1. Time-value is the difference between the values of things at different times. Things differ in value according to form, place, quality of goods, and according to the feelings of men, and - not least important factor - according to time. The simplest and clearest case of time-value is the difference noticeable in the same thing at different moments. Is this good worth more now or next week? Shall this apple be eaten now or next winter? These questions can be answered only after comparing the marginal utilities which differ according to the varying conditions of the two periods.

All the other cases of time-value can, by the practical device of substituting other goods of equivalent value, be reduced to the typical case of comparison of the same thing at different times. The comparison may be between very similar things, the one consumed being replaced by a duplicate. An apple borrowed now may be returned next year in the form of one of the same size and quality. The essential thing in this comparison is not physical identity, but equivalence in size, sort, and quality at the two periods. This is borrowing under the renting contract.

The simplest cases of time-value.

But two or more quite different things may be expressed in terms of another thing and so be made comparable. Money becomes the value-unit through which different things may be_reduced to the same terms for comparison. With this mode of expressing the value-equivalence of various goods, the interest contract first becomes possible, money (the standard of deferred payments) being the thing exchanged (possibly only in name) at two periods of time. What is really compared are various gratifications which may be produced by very different material things or ser-vices. In its last analysis comparison of values at different periods of time must be a comparison of psychic incomes, of two sums of gratification. The comparison of the value of a bushel of apples with that of a barrel of potatoes or a suit of clothes at the same moment appears simple enough. When all are expressed in terms of money, the comparison of each with its value-equivalent at a later date becomes easy. The simplicity and obviousness of time-value in the case of money loans at interest led men at first to recognize that phase of the problem exclusively, and later the term "interest," not without much confusion of thought, was given a wider significance. Let us now see how large a part of the whole problem of time-value is outside) of the money loan.

Time-value in the case of different kinds of gratifications.

Time-value is involved in capital-ization of land.

2. The problem of time-value is quite separable from the concepts of money and capital, though usually connected with them in practice and theory. It is true that the problem of time-value was first clearly recognized in connection with money and a formally expressed capital sum. Misled by this fact, and taking a very narrow view, writers seventy-five years ago recognized but dimly the problem of time-value in connection with the valuation of the incomes derived from land. It is true, as has been shown above, that the mere putting of an estimate on a durable good such as land involves the process of capitalization, which in turn implies a comparison of the values of the rents expected at different periods. Diminishing returns in the use of agents involves a loss of time to secure the usufructs emerging. The relation of these facts was not clearly seen until of late.

The phenomenon of time-value as above defined may be seen to be broader even than that of capitalization. The difference in the value of the successive rents of wealth must have been recognized and in some degree measured before there was any conscious calculation of capital value. Differences in value due to time are everywhere. The problem of time-value often is present where money is not even spoken of or thought of. Money no more causes this time-difference in value than balances cause weight.

3. The problem of time-value is involved in repairs and depreciation, and in the use of consumption goods. It is possible, as we have seen, to increase the sum available for present needs, and to encroach upon the future by postponing repairs on intermediate goods. The balancing of the cost of repairs against the future income is a never-ending task in practical business. One making repairs must purchase the needed materials and labor at a capitalization determined by their expected earning-power in other industries. If the repairs in question will not ensure an annual saving as great as this expected rent, they will not be made. When an industry is declining, it may, for the sake of putting the capital into a better business, be good policy to let the machinery fall into bad repair. The problem of time-value is involved in the application of one's energy to repairing one's own possessions. It is a thought of wide bearings that numberless minor decisions in every petty business involve, if they are correctly made, a measuring of the rate of capitalization.

Time-value is taken account of in the keeping up of repairs.

As will be more fully shown in discussing the relation of the prevailing rate of interest to saving, the recognition of time-value is implied in the use men make of consumption goods, in their postponement of enjoyment, in their storing of goods for future use. The varying gratifications yielded by consumption goods, and their values in different conditions cannot be explained without taking account of differences in time. Wherever there can be a choice in the time at which, and consequently in the conditions under which, a thing can be used, there is a choice presented between the different values. Time-value is present even in a period during which no goods continue to exist, as when a good is consumed at a moment of greater need, to be replaced at a time when less valuable. If an apple is borrowed on the promise to return an apple and a peach at the end of a year, the peach represents the time-difference in value but in the meantime there has been no apple in existence. It is only in a figurative sense that it may be said that interest is paid on that "capital." Interest is paid because of a difference in want-gratifying power, but during the interval there is no material capital.

And in the choice of enjoyments.

Prodigality and vice involve a high discount of future happiness.

4. The problem of time-value is involved in much foolish pleasure, in prodigality, and in vice. Economics touches frequently on the borders of ethics. If there were to be formulated an economics of personal conduct, it surely would give a large place to the comparison between present and future pleasures. Forethought, or prudence, is the virtue of recognizing not only future dangers to be avoided, but the greater future joys to be gained in exchange for present pleasures. The reckless and the prodigal underestimate the future and barter all to gratify the moment's impulse. The drinker exchanges the hopes of worthy life for the exhilaration of the spree. Indulgence in social pleasures, if secured at the price of lost sleep, weakened health, and debauched character, are loans from the future made by youthful prodigals at usurious interest. If no one ever paid more than a moderate rate of interest for the gratification of his present whims and impulses, most hospitals, drug-stores, and medical colleges would close, and half, if not all, the prisons would be empty.

Indeed, time difference in value is a universal phenomenon of life and conduct. Contract interest is but one phenomenal form of time-value, and this in turn is but one phase of value. This section may serve to suggest how much more varied and pervasive the fact of time-value is than has usually been recognized in popular or economic discussion of the subject of interest.