base on which its capital value is reckoned, but that value is not an equivalent amount. It is reckoned as somewhat less, deduction being made for interest. How is this deduction justified? In this way does the Austrian school state the problem of interest, the solution of which is essential to the complete solution of the problem of the value of capital.
The problem of the value of land moreover stands in connection with it. A piece of land contains for its owner the promise of rent for an indefinite number of years, and therefore its value ought to be equal to the sum of this whole series of years, which might even be taken as infinite. Actually, however, the value of land is rated much lower, viz., as the product of the annual rent multiplied by twenty, thirty, or some such shorter term of years.
The Austrian school does not maintain its unanimity over the theory of interest. As it is impossible for me to set forth here all our attempts to explain it, the reader will forgive me if I merely set forth my own. I can the more readily venture on such a course in that our several theories, although they do not thoroughly harmonize, are nevertheless mutually related like variations on the same, or similar themes; while the theory of Dr. Böhm-Bawerk and that of his opponent Prof. Menger are accessible to the English public in the translation of 'Capital and Interest,' by Mr. Smart.
I start from the notion of imputation. A portion of the product must be assigned to capital. But of this share we must first replace as much of the capital as was consumed. Now experience shows that this being done, the reward of capital as a rule is not exhausted, a surplus of clear profit remaining over. That capital is in this sense productive is just as truly a fact of experience as that the soil always brings forth fresh produce.
I ask the reader to note that hitherto I have spoken only of produce in kind, and not yet of its value. The aggregate gross income of capital, considered in kind, contains in itself the replacement of capital in kind, besides a surplus produce, viz. net profit. If the total capital = x, and the net profit = 5, then, assuming that all the capital is consumed, the total gross produce is x + 5. But if this is so, if the total produce is greater than was the total capital, then its value must also be greater, and that by just the amount of net profit. The value of 100 items must be less than that of 105, just as that of the field cleared of its harvest must be less than the value of field plus crop. The difference between the value of capital and the value of gross
