Studies and exercises in economics by Parish L

Author:Parish, L[eonard] W[oods], 1850- [from old catalog]
Language: eng
Format: epub, pdf
Tags: Economics
Publisher: Cedar Falls, Ia., Gazette book and job printing house
Published: 1903-03-25T05:00:00+00:00

19 Briefly, the rate of interest is determined by the ptoduc-tivity of capital in the hands of the marginal borrower. President Hadley says "We must note that interest is not a natural return for capital independent of skill. The power of capital to yield interest is dependent upon the skill with which it is managed. A borrower offers interest because he thinks he has the ability to earn it. The rate which capital commands will depend primarily upon the borrowers' estimates of their skill in this respect, rather than upon any natural or inherent qualities in capital itself" ^

Interest under Double Competition. President Hadley gives the following statement which may be taken as a general law of interest from the stand point of double competition. "We may say, in a rough way, that the rate of interest in any business tends to a point where the demand for capitsil on the part of those who think their profit will exceed that rate equals the supply tur-nished by those who think that it will not?"^

Supply—Lenders' Minimum Rates 4 5-6 7-8-9 Demand—Borrowers' Maximum Rates s-G-y-S-g-io.

1. Find the current rate of interest .under the law of value.

2. Is this law inconsistent with the laws given previously?

N. B. The rate of interest is, generally speaking, fixed at that point where the demand for and supply of capital are equal.

3. Is there any similarity between this statement and that of President Hadley?

1. Hadley's Economics p. 268

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