Interest
The classical economists referred to the fee paid for the use of money or stock as "interest" but declared this to be a derivative income. The distinction between interest and profit is murky:
"Whoever derives his revenue from a fund which is his own, must draw it either from his labor, from his stock, or from his land. The revenue derived from labor is called wages. That derived from stock, by the person who manages or employs it, is called profit. That derived from it by the person who does not employ it himself, but lends it to another, is called the interest (f)or the use of money (or stock). It is the compensation which the borrower pays to the lender, for the profit which he has an opportunity of making by the use of the money (or stock). Part of that profit naturally belongs to the borrower, who runs the risk and takes the trouble of employing it; and part to the lender, who affords him the opportunity of making this profit. The interest of money is always a derivative revenue, which, if it is not paid from the profit which is made by the use of the money, must be paid from some other source of revenue, unless perhaps the borrower is a spendthrift, who contracts a second debt in order to pay the interest of the first." (Smith)
Smith uses the word profit in two different ways here. Is the owner of the money/tractor in his capacity as owner realizing profit or interest? It is certain that the proprietor of the money/tractor is realizing profit as opposed to interest. See "Smith on Profits and Interest" below.
Read more about this topic: Returns (economics)
Famous quotes containing the word interest:
“Justice is a moral virtue, merely because it has that tendency to the good of mankind, and indeed is nothing but an artificial invention to that purpose. The same may be said of allegiance, of the laws of nations, of modesty, and of good manners. All these are mere human contrivances for the interest of society.”
—David Hume (1711–1776)
“Women hock their jewels and their husbands’ insurance policies to acquire an unaccustomed shade in hair or crêpe de chine. Why then is it that when anyone commits anything novel in the arts he should be always greeted by this same peevish howl of pain and surprise? One is led to suspect that the interest people show in these much talked of commodities, painting, music, and writing, cannot be very deep or very genuine when they so wince under an unexpected impact.”
—John Dos Passos (1896–1970)
“They were evidently small men, all wind and quibbles, flinging out their chaffy grain to us with far less interest than a farm- wife feels as she scatters corn to her fowls.”
—D.H. (David Herbert)