If certain differences of valuation have once become established as regards long intervals of time, they must, through the agency of exchange transactions, to some degree affect shorter intervals. For the mechanism which determines objective value abhors any sudden leap in value. It is not possible, for example, that a payment of œ100 which will be made on 1st January 1900 certain, should be worth only œ80 till 31st December 1889, and should jump up to the full value of œ100 at twelve oclock that night, because the due date is now only ten years off. Equalising tendencies, and transactions which I can best compare with stock exchange arbitrage, spread the differences of value, which obtain as regards long periods, uniformly over the entire intermediate period—Putting all these peculiar circumstances together, I should be inclined to consider the practical efficiency of this factor not altogether trifling. Still I should not place it very high, especially as it is weakened, to a not inconsiderable extent, by the consideration of closely related heirs. In any case, the two motives first mentioned have considerably more to do with the undervaluation of the future utility than the third.14 All three causes of our underestimate of future utility—errors of valuation through faulty representation of coming needs, defects of will, and consideration of the uncertainty of life—manifest themselves in extremely different degrees in different individuals, and even in the same individual at different times, according to differences of temperament and mood. For the same interval of time they may cause one to make an undervaluation of 100%, another of 50%, a third of 1% or 2%: while they may send fanatics in the matter of foresight and precaution to the opposite extreme of overvaluing future utility. I should like to call special attention, further, to the fact, that the undervaluation which results from these causes is not at all graduated harmoniously, in the subjective valuation of the individuals, according to the length of the time that intervenes. I mean, it is not graduated in this way, for example, that the man who discounts a utility which he expects to get in one year by 5%, must discount a utility due in two years by 10%, or one due in three months by 1¼%. On the contrary, the original subjective undervaluations are, in the highest degree, unequal and irregular. In particular, so far as the undervaluation is caused by defects of will, there may be a strong difference between an enjoyment which offers itself at the very moment, and one which does not; while, on the other hand, there may be a very small difference, or no difference at all, between an enjoyment which is pretty far away, and one which is farther away. Uniformity is practically introduced into the various undervaluations, as we shall see later, only through the mediation of exchange business. At any rate—and this is sufficient for us here—all three causes have one common result; that, under their influence, we estimate the utility of future goods at a lower figure than expresses their true value: we look at the marginal utility of future goods diminished, as it were, in perspective.15

Now it is easy to show that this phenomenon must substantially contribute to strengthen the efficiency of the first factor in the undervaluation of future goods, the difference in the provision of goods for present and future. All persons who are worse off in the present than they expect to be in the future,—persons to whom, therefore, the true marginal utility of a future good is already less than the marginal utility of a similar present good,—are led by this second factor to put the future marginal utility still lower than it really is, and this increases the difference in value to the further prejudice of future goods. If, for example, the marginal utility of a definite present good is 100, and the true marginal utility of a similar good in a better-provided future is 80, the future good will be rated, perhaps, at 70 only, thanks to this second factor, and thus the difference of valuation rises from 20 to 30. In the same way those persons who may be supposed to be in approximately similar circumstances in present and future, and would, other things being equal, value present and future goods at approximately the same figure, will fall under the category of those who value present goods more highly than future. This second factor, then, increases both the number and the intensity of the differences in valuation to the prejudice of future goods, and, naturally, in the market where present goods are exchanged against future, this must make the resultant exchange value more unfavourable to the latter. The agio on present goods moves upwards.16

Book V, Chapter IV

The Technical Superiority of Present Goods

There is still a third reason why present goods are, as a rule, worth more than future. The fact on which it is based has long been known in a general way, but its essential nature has been thoroughly misunderstood. Hidden in a perfect wilderness of mistakes, economists ever since Say and Lauderdale have been in the habit of going to it, under the name "productivity of capital," for their explanation and justification of Interest.17 This name, which has already been the cause of so many errors, and which, besides, does not altogether correspond with what it is intended to convey, I shall lay on one side, and shall confine myself to the facts of the case pure and simple. These facts are as follows:—that, as a rule, present goods are, on technical grounds, preferable instruments for the satisfaction of human want, and assure us, therefore, a higher marginal utility than future goods.

It is an elementary fact of experience that methods of production which take time are more productive. That is to say, given the same quantity of productive instruments, the lengthier the productive method employed the greater the quantity of products that can be obtained. In previous chapters we went very thoroughly into this, showed the reasons of it, and illustrated and confirmed it by many examples.18 I venture to think we may now assume it as proved. If, then, we take an amount of productive instruments available at a certain point of time as given, we have to represent the product, which may be turned out by increasingly lengthy processes, under the picture of a series increasing in a certain ratio, regular or irregular. Suppose that, in the year 1888, we have command of a definite quantity of productive instruments, say, thirty days of labour, we may, in terms of the above proposition, assume something like the following. The month's labour, employed in methods that give a return immediately, and are, therefore, very unremunerative, will yield only 100 units of product: employed in a one year's process, it yields 200 units,19 but, of course, yields them only for the year 1889: employed in a two years' process it yields 280 units—for the year 1890—and so on in increasing progression; say, 350 units for 1891, 400 for 1892, 440 for 1893, 470 for 1894, and 500 for 1895.

Compare with this what we may get from a similar quantity of productive instruments, namely, a month's labour, under the condition that we do not get possession of the labour till a year later. A month's labour which falls due in the year 1889 evidently yields nothing for the economic year 1888. If any result is to be got from it in the year 1889 it can only be by employing it in the most unremunerative (because immediate) production, and that result will be, as above, 100 units. In 1890 it is possible to have a return of 200 units by employing it in a one year's method of production; in 1891 to have 280 units by employing it in a two years' process, and so on. In exactly the same way, with a month's labour falling due two years later, in 1890, nothing can be had to satisfy the wants of the economic years 1888 and 1889, while 100 units may be got for 1890 by an unremunerative immediate process, 200 for 1891, 280 for 1892, and so on. If we group together in one table the result obtainable for the satisfaction of our wants from a similar amount of present, next year's, and succeeding years' productive instruments, we get the following scheme:—

Putting these figures into words, the table shows that, whatever economic period we may fix upon, our economic interests for that period are more advanced by a month's labour of 1888 than by a month's labour of 1889, by one of 1889 than by one of 1890, and so on. To meet the wants of 1888, for example, a month's labour expended in the year 1889 or 1890 gives us nothing, while a month's labour expended in 1888 places at our command at least 100 units of product. To meet the wants of 1893 a month of 1890 gives us 350 units, a month of 1889 400 units, a month of 1888 440 units. Whatever period of time we take as our standpoint of comparison, the earlier (present) amount of productive instruments is seen to be superior, technically, to the equally great later (future) amount.20

But is it superior also in the height of its marginal utility and value? Certainly it is. For if, in every conceivable department of wants for the supply of which we may or shall employ it, it puts more means of satisfaction at our disposal, it must have a greater importance for our wellbeing. Of course I am aware that the greater amount need not always have the greater value;—a bushel of corn in a year of famine may be worth more than two bushels after a rich harvest; a silver shilling before the discovery of America was worth more than five shillings are now. But for one and the same person, at one and the same point of time, the greater amount has always the greater value; whatever may be the absolute value of the bushel or the shilling, this much is certain, that, for me, two shillings or two bushels which I have to-day are worth more than one shilling or one bushel which I have to-day. And in our comparison of the value of a present and a future amount of productive instruments the case is exactly similar. Possibly the 470 units of product which may be made from a month's labour in 1889 for the year 1895, are worth less than the 350 units which may be got from the same for the year 1892, and the latter, notwithstanding their numbers, may be the most valuable product which can be made out of a month of 1889 in general. In any case the 400 units which a man can gain by a month's labour of the year 1888 for the year 1892 are still more valuable, and therefore the superiority of the earlier (present) amount of productive instruments—here and everywhere, however the illustration may be varied—remains confirmed.

The truth of the proposition, that the technical superiority of present to future means of production must also be associated with a superiority in value, may be made absolutely convincing by mathematical evidence if the tabular comparison, which we have drawn out to show the technical productiveness of different years of productive instruments, be extended to the marginal utility and value of the same. And since we have to deal here with a proposition which will form the chief pillar in my interest theory, I prefer to err on the side of making it too plain rather than risk not making it plain enough, and I shall spare no pains to prove it in the most complete way. In other respects, too, the trouble it costs us will not be altogether lost: as we proceed we shall get an occasional glimpse into certain relations which are seldom or never taken thought of, and yet, none the less, have some importance towards giving us a complete and thorough grasp of the whole.

The marginal utility and value of means of production depend, as we know,21 on the anticipated marginal utility and value of their product. But the means of production of which we have been speaking, the month's labour, may be invested in a production that yields an immediate return, or in a one, two, three, or ten years' period of production, and, according as it is so invested, we may obtain the very different product of 100, 200, 280, 350 units, and so on. Which of these products is to be our standard? The foregoing chapters have already given us the answer. In the case of goods which may be employed in different ways yielding different marginal utilities, it is the highest marginal utility that is the standard. Therefore, in our present case, it is that product which produces the greatest amount of value.22 But this need not coincide with the largest product, the product which contains the greatest number of units; on the contrary, it seldom or never coincides with that. We should obtain the greatest number of units by an infinitely long production process, or a process lasting a hundred or two hundred years. But goods which first come into possession in the lifetime of our grandchildren or great-grandchildren, have, in our valuation of to-day, little or no value.

In determining which, of various possible products, has the highest value for us, we are guided by the two considerations of which we have just spoken. First, we are guided by the anticipated position of our provision at the various periods of time. If, for instance, a man is ill provided for in the present, or not provided for at all, the unit of product in the present may, on that very account, have so high a marginal utility and value, that the sum of value of 100 present units of product is greater to him than that of 500 units which he might have at his command in 1895. To another man, again, whose present is as well provided for, or nearly as well provided for, as his future, the advantage in numbers may give an advantage in value to the 500 units. The second consideration by which we are guided is, that our present valuation of a future good or product does not depend on its true marginal utility, but on our subjective estimation of the marginal utility. But, in forming this subjective estimate, there takes place, as we have already seen, a kind of perspective diminution; a diminution which is in direct ratio with the futurity of the time to which the good in question belongs. The amount of which we are in search, therefore, the greatest sum of value, will evidently belong to that one, among the various possible products, the number of whose items, multiplied by the value of the unit of product (as that value shows itself with regard to the relation of want and provision for want in the particular economic period, and with regard to the diminution which future goods undergo from perspective), gives the greatest amount of value.

We shall put our illustration in figures chosen at random. I wish to emphasise that the figures can be chosen quite at random and varied by the reader at will, for our proposition maintains its validity in every conceivable position of subjective valuations. Moreover I intentionally take figures varying very greatly and irregularly, it being obvious enough, without any special demonstration, that, if the value of the unit of goods were not to vary for the different periods, or not to vary much, the present means of production, as giving a greater quantity of products, would inevitably give us also a greater sum of value. Assume, then, quite at random, that, for a certain individual, the true marginal utility and value of the unit of product—taking into account his special circumstances of provision, which we shall suppose are, on the whole, gradually improving—are as follows: in 1888, 5 units, of value (pounds, shillings, or units of any ideal standard); in 1889, 4; in 1890, 3.3; in 1891, 2.5; in 1892, 2.2; in 1893, 2.1; in 1894, 2; and in 1895, 1.5. This true marginal utility, then, by reason of perspective, experiences, for the later periods, an irregularly progressive reduction of this kind: for 1888 it is, subjectively estimated, 5 (without reduction); for 1889, instead of 4, it is 3.8; for 1890, instead of 3.3, it is only 3; for 1891, 2.2; for 1892, 2; for 1893, 1.8; for 1894, 1.5; and for 1895, 1. If, now, on the basis of these figures, we calculate the sums of value represented by the different possible products of a month's labour falling due in the various years, from 1888 to 1891, we get the following tables:—

The conclusion we draw from these tables is the following. The highest value of product obtainable by the month's labour available in 1888—that which determines its own valuation—is 840: the highest value obtainable by a month's labour available in 1889 is only 720: while the highest value obtainable by a month's labour available in 1890 and 1891 is 630 and 525 respectively. As a fact, therefore, the present month's labour is superior to all future ones, not only in technical productiveness, but also in marginal utility and value.

I repeat emphatically that this result is not an accidental one, such as might have made its appearance in consequence of the particular figures used in our hypothesis. On the single assumption that longer methods of production lead generally to a greater product, it is a necessary result; a result which must have occurred, in an exactly similar way, whatever might have been the figures of quantity of product and value of unit in the different years.

I must, further, lay particular weight on the fact, that this result does not make its appearance simply because, in our hypothesis, we have introduced, as already active, those other two circumstances which are fitted to account for a surplus value of present as against future goods—namely, a difference in the circumstances of provision at the various periods of time, and a diminution of the future utility by way of perspective. The superiority in value of present means of production, which is based on their technical superiority, is not one borrowed from these circumstances; it would emerge of its own strength even if these were not active at all. I have introduced the two circumstances into the hypothesis only to make it a little more true to life, or, rather, to keep it from being quite absurd. Take, for instance, the influence of the reduction due to perspective entirely out of the illustration, and we get the following figures:—

We see that now the absolute figures of the sums of value are increased throughout, and also that the economic centre of gravity is transferred to another year;23 but the thing which concerns us is that the result remains unchanged;—the month's labour of 1888 shows the highest figure of value, and all the others a decreasingly smaller one.

But if we were also to abstract the difference in the circumstances of provision in different periods of time, the situation would receive the stamp of extreme improbability, even of self-contradiction. If the value of the unit of product were to be the same in all periods of time, however remote, the most abundant product would, naturally, at the same time be the most valuable. But since the most abundant product is obtained by the most lengthy and roundabout methods of production,—perhaps extending over decades of years,—the economic centre of gravity, for all present means of production, would, on this assumption, be found at extremely remote periods of time24 —which is entirely contrary to all experience. And, besides, if such a state of things were to emerge at any particular point of time, it would immediately bring its own correction. For if every employment of goods for future periods is, not only technically, but economically, more remunerative than the employment of them for the present or near future, of course men would withdraw their stocks of goods, to a great extent, from the service of the present, and direct them to the more remunerative service of the future. But this would immediately cause an ebb-tide in the provision for the present, and a flood in the provision for the future, for the future would then have the double advantage of having a greater amount of productive instruments directed to its service, and those instruments employed in more fruitful methods of production. Thus the difference in the circumstances of provision, which might have disappeared for the moment, would recur of its own accord.

But it is just at this point that we get the best proof that the superiority in question is independent of differences in the circumstances of provision: so far from being obliged to borrow its strength and activity from any such difference, it is, on the contrary, able, if need be, to call forth this very difference.—Thus we get, as result of our digression, the assured conviction of two things; first, that the productive superiority of present goods assures them, not only a surplus in product, but a surplus in value, and, second, that, in this superiority, we have to deal with a third cause of the surplus value, and one which is independent of any of the two already mentioned.25

We have now to ask: To what extent is this third cause active? Of this our former analyses give a poor and inadequate picture. What has been said is only sufficient to explain how present Means of Production are worth more than future means of production. But, from the same cause, as we have now to show, present consumption goods also obtain a preference over future consumption goods, so that, in this third cause, we have a quite universally valid reason for present goods having a greater value than future.

The connection is as follows. Command over a sum of present consumption goods provides us with the means of subsistence during the current economic period. This leaves the means of production, which we may have at our disposal during this period (Labour, Uses of Land, Capital), free for the technically more productive service of the future, and gives us the more abundant product attainable by them in longer methods of production. On the other hand, command over a sum of future consumption goods leaves, of course, the present unprovided for, and, consequently, leaves us under the necessity of directing the means of production that are at our command in the present, wholly or partially, to the service of the present. But this involves curtailment of the production process, and, as consequence, a diminished product. The difference of the two products is the advantage connected with the possession of present consumption goods.

To illustrate this by an example as simple as it is well-worn. Imagine, with Roscher,26 a tribe of fisher-folk without capital, subsisting on fish left in pools on the shore by the ebb-tide and caught with the bare hand. Here a labourer may catch and eat three fish a day. If he had a boat and net he could catch thirty fish a day, instead of three. But he cannot have these tools, for their making would cost him a month's time and labour, and, in the meantime, he would have nothing to live upon. To save himself from starvation he must continue his wretched and costly fishing by hand. But now some one cleverer than the rest borrows ninety fish, promising, against the loan, to give back a hundred and eighty fish after one month. With the borrowed fish he supports himself during a month, makes a boat and net, and, during the next month, catches nine hundred fish instead of ninety. From this take, not only can he make the stipulated payment of a hundred and eighty fish, but he retains a considerable net gain to himself, and thereby affords a striking proof that the ninety (present) fish he borrowed were worth to him, not only much more than the ninety, but even more than the hundred and eighty (future) fish he paid for them.

Now, of course, the differences in value are not always so great as in this example. They are greatest among people who live from hand to mouth. For them to get command over present consumption goods means the transition to capitalist production. Less striking, but always present, is the difference where people already possess a certain stock of goods. If, for example, their stock of goods is sufficient for three years, they may realise their means of production in an average three years' production process. If, now, by some means or other, they obtain another year's supply of present means of subsistence, they may extend their average production period from three to four years, and obtain thereby an increment of product which, absolutely, is always important, but, relatively, will be much less than in the first case.

We can see that here, again, the matter of fact, on which I base my conclusions, is an old and well-known one: even in the time of Adam Smith and Turgot, it was notorious that the possession of present consumption goods confers certain advantages. But as the older theory of capital was, generally speaking, a nest of warped conceptions and incorrect explanations, this fact also was put down in a form as singular as it was inappropriate. Consumption goods—goods for immediate consumption—were looked on as productive goods or means of production; as such they were counted capital; and then all the advantages inherent in them were explained by the productivity of capital. Indeed, a writer of the standing of Jevons, simply through dwelling on the great importance which attaches to the command over present goods, was misled into ascribing to consumption goods the high position of being the only capital! In face of such misinterpretations our business now is to get at the truth of facts. And the facts are very simple. Consumption goods are not means of production: they are, therefore, not capital; and the advantages which they confer do not proceed from any productive power they possess. Everything turns on the simple fact that, according to the quite familiar laws of value, present goods, in virtue of the above stated casuistical connection of circumstances, are, normally, the means of obtaining a higher marginal utility, and receive thereby a higher value, than future goods.

Book V, Chapter V

Co-operation of the Three Factors

To put together the results at which we have arrived thus far. We have seen that there are three factors, each of which, independently of the other, is adequate to account for a difference in value between present and future goods in favour of the former. These three factors are: The difference in the circumstances of provision between present and future; the underestimate, due to perspective, of future advantages and future goods; and, finally, the greater fruitfulness of lengthy methods of production. The question now is:—how do these factors, working simultaneously, affect each other?

About the two first factors we know already: their effects are cumulative. In the case of a man badly provided for in the present, if the marginal utility of a present good were 100, and its true marginal utility in a future period only 80, the present good would be valued, relatively to the future, in the ratio of 100 to 80, if no other influence intervened. But if there is, besides, a perspective diminution of the true future marginal utility, say by one-eighth, the marginal utility would be put at 70 instead of 80, and the superiority of the present good to the future would be in the ratio of 100 to 70.

It is essentially different with the co-operation of the third factor. True, it also tends to strengthen the action of the other factors, but it does so alternatively, not cumulatively; that is to say, that factor which confers the greater advantage on present goods always stands out from the other as the active agent. Say, for example, that the first factor (the circumstances of provision), together with the second factor (that of perspective), taken cumulatively, would give present goods an advantage of 30%, while the factor of productivity would give an advantage of 25%, we should not get a total advantage of 55%, but of 30%, the advantage being based on the stronger factors.

The matter stands thus. The superiority of present goods, as making roundabout and more fruitful ways of production possible, cannot be increased by the perspective undervaluation of future goods, because the utility got from lengthy processes is itself a future utility, to which the perspective undervaluation applies as much as it applies to the future goods with which the present goods are compared. Say that, by employing a month's labour now, in 1888, in a one year's process, I can make, for 1889, a product of 200 units, and, by employing a month's labour of 1889, I can make for that same year—on account of the short and unproductive method—a product of 100 units only, it will be a reason for my valuing the present month of labour at double the next year's month. If, now, there comes in a ten per cent undervaluation of next year's utility, I shall, of course, value the next year's 100 units at 90 present units only; but, for exactly the same reason, I shall value the 200 units at 180 present units only; and the ratio of valuation, two to one, remains exactly as if the perspective undervaluation had never come into play at all.

As little can the third factor be strengthened by the first factor, namely, the consideration of a greater present want. For, evidently, employing a good to a great future productive utility, and employing it to satisfy an immediate pressing want, are mutually exclusive employments; and it is clear that a good, which can only be employed in the one way or the other, cannot obtain a cumulative advantage from the two together.

But these two factors do work into each other's hands in the following way. Present goods may be used to meet present wants, or they may be invested in production for the future. These are the two possible employments to which each individual may put his present goods. According to principles with which we are familiar, the stock of goods will be guided into these employments in such a way, that the most important chances of using the goods are utilised first, the next important second, and so on down the scale. Here, however, it is to be noted that the employments in producing for the future, as standing over against the employments in the satisfaction of immediate wants, must submit to the perspective diminution with which we are familiar. Say, for instance, that a man's particular circumstances are such that he estimates a utility, falling due in the following year, at 10% less than an equally great present utility; then a future utility of 110 becomes equal to a present utility of 100, and, on that account, when there comes to be a choice between employments, the future utility of 110 may be postponed to a present utility of 102. The last employment, then, which, on these principles, is still supplied from the stock of goods, indicates, as we know, the marginal utility, and, at the same time, the value of the unit of goods.

Now the following cases may occur. First, the individual may be badly off in the present. In that case the pressing wants of the moment will, by themselves, absorb the small stock of present goods, and, on the ground of this bad provision in the present, these goods will obtain a high value and a preference over future goods. The needy man prefers present goods because he must consume them in the present. The opportunities of employing the goods for productive purposes in the future remain in this case—since the poverty-stricken present, naturally, cannot afford any goods for purposes beyond itself—out of court as economically impossible, and, of course, without any influence on the value, or preferable value, of present goods.

Or, second, the individual may be equally well provided as regards both present and future, but may have less forethought. This case leads to a similar result. Before, it was urgent want that prevented portions of the stock of goods from being withdrawn from the service and enjoyment of the present, and invested in future production: now, it is want of thought for the future: and this want of thought confers, at the same time, on the present enjoyment, and on the present goods which minister to it, a preference over future. The spendthrift, greedy of pleasure, values present goods more highly than future, because he wishes to enjoy them in the present.—If bad provision goes along with small foresight, the two effects, as we have seen, are cumulative.

Or, third, the individual is well provided, and takes due thought for the future. In this case, of course, the two former sanctions of the preference do not come into play at all, or scarcely at all. In this case, beyond the satisfying of the immediate wants, the other course is economically open,—of investing a portion of his present goods in production for the future: thereby their economic centre of gravity, their marginal utility, and the formation of their value, are shifted to a sphere in which present goods enjoy a preference in value under the third sanction, that of their greater productiveness. A moderately rich and prudent man who has £10,000, must not, and will not consume his £10,000 in the present, but will, in any case, save for the service of the future. But if any one were to make him the proposal, to exchange his £10,000 of present money for £10,000 of future money, he would be fully justified in declining the transaction; as, with £10,000 (now) he can provide more effectually and richly for the future than with £10,000 at a future period.

But, finally, there is still a fourth case conceivable: an individual may be so badly off in the present, or have so little thought for the future, that, on those two accounts, he values present goods more highly than future. At the same time, however, he is tempted by business which promises him so good a return in the future that he stints himself still further in his present provision, and engages in the business. Here, after the analogy of the case worked out on p. 165, the available sums of goods are directed, successively, into the most important employments of the two spheres taken together, and the competition of these future employments has for result that the satisfaction of present wants is broken off at a higher point or level than it would otherwise be. This must, in the end, raise the value of present goods, and indirectly increase their superiority over future.27

Thus the various sanctions come alternatively into play. Where the first two are active the third is suspended: but where the first two are not active, or not sufficiently active, there comes in the action of the third. One can easily understand how very directly this circumstance is calculated to give the phenomenon of the higher valuations of present goods an almost universal validity. The needy and the careless value present goods more highly because they urgently require them in the present, or only think about the present: the well-off and the saving value them because they can accomplish more with them in the future: and thus, in the long-run, every one, whatever his economical position, and whatever his economical temperament, has some ground for valuing present goods more highly than future. And, further, it is easy to understand how much the universal emergence of subjective differences in valuation must favour the extension of this phenomenon to the sphere of objective exchange value and price. If the third factor were to act cumulatively with the two first there would, indeed, be many who would value present goods at an extravagant rate, but it is not certain that there would not be as many, perhaps an overwhelming majority, who would have no preference for present goods, and it is doubtful how, in this case, the resultant of exchange value would turn out. But as the third factor is alternative in its action, it levels up, as it were, the depressions instead of exaggerating individual heights; thus it brings about a general raising of subjective valuations; and this is necessarily connected with a raising of the average line, the resultant exchange value.28

Here we come to our last duty in this book: to show how the ratio that obtains between present and future goods in subjective valuations is transferred to their objective exchange value.

In the case of the single individual, extremely various subjective valuations will be formed, according as the one or the other of the above-mentioned factors is stronger or weaker. These encounter each other on the market where present goods are exchanged against future. There are many such markets and they take many different forms. In the next book we shall more exactly examine their constitution. In the meantime we must be content to examine the method in which prices are formed in its most general and typical outlines. Indeed the formation of price here takes the same course as it does elsewhere. The divergence of the subjective valuations which encounter each other on the market makes possible, economically, the exchange of property between the two parties.29 Those who, on any subjective grounds, put a relatively high value on present goods, appear as buyers of present against future commodities; those who put a relatively low value,30 as sellers: and the market price will be settled between the subjective valuations of the last competitors who actually exchange, and the first competitors who are shut out, or, as we have put it, between the valuations of the two marginal pairs. We may represent the position of the market by the followinge scheme:—

In the circumstances of the market which this scheme represents, A₇ and B₇ form the upper marginal pair, A₈ and B₈ the lower. The market price for 100 present units of goods will be fixed between 106 and 107, say at 106½ next year's units, and this determines an agio of 6½% in favour of present goods.

Once a market price of this kind for present goods has been established, it exerts a reflex levelling influence on the subjective valuations which were originally so strongly divergent. Even those who, from personal circumstances, would value future goods only a little under, or perhaps at equal terms with, present goods, now value present goods according to the higher exchange value which the position of the market lends to them. This is the reason, and the only reason, why, in practical life, scarcely any one would be willing to exchange present goods against an exactly equal sum of future ones. There are plenty of people whose circumstances of want and provision for want are of such a kind, that the subjective use value of present and future goods to them stands almost equal. But the general position of the market is, almost invariably, so strongly in favour of present goods, that it assures them a preference in exchange value, of which, naturally, every one takes advantage.

Developed market exchange, however, brings with it a levelling effect from another side; that is to say, it brings the amount of agio in favour of present goods, as against future goods which fall due at variously remote points of time, into one normal ratio with the length of the elapsing time. It might easily be the case that the causes which tend to the undervaluation of future goods might chance to be quite disproportionately effective on goods belonging to different periods of time. Indeed, in the very nature of several of those causes (for instance, the consideration of the shortness of human life) they would scarcely obtain at all as against goods of the near future, while, as against goods of remote periods, they would obtain strongly and irregularly. In itself, therefore, it might be quite possible that, while 100 present units of goods, as against 100 units of next year's goods, obtained, in the market, an agio of 5 units only, as against goods of the next year they might obtain an agio of more than twice that, say 20, and, as against the third year's goods, perhaps an agio of 40. But such disproportionate prices for goods of different periods of remoteness could not long hold. By a kind of time arbitrage they would very soon be brought into an equal ratio. If, for instance, the various market prices mentioned above were found quoted at one given moment, speculators would immediately appear on the scene, who would sell present goods against two years' goods, cover the purchase by buying present against next year's goods, and arrange for paying the latter a year later by a second purchase of present against next year's goods. The business would work out thus. In 1888 the speculator buys 1000 present units for 1050 units of the year 1889, and sells them at the same time for 1200 of the year 1890. In 1889 be has to deliver 1050 units, and he gets them by buying, again with a agio of 5%, the then present (1889) goods for the then next year's (1890) goods. For the 1050 units he requires to deliver he must thus give 1102½ units of 1890. But, from the first transaction, he then receives 1200 of these very (1890) units. He has thus, on the whole business, a utility of about 100 units. Such arbitrage transactions must evidently bring the prices obtainable for goods of various future years to a level. The speculative demand for the much undervalued two years' goods must raise their price; the supply of next year's goods must depress their price; till such time as the agio is brought directly into proportion with the length of the time. When this happens—say, for example, that the agio has become equalised at 5% per year, it may hold on at that rate undisturbed. For then it is equally remunerative to exchange present goods against next year's goods for three years successively, or to exchange present goods directly against three years' goods, and the arbitrage we have just sketched has no further occasion to interfere in the formation of price.

Thus we may accept the following as positive result of the present book.

The relation between want and provision for want in present and future, the undervaluation of future pleasures and pains, and the technical advantage residing in present goods, have the effect that, to the overwhelming majority of men, the subjective use value of present goods is higher than that of similar future goods. From this relation of subjective valuations there follows, in the market generally, a higher objective exchange value and market price for present goods, and this, reflecting back on present goods, gives them a higher subjective (exchange) value even among those whose personal circumstances happen to be such that the goods would not naturally have any preference in subjective use value. Finally, the levelling tendencies of the market bring the reduced value of future goods into a regular proportion to their remoteness in time. In the economic community, then, we find universally that future goods have a less value, both subjective and objective, corresponding to the degree of their remoteness in time.

[1.]A history of the theory of this subject—which I have no intention of writing here—would probably start with Adam Smith's emphatic opposition of "present enjoyment" to "future profit" (ii. 1). In more recent times there are some good observations on the subject in Senior (Political Economy, third edition, p. 58) under the headings of "Abstinence" and "Capital"; in Rae (New Principles of Political Economy, quoted in Mill's Principles, book i. chap. xi.); and in Menger (Grundsätze der Volkswirthschaftslehre, p. 127). The first, so far as I know, to treat it as a subject by itself, was Jevons (Theory of Political Economy, 1871, second edition, 1879). Jevons's work is exceedingly interesting and suggestive, but, on the whole, it is rather imperfect—as could scarcely be otherwise in a first attempt, and on a field of speculation hitherto all but untouched. It shows a good deal of incorrectness, a good many contradictions, and, in particular, many obvious gaps. Jevous may be said rather to have shown, by a bold stroke of genius, that here was a new circle of ideas waiting to be taken up, than shown what was to be done with them. Closely following Jevons, without going beyond their master, are, quite recently, Launhardt Mathematische Begründung der Volkswirthschaftslehre, 1885) and Emil has (Grundlegung der theoretischen Staatswirthschaft, 1887, pp. 178, 313). A little before these G. Gross (Die Zeit in der Volkswirthschaft, in the Zeitschrift für die ges. Staatswissenschaft, 1883, p. 126) had made a well-meant suggestion,—which, however, was by that time carried out by Jevons and then by myself,—that the element of time in economical theory was worthy of a fuller consideration. Finally, as concerns my own work, I owe it to myself to say that I arrived at my views on this subject in complete independence, and altogether uninfluenced by Jevons—and, naturally, still less by later writers. I first became acquainted with Jevons's writings in 1883,—shortly before the printing of my Capital and Interest,—when completing the historical material already collected in that work by a review of the latest English literature on the subject. The principles of my own theory of capital, on the other hand, were laid down by me as early as 1876. In that year I first suggested them in a youthful work never published. In later writings I gave many plain, if still cautious, hints of my leading ideas (e.g. in Rechte und Verhältnisse, p. 68 in note on the phenomenon of Abnützung, pp. 76 and particularly 109, 115 in note, on the computation of the future rise, and p. 152; in Capital and Interest, pp. 257, 276, 343, 424, and particularly on p. 428 where I formulated the programme of my positive theory in saying that the explanation of interest was to be deduced from the influence of Time on human valuations of goods). The cautious tone which I still deliberately adopted in giving these hints was due to my desire not to compromise my new ideas by any premature or incomplete formulation of them. I meant that they should not go before the public till I was in a position to produce them as a finished whole, all harmoniously fitted in to a system of carefully planned economic doctrine. That is why I preferred to work for ten years at laying the foundation of the present theory by completing the theory of goods (1881), the criticism of the theories of capital (1884), and the theory of value (1886), rather than snatch, as I might easily have done, at the glory of priority by publishing original but still immature ideas a decade earlier. Moreover my theory, if it touches that of Jevons at several points, by no means agrees with it in essence; and in the most important points, such as the explanation of interest, it is in distinct opposition to his.

[2.]When Jevons calls that intellectual phenomenon which impels us to provide for future wants and to value future goods, a "present anticipated feeling" (Political Economy, second edition, p. 37), the expression is very apt to be misleading. We must distinguish between two fundamentally distinct things, which Jevons seems to me not to have sufficiently kept apart. It is one thing to represent to ourselves, or imagine, a future pleasure or future pain, and to estimate its presumable intensity on the ground of this imagination. It is quite another thing to experience, in this imagination itself, a pleasure, an actual present pleasure of anticipation. To give an example. I think of taking a pleasure trip to Italy. From personal experiences, or from travellers' tales heard or read, I represent to myself the pleasures of the journey, and I put the intensity of these pleasures so high, that it seems to me worth the sacrifice of £50 to realise them. But, beyond this, in picturing to myself the future pleasure of the journey, a real present pleasure of anticipation is kindled. Thinking on the journey affords me an actual pleasure, but, in any case, it is an entirely different pleasure and, in all probability, its intensity is ever so much less than the pleasure of the journey itself. If I value the latter at £50, the pleasure of anticipation is, perhaps, not worth more than 10s.—of which it may be sufficient proof that I am willing to lay out so much money, and no more, in buying a book of travels that lifts me into the pleasant world of thought. The concrete figures here are of no moment. No constant or normal quantitative relation can be established between an anticipated pleasure and a pleasure of anticipation: the relation will vary in the wildest way according to persons, motives, and circumstances. With dreamy imaginative men, for instance, who are apt to be strongly excited by their own imaginings, the pleasures of anticipation may be relatively strong; with hard-headed unimpassioned men, on the other hand, they will be disproportionately weak. For our purpose it is sufficient to establish two things: first, that the intensity of the represented future pleasure and that of the actually felt pleasure of anticipation, are two different quantities; and second, in the vast majority of cases, the intensity of the pleasure of anticipation is less than the anticipated pleasure, not by a few per cent, but infinitely.

The question now is: When we value future goods, and when in conformity with that valuation we are making these economical determinations on which we provide for future wants, with which of these two intensities have we to do? On this, at any rate, there call be no doubt: we shall all agree that it is the intensity of the future pleasure (or of the averted future pain) valued on the representation or imagination of it. A good which I have every reason to expect will bring me all intensity of satisfaction indicated by 100, I shall value at 100 and not at 1, even if, in anticipating the same, I experience only all actual pleasure of anticipation of the intensity 1. And, in the same way, in choosing whether I shall provide for any definite future want, in general, or to which of several I should give the preference, I shall try to decide, as impartially as possible, according to my reasonable valuation of the future pleasure, and not according to the degree of my momentary feeling of pleasure. (That we not seldom have our clear judgment clouded by the latter, and that it thus obtains an indirect influence on our determinations, is a phenomenon which belongs to quite another sphere.) If, after what has been said, there should still be any doubt on the subject—which I do not anticipate—it may be removed by pointing to the well-known fact, that enthusiastic dreamers, in whom the anticipation of future events excite very lively present emotions, are not at all the sort of people who are given to provide economically for their future needs in the most efficient way. On the contrary, it is the cold calculating men who do so; men whose sober intellectual judgment of future situations is little or not at all affected by accompanying excitement.

Now Jevons has fundamentally confused these things. He makes out that our economical transactions have for their motive present feelings, which, according to the distance of time, remain a few per cent behind the intensity of future pleasures and pains—standing to the latter, perhaps, in the ratio of 95 to 100. But nothing is more certain than that, while we represent to ourselves feelings of that intensity and anticipate them, we do not experience them as present feelings. Sax, again, who, in this respect, has obviously followed Jevons without proving the facts of the case for himself, has made the same blunder in a ruder way. He speaks of a Vorempfindung of future wants—to be distinguished from a simple prescience (Grundlegung, p. 178), and out of these "previous feelings" he even construes actual "present wants" and "feelings of want," which should be only a little weaker, according to the distance of time, than the corresponding immediate want of the present itself (p. 314). Surely Sax has scarcely considered what tortures aye must constantly endure if all the future pleasures and pains, against which we protect ourselves by forethought, are really to be experienced by us in anticipation, and only a few per cent less vividly than in reality!—Let me add the following remark. I am quite aware that the psychologists attach two distinct conceptions to the words "feeling" and "sensation" (Gefühl and Empfindung). The speech of economics, however, has not yet carried out this distinction and it is usual to speak either of sensations or feelings of want, pain, and so on. I retain these common expressions because, by giving them up, I should probably lose more, among economic readers, in plainness, than I could gain in exactness.

NOTE BY TRANSLATOR.—I may suggest here that, so far as concerns Jevons, the above criticism scarcely applies. It is based on a literal reading of two unfortunate expressions, "present anticipated feeling" and "vague though powerful feeling of the future." The whole passage, however, shows that Jevons did not mean the present feeling, but the represented future feeling—what he himself calls the "actual amount of feeling anticipated." The criticism, however, probably finds its mark in those German writers who have too faithfully followed the letter of Jevons.—W. S.

[3.]On the conception of Material Services see Capital and Interest, p. 223.

[4.]Menger, Grundsätze, p. 124.

[5.]This proposition has lately been disputed by Mataja (Das Recht des Schadenersatzes vom Standpunkte der Nationalökonomie, Leipsic, 1888, p. 149, note 1) on the ground that, in the selling of such goods, one might actually obtain their average return as price, and therefore, quite correctly, value them according to this. But Mataja forgets that the market price is not the cause, but is itself the result of the fact that the individuals, who appear as buyers and sellers of such goods, value them in the first instance—that is, in the individual case, objectively falsely—according to the average return.

[6.]See my former tract on Rechte and Verhältnisse, p. 85, where I brought out the same idea in a somewhat different connection: also Mataja, ibid. p. 139.

[7.]It embraces also goods which, materially, are present, but are intended for future consumption; for instance, productive goods, the technical transformation of which into consumption goods is accompanied by a danger of not succeeding.

[8.]The proverb bis dat qui cito dat has therefore a quite sound economical basis.

[9.]For this reason the well-known postponement of university fees in the case of poor students in Germany (Stundung) is found to be a relief not much inferior to the total exemption of the same class in Austria (Befreiung). Or we may think of the conditions of the contract which the impresario makes with the singers he educates and brings out.

[10.]According to the law laid down above on p. 162, for the case of alternative employments with different marginal utilities.

[11.]I need scarcely say that, in practical life, we seldom or never make out our valuations with such minute exactitude as in the above illustration. But it does give a faithful picture of the kind of considerations of which we avail ourselves in such cases.

[12.]See above, p. 245.

[13.]If there is objective uncertainty as well as subjective there will, naturally, be two deductions. Of these the one made on account of objective uncertainty, as a particular phenomenon of certain kinds of goods, has nothing to do with interest; we have only to deal with the deduction on account of subjective uncertainty.

[14.]An effect analogous to that of the uncertainty of life might be exerted by the uncertainty of the duration of our capacity of enjoyment; but in any case the limits of the efficiency of this motive are much more closely drawn.

[15.]Jevons, like his follower Sax, as we saw in the note to p. 239, fell into a misunderstanding as to the entire nature of the phenomenon mentioned in the text, in confusing the representations and valuations which we make as regards future feelings with actually present feelings. We need not wonder, then, at not finding in these writers any sound thorough-going explanation of the phenomena, or even an attempt at such. They accept the supposed "weakened anticipated feelings" of future needs simply as fact, as a " well-known psychological fact," and they pass over much of its detail—which really very much requires explanation—without comment as "self-evident" (see e.g., Sax as before, p. 178).

[16.]Indirectly this effect will be strengthened by the fact that, through the under-valuation of the future utility, men will refrain from providing for the future so amply as they would otherwise have done. In other words, this underestimate acts to the prejudice of saving and accumulation of wealth, and still further reduces the number of persons who have to throw an accumulated surplus of present goods on the market.

[17.]See Capital and Interest, p. 111.

[18.]See above, pp. 18, 84.

[19.]Naturally, in the case of lengthier processes, the labour first expended requires that the production should be continued by the addition of new labour. By the figures given in the text is always meant that share in the product which, of the total product, falls to the productive unit—in this case the thirty days' labour. If, e.g., in the case of a one year's process, other eleven months of labour follow the one first expended, this would involve, in terms of our illustration, that a total product of 2400 units was obtained in the twelve months taken together, and thus, to the one month, would be ascribed a product of 200 units.

[20.]On the same analogy, as a present month of labour is technically superior to a future, so is a past month to a present. According to our scheme a month of the period 1883, e.g., would give for 1888, in a 5 years' process, 440 units, while a month of the year 1888 would give only 100 units. But, naturally, the past years would realise their technical superiority, as against the present, only under the condition that they also were actually invested in correspondingly lengthy and roundabout processes. But this is seldom the case as regards long past years. And, therefore, one need not be frightened at the consequences which, of course, the above theory involves; that, for instance, a month's labour of the fifteenth century is, perhaps, a hundred times, and a month's labour of the year of our Lord, perhaps, a thousand times more fruitful than a month's labour of the present year; that, accordingly, to a certain extent, the productive powers of the past were gigantic beside those of to-day, and to-day's productive powers gigantic compared to those of future centuries—a view which would seem to give us but a dreary outlook to a continuous degeneracy of our productive powers. Certainly, if any one in the year I had expended a month of labour with a view to the marginal utility of the year 1888, and had arranged for the systematic continuation of the work during all the 1888 years intervening, in that case, thanks to the natural powers impressed into the service in the course of such a roundabout journey, the product of that long past month would be mountains high beside the product of a month of the present year. But, as things are, trees do not grow up till they meet the sky. The productive powers are too necessary for the wants of the living, to let us employ them in advance for the behoof of future centuries or future thousands of years. And thus the year of those future wants to which we look forward and work, and by which we get the measure of the productiveness of the powers, moves forward very much parallel with the year when the productive powers are exerted. It is quite certain that our productive powers of 1888 do for the wants, say, of the year 1898, as much as and more than the productive powers of the year 1 A.D. did for the wants of the year 11 A.D. And thus the productive powers of giants do not degenerate into those of pigmies, as a sophistical dialectic might easily delude us into believing: in all ages, the productive powers, according to the advance of technique, do as much or, rather, increasingly more for the wants of their own circle of provision.

[21.]See above, p. 179.

[22.]See above, p. 163. To prevent a mistake which is very apt to arise through the similarity of the words, I again emphasise here that the proposition in the text is not in contradiction with the fundamental proposition on p. 186, that, for productive goods, the value of the least valuable of their products, the value of the "marginal product," is the standard. The marginal product, that is to say, is the last of several products which may all be made from the available means of production; but, in the case we are now considering, it is not a matter of employing a month's labour in one and more years' production, but in one or more years' production. And of these alternative employments, naturally, the most important has the preference.

[23.]e.g. the economic centre of gravity for the month's labour of 1888 in the former case lay in the product attainable for the year 1890; it now lies in that attainable for 1894.

[24.]But here, all the same, the month's labour of 1888 remains superior to that of 1889. For, as regards any one remote period, say, the year 1988, the former, as employed in a process longer by one year, could produce a somewhat greater product than the latter.

[25.]Those who prefer somewhat more venturous generalisations might, perhaps, be inclined to put the first and the third cause together under one common category, that of the "technical superiority" of present goods. For the preference given to present goods in virtue of the different relations of provision also rests peculiarly on a technical circumstance; namely, that they allow of a greater choice of employments, both as regards present and future wants, while future goods, naturally, are adapted to serve future wants only. At all events, this technical superiority is so essentially distinct from the other, of the greater technical productivity, that the two elements would require again to be kept separate from each other. It appears to me, therefore, in the interests of clearness that they should be kept entirely distinct from the first.

[26.]Grundlagen, § 189.

[27.]Suppose, e.g., that a man has 6 units of goods, say 6 five-pound notes, at his disposal. There are present groups of wants, which these notes could supply, and their importance is indicated by the figures 10, 9, 8, 7, 6, 5. Now there appear opportunities of employing these in business transactions which will not yield any result for a year, but are so profitable that, even after deducting the necessary dis-agio on account of the year's delay, they are equal to a present utility of 7. The following will evidently be the disposition of the notes. Four of them will go to the present wants which bear the utility 10, 9, 8, 7, the remaining two to the future employments which, likewise, show the (reduced) figure 7. The marginal utility which attaches to the present five-pound note is, therefore, 7, while, without the competition of the profitable future employments, it would have been only 5.

[28.]The statement of how the productivity of capital works into and together with the other two grounds of the higher valuation of present goods, I consider one of the most difficult points in the theory of interest, and, at the same time, the one which must decide the fate of that theory. It is just at this point that we discover the chief weakness in Jevons's otherwise suggestive work. None of the groups of phenomena concerned escaped his keen observation; what did escape him was the way in which they work into one another. Consequently his work remains an eclectic piece of patchwork instead of being welded into an organic theory. He gathers together quite correctly all the primary phenomena required for the explanation. But he does not find the common channel through which they all work together to the one common end, and so he explains it differently from each different point of view, with a result that is eclectic and self-contradictory. After a most promising beginning he quite loses sight of the element of the different valuations put upon present and future wants, and for the rest gives a double explanation, full of contradictions, and scarcely rising much above the level of the old classical economy,—part of it taken from the Abstinence, part from the Productivity theory. (See my Capital and Interest, p. 400.) The not very independent treatment which the subject has received from Sax is in one respect better, while in another it is even more incomplete than that of Jevons. It shows an advance to find the element of the undervaluation of future wants generally interwoven into the explanation of interest. (See also on this point Launhardt, Mathematische Begründung der Volkswirthschaftslehre, Leipsic, 1885, § 2, and again my Capital and Interest, pp. 344, 427.) But, on the other hand, it is a sensible omission that the difference between the values of present and future goods is traced exclusively to this factor, and that the much more important factor that co-operates with it, that of the greater productiveness, does not get even the scanty consideration it gets from Jevons. (Sax, Grundlegung, p. 314.)

[29.]See above, p. 195.

[30.]For reasons with which we are now familiar almost all the competitors, whether buyers or sellers, will value present goods, absolutely, above future. But the valuation will be higher on the part of the buyers, as a class, than on the part of the sellers.