THE INTEREST RATE AS A GUIDE IN CONSERVATION
In striking a balance between the present and the future, economists have emphasized the importance of recognizing the interest rate as a guiding, if not a controlling consideration. It is obviously difficult for private capital to make investments of effort and money for the purpose of conservation which will not be returned with interest some time in the future. For the present, at least, this consideration furnishes the best guide to procedure in the field of private endeavor. So far as conservational measures, such as investment in an improved process of concentrating low-grade ores, promise return of capital and an adequate interest rate in the future, they are likely to be undertaken.
It is clear that governments are not so closely bound by this economic limitation. They can afford to carry their investments in raw materials and processes at a lower interest rate than the private investor. Their credit is better. Taxes do not figure so directly. They can balance losses in one field against gains in another. As a matter of insurance for the future of the nation, a government may feel justified in inaugurating conservational measures for a particular resource without hope of the interest return which would be necessary to the private investor. In appraising the iron ores of Lorraine taken over by France from Germany at the close of the war, the actual commercial value of these ores, as figured by the ordinary ad valorem method, was only ninety millions of dollars. It is clear, however, that to France as a nation the reserves were worth more. They could afford to pay more for them, and could afford to spend more money on conservational practice than under ordinary commercial limitations, because of the larger intangible and more or less sentimental interest.
The valuation of this larger interest, as a means of determining the limit to which conservational investments may be made, lies in the political field. It may be suggested, however, that a desirable first step in