Responding to C.H. Nightingale
on Interest -- Investments
[Reprinted from Land and Freedom,
In the true spirit of scholarship Mr. C. H. Nightingale of New
Zealand has sent me a copy of his communication to you. He writes me
that he is "very keen to know what reply I can make to it."
The difficulty that Mr. Nightingale has encountered here is not, as
he says, that I "refuse to see any difference between economic
interest and the market rate for loans," but that he mistakenly
imagines that this has anything to do with the problem.
Rent, as pointed out by W. R. B. Willcox in his new book, Taxation
Turmoil, is the compensation due those who make investments on
other sites around and about, far and near, that contribute to the
safety, comfort, and convenience of the occupants of that site rented
whether these activities are financed by public funds or private
This compensation is a definite amount, determined by the returns
realizable by the public from direct investments of similar amounts.
There is only one rent. The term "economic rent," or "economic
interest," is as unjustifiable as the term economic wages. What
is mistakenly called "monopoly rent" is, as P. W. Schwander
(Horatio) points out, merely a combination of rent plus an element of
Although the returns in individual cases will vary, the higgling of
the market brings it about in a free market that, in the long run and
on the average, what is left of the product after payment of the rent
is divided fifty-fifty between labor and capital, as their wages and
If the market is not free, which means that the takers of rent are in
control, more than the rent will be taken by the owners of strategic
sites; and labor and capital get less than their wages and interest.
The amount due capital as interest is no more affected by the fact
that men do, or do not, borrow than the amount due men's wages is
affected by the fact that men worked for themselves or for others.
Wealth gotten either as wages or as interest belongs to those who
made the investment of labor or capital for which it is the
compensation; and it is theirs to use as (hey please and to bequeath
to whom they please.
If it should happen that sufficient wealth should be left as a
bequest to an infant to keep that infant through childhood, maturity,
and old age without working, it might happen that this beneficiary
would go through life without ever earning a dollar by labor and yet
be entitled to live out his years in luxury; for it either is, or is
not, true that the product belongs to the producer to use and to
bequeath as he pleases.
If that is true, the capital involved in this case belongs to this
As for the interest he receives during his life, the reply is that
this comes out of the new product that is produced year after year as
the result of the use to which the capital is put by others. As the
owner of this capital, this beneficiary is entitled to his share that
is, to interest on his capital.
This is not approving a life of idleness; but that is a question in
morals. What may be the effect on the character and soul of this
beneficiary of such a life of idleness is another question and outside
the field of economics. This is a discussion of economics.
As for the Scriptural injunction that they who will not work shall
not eat, one would have to be a Greek scholar to determine whether the
word "work" in that case is justifiably limited to physical
or mental labor, or whether it covers any contribution to the work of
the world such as this beneficiary makes in putting his capital to
work. And, even if Nightingale won on that point, it would still be
necessary to decide whether that were a figurative or literal
expression. And even if literal, it would still be in order to ask
whether we are any more bound by Bible texts in matters of economics
than we are by the Bible references to the "corners of the earth."
The fact is that the Bible is not a text-book in science. Economics
is a science.