Reading Notes for The Theory of Interest for Irving Fisher
1
Reading notes from Irving Fisher’s The Theory of Interest, 1930
Preface -- It was the misunderstanding of my theory of interest put forward in my 1907 book the Rate of Interest that led me to adopt the catchword “investment opportunity” as a substitute for the inadequate term “productivity” which had come into general use.
This combined with my early “impatience theory” led to the impatience and opportunity theory which can be said to be distinct from all other theories of interest because it explicitly analyzes opportunity and fits together impatience and opportunity and income.
The income concept plays the basic role in the theory of interest. I venture to hope that the theory here presented, will be found not so much to overthrow as to coordinate previous theories, and to help in making the chain of explanation complete and strong.
The term “investment opportunity” seems to be the nearest expression in popular language to suggest the technical magnitude r employed in this book. The full expression for r is the rate of return over costs, and both cost and returns are differences between two optional income streams. So far as I know, no other writer on interest has made use of income streams and their differences, or rates of return over cost per annum.
Part I Introduction Chapter 1 income and capital Paragraph 1 subjective or enjoyment income. It is only what we carry out of the marketplace into our homes and private lives which really counts. Money is of no use to us until it is spent. The ultimate wages are not paid in terms of money but in the enjoyment it buys. Enjoyment income is a psychological entity; we can approximate it indirectly by going one step back a bit to what is called real income. Real wages and indeed real income in general consist of those final physical events in the outer world which give us our inner enjoyment.
Just as we went back of an individual's enjoyment income to his real income, we now go back to his real
Reading notes from Irving Fisher’s The Theory of Interest, 1930
Preface -- It was the misunderstanding of my theory of interest put forward in my 1907 book the Rate of Interest that led me to adopt the catchword “investment opportunity” as a substitute for the inadequate term “productivity” which had come into general use.
This combined with my early “impatience theory” led to the impatience and opportunity theory which can be said to be distinct from all other theories of interest because it explicitly analyzes opportunity and fits together impatience and opportunity and income.
The income concept plays the basic role in the theory of interest. I venture to hope that the theory here presented, will be found not so much to overthrow as to coordinate previous theories, and to help in making the chain of explanation complete and strong.
The term “investment opportunity” seems to be the nearest expression in popular language to suggest the technical magnitude r employed in this book. The full expression for r is the rate of return over costs, and both cost and returns are differences between two optional income streams. So far as I know, no other writer on interest has made use of income streams and their differences, or rates of return over cost per annum.
Part I Introduction Chapter 1 income and capital Paragraph 1 subjective or enjoyment income. It is only what we carry out of the marketplace into our homes and private lives which really counts. Money is of no use to us until it is spent. The ultimate wages are not paid in terms of money but in the enjoyment it buys. Enjoyment income is a psychological entity; we can approximate it indirectly by going one step back a bit to what is called real income. Real wages and indeed real income in general consist of those final physical events in the outer world which give us our inner enjoyment.
Just as we went back of an individual's enjoyment income to his real income, we now go back to his real