regarded as a "real cost." Interest, it
is sometimes said, is necessary to provide for the future. It is far
more certain that interest is necessary to provide for the present. It
is a matter of legitimate doubt how far it is necessary to _pay_
interest to secure a supply of capital; there is no doubt at all that
it is necessary to _charge_ interest to limit the demand for it. As we
saw in Chapter I, a world socialist commonwealth would require to
retain a rate of interest, if only as a matter of bookkeeping, in
order to choose between the various capital undertakings that were
technically possible. And this is the primary function which the fate
of interest fulfils in our present-day society. It separates the sheep
from the goats. It serves as a screen, by means of which capital
projects are sifted, and through which only those are allowed to pass
which will benefit the future in a high degree. For this essential
purpose it is hard to imagine how a better instrument could be
devised.

Sec.8. _The Supply of Capital_. Let us dwell for a moment on this image
of a screen, or sieve. One condition of a good sieve is that its
meshes should all be of the same size. This condition the rate of
interest almost perfectly fulfils. But it is also important that the
meshes should be of the _right_ size. Whether this is true of the
actual rate of interest is a far more doubtful matter. It is, indeed,
plain that it is not altogether devoid of merit in this respect. In
times of general world poverty, like those which follow upon a great
war, it is desirable, as has been argued, that more of our productive
resources should be devoted to immediately useful purposes, and a
smaller portion dedicated to a distant future. This readjustment the
rate of interest helps to bring about. For it rises to a higher
level, and there is accordingly a strong inducement to all
manufacturers and traders to economize their use of capital, and thus
to set free productive resources for more urgent needs. But, while the
meshes of the sieve, as it were, contract in times when it is
desirable that they should contract, we have no reason for supposing
that they will contract in just the degree that is desired, neither
more nor less; or, indeed, that at any time they approximate to the
right size. We in the twentieth century owe much of the material
wealth that we enjoy to the fact that over the last century men saved
as largely as they did. But our natural gra