Dynamic theory of interest : a differential analysis
Date
1931
Authors
Spencer, Norman Stuart
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Description
This work in "pure" economic theory is limited to an attempt to account for the existence of the net exchange value productivity of capital in industry, and for the market rate of interest for the use of loanable funds. It does not offer any theory of personal consumption nor set forth any social or political philosophy deduced from the dynamic theory of interest; and, except for a few incidental remarks, it offers no criticisms of other theories of interest. Its purpose is constructive. In a sense neither new principles have been discovered nor new methods employed. While it is claimed that certain new laws are developed, these are based on other laws which have been worked out by classical and neo-classical economists. The method employed is largely deductive, but no assumptions are made of any society other than the dynamic one which is thought actually to exist. Historical and statistical data are now available in such quantities that static assumptions are no longer as necessary to the economic theorist as once they were. Capital is defined from the point of view of exchange value income. Thus any property or wealth devoted to the acquisition of income through exchange is capital. From this point of view both land and industrial equipment are capital, and so are intangibles if they aid in securing income through exchange and themselves can be sold apart from their owners. Of course, this approach is not new. Similar, if not identical, approaches are well known to all economists who are acquainted with the works of Hermann, J. B. Clark, Cannan, Hobson, Webb, and Commons. In the last edition of their Outlines (pp. 94-108), 1930, which appeared after most of the present theory was elaborated, Ely, Adams, Lorenz, and Young employ a definition of capital essentially the same as that used in the development of this theory. Neither the present writer nor any of those mentioned above denies that each special category of capital has its peculiar qualities which are important. And if the present theory of interest were developed in great detail, it would necessarily contain some principles applicable to certain categories of capital but not to all. It is because the resemblances between special categories are more important than the differences that the present writer undertakes to explain the fundamental nature and causes of their net incomes by the same general principles