suits, say, that they lend. To do so might, in the case of loans for a considerable time, be disastrous to themselves; for nobody can know that the identical goods will be as valuable next year as they are this year. What lenders want back, as "principal," is goods or services of the later time having the same nominal1 value (see § 14) as the goods or services lent. So such an area as E'F'G'H' in Figure II, or any other area of 100 units, may represent the value of the principal of the later time. As the chances are overwhelmingly against the later principal's having dimensions precisely the same as those of the principal of the earlier time, I shall always use an irregular solid like that of Figure II rather than a parallelepiped like that of Figure I to represent the thing whose price is interest.

For this three-dimensional thing whose price is interest we need a short name. I propose to call it an advance. An advance, then, as we shall use the word, is not to be confused with the goods or services advanced. The latter are things of two dimensions, whereas an advance is a thing of three, the third dimension being time.

§ 31. Advances are of several sorts. I make an advance whose cross-section, parallel with A'B'C'D' in Figure II, we may call 10 and whose time-dimension we may call 5 when I lend you ten dollars for five years. That sort of advance is usually called a loan. I make an advance also if I rent you a house. This sort of advance is usually called a rent contract or a

1 This sentence may serve temporarily as a definition of the principal. See §§ 34 and 35.

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lease. It differs from what we call the loan at interest in providing for the return of the identical good lent: if a certain house is advanced on a lease, it is expected that the very same house, not any other house or other thing of the same nominal value, will be returned at the end of the time stipulated. And as any particular durable good usually declines in nominal value with the passing of time, on account of wear and tear, the good itself at the end of the time is usually not expected to suffice for the principal of the loan, and the difference is charged in money and appears as the excess of the rent charged over what would be interest at the current rate on the market value of the good at the beginning of the time. As investors express it, "If you don't get enough rent from a building to yield you interest at the current rate above taxes, cost of repairs, and everything else that must be written off so as to leave. your principal intact, the investment in the building is a bad one."

A third sort of advance I make when I store up goods for future use, as when I store part of my harvest in the cellar for use in the winter, or when I store up my labor in some concrete thing - a table, say, a canoe, a fencegate whose services will not repay me for my labor for a considerable time. This sort of advance I make, indeed, even when I merely reserve for its future services a durable good which no person in his senses and under ordinary circumstances would think of treating otherwise but which it would give me more immediate pleasure to consume utterly at once, as when, for instance, I reserve my study-table for its future uses as such instead

of burning it in the fireplace the first time I happen to be cold, out of fuel, and not especially in need of a table for the moment. For making an advance consists simply in giving up an earlier pleasure for a later pleasure (presumably greater). Nowadays, of course, in commercially advanced countries, this third sort of advance is often made by saving money or credit - either of which represents a claim on some of the market's goods or services rather than by piling up concrete goods or by investing one's own labor directly in a durable good; but, equally of course, saving five dollars and then buying a wheelbarrow with the money is just the same, so far as our inquiry is concerned, as building the wheelbarrow with one's own saved labor.

It is to be noticed that what is really advanced in any case is earlier services for later services. If I lend you ten dollars for five years, I make over to you a claim on the present market's services - those rendered by persons directly, those rendered by persons indirectly through goods, or those (of which the services of favored land sites are examples) rendered by nature or by society but appropriated by persons up to a market value represented by ten dollars, in exchange for a claim on the services of the market of five years hence to the same nominal value, plus any interest that may be agreed on. If I rent you a house, I give you its services now in return for its services at the end of the time agreed on, plus the "rent." If I store apples in my cellar for winter use I forego their services the word is odd in such a connection, but there is no harm in using it— in the autumn to have instead their services in the

winter. If I store up some of my labor in a canoe that will not repay me for that labor for a considerable time, I am exchanging the services of goods or of persons that I could secure for that labor now for the services of the canoe some of which it will render me only after the lapse of months or years. As what is advanced is thus always, in the last resort, services, it is permissible to speak of it merely as services instead of as "goods or services," as I have done hitherto. It is, indeed, actually preferable to use the single word only, because doing so helps us bear in mind what it is that is in all cases really advanced.

32. Between the first and second sorts of advances on the one hand and the third on the other there is a distinction that we shall find to be of the greatest significance for the theory of interest. Advances of the first and second sorts are from one person to another; those of the third sort from a person to nature. Advances of the first and second sorts only shift the burden of making an advance-to-nature from one person's shoulders to another's, whereas those of the third sort actually lock up in concrete things of the physical world, or in the relations to each other of such things, services that will not for a considerable time be enjoyed to a nominal value equal to that of the labor they cost.

The significance, for the theory of interest, of this difference between advances to persons and advances to nature appears when we undertake to apply to advances the theory of normal prices explained in the preceding chapter. When, for instance, the diagram of § 25 is to be used for advances, just what is it that

is to be laid off along the base-line LI? Are advances to persons as well as advances to nature to be laid off on it? The question is very puzzling until we realize that an advance to a person is nothing but the sale to him of an advance to nature. Then it becomes clear that the only stock of advances that corresponds, in the theory of the normal price of advances, to the stock of any sort of goods or services in the theory of the normal price of goods or services, is that of advances to nature; and that advances to persons, being really only sales of advances to nature or at least of opportunities to make such advances do not affect the normal price of those advances any more than the sale of a table, once or a dozen times, affects the normal price of tables. Nothing affects the normal price of tables that does not affect the curve CH or the curve OR as applied to tables; nothing affects the normal price of advances that does not affect the curve CH or the curve OR as applied to advances; and neither the sale of a table nor the sale of an advance to nature does affect either of these curves, for the reason that, so far as these curves are concerned, such a sale's effect on the buyer and its effect on the seller exactly cancel each other.

It will be evident without detailed explanation that an advance to nature is represented by Figure II of § 30 just as well as an advance to a person is. When that figure represents an advance to nature, the area A'B'C'D' represents the nominal value, 100 (corresponding to the price $100), of services D'C' which are invested in an advance to nature; and the area E'F'G'H' represents the nominal value of the services H'G' of