h which we
are all tolerably familiar. We recognize a short-loan market, a stock
exchange, a number of "markets" where lenders and borrowers are
brought together by the aid of various intermediaries, such as banks,
bill brokers, and stock jobbers, who correspond to dealers in
commodities. Between these different specialized markets, we are
aware of an interconnection so close and strong that we speak more
generally of a Capital Market, of which the stock exchange, the
short-loan market and so forth, are the component parts. Now, "market"
is a word which was originally used to denote a place where tangible
commodities were bought and sold; and the more closely we examine the
phenomena of the Capital Market, the more closely do we perceive the
profound resemblance between the mechanism of borrowing and lending,
and that of buying and selling. Corresponding to the price of a
commodity is the rate of interest (in the short-loan market we
actually call the rate of Discount "the price of money," and speak of
money being cheap or dear); and between the rate of interest, the
demand for and the supply of capital there exist relations precisely
similar to those between price, demand, and supply in commodity
markets. Above all there is the same strong prevailing trend towards
an adjustment of demand and supply.

This fundamental resemblance between two such apparently
incommensurable things as the buying of material commodities and the
borrowing of capital is highly significant; it is another instance of
that order in the economic world, of which the reader may now be
growing weary. But so difficult is it to see clearly and fully
something which one sees, as it were, every day of one's life, that a
few more moments of reflection on the special case of capital will be
time well spent. Let us revert then to our fantasy of a world
socialist commonwealth; and humbly submit another poser to its supreme
executive. The question this time will be whether some great
constructional work, such, let us say, as the recently mooted Severn
barrage scheme, should or should not be undertaken. Let us suppose
that the costs and future benefits of the undertaking can be estimated
accurately; and that the problem reduces itself to one of expending
now a sum, let us say, of $100,000,000, with the prospects of
obtaining in the future an income of power, or whatever it may be,
worth $5,000,000 per annum. I have assumed for the sake of simplicity
that w