Online Library of Liberty: Capital, Interest, and Rent

unsound. Not discovering the generally valid ground of explanation, it has chosen an invalid—not even partially valid—ground.

It may be too much to attribute to the lack of sound interest theory alone all the inharmonious and discordant ideas and policies regarding interest rates and prices that have lately stalked abroad. Human thought has a remarkable capacity to go wrong at many points and in many ways. But the thesis of this paper is that a unified timevaluation theory makes it clear that time-discounts and premiums enter into the formation of all prices both of direct and of indirect goods, and are an inseparable part of even the earliest price systems; that the price system is logically and chronologically antecedent to all forms of contractual interest, which is merely derivative from the capitalization process; that finally this view gives a clear, consistent criterion by which to test various notions with respect to price changes and policies with respect to the fixing of interest and discount rates by government or banks, and it shows the limits of their possible application. Our object will have been attained if theoretical discussion shall have been aroused, statistical inquiry stimulated, and in the end, practical efforts to stabilize prices helped to move along right lines.

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