This extra payment was regarded by the classical economists as a cost or price paid for an effort of abstinence.More recent economists have usually chosen to substitute for abstinence 'waiting' or some equally colourless term.But abstinence is better, for it does suggest a painful effort involving some human cost, some play of motives naturally adverse to saving which requires to be overcome by a positive economic payment.Thus, not merely the economic, but the moral or human necessity of interest is best asserted.
This abstinence or postponement of possible present consumption of commodities is admittedly the condition or even the cause of the supply of the productive instruments which increase the production of future wealth and incidentally furnish the fund out of which the interest is paid.For our present purpose, then, it makes no difference whether we look at the primitive saving which stored consumables for future use, or the modern saving which causes productive instruments to be created, applied and maintained.
The question whether there are human costs of saving, and what they are, is in the last resort the same in both cases.
Out of any individual, or social, income a certain amount or proportion of saving evidently may be 'costless' in the human sense.That is to say, the person or society that saves it sustains no organic loss or injury by doing so, though he may sometimes think or feel he does.If he does so think or feel, society must set a counter-weight against this false imaginary loss, in the shape of interest.But, as we have already noted, there is a good deal of saving which represents the calculated outlay over a period of time, which the owner of an income will make in his own interest.
In such cases there is no human cost, and if an economic cost (interest)is defrayed, it has no human correlative.From the standpoint of human distribution of wealth it involves a waste.
The organic utility to individuals of hoarding, in order, by distributing consumption over a longer period of time, to get from it a larger aggregate of goods, will thus furnish a considerable quantity of instrumental capital to modern industry.For, only by putting the postponed consumption into the form of instrumental capital, can the savers establish the lien they want upon the future output of consumables.If all the required capital could be got by this simple play of motives, the savers balancing more useful future units of consumption against less useful present units, with due allowance for risks connected with postponement, the supply of capital would be humanly 'costless.' Though some element of risk, inherent in the proceeding, would, taken by itself, carry a cost, the superior utility attaching to the postponed units of consumption, as compared with that which the same number of units would afford when added to the consumption already provided, would offset that cost, so that the arrangement, as a whole, would be costless.
§5.Though the method of our analysis has obliged us to approach this problem of saving as part of our enquiry into processes of production, because it is the means by which a productive factor, viz.capital, is supplied, it appertains directly to the process of consumption, or outlay of income on consumables.As the current expenditure of any member of industrial society will be distributed among a number of different purchases, contributing by natural, conventional, or purely personal connections, towards a standard of consumption endowed with maximum utility (or what the consumer takes for such), so will it be with the distribution of expenditure over points of time.Let us elevate into a clear conscious policy of calculation what is in large measure a blind instinctive conduct, and the organic relation between the two 'economies' is apparent.It involves an intricate balancing of larger future utilities, weighted by risks, against smaller present utilities not so weighted.To take the simplest instance.If, out of an income of £600 coming in this year, I decide to consume £500in the current expenditure of the year and to put aside £100 for consumption in five years' time (when I purpose to work only half-time and earn only half my present income), I shall have estimated that the luxuries which i could buy this year by the sixth hundred pounds expenditure are slightly less agreeable or 'useful' to me than the comforts purchasable by the fourth hundred pounds as visualised five years off, with an allowance for the chance that i may then be dead, or that I may have come into a legacy which renders this postponement of consumption unnecessary.In a word, this economic ego must be conceived as operating by a plan of outlay which, in regard to the disposal of the current income, has a longitude and latitude of survey and valuation.Just as the different ingredients of present consumption make a complex organic whole with delicately proportioned parts, the size and form of each dictated by the unified conception of the current standard of comfort, so the disposition of the income over a series of points of time in which present values of each several consumable and of the whole standard are compared with future values, involves the similar application of a plan for the realisation of my economic ideal.
Though a fully rational conception and calculus, either for the composition of current expenditure or for prospective outlays, is very rare, some half-conscious, half-instinctive calculus of the sort must be accredited to everybody.3So far as it is rightly conducted by their reasoning or just instinct, it means that, out of all or most of the members of an industrial society, some humanly costless saving could be got, some contribution towards the socially desirable fund of capital.
