Problems for Section 261

1. The real rate of interest fell from 4% to 3%: from 4 minus 0 to 5j minus 2\. The value of an infinitely long-lived capital good, in other words, rose 33%. Improving the land by enclosure was a capital good, very long-lived. Therefore landlords had more incentive to enclose. The historians are wrong.

2. As stated in the text, the American interest rate was higher than the British; other things being the same, Americans would prefer to defer expenditures, relative to the British, by building less durable roads. To put it the other way, a project to build railways in a very durable fashion, yielding returns (less maintenance and rebuilding costs) far in the future would be less attractive to Americans: high interest rates make for future returns worth little.

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