Chapter III. The Use Theories

CHAPTER III

THE USE THEORIES

OF the numerous opinions which have contended for mastery upon the literary battlefields of the past, some have received no reënforcement whatever in recent times, and others have had only an occasional champion. Of the first kind, for the most part, has been the fate of those groups of theories which have either reduced the problem of interest to too great simplicity, or have subjected it to a refinement of treatment which is fatal. For the first reason the colourless theories,¹ the naive productivity theory, the fructification theory of Turgot, and the theory of Henry George, have remained without new adherents; and for the second reason theories of the type of Schellwien’s.

To the group which has only received occasional reënforcement belongs the interesting use theory. From its most distinguished representative, Karl Menger, nothing new has appeared; though in his highly esteemed monograph on “The Theory of Capital”¹ this author has subjected the concept of capital to a thoroughgoing and fruitful investigation, which, however, does not extend to the contested question of interest. Walras, who had previously expounded the use theory in a form which reminds us of J. B. Say, still holds to this theory.²

Among recent works which adhere clearly and firmly to the standpoint of the use theory (occasional allusions to this theory are frequent, especially among eclectic writers¹), only that of Ladislas Zaleski in the Russian language on “The Doctrine of Capital”² is known to me. Since for linguistic reasons my knowledge of this work is confined to a few extracts placed at my disposal, I can only make the statement that Zaleski expresses his adherence to the use theory ahd attempts to base it upon the doctrine of natural science regarding “the unity of matter and the conservation of energy.” How far removed he is in this new departure from the use theory of Menger, and to what extent he approaches the intricate productivity theory, I am unable to say.

¹ I am almost inclined to class under this head the interest theory of Lehr (“Grundbegriffe und Grundlagen der Volkswirtschaft,” Leipzig, 1893, Pt. VII, Ch. 6); at least, I am unable to discover any characteristic point in his rather voluminous disquisition upon this subject. He refuses his adherence to most of the theories ordinarily held, but on his part presents only such statements as in substance constitute either an appeal to the reality, propriety, justice, and equity of certain phenomena or echo certain universal motives (such as the motive referred to by Adam Smith, that without the prospect of interest, capital would not be accumulated for purposes of production or loan, p. 332), but in my opinion constitute no real explanation of the phenomenon of interest.

¹ Conrad’s Jahrbücher, new series, Vol. XXII (1888).

² “Eléments d’Économie politique pure,” ist ed., Lausanne, 1874, 2d ed., 1889. Walras considers interest as the payment for the productive service (“service producteur”) of capital, which is a distinct immaterial good (see, for example, pp. 201, 2n, and XIII of the 2d ed.). In essentials Pareto (Corns d’Economie politique, Vol. I, p. 40 sq.) adheres to the conception of Walras, but not without occasional allusions to the difference in value between present and future goods (see, for example, p. 50).

¹ For example, Conrad (“Grundriss zum Studium der politischen Ökonomie,” Jena, 1896, Pt. I, § 67); Dietzel, in an article quoted farther on (Gottinger gelehrten Anzeigen) Diehl (“Proudhon, seine Lehre und sein Leben,” Jena, 1890, Pt. II, p. 204); M. Block (“Progrès de la science Économique depuis Adam Smith,” Paris, 1890, Pt. II, Ch. XXIX); Ch. Gide (“Principes d’Économie Politique,” 5th ed., Paris, 1896, p. 451); and several others.

² Kazan, 1898.