with no appreciable change in the form of equipment, where this will bring an increase either in quantity or value of product and therefore enough more income to repay the larger period of waiting for its arrival. Unless other possible proc esses and kinds of tools and machines are already known (have been discovered and invented) duplicating and slow ing-up are the only two ways of adjusting production to a lower time-price. And nowhere and in no time before the modern period of science and invention (say 1700 A.D.) does there seem to have been any crowd of unemployed processes, waiting, so to speak, just outside the gates of industry. So it might happen that a large fall in the interest rate would not be quickly followed by any noticeable change in the ex ternal forms of production, either the machines or the methods. Such a change had to await the slow process of discovery and invention, to occupy this new territory which abstinence had opened up for settlement. Great changes came about by slow adaptations and by accretions of new ideas. The simple truth must not be forgotten that until a better technical process be comes known it can not be adopted even if the rate of interest were to become zero.
§ 11. Lower interest rate stimulating invention. But on the other hand, a fall in the rate of interest (and the condi tions of saving it reflects) must give a new stimulus to in vention by opening up a new zone of waiting time, or in other words, by embodying a definite offer of investors to back any new method (whether more indirect or not) that can be found by experience to lie between the old standard and the new standard of' waiting time. The lower the rate of interest, the greater the change in waiting time that corresponds with a further fall of 1 per cent. When interest falls from 10 per cent to 9, it means a lengthening of the waiting time by only 1% years; but when interest falls from 5 to 4, it means a lengthening of the waiting time by full 5 years. With each further fall of 1 per cent in the rate of interest the extension of waiting time goes on at an accelerating rate. At an in terest rate of 1 per cent the waiting time would be a hundred years, and at an interest rate of zero (only abstractly conceiv able) the waiting time must be infinity. If the interest rate were to fall to 3 and again to 2 per cent it would bring within the range of the economic an almost inconceivable number of technical processes which can not now be used. Viewed in this light, the remarkable outburst of practical invention and of new industrial processes in western Europe (particularly in England) in the eighteenth century, seems to have been partly due to a lower rate of interest (as compared with former centuries) following the more settled conditions, the growth of commerce, of banks, and of more regular investment mar kets in the financial centers.
This development of invention has been in turn greatly aided by the progress of the pure sciences since the seventeenth cen tury, brought about by investigators in universities and out side, who have continued to heap up a great mass of knowledge of nature from which the practical arts can increasingly draw.
To-day it is a matter of common knowledge that there are many better technical ways of doing things in every craft, ways which "do not pay" under present conditions. Many of these lie just outside the border of practical, profitable utilization. A fall in the rate of interest now makes possible the adoption of many technical processes that were formerly too slow in yielding the income on the investment. Partly this means the making of new and better instruments which call for a larger initial outlay to secure a certain income, partly it means the choice of chemical, botanical, mechanical, electrical, or other methods that yield larger results by tying up the equipment for a longer a This change is often said to be one "to more time-consuming processes." This phrase is easily misleading. It can not properly refer to the length of the technical process itself, but merely to what we here call the waiting-time for a certain income to mature on a certain invest ment. One technical process may require only a few days from the § 12. Time-price determining the selection of processes. Take now a situation where there is a prevailing interest rate with its corresponding equilibrium of investment, and consider what is the effect of the discovery of a new method of produc tion known to every one,' and of the invention of a machine that calls for a smaller investment (even after paying royalty to the inventor). Among many new methods and new ma chines, all degrees of advantage will be found in all varieties and combinations, ranging from those that require actually less equipment, use less material, require less labor for their operation, shorten the time for the process, reduce the number of technical steps, increase the quantity, and improve the quality of the product, to the opposite in each of these respects. Regarding the change from the old to these new methods and machines, two questions occur : (1) What determines where the line is drawn in making these changes from old to new methods? (2) What is the effect of the new methods upon the existing degree of abstinence ? So far as this change is rationally and wisely made, any new method will be adopted that will yield an income falling within the waiting-zone corresponding with the interest rate. Of course all of the extremely advantageous kinds just men tioned would be adopted, and others up to the limit of paying investment. Beyond that lie many processes which are tech nically possible but not economically possible. All of the ex making of the first machine to the finishing of the product, it may per mit a turnover several times a year (the making of new machines to be rapidly worn out) and yet "not pay," because it is a slow income yielding process. Whereas a machine, that lasts and a process that goes on for years until the product is ready, may yield income at such a rate that it is economic when interest is very high. (See ch. 21 on the relation of technic to time.) If the term time-consuming be used at all it must be taken in an income-ripening sense, not in a tech nically productive sense.