Page:The Economic Journal Volume 1.djvu/703

THE NEW THEORY OF INTEREST 681 This under-estimate seems to rest on three grounds: want of imagination, want of will, and the uncertainty of life. If we could imagine the future pain as keenly as we feel the present one, we should probably expend the same labour in averting it, were it not that our will is inadequate to carry out the dictates of reason. Even if, however, imagination is fairly active, and will comparatively strong, it is evident that a great many pleasures and pains never come into our mind at all, and these have no influence whatever on our valuations. And, again, however cer- tain an objective result may be, we individually do not know that we shall live to 'see it. In a good many cases, as where people are engaged in dangerous occupations, this has a direct influence; but in normal circumstances, and as regards short periods of time, its influence is only indirect. The healthy man of middle age will lay the lines of his provision for the next year, or the next five years, without allowing the consideration of his possible demise to affect seriously his estimate. But if the period of time mapped out for economic provision is twenty or thirty years, there can be no doubt that this consideration of the uncertainty of life will be a definite factor in our valuations. Certainly no one would consider the most certain promise to pay ?1000 at twenty years' date as possessing apything like the value of ?1000 now, or in five years' time. But if a difference in value does emerge between present goods and goods available in, say, twenty years, and if these differences of valuation meet each other on a market, they very soon become spread, by arbitrage, over less periods of time particularly when there are whole classes of people who make their living by taking advantage of such arbitrage business. 3. Third is the technical superiority of present goods as capital. To explain this fully would take much longer time than is possible here. But to put it in the briefest way: in production the longest way round is the shortest way home. The savage who pinches his subsistence, and stores up food till he gets a few weeks free to devote to making weapons or tools, is instantly rewarded ?y. a return of, perhaps, a thousand-fold what he could get uvmg from hand to mouth. From that simple case down to the continuous division and subdivision which is so notable in our great capitalist industries is a simple evolution of the same principle, the extension in time of the productive pro- cess. The greater time we give to the preparation of preliminary tools and machines, the greater the final product. If we take She case of any complicated machinery, and calculate how far