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The purpose of this book is not to give a history of the problem of interest or to discuss in detail all the supposed solutions of it, but to try to solve it correctly.

The importance of a correct solution can hardly be overestimated.

Millions of men now call themselves party Socialists in countries where that party is committed to the Marxian doctrine of interest, according to which interest is due to the exploitation of wage-earners by capitalists. Millions of men, in other words, on account of the theory of interest they have accepted, regard themselves as robbed by capitalists. By many party Socialists in the United States and elsewhere, indeed, the view is held that the capitalists themselves fully understand how the system robs the wage-earners, and sustain universities, whose professors defend it, not, as they pretend, primarily for the advancement of learning, but primarily for the perpetuation of organized injustice. Such is the attitude, I say, of millions of persons at one end of the scale of political opinion. At the other end of the scale are the business men the "bourgeoisie,” in the Marxian terminology- who in fact do not see any injustice in the receipt of interest, and who therefore in turn view the party Socialists as men who would rob them of their just accumulations. Neither group respects or understands the other. And the root of the whole misunderstanding, which breaks out into bitter struggles and dynamite plots today


and which may break out into civil war before long, is a difference in accounting for the surplus called interest. Marx's theory, which is accepted by acclamation by many wage-earners, seems wholly untrue to the few capitalists and the many professional economists who inquire into it. The theories of the professors and the capitalists, on the other hand, are hard to understand, and hopelessly at odds with each other. To the few leaders among the wage-earners who inquire into them, therefore, they are quite unconvincing. So the misunderstanding and the recriminations go on, and the political sky is full of warnings.

All that is needed is light and moral courage. The light must come from those who study the problem of interest deeply and honestly. The courage must be furnished by the leaders of those political groups, in all lands, whose conceptions of interest must be modified in accordance with the light.

Though inclined by my natural sympathies, on undertaking the study of interest, to take sides with the poor rather than with the rich if I could do so with intellectual sincerity, I was concerned, above all things, to discover the truth. And my conclusion is that, provided only a person's capital itself is equitably his own, his title to the interest accruing from it is as good as his title to the earnings of his hands.

Here, of course, the Marxians and the Anarchists among my readers will be inclined to throw the book aside because its conclusion conflicts with their own. To such readers, therefore, I want to address two paragraphs.

You who believe that interest is robbery, who, indeed,


as you would say, know that it is robbery, you who are sure that perpetual motion is as impossible in finance as it is in mechanics, do you dare to read this book and then to act honestly according to your convictions ? If interest does not involve perpetual motion in finance, and if it is involved in the very make-up of the world, nothing is to be gained by failing to understand the truth about it and to modify your political and economic programs accordingly.

Wage-earners and capitalists can understand each other and work together for the common good, as they cannot do now, just as soon as they agree on the interest problem ; and they will agree on that problem, obviously, as soon as they both see the truth. The capitalists are approaching the truth, under the guidance of the professional economists, who in the main are quite honest men. It is to be hoped that the wage-earners will approach the same truth from their side, under the guidance of their leaders, of whom, perhaps, you are

To understand the interest problem will call for time and thought, but surely they are well bestowed for so great an object. To defend the truth among those who now oppose it will call for moral courage.

Of the professional economists I must ask indulgence for using a terminology containing more new words and meanings than will at first seem to them necessary. My defence is that my whole theory is cast in a fresh mould, and I could not bring myself to be satisfied with expressing it in terms shaped by their associations with theories that will not fit my mind. I venture to hope that I have thrown enough light on the problem to be partly excused for my innovations.


The keystone of economic theory is the conception of value. Without a correct theory of value it was impossible to work out a correct theory of interest, and without a correct theory of interest it was impossible to work out correct theories of price and of distribution. This book makes in the theory of value some modifications that seem to me important.

If my theory is to be called by a brief name, it should be called the nominal value theory, for the keystone of it is my conception of nominal value.

The author to whom I owe most is Professor von Böhm-Bawerk, whose Capital and Interest and Positive Theory of Capital were very helpful to me. The following gentlemen have extended to me various courtesies, and it gives me pleasure to record my obligation to them : Professors Patten and McCrea of the University of Pennsylvania; Clark, Seager, and Mussey of Columbia; Taussig and Carver of Harvard; Barrett and Wilson of Haverford College; Mr. J. A. Hobson of England; Mr. Cyril A. Ward of Lausanne, Switzerland; Mr. Arthur H. Thomas of Haverford, Pa.; and Mr. Charles L. Serrill and Dr. C. W. Macfarlane of Philadelphia. Mr. Ward was very kind in helping me in regard to the algebraic formulæ. Most of all I am indebted to my wife. Without her encouragement and coöperation I could not have written the book at all.


April 15, 1913.

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