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At every point where Professor Fisher is at his best, and rejects productivity "as a direct acting cause," Professor Brown disagrees with him, and accepts productivity. Yet the article is marked by a number of just observations and seems at one point to touch upon the truth of the capitalization theory:"2

We may say that a person's valuation of capital, along with the valuations of other persons in like situation, is less the direct result of the previously existing market rate of interest, than it is, by affecting his and their attitude towards the market, a determinant of the rate of interest.

But the argument on the whole is on the plane of that conception. of productivity criticised above. Every feature of the old argument is reproduced. The explanation is hardly begun until the productivity is assumed to be a five per cent, a ten per cent, or a twenty per cent productivity. Per cent of what? Of the capital valuation, or the prices at which the borrower can buy the agents. Productivity in what way? In that the present prices, being the discounted value of the incomes that are expected, emerge at their maturing value as time elapses. The discount-rate involved in the capitalization is the "rate of productivity" which appears again and again in the argument. The borrower pays contract interest of five per cent only when he thinks he sees the opportunity to get this increment and something more for his trouble. Simple and true as an explanation of why men borrow at a rate of contract interest related to the prevailing rate of time-discount, but no proof whatever that the rate of interest is due to technical productivity.

Here, as always, the productivity theorist looks at the proximate influence, not at that one step removed; examines the middleman's motive, and ignores the ultimate consumer. The productive borrower is but the intermediary, transmitting to the market of consumers through the agency of prices, the effects of time-preference. Forgetting the motives and influences of the really determining group of minds, Professor Brown looks only at the "productive" borrower and says: "In what possible sense can it be said that he borrows only because he is impatient ?" "All question of im

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."

Quarterly Journal of Economics, Aug., 1913, p. 644. "Idem, p. 638.


patience aside"; "For even those [productive borrowers] who are not by nature impatient" etc. Professor Brown shows well the inaptness of the word "impatience," but his argument is futile as a refutation of a true psychological theory, for he is quite overlooking the substance, while he chases the shadow, of time-preference.


This motive to borrow exists as well when the agent to be bought with borrowed money is land, as when it is another agent. But just here Professor Brown withdraws to the citadel, the cost-ofproduction of capital, as that which tends "to fix the rate of interest and of discount." He reaffirms the

importance of the distinction which Professor Seager has recently emphasized, between land and made capital, between original natural resources and "the produced means to further production." Land is already present. For the most part, there is no balancing of choice as to whether or not we shall produce it.

What is the force of "already present"? Does "for the most part there is no balancing of choice" etc., mean that the way we use land has not affected its quantity in the past, and does not affect it for the future, either as acres or as productive power? In this day of the conservation and reclamation movements, are we to forget the part of repairs and depreciation, and assume the immutability of acres, arable and other kinds? Is there not involved in any standard of husbandry where soil-fertility is maintained, an adjustment of the cost-of-production and of the capitalization of each arable acre to its price based on its expected return quite as this is done in the case of factories ?68

It is not for us here to discuss further the older conception of capital here involved. We had supposed that it had become unthinkable in the atmosphere of Columbia and of Yale, under the influences of J. B. Clark and of Irving Fisher.

VIII. Summary.

Surely we are making some progress in formulating more clearly the issues involved in the interest problem. The opinions we have reviewed face in at least three different directions, not squarely Quarterly Journal of Economics, Aug., 1913, p. 639.

Idem, p. 640. "Idem, p. 637.

"Idem, p. 644.

"Professor V. G. Simkhovitch's illuminating article on "Hay and History," in the Political Science Quarterly, Sept., 1913, gives new evidence of the effect

opposing each other."9 Seager and Brown stand together on one side of the circle of opinion, glancing now and then with one eye at a psychological explanation (for consumption loans) and with the other eye fixed most of the time on the enterpriser-productivity explanation. They are not far away from Böhm-Bawerk, who is likewise eclectic; but their conception of productivity goes little farther than the personal enterpriser, whereas Böhm-Bawerk seeks, though vainly, in his roundabout theory, to extend his explanation formally to the impersonal productive powers in the agents. Nearly opposite them stands Fisher, directing his attention mainly upon the market for money loans, but giving many glances before and after to the psychological causes, in accord with the capitalization theory. The capitalization theorist at another point in the circle is faced directly toward the psychological explanation of interest, and sees the other features of the picture in due perspective to this central fact.

Seen from any of these standpoints, the interest paid on consumption loans is and must be explained in purely psychological terms. The capitalization theory, alone, is not eclectic, and explains interest on consumption and on production loans, in the same psychological terms. It alone sees the enterpriser's part embraced within the larger circle of time-preference, and explains interest on productive loans as but the reflection of the time-preference in the minds of the great body of buyers in the community, whose representatives and intermediaries the enterprisers are. FRANK A. FETTER.

Princeton University.

upon agricultural industry of enlarging man's power over the production of fertile and arable qualities in land.

"A different conception, apparently a unique variation of the enterpriserproductivity 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.


Bolingbroke's famous statement that "history is philosophy teaching by example," is particularly applicable to the American immigration problem, for it is only in the light of our own history that we can attempt to solve a question involving so many diverse, complicated, and elsewhere unprecedented, factors. President Cleveland, in his famous veto message of the immigration bill of 1897, ably gave expression to this idea in pointing out that "a contemplation of the grand results" of our immigration policy precludes our regarding it "as an original proposition and viewed as an experiment," merely. Substantially all the arguments advanced against our present policy of regulating immigration, as distinguished from the new schemes to restrict it, are based upon unwarranted and commonly sweeping assumptions, or an imperfect reading of our history and of the history of the agencies for the Americanization and assimilation of the immigrants. Few students of the immigration question have studied the general subject and its factors historically with any degree of thoroughness. The exponents of restriction have frequently been either politicians and advocates appealing to or swayed by popular prejudices, or economists with only slight familiarity with this branch of our national history, and still less familiar with the development and extent of our present-day Americanizing agencies, or with the history of the "new" immigrant races in our midst, whom they distrust. Nor is this strange, in view of the fact, pointed out by Professor Callender in an article on "The Position of American Economic History," that even our trained historians have greatly neglected such fields in our economic and social history in general-an observation particularly applicable to the innumerable agencies scattered throughout our country, which are working for the welfare of the immigrant, and which have developed since 1881, the date commonly assigned as marking the beginning of our present era of new immigration from southern and eastern Europe. Dogmatic reiteration gives the semblance of proof; and it is remarkable how many erroneous or unproven statements are current in this field.

The national Immigration Commission conducted substantially all its investigations in terms of race, and adopted as its ultimate conclusion or assumption the view (unproven by its own investigations) that the new immigration, unlike the old, requires re1 American Historical Review, October, 1913, p. 80.

striction and not merely regulation. There was very little historical investigation made by the commission; there were no public hearings for discussion of remedies by experts; and no effort was made to study the economic and social conditions which the "old" immigrant encountered, and substantially none to study the innumerable present-day Americanizing agencies, comparing them with the scanty ones of the former period and weighing the effects of their relative potency and success. The old immigrant, because more closely related to us in point of race-stock and language, is assumed to have been rapidly and readily assimilated and to have created high American standards of wages and living, while greater differences of race and language are assumed to lead to the opposite result as to the new immigrants. In this way, the conditions attending the arrival of the old immigrant (almost absolutely the same as the new immigrant now encounters) are conveniently ignored, or sunk in a mythical Golden Age, now past; and present-day Americanizing agencies are overlooked.

Professor Henry P. Fairchild, in his newly published work on Immigration unlike most other recent restrictionist writers who have commonly followed in the wake of the Immigration Commission, out-heroding Gen. Walker, argues that until our Revolutionary War, we had practically no "immigration" at all, the arrivals being substantially all "colonists" of English or allied stock, Protestant in creed, and therefore homogeneous and English; that then our American institutions were established, and the immigrants who have since come over, being of other race or creed, have jeopardized our American institutions, economic, political, and social; and have merely prevented a corresponding or even greater native growth, which, presumably, because of the "superior" English stock, would have accomplished far more than even the old immigration accomplished.*

Is it true that the large immigration of our day results in a larger percentage of increase of foreign-born in our country than heretofore? The Immigration Commision shows that the decade of 1850 to 1860 was marked by an increase of 84.4 per cent foreign-born, the largest in our history, while from 1890 to 1900 there was an increase of only 11.8 per cent, the smallest since our census takers began to compile such returns, in 1850.5 Even


Macmillan, 1913, pp. ix, 455.

Henry Pratt Fairchild, Immigration, pp. 27 et seq., 51-2.

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"Reports of the Immigration Commission, 1911, vol. I, p. 123.

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