On Interest Theory

C.H. Nightingale

[A response to L.D. Beckwith. Reprinted from Land and Freedom, January-February 1939]

Beckwith asks me: "How could interest go to zero when all business had become so profitable that every one became a capitalist?"

To make this relevant to my argument the question needs revising, and should read:

"How could the interest rate on investments go to zero when all business is being increasingly aided by capital?"

For convenience let me call this aid by capital economic interest.

The answer now is very simple. In 1850, in California, the interest rate on investments was very high; today, it is by comparison very low. Yet economic interest has greatly increased.

This history proves that the interest rate on capital may decline while economic interest goes up. Let us say the market rate is now 5 per cent. Is there any reason to doubt that it might go down to 1 per cent while economic interest still rises? And if 1 per cent, why not zero?

The market rate has no relation to economic interest. When Beckwith learns this, he will not ask simple questions like the above.