Capital, Interest, and Rent: Essays in the Theory of Distribution

Fetter, Frank A.
(1863-1949)
BIO
Display paragraphs in this book containing:
Editor/Trans.
Murray N. Rothbard, ed.
First Pub. Date
1897
Publisher/Edition
Kansas City: Sheed Andrews and McMeel, Inc.
Pub. Date
1977
Comments
Collected essays, 1897-1937. First published as a collection in 1977.

1. [1] We will note later his abandonment of this idea, calling the rent of land "interest" (Positive Theory, 355) and ascribing interest to all consumption goods, even those not included in capital. Ibid., 350.

2. [2] Positive Theory, p. 24, ff.

3. [3] Ibid., p. 42, ff.

4. [4] Ibid., p. 27.

5. [5] Ibid., p. 31, ff.

6. [6] Positive Theory, pp. 43-59.

7. [7] Ibid., p. 31.

8. [8] Ibid., p. 38.

9. [9] Positive Theory, p. 59.

10. [10] Ibid., p. 60.

11. [11] Ibid., Preface, p. xxiii.

12. [12] E.g., Horace White on "Böhm-Bawerk on Capital," Political Science Quarterly, vii. 133-148; General Walker, "Böhm-Bawerk's Theory of Interest," in Quarterly Journal of Economics, vi. 399-416.

13. [13] "The Genesis of Capital," Yale Review, ii. 302-315; "The Origin, of Interest," Quarterly Journal of Economics, ix. 257.

14. [14] Publications of American Economic Association, iii. (1888).

15. [15] Positive Theory, pp. 33, 34.

16. [16] Yale Review, ix. 307.

17. [17] Publications of American Economic Association, iii. 91.

18. [18] Yale Review, ii. 308.

19. [19] Quarterly Journal of Economics, ix. 257.

20. [20] Quarterly Journal of Economics, ix. 116.

21. [21] Ibid., 380.

22. [22] Ibid., 263.

23. [23] Positive Theory, pp. 17-23.

24. [24] Quarterly Journal of Economics, ix. 258.

25. [25] Yale Review, ii. 304.

26. [26] A fuller discussion of this point is given later, p. 49.

27. [27] Yale Review, ii. 307.

28. [28] Publications of American Economic Association, iii. 95, 112.

29. [29] Yale Review, ii. 309.

30. [30] Ibid., 303, 304.

31. [31] Yale Review, ii. 309. I must dissent from Clark's opinion that the term "abstinence" is, in the discussion of value theories, to be applied only to the first act of saving. See this view in Quarterly Journal, ix. 260, 261. In a more useful sense it is a power of choice that is continuously present during the foregoing of the right to consume wealth, at every moment during which a man could convert the principal of interest bearing capital into a source of present enjoyment.

32. [32] This point is treated more fully later, p. 57.

33. [33] Yale Review, ii. 309.

34. [34] Ibid., 312.

35. [35] This has already been observed by Fisher, Economic Journal, vi. 530.

36. [36] Yale Review, ii. 309.

37. [37] See further on this, infra, pp. 44-45.

38. [38] Quarterly Journal of Economics, ix. 124, 125.

39. [39] Yale Review, ii. 312.

40. [40] This is a somewhat different presentation of Böhm-Bawerk's argument in Quarterly Journal of Economics, ix. 125-128.

41. [41] Yale Review, ii. 310, 311.

42. [42] Böhm-Bawerk appears to have very much the same conception of products ripening into consumption goods, in his circles of production periods. See Positive Theory, 93, 106-108.

43. [43] Yale Review, ix. 312.

44. [44] Yale Review, ii. 307.

45. [45] Ibid.

46. [46] Publications of American Economic Association, iii. 11.

47. [47] Yale Review, ii. 308.

48. [48] Quarterly Journal of Economics, ix. 275.

49. [49] This article was in the editor's hands before the appearance of Professor Clark's latest work, The Distribution of Wealth. The views of the author on the capital concept there expressed show no essential change from those here examined, and the criticism stands as first written.

50. [50] In three articles, Economic Journal, vi. 509; vii. 199, 511 (1896-97.)

51. [51] Ibid., vi. 513.

52. [52] Ibid., p. 514.

53. [53] Economic Journal, vi. 515.

54. [54] Ibid., p. 530.

55. [55] E.g., at the very outset, Economic Journal, vi. 515.

56. [56] See as to Clark, supra, p. 43.

57. [57] Economic Journal, vi. 514, ff.

58. [58] Economic Journal, vi. 534.

59. [59] Supra, p. 39.

60. [60] Quarterly Journal of Economics, ix. 253.

61. [61] Especially in Positive Theory, 339-349.

62. [62] I should add, if the income is estimated as a percentage of the capital value.

63. [63] Positive Theory, p. 44.

64. [64] Ibid., p. 45.

65. [65] Here we develop some of the thoughtful suggestions of Fisher, though differing with his view in ways already suggested. See Economic Journal, vii. 525.

66. [66] Positive Theory, p. 40.

67. [67] Ibid., p. 61. He says here, flatly contradicting his own words just quoted: "Substantially, [the conception of social capital] is a quite independent conception. In every essential respect (in definition, in scientific employment, and in scope) it stands on entirely independent principles."

68. [68] Ibid., p. 22.

69. [69] Positive Theory, pp. 55, 56.

70. [70] Ibid., p. 56.

71. [71] Commons, Distribution of Wealth, p. 29.

72. [72] Marshall, 2d ed., p. 198.

73. [73] Positive Theory, pp. 339-357.

74. [74] Ibid., p. 55.

75. [75] Ibid., p. 357.

76. [76] Ibid., p. 355. The explanation given by Böhm-Bawerk is open to serious criticism.

77. [77] Capital and Interest, passim, but particularly pp. 237-387.

78. [78] Positive Theory, p. 33.

79. [79] Positive Theory, p. 53.

80. [80] Capital and Interest, p. 341.

81. [81] Ibid., p. 341.

82. [82] Ibid., p. 387.

83. [83] Positive Theory, p. 99.

84. [84] Capital and Interest, p. 341.

85. [85] Capital and Interest, p. 338.

86. [86] Positive Theory, p. 55.

87. [87] Ibid., p. 98.

88. [88] Ibid., p. 117.

89. [89] E.g., ibid., pp. 89 and 106.

90. [90] The italics are my own.

91. [91] Positive Theory, p. 65.

92. [92] Ibid., p. 65.

93. [93] Positive Theory, p. 65.

94. [94] See supra., p. 37.

95. [95] Positive Theory, pp. 33, 34.

96. [96] Ibid., pp. 58, 59.

97. [97] See other definitions of capital as concrete in Positive Theory, pp. 22, 65, and passim.

98. [98] One of which differs both from the social and the private capital; three, therefore, including both of them.

99. [99] Positive Theory, p. 344.

100. [100] Ibid., p. 348.

101. [101] Charles A. Tuttle, in Annals of the American Academy of Political and Social Science, i. 615, ff.

102. [102] Such a view is taken by Irving Fisher, Economic Journal, vii. 206.

Part 1, Essay 7. The Nature of Capital and Income

1. [1] The Nature of Capital and Income, by Irving Fisher, Ph.D., Professor of Political Economy, Yale University. Pp. xxi+427. New York: The Macmillan Co., 1906.

2. [2] The Nature of Capital and Income, p. 52.

3. [3] Op. cit., p. 52. The italics in all the quotations in this review follow exactly the original texts.

4. [4] Op. cit., pp. 58, 324, et passim.

5. [5] "What is Capital?" Economic Journal, Vol. VI (1896), p. 514.

6. [6] Ibid., p. 514.

7. [7] Ibid., p. 516.

8. [8] Ibid., p. 527.

9. [9] Loc. cit., p. 528.

10. [10] Ibid., p. 533.

11. [11] Ibid., p. 534.

12. [12] Ibid., Vol. VII, p. 199. So desirous was the author to emphasize the idea of stock as the essence of the capital concept, that he framed a definition doubly tautological: "stock of wealth existing at an instant of time." In any applicable sense of the word stock, the stock of wealth must be both existing and at an instant of time. "Stock of wealth" tells it all.

13. [13] Quarterly Journal of Economics, Vol. XV (1900), p. 19.

14. [14] Three articles in Economic Journal, Vols. VI and VII (1896 and 1897).

15. [15] Ibid., Vol. VII, p. 511.

16. [16] Op. cit., Vol. VI, p. 514.

17. [17] Ibid., p. 516.

18. [18] Ibid., Vol. VI, p. 527.

19. [19] Ibid., p. 516.

20. [20] Ibid., p. 526.

21. [21] Ibid., Vol. VII, p. 530.

22. [22] The Nature of Capital and Income, p. 106.

23. [23] See Quarterly Journal of Economics, Vol. XV, p. 19. Further comment on Fisher's present use of the value relation is found above, p. 106.

24. [24] Economic Journal, Vol. VI, p. 530.

25. [25] Ibid., Vol. VII, p. 199.

26. [26] Nature of Capital and Income, p. 66.

27. [27] "Recent Discussion of the Capital Concept," Quarterly Journal of Economics, Vol. XV, p. 19.

28. [28] Economic Journal, Vol. VI, p. 514.

29. [29] Ibid., p. 532.

30. [30] Ibid., p. 534.

31. [31] Ibid., Vol. VII, pp. 512, 522.

32. [32] Ibid., p. 526.

33. [33] Ibid., p. 526.

34. [34] Nature of Capital and Income, p. 106.

35. [35] Ibid., pp. 105, 106, 112.

36. [36] Ibid., pp. 105, 112. In a later summary of enjoyable objective services the money income is not named (p.165), and it is recognized as a different method of reckoning, apparently in conflict with the former view (p. 107).

37. [37] Op. cit., p.177. This is the view that was rejected by Fisher in the articles; see above, p. 99.

38. [38] Ibid., p. 168.

39. [39] It is very questionable whether this is "usually" recognized. Only one reference in support of the statement is given in the footnote p. 165, and that one is to the reviewer's text which cites few precedents for the view.

40. [40] Fetter, The Principles of Economics, p. 43 (1904).

41. [41] Nature of Capital and Income, p. 177.

42. [42] Ibid., p. 176.

43. [43] Ibid., p. 177.

44. [44] Ibid., p. 149.

45. [45] Ibid., p. 326.

46. [46] Ibid., p. 232.

47. [47] Chap. xiv, passim, especially p. 250.

48. [48] It first appeared in criticizing Edwin Cannan, Economic Journal, Vol. VII, p. 532.

49. [49] Op. cit., p. 232.

50. [50] Ibid., p. 234.

51. [51] Op. cit., p. 234.

52. [52] Ibid., p. 238.

53. [53] Ibid., p. 248.

54. [54] Ibid., p. 249.

55. [55] Ibid., p. 253.

56. [56] Op. cit., p. 230.

57. [57] Ibid., p. 177.

58. [58] Ibid., p. 230.

59. [59] Ibid., p. 232.

60. [60] Ibid., p. 235.

61. [61] Ibid., p. 184.

62. [62] In these cases the word "wealth" would be more fitting than the word "capital."

63. [63] Op. cit., p. 188.

64. [64] Ibid., p. 303.

65. [65] Ibid.

66. [66] Ibid., p. 327. See also above, p. 99, where is shown Fisher's change from this earlier thought to the value concept.

67. [67] Economic Journal, Vol. VI, p. 526.

68. [68] Economic Journal, Vol. VII, p. 511, note.

69. [69] Nature of Capital and Income, Preface, p. viii.

Part 1, Essay 9. Clark's Reformulation of the Capital Concept

1. [1] May, 1883, in Publications of the Amer. Econ. Asso., Vol. III, No. 2.

2. [2] Op. cit., pp. 11-12.

3. [3] J. R. Turner, The Ricardian Rent Theory in Early American Economics, 1921.

4. [4] Staatswirtschaftliche Untersuchungen, etc., Munich, 1832.

5. [5] The ideas of Rodbertus on capital are scattered throughout his writings, but perhaps more systematically presented in his work Das Kapital, written 1850-51 but published first in 1885 by A. Wagner and T. Kozak. (Known to the writer only in the French translation, Paris, 1904.)

6. [6] See Wagner's Grundlegung, 3rd. ed., 1892, p. 307 ff.

7. [7] Knies, op. cit., p. 43.

8. [8] Clark, op. cit., p. 11.

9. [9] See Dr. A. N. Young, The Single Tax Movement in the United States (1916), passim. Prof. R. T. Ely noticed it in his Recent American Socialism in 1885.

10. [10] Largely a republication of a series of articles the publication of which was begun ten years earlier. See preface to first edition.

11. [11] Op. cit., p. 86.

12. [12] E.g.,op. cit., pp. 33, 34.

13. [13] Op. cit., p. 86.

14. [14] Op. cit., pp. 55, 66.

15. [15] See the discussion, Quarterly Journal of Economics (1895-1896), Vol. 9 (Clark), p. 238; (Böhm-Bawerk), pp. 113, 235, 380; Vol. 10 (Clark), p. 98, (Böhm-Bawerk), p. 121.

16. [16] Principles of Economics, 1st ed., 1911, Vol. 2, p. 115.

17. [17] E.g., Vol. 1, pp. 72, 75; Vol. 2, p. 119ff.

18. [18] Ibid., Vol. 2, pp. 5-8, 58.

19. [19] Ibid., Vol. 2, p. 118.

20. [20] Vol. 1, pp. 84, 85.

21. [21] Ibid., pp. 121-123.

22. [22] In part his objections result from his not seeing the full import of the principle; however, his objection to Professor Irving Fisher's view of capitalizing human beings is in my judgment well taken. The reference to my text at this point in the 3rd edition (1921) is misleading. (Vol. 2, p. 126)

23. [23] Introduction to Economics (1904), p. 108.

24. [24] Ibid., p. 126, and, in revised form, Principles of Economics (1913), p. 14.

25. [25] Principles, p. 148.

26. [26] Ibid., p. 149.

27. [27] Ibid., p. 239.

28. [28] E.g., note p. 615; and specific reference to Capital and its Earnings in note, p. 492.

29. [29] Ibid., p. 137.

30. [30] Ibid., pp. 135-136.

31. [31] Ibid., p. 133.

32. [32] Ibid., p. 284.

33. [33] Ibid., pp. 513, 620 ff., 635, 648, etc.

34. [34] 8th ed., p. 72. But still, in his last word on the subject (p. 790), Marshall justifies his own adoption of "the two-fold definition of capital."

35. [35] Ibid., p. 170.

36. [36] Ibid., pp. 430-431. Also p. 535 et passim.

37. [37] Ibid., p. 78.

38. [38] E.g., ibid., p. 411.

39. [39] Ibid., p. 412.

40. [40] Yale Review, Vol. 4, pp. 156-170, "Misunderstandings about economic terms."

41. [41] In a footnote, p. 5.

42. [42] It would be a more accurate description of this distinction to say, using Hadley's own phrases: between public wealth as the sum of the "means of enjoyment" or "means of happiness," in existence, and private capital as the value of individual property rights.

43. [43] Material objects by Fisher's definition, Nature of Capital and Income, p. 3.

44. [44] Economic Journal, Vols. 6 and 7, 1896, 1897. A number of references to J. B. Clark's ideas occur in the three articles.

45. [45] Op. cit., Vol. 6 (1896), p. 514.

46. [46] See Quarterly Journal of Economics, Vol. 15 (1900), p. 19.

47. [47] The Nature of Capital and Income (1906), p. 52. Italics in the original.

48. [48] The thought is hardly to be avoided that some of the peculiar ideas regarding savings and income to which Fisher has adhered so uniquely despite criticism are traceable to this confusion of definitions. We refer especially to his reiterated proposition that "savings are not income." As a financial fact, there can be no saving and addition to capital value until there is first a property right to an income calculable in monetary terms (a financial present worth) to be saved. Hence to deny that monetary savings are monetary income is in simple common sense to deny a fait accompli; it is to assume the existence of the effect before its cause.

49. [49] Elementary Economics (1926), Vol. 1, p. 32 ff.

50. [50] Ibid., p. 40.

51. [51] Ibid., Vol. 1, p. 355.

52. [52] E.g., Vol. 2, pp. 163 and 189.

53. [53] Introduction to Economics, 1919.

54. [54] As developed in various places; see, among other, Quarterly Journal of Economics, Vol. 15 (1900), pp. 1-45, "Recent Discussion of the Capital Concept"; "The Relations between Rent and Interest," paper read at the New Orleans meeting, with discussion, Publications of the American Economic Association, 3rd series (1904), Vol. 5, pp. 176-240; The Principles of Economics (1904); American Economic Review, Vol. 4 (1914), pp. 68-92; Economic Principles (1915), p. 267: "Capital is a person's investment power as expressed in terms of money, being a person's property rights to income, estimated, as to amount, with reference to market conditions." The definitions given in the references dating 1900 to 1904 followed in part Clark's and Fisher's leads in conceiving of capital more nearly as the valuation expression merely of (material) wealth. In developing after 1904 a more adequate capitalization and "interest" theory, the writer returned with clearer convictions to the conception of capital that he had glimpsed before 1900.

55. [55] Outlines of Economics.

56. [56] Outlines of Economics, 4th revised edition (1923), p. 206; see also p. 103 et passim.

57. [57] Principles (1913), p. 69.

58. [58] R. T. Bye, Principles of Economics, 1924.

59. [59] Op. cit., p. 24.

60. [60] Principles of Economics, 2 Vols., 1925. Ref. to Vol I.

61. [61] Op. cit., p. 95. These ideas are more elaborately set forth pp. 370-376.

62. [62] Ibid., p. 381.

63. [63] Economics, 1926.

64. [64] Op. cit., p. 247 ff.; also p. 254.

65. [65] Ibid., p. 255.

Part 1, Essay 11. Reformulation of the Concepts of Capital and Income in Economics and Accounting

66. [66] Prof. A. C. Littleton in the Accounting Review, September, 1935, p. 270.

67. [67] Prof. W. A. Paton, Accounting (1924), p. 22. It is to be remarked that the author bases this statement on his belief that "the economist in general deals with the general or social point of view," whereas "the accountant takes the point of view of the individual enterprise." The fact is, however, that the greater part of the discussions of capital and income in the current economic texts is as completely concerned with the individual enterprise and as fully overlooks "the social point of view" as is done by the accountants. Much current economics is pervaded by a confusion of individual and social conceptions. See note 4 below, and related text.

68. [68] A recent text, Porter and Fiske, Accounting, 1935, pp. 15-16, contrasts the economists' concept of capital which, it says, is "ordinarily" limited to "material wealth" with that of the accountants which includes property rights and claims. Let it be noted, however, that the authors somewhat vaguely imply in the adverb "ordinarily" their awareness that this concept is not universally or consistently employed in economics; and they incidentally recognize the growing influence of the unorthodox school to which I belong when they say: "The sharp distinction drawn by older economists between land and capital has tended to break down and to result in grouping the two as a single factor."

Another leading accountancy text (Hatfield, Accounting, p. 173 n) repeatedly refers to some unquestionable contrast between the economic and the accounting definition of capital without, however, anywhere defining capital either in the economic or in the accounting sense. The author does, however, imply his meaning; for example, when referring to one definition of "capital stock" frequently used in statutes, he quotes an explanation of it as meaning "not the shares of which the nominal capital is composed but the actual capital, that is, the assets with which the corporation carries on its corporate business." Whereupon the author comments: "This corresponds to the economic, not to the accounting definition of capital." I take this to mean that the author believes the economist's definition of capital to be "the assets" of the corporation, and the accountant's definition as "the capital account of a corporation"—explained in his text as "a nominal sum, the par value of the capital stock." In another passage—the phrase: "using capital in the economic, but not in the accounting, sense" [p. 375] carries the same implication, that "invested capital" in the economic sense includes all assets of the corporation whether financed by stocks or by bonds, whereas capital in the accounting sense means only the amount represented by shares of stock, the "capital stock," or perhaps "the stated capital." See below, notes 8 and 10, two other conceptions of "capital" that are held by accountants.

69. [69] The writer has discussed this contrast in two articles in the American Economic Review, Vol. x, pp. 467 and 719: "Price economics versus welfare economics."

70. [70] Accounting, 1927, p. 294.

71. [71] H. W. Sweeney, in the Accounting Review, December, 1930, p. 277.

72. [72] A. C. Littleton, "Contrasting Theories of Profit," Accounting Review, March, 1936, p. 15.

73. [73] E.g., Porter and Fiske, Accounting, 1935, p. 16: "Business capital and business assets are synonymous. Business assets consist of the material goods, claims and property rights applied to the business project.... Assets are capital." And again, p. 544: "The term capital...refers to the assets employed in the business and not to that portion of the claim against the assets vested in the stockholders." See also quotation from Hatfield in note 3 above, where he calls this the "economic" definition, in contrast to that of the accountants, which, he says, is merely the stated capital, "a nominal sum."

74. [74] Paton, Accounting Theory, 1922, p. 37.

75. [75] E.g., Kester, Accounting Theory and Practice, 3d. ed., 1930, Vol. I, p. 290. "From an accounting viewpoint, the capital of any business enterprise is the excess of its assets over its liabilities." The same view is expressed in these words by a legal student of accounting and disciple of Hatfield: "Capital should be defined as the difference, in value between the total assets and the total liabilities of a business at a given moment of time." (Prosper Reiter, Profits, Dividends and the Law, 1926, p. 5.)

76. [76] Quoted in The Oxford Dictionary.

77. [77] The Germanic word "stock" had the root meaning of "stick" and hence main stem (as of a tree), hence, figuratively, a collection of physical things viewed as a fund of goods and resources constantly renewed—all of which meanings still persist in good use in various contexts. Evidently the "capital" of individual subscribers meant something quite different from "capital" in the sense of the "capital stock" of the whole enterprise, the latter corresponding rather to the physical aspect of what today are generally called assets.

78. [78] The writer is indebted to Prof. Stanley E. Howard for the opportunity to consult an unpublished manuscript further developing this subject.

79. [79] Thus he says: "The stock which is lent at interest is always considered as a capital by the lender.... The borrower may use it either as a capital or a stock reserved for immediate consumption." Wealth of Nations, Book II, Ch. 4. Cannan ed., p. 332. The word "stock" as used by Smith suggests a collection of useful things, and "capital" seems only meant to suggest that these things are used in business as a source of income, either to individuals or to the whole nation. In the latter case the thought of their money valuation is lacking. Such phrases occur as "the capital stock of the society," "the stock of the country," "the wealth of the society," "the capital of a great nation" and "the capital stock of Great Britain" (Ibid., Book I, Ch. 9, pp. 94, 95) with no hint of distinction; but also occurs the phrase, "the capital of a private man" Ibid., p. 93).

80. [80] The preliminary report (1931) on Accounting Terminology says (p. 31) of "circulating capital": "This expression appertains to economics rather than to accounting"; and of "fixed capital": "A rather vague term, used in economics more than in accounting." In further comment the Committee uncritically accepts both mutually inconsistent criteria of the distinction between fixed and circulating capital, saying of fixed capital: "It has been defined as wealth used in the production of commodities, the efficacy of which is exhausted by a single use," and in the next line: "The term 'circulating' is derived from the circumstance that this portion of capital requires to be constantly renewed by the sale of the finished articles and repurchase of raw materials, etc." The former makes the criterion a physical quality (durability), the latter makes it a financial quality (continuous and ready saleability, i.e., liquidity).

It is to be observed, however, that the older economic distinction between fixed and circulating capital survives in slightly altered, and perhaps equally troublesome, form in the accountants' attempt to divide assets into fixed and current. For example, the Accountants' Handbook (14th printing, 1934, p. 151) calls this "the most satisfactory basis of asset classification," adding: "This is founded on the economists' distribution of all capital goods into fixed and circulating capital, and has genuine economic and operating significance." The confusion of technical and financial criteria is plainly evident in the context.

81. [81] In my essay on "Clark's Reformulation of the Capital Concept," in Essays in Honor of John Bates Clark [see above].

82. [82] A capitalization theory is completely wanting in Clark's treatment, and was lost sight of by the Austrians after a promising beginning in its recognition. By this is meant the process of estimating capital as the present worth of the proprietorship of sources to future incomes, which is not to be confused with the very different process of issuing various kinds of shares in nominal amounts, as the term capitalization is often used in statute law and elsewhere

83. [83] A recent text (Porter and Fiske, 1935, p. 327) declares in the chapter on "Income—its nature and determination," that "it is impossible to find a universal definition of income" and then proceeds at once to discuss profits as synonymous with it, as if that solved the problem. (E.g., 327, 338.) A veteran in academic accounting having, as he says, "vainly tried to find any accepted differentiation between" the terms income and profits and finding no aid in the preliminary report of the accountants' Committee on Terminology (1931) explains that in his "treatise, therefore, the words are used indiscriminately." (Hatfield, Accounting, 1927, pp. 214-242.) A writer in the June, 1936, Accounting Review, (G. A. D. Prienreich, p. 130), still further complicates the problem by announcing that "the terms 'income' and 'profits' are synonymous with 'earnings' for all purposes germane to the present discussion," and a moment later discouragingly adds: "Apparently discussion will be facilitated by avoiding the use of the term 'income.'" Thus he disposes of half the subject matter of this paper, and we may feel tempted to emulate his discretion by pitching the other half out of the window. But what then becomes of "the fundamental purpose of accounting"—"to distinguish clearly between capital and income?"

84. [84] See Oxford Dictionary to this effect.

85. [85] Paton, Accounting Theory, p. 53.

Part 2, Essay 1. The "Roundabout Process" in the Interest Theory

1. [1] Capital und Capitalzins, Innsbruck, 1884. The second edition, Innsbruck, 1900, is reviewed by F. A. F. in the Journal of Political Economy, January, 1902. The English translation of the first edition, cited in this article, bears the title Capital and Interest.

2. [2] Capital and Interest, preface, p. xix, referring to text pp. 257-259.

3. [3] Positive Theory of Capital, p. 237.

4. [4] The last five words, if taken in a literal and objective sense, are open to criticism. See my discussion in the Quarterly Journal of Economics, vol. xv. p. 8 [see above, p. 38].

5. [5] Positive Theory, p. 237.

6. [6] Ibid., p. 260. The other reasons given are: (1) differences in want and provision in present and future (Positive Theory, p. 249); and (2) underestimate of the future (Positive Theory, p. 253).

7. [7] Positive Theory, p. 22.

8. [8] Ibid., p. 264.

9. [9] Einige strittige Fragen der Capitalstheorie, Wien u. Leipzig, 1900. Published first as three articles in the Zeitschrift für volkswirtschaft, Sozialpolitik, und Verwaltung, in 1899. Reviewed by F. A. F. in the Political Science Quarterly, vol. xvii. pp. 169-173, March, 1902.

10. [10] The first explanation Böhm-Bawerk offers is an appeal to practical examples. It can easily be shown that he wavers greatly in his thought and statement of the degree of validity in the proposition. See, e.g., Positive Theory, pp. 20, 22, 82, 84, 260; Einige strittige Fragen, pp. 39, 40. The second reason given to account for the greater productiveness of roundabout methods is that thereby natural forces are enlisted in the service of man. Positive Theory, pp. 12-33; Einige strittige Fragen, p. 10. This second reason is open to the criticism to be given in discussing the third (see below, p. 177); and the two will stand or fall together.

11. [11] Quarterly Journal of Economics, vol. xv. pp. 1-45.

12. [12] These words occur in Einige strittige Fragen, p. 11.

13. [13] Einige strittige Fragen, p. 11: "Die Arbeit desto productiver ist, mit je mehr capitalistischen Hilfsmitteln sie ausgerüstet ist."

14. [14] This modifying phrase is needed, as there are several different conceptions of capital used by Böhm-Bawerk. See "Recent Discussion of the Capital Concept," Quarterly journal of Economics, vol. xv. pp. 8,40.

15. [15] Einige strittige Fragen, p. 11: "Was ist denn eigentlich das 'Capital'? Es ist, wie es mit einer zwar nicht ganz schulgerechten aber wenigstens im Groben recht zutreffenden Definition bezeichnet zu werden pflegt, 'vorgethane Arbeit.'" The note reads: "Genauer ist es zu sagen, aufgespeicherte, vorgeschossene Productivkraft, die nicht nur Arbeit, sondern auch wertvolle Naturkraft oder Bodennutzung sein kann."

16. [16] Einige strittige Fragen, p. 12.

17. [17] The "production period" with Böhm-Bawerk means not the entire time elapsing from the first labor applied to goods, but the average time from the embarking of labor in products until its emergence as enjoyable goods, the whole produced value being thought of as ultimately consumed. This is carefully restated by the author in Einige strittige Fragen, pp. 4, 5. Misunderstanding on this point has led to most of the criticisms to which Böhm-Bawerk has replied. We must recognize also that Böhm-Bawerk uses the conception of the production period as that of the average for all industry.

18. [18] Einige strittige Fragen, p. 11.

19. [19] It may seem that this is not true of Böhm-Bawerk's concept of capital, as he has defined it in terms of concrete things and not according to its money expression. Yet as in this very passage he has employed the money expression, and as the discussion of "units" of capital is impossible without violating his definition, it is permissible to cite this against him.

20. [20] Einige strittige Fragen, note, p. 12.

21. [21] One can imagine the reply that the greater proportion of interest is the result, and expresses the lengthening of the period of production; but this fails to explain profits and monopoly gain. It is shifting entirely the test by which the length of a period is to be measured; for, if only one-sixth of the results of the year's labor is at any time bound up in the form of capital, evidently five-sixths of it are applied to current uses, are on an average consumed at once, and only two months elapse on an average from the moment a unit of labor is applied until it emerges as product. And, finally, it brings us back to the difficulty that the amount of capital must, if it includes an element of interest, vary according to the rate of interest: it must involve already the rate of interest which it is the problem to explain.

22. [22] Einige strittige Fragen, p. 11 and note.

23. [23] Positive Theory, pp. 262, 266, 267, 269.

24. [24] See above, p. 189 note 17.

25. [25] Positive Theory, p. 260.

26. [26] Ibid., p. 262.

27. [27] Ibid., p. 264.

28. [28] Positive Theory, p. 268.

29. [29] Capital and Interest, p. 428.

30. [30] Given above, p. 189 note 6.

31. [31] Positive Theory, p. 227, note.

32. [32] The reader will recall the distinction between the action of the different causes, the first two being called cumulative, the second alternative. See Positive Theory, pp. 273-277.

33. [33] See Capital and Interest, e.g., pp. 111-119, 180, 181, and 183, quoted below.

34. [34] See Capital and Interest, e.g., pp. 116-118.

35. [35] Capital and Interest, p. 138.

36. [36] Positive Theory, p. 263.

37. [37] Ibid., p. 264.

38. [38] After this article was in print the new edition of the Positive Theory came to hand. It proves, however, to be a verbatim reprint, not a revision of the first edition, the author's official duties having prevented his undertaking its rewriting at this time. This will be a source of much regret to economic students, although recent magazine articles by the author make it clear that he has in no essential way modified the concepts or theories presented in the first edition.

39. [39] E.g., Positive Theory, pp. 352-357.

Part 2, Essay 2. The Relations between Rent and Interest

40. [40] A. S. Johnson, Rent in modern economic theory, p. 19, Publ. Amer. Econ. Asso., 3d ser., vol. 3, no. 4. Probably most students would not consider this explanation a commonplace and would even deny that it truly states the principal cause of the distinction in question. The author quoted makes it the main thesis of his book that the difference between land rent and interest, though thus originally observed as a merely transitory historical fact, remains of permanent significance.

41. [41] Zwei Bucher zur socialan Geschichte England's, p. 160.

42. [42] Note for example, Ricardo, 1817: "that portion of the produce of the earth, which is paid to the landlord," etc.; F. A. Walker, 1887: "the remuneration received by the landowning class," etc.; Marshall, 1890: "the income derived from the ownership of land," etc.; Bullock, 1897: "the return that is secured by the owner," etc.

43. [43] This question is dealt with more fully in "The passing of the old rent concept," especially pp. 333-350.

44. [44] This thought was stated with a somewhat different emphasis in "The next decade of economic theory," pp. 80-81.

45. [45] Still other distinctions find partial recognition in current economics. See "The passing of the old rent concept," 325-332, for a discussion of space extension and of time in this connection.

46. [46] The ablest attempt to face this difficulty formally, that of Böhm-Bawerk, in his "Positive theory," pp. 55-56, is quite unsuccessful. A criticism of his argument is given in "Recent discussion of the capital concept," pp. 57-65.

47. [47] This idea as held by Böhm-Bawerk is more fully criticized in "Recent discussion of the capital concept," p. 63.

48. [48] The "land concept of rent" in the somewhat complex form as held by Marshall, is criticized in "The passing of the old rent concept," pp. 320-325.

49. [49] "The law of the three rents," article in Quarterly Journal of Economics, vol. 5, p. 263; restated in his "Economics of distribution," 1900. Likewise in vol. 5, p. 289, appeared John B. Clark's remarkable paper on "Distribution as determined by a law of rent."

50. [50] The change in the rent concept is reviewed in "The next decade of economic theory," pp. 78-79.

51. [51] "The law of the three rents," pp. 287-8.

52. [52] Value and distribution, 1899.

53. [53] The mistaken origin of the no-cost concept is shown in "The passing of the old rent concept," especially pp. 345-350.

54. [54] This solution was implied in the capital concept presented in "Recent discussion of the capital concept," pp. 65-70.

55. [55] This conception was briefly suggested in concluding the criticism of Böhm-Bawerk: "The 'roundabout process' in the interest theory," pp. 185-188.

56. [56] The broader conception of interest was presented in "Recent discussion of the capital concept," pp. 33-73, especially pp. 49-57.

57. [57] Brevity compels me to confide these closing comments to the criticisms adverse to the opening paper.

58. [58] Hollander, "Discussion, A.E.A." Proceedings 5 (February 1904): 204.

59. [59] See above, pp. 197-198.

60. [60] See Hollander, pp. 204, 205.

61. [61] See Carver "Discussion, A.E.A." Proceedings 5 (February 1904): 205.

62. [62] See above, p. 205.

63. [63] See Hollander, passage beginning "No entrepreneur" and ending "only in inferior efficiency," p. 208.

64. [64] See Carver, pp. 200-201.

65. [65] See Daniels, p. 226. Dr. Whitaker's remarks to the same effect unfortunately were not obtainable for this report.

66. [66] This applies also in answer to the remarks of Professor Ely.

67. [67] Marshall, Principles of economics, 4th edition, p. 224. He does not draw the conclusion, however, that is here suggested as necessary.

68. [68] The interesting facts cited by Professor LeRossignol, p. 224, seem to me to illustrate, not to disprove, the view I have taken, which is far from a denial of the "surplus return" to the investor in land, or in other wealth, in a new country.

69. [69] See Taylor, "Discussion, A.E.A." Proceedings 5 (February 1904): 221.

70. [70] See Taylor, p. 218

71. [71] See Taylor, p. 220.

72. [72] MacFarlane, "Discussion, A.E.A." Proceedings 5 (February 1904): 215.

73. [73] As is well known to students of economic theory Dr. MacFarlane has in his work "Value and distribution," obliterated the distinctions between the objective classes of agents yielding rents, and other incomes, more fully than has any other writer.

74. [74] See MacFarlane, pp. 213-14.

75. [75] See Professor Gidding's reply, "Discussion, A.E.A." Proceedings 5 (February 1904): 226.

76. [76] See MacFarlane, p. 212.

77. [77] See Carver, pp. 203-4.

78. [78] See MacFarlane, p. 214.

79. [79] See Taylor, p. 219.

80. [80] Hollander, p. 209.

81. [81] Daniels, Giddings, Marburg, Whitaker. Unfortunately no report was secured of Mr. Marburg's brief and pointed remarks or of Dr. Whitaker's subtle discussion. Professor Keasbey's attitude toward the question is favorable to the opening paper as against its critics, but his point of view is original, and his treatment in several ways not consistent with the views I have expressed.

Part 2, Essay 4. Interest Theories, Old and New

1. [1] American Economic Review, Dec., 1912, H. R. Seager, (critique of) "The Impatience Theory of Interest"; Sept., 1913, Irving Fisher (reply), and H. R. Seager (comment) "The Impatience Theory of Interest."

Quarterly Journal of Economics, Aug., 1913, Harry G. Brown, "The Marginal Productivity versus the Impatience Theory of Interest."

2. [2] To prevent misunderstanding, let us say that Böhm-Bawerk is here classed among those holding to the old theory, for his "round-about process" explanation is technological, though united with strong psychological features in the explanation of consumption loans.

3. [3] This somewhat unusual word is here employed in the sense of physically productive, a technological interest theory being one which finds the explanation of the rate of interest in the actual, practical performances, or uses, of agents in producing other goods.

4. [4] American Economic Review, Sept., 1913, p. 610.

5. [5] The Rate of Interest, 1907, p. 12.

6. [6] Ibid., p. 15.

7. [7] Ibid., p. 22.

8. [8] Ibid., p. 28.

9. [9] The Impatience Theory of Interest," Scientia, vol. IX, 1911, pp. 383, 384, 386.

10. [10] American Economic Review, Sept., 1913, p. 610.

11. [11] Ibid., p. 610.

12. [12] Ibid., p. 611.

13. [13] My italics throughout.

14. [14] Ibid., p. 611.

15. [15] Ibid., p. 617.

16. [16] The Rate of Interest, p. 251.

17. [17] American Economic Review, Sept., 1913, p. 612.

18. [18] Ibid., 613.

19. [19] Ibid., p. 617.

20. [20] My italics.

21. [21] Ibid., p. 612.

22. [22] "Recent Discussion of the Capital Concept," Quarterly Journal of Economics, vol. XV (Nov., 1900), p. 45.

23. [23] Proceedings of the Thirteenth Annual Meeting, Dec., 1900, "The Next Decade of Economic Theory," Publications of the American Economic Association, 3d series, vol. 2, pp. 240, 246.

24. [24] "Einige Strittige Fragen der Capitalstheorie," Political Science Quarterly, vol. 17 (Mar., 1902), p. 173.

25. [25] Quarterly Journal of Economics, vol. 17 (Nov., 1902), p. 179.

26. [26] The reader will observe that the term rent was there used in the more general sense of the income from the use, or the usance, of agents, not merely in the sense of contractual rent. This particular terminology which was due to the influence of J. B. Clark, has since been modified, not to weaken but to strengthen, the conception involved.

27. [27] Publications of the American Economic Association, 3d series, vol. V, in a paper on "The Relations between Rent and Interest," p. 197.

28. [28] Believing this conception to be logically involved in much of Böhm-Bawerk's argument in his critical volume, "Capital and Interest," I credited him with "the fertile suggestion" (see above, p. 231, quotation from the article, "The Roundabout Process"). But he has not accepted this interpretation; indeed, this would invalidate the greater part of what is distinctive in his positive theory of the roundabout process, to which he adheres without change in the latest edition, 1912.

29. [29] Fisher prefers to call the one explicit and the other implicit interest. However, throughout his book he uses the phrase "the rate of interest" almost if not exclusively for contract interest, and other terms, such as rate of preference, time-preference, etc., when implicit interest is meant.

30. [30] Other expressions, to designate various aspects of the same problem, used in my Principles of Economics (1904), were "choice between different values," p. 104; "difference in want-gratifying power," p. 144; "time-difference"; "time-discount"; "the rate of time-discount," p. 145; "estimate of time value," p. 145; "a choice between present enjoyment and future provision," p. 146; "a premium rate on present goods," p. 146; "the exchange in time-valuation," p. 146; "preference of the future over the present," p. 158; "the preference of present over future," p. 159.

31. [31] When, however, attention is given to the details in the modern loan market following the action of this man or that, or studying a temporary situation such as a sudden demand for loans on the occasion of a war or in a financial panic, we break into the explanation at a different point. The change in the immediate status of the loan market is reflected in widening circles and for a time affects the capitalization of much of the wealth in the economy (of the nation or of the world). This and many other needed interpretations are briefly indicated in my elementary text. It is fundamental to the conception of the capitalization theory, however, that these impulses from the money market are not, as they superficially appear, primary or causal in a theory of interest, in the same sense as is the preference in time for enjoyable goods and the resulting level of capitalization. See especially chs. 17-19, in my Principles of Economics, 1904.

32. [32] The Rate of Interest, p. 88.

33. [33] Ibid., p. 88.

34. [34] Ibid., p. 91.

35. [35] Elementary Principles, 1912, p. 229.

36. [36] Ibid., p. 336.

37. [37] The Rate of Interest, p. 117.

38. [38] American Economic Review, Dec., 1912, pp. 836-837.

39. [39] My purpose, in large part, in calling attention to my mode of approach to the interest problem as outlined above, is to show that the psychological theory, in its original form, is not open to the criticism which Seager forcibly directs against Fisher, "that he dissociates his discussion completely from any account of the production of wealth." To be sure, Fisher's reply begins with a categorical denial, "I did not dissociate" (American Economic Review, Sept. 1913), but he immediately admits that in his "first approximation" the income streams were "temporarily assumed." And while in his larger theoretical book, he believes that "this assumption gives place to the more complicated conditions of the actual world," when he comes to the second and third approximations, he confesses that those complications were, "for the most part, omitted (as too difficult and controversial)" from the elementary book. Seager's comment (American Economic Review, Sept., 1913, p. 618) is pertinent: "A methodology that causes an author to drop out an essential link when he tries to restate his theory in elementary form seems to me to be almost self-condemned." At this point may be recalled my own criticism of Fisher's treatment of capital in his Capital and Income. Reviewing this in the Journal of Political Economy, March, 1907, vol. 15, p. 147, I spoke of a "certain isolation in Fisher's capital theory. He began the analysis and reconstruction of the capital concept as if it were a task apart from the theory of distribution as a whole....The capital theory presented has therefore a certain character of intellectual aloofness that leaves it out of touch with the larger theory of distribution, of which it should be but one part." The same criticism applies in general to The Rate of Interest, published a year later.

40. [40] Seager, American Economic Review, Dec., 1912, p. 835.

41. [41] The Rate of Interest, p. 184.

42. [42] "The Impatience Theory of Interest," Scientia, vol. IX, p. 387.

43. [43] Elementary Principles, p. 371.

44. [44] American Economic Review, Dec. 1912, pp. 841-842.

45. [45] Fisher has followed Böhm-Bawerk in presenting objections to the productivity theory in terms that logically invalidate every productivity theory and, apparently, is again following his example in withdrawing the objections insofar as they apply to any but the naive theories. (See above, pp. 227-228.)

46. [46] American Economic Review, Sept., 1913, p. 617.

47. [47] Ibid., Dec., 1912, p. 849.

48. [48] Ibid., p. 845.

49. [49] Ibid., p. 848.

50. [50] Ibid., pp. 847-848.

51. [51] The Principles of Economics, 1904, p. 127.

52. [52] American Economic Review, Dec, 1912.

53. [53] American Economic Review, p. 842.

54. [54] Ibid., pp. 842-843.

55. [55] See above, pp. 235-236, 240-241.

56. [56] American Economic Review, Dec., 1912, p. 848.

57. [57] Ibid., p. 844.

58. [58] American Economic Review, Dec., 1912, p. 847.

59. [59] On this Fisher has taken a position in accordance with the capitalization theory. See American Economic Review, Sept., 1913, p. 614.

60. [60] Cited above, p. 252, n. 1.

61. [61] Quarterly Journal of Economics, Aug., 1913, p. 634. Here impatience and productivity are said to be coordinate determinants, though productivity may be the more important; and again, page 645, impatience is said "to enter into the chain of cause and effect" in a certain connection "as effect rather than cause"; and, finally, page 650, impatience "is also, to some extent, a joint consequence, with interest, of the other cause, the superiority of indirect production."

62. [62] Quarterly Journal of Economics, Aug., 1913, p. 644.

63. [63] Ibid., p. 638.

64. [64] Quarterly Journal of Economics, Aug., 1913, p. 639.

65. [65] Ibid., p. 640.

66. [66] Ibid., p. 637.

67. [67] Ibid., p. 644.

68. [68] Professor V. G. Simkhovitch's illuminating article on "Hay and History," in the Political Science Quarterly, Sept., 1913, gives new evidence of the effect upon agricultural industry of enlarging man's power over the production of fertile and arable qualities in land.

69. [69] A different conception, apparently a unique variation of the enterpriser- productivity theory, is the dynamic theory of Professor Schumpeter, as presented in his Theorie der Wirtschaftlichen Entwicklung, 1912, and reviewed at length by Böhm-Bawerk in the Zeitschrift für Volkswirtschaft, 1913.

Part 2, Essay 6. Interest Theory and Price Movements

70. [70] Capital and Interest, English translation, p. 47.

71. [71] E.g., he speaks of political economy, "from Say's time to the present," as having been "captivated by the deceptive symmetry that exists between the three great factors of production—nature, labour, capital." Positive Theory, p. 1.

72. [72] Many examples of this could be cited. Even Irving Fisher lapses into this thought at times; e.g., The Rate of Interest, p. 91; and Elementary Principles, pp. 229 and 336.

73. [73] A term introduced by the writer in Principles of Economics, 1904.

74. [74] See above, sec. 4.

75. [75] Positive Theory, pp. 348-9.

76. [76] Capital and Its Earnings, 1888.

77. [77] Explicitly, first, it seems in his Principles, 3d ed., 1895, pp. 142 and 664, cited by Böhm-Bawerk in preface to his second edition of his Geschichte, etc.

78. [78] History of Theories of Production and Distribution, 1894.

79. [79] See "Interest Theories, Old and New," American Economic Review, vol. 4, March, 1914 [see above, pp. 226-255].

80. [80] See the writer's paper on "Value and the Larger Economics," Journal of Pol. Econ., 1923, pp. 587, 790.

81. [81] Some of these are indicated in "Interest Theories, Old and New," op. cit.

82. [82] Positive Theory, p. 237. Of course this proposition is not itself a theory of interest, but merely the statement of a broad empirical fact whose explanation constitutes "the interest problem." The truth is that Böhm-Bawerk does not make and keep this "the kernel and center" of his "positive theory," for to do so would seem to require a consistent "agio" or time-preference theory such as he promised to give. But instead, as he went on, he made technical productivity of capital (in the roundabout process) more and more the kernel and center of his explanation, "the third reason why present goods are, as a rule, worth more than future." Positive Theory, p. 260. This becomes in his view "the principal form assumed by the interest problem." Ibid., p. 299. It is the circumstance giving "the phenomenon of the higher valuations of present goods an almost universal validity" whereas on the other merely psychological grounds "an overwhelming majority (of men) would have no preference for present goods." Ibid., 277. This prevailing preference becomes in his explanation almost entirely the result of technical productivity, presented as the chief cause of this premium on present goods (and therefore of interest) independent of any of the two already mentioned. Ibid., p. 270.

83. [83] Ibid., e.g., pp. 250, 251, 297. The frequency of these exceptions seems to be greatly minimized in Böhm-Bawerk's view by his practice, in nearly every case where he seeks to test the matter by an example, of shifting from particular goods to a sum of money. E.g., ibid., pp. 250 ff., 255, 256, 276, et passim. It can happen much more rarely that a present dollar would be worth less than a future dollar, in a modern community with a developed financial system, with borrowing, saving accounts, etc.; in fact, it could occur only in periods of catastrophic changes in general prices, or because of some peculiar personal choice of particular goods that are undergoing great changes in their relative prices. This adjustment of particular prices to the general time-premium on money is in part touched on below.

84. [84] Principles, 1st. ed., p. 627.

85. [85] Prof. Waldo F. Mitchell alone, it seems, claims now to find in the statistical data no evidence of such a result.

86. [86] Part II, Sec. 8.

87. [87] See Mr. Carl Snyder's discussion and formulation in American Economic Review, December, 1925, pp. 684-699, esp. p. 690.

88. [88] Approximately Snyder's estimates, op. cit.

89. [89] See some data given by Waldo F. Mitchell, in American Economic Review, June, 1926, p. 216.

90. [90] As shown by the statistical studies of Holbrook Working, Review of Economic Statistics, July, 1926, p. 120, "Bank Deposits as a Forecaster of the General Wholesale Price Level"; earlier article in Quar. Jour. Econ., Feb., 1923.

91. [91] See Holbrook Working, op. cit., for striking statistical confirmation of the principle.

92. [92] See Economic Journal, vol. 36, p. 503 (and especially p. 507) Sept., 1926, obituary notice of Knut Wicksell by Prof. B. Ohlin; Economic Journal, vol. 17, p. 213, "The Influence of the Rate of Interest on Prices," paper read by Prof. Wicksell before the economic section of the British Association; Jahrbucher, 1897, p. 228, "Der Bankzins als Regulator der Warenpreise," by K. Wicksell.

93. [93] Econ. Jour., op. cit., p. 216.

94. [94] As shown above in sections 5 and 6.

95. [95] Book 1, Chapter V. Section VII.

96. [96] Our italics.

97. [97] See above, part I, sec. 4.

Part 3, Essay 1. The Passing of the Old Rent Concept

1. [1] P. 150. References are to the fourth edition, 1898.

2. [2] Pp. 213, 220.

3. [3] P. 628.

4. [4] A number of these are noted in the article on "Recent Discussion of the Capital Concept" in this journal for November, 1900 [cf. 33-73].

5. [5] P. 220. He adds, however, that "there is a scientific principle underlying the distinction, which is the fixity of the supply of utilities connected with land." This is discussed below, p. 322.

6. [6] Pp. 223, 224. The indestructible properties are said to be robbed!

7. [7] P. 233.

8. [8] P. 144.

9. [9] P. 492.

10. [10] P. 493.

11. [11] Pp. 607-8.

12. [12] P. 494.

13. [13] P. 717.

14. [14] P. 144.

15. [15] P. 493.

16. [16] P. 478, note.

17. [17] P. 494. See other examples, pp. 714, 760, 765. Note also the point discussed below, p. 327.

18. [18] E.g., p. 608, where this view is taken.

19. [19] P. 220.

20. [20] P. 221.

21. [21] Pp. 224, 225.

22. [22] Pp. 220-1.

23. [23] See above, pp. 319, 322.

24. [24] P. 501.

25. [25] Ibid.

26. [26] P. 233.

27. [27] P. 504.

28. [28] Preface, p. x.

29. [29] P. 489.

30. [30] Especially pp. 489-499.

31. [31] P. 496.

32. [32] P. 199.

33. [33] Ibid. See also the diagram of producer's and consumer's rent, p. 521.

34. [34] P. 661.

35. [35] P. 663.

36. [36] P. 598.

37. [37] P. 599, notes.

38. [38] P. 418, note.

39. [39] P. 477. This is shown by many other passages; e.g., pp. 418, 423, 426, 428, 430, 431, 433, 473, 477, 561, 608.

40. [40] P. 476.

41. [41] See below, pp. 345-346.

42. [42] P. 478.

43. [43] P. 486.

44. [44] P. 487.

45. [45] P. 478.

46. [46] P. 477.

47. [47] See recognition of this, p. 482, note.

48. [48] This point has been noted, doubtless quite independently, by Mr. H. M. Thompson, in The Theory of Wages (1892), pp. 49-80; by Mr. J. A. Hobson, The Economics of Distribution (1900), pp. 113-159; and by Professor J. B. Clark, The Distribution of Wealth (1899), pp. 354-365.

49. [49] P. 492.

50. [50] P. 493.

51. [51] It is not intended to call in question the worth of the mathematical method of increments in economic studies, but only the correctness of this particular application of it.

52. [52] This argument, if sound, invalidates the theory of distribution and the terminology presented by Dr. C. W. Macfarlane in Value and Distribution (1899).

53. [53] P. 477.

54. [54] Adam Smith, noting such facts, stated a doctrine opposed to that under criticism, saying that the most fertile coal and silver mines regulate the price of the whole supply. Wealth of Nations, Book I., chap. xi., Part II. This is equally unwarranted.

55. [55] Pp. 481, 482. The thought is further illustrated, p. 487.

56. [56] See pp. 481-483, passim.

57. [57] P. 492.

58. [58] P. 419.

59. [59] P. 489. The italics are Professor Marshall's.

60. [60] P. 491.

61. [61] Pp. 419, 498.

62. [62] P. 495.

63. [63] P. 489.

64. [64] If he be not merely another undertaker through whose hands the thing has passed and who must pass on to others a part of the price as part of his costs.

65. [65] P. 489, Book V., chap. ix.

66. [66] P. 476.

67. [67] P. 491.

68. [68] E.g., p. 220.

69. [69] P. 494.

70. [70] See above, pp. 319-321.

71. [71] Besides Professor Marshall, already cited, see Professor J. R. Commons's interesting and ingenious presentation of this idea in The Distribution of Wealth (1893), pp. 27-41.

72. [72] See above, pp. 321-326.

73. [73] It need hardly be said that a notable essay in the direction here indicated is the concept presented by Professor J. B. Clark.

Part III, Essay 2. Landed Property as an Economic Concept and as a Field for Research—Discussion

74. [74] See the discussion on "The Relations between Rent and Interest," still significant, though now appearing in some respects undeveloped, at the New Orleans meeting, 1903, Publications, Third Series, Vol. V.

End of Notes

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