FOR US THE LIVING BY ROBERT A. HEINLEIN

“The eon is over. The cycle is finished. Your factory has depreciated to no value at all. I must remind you that your note is due at the bank.”

“Wait a minute. Why do you assume that the factory is now worthless?”

“It isn’t necessary. Had you figured for a shorter period, the cost item labeled ‘Factory’ would have been just the percentage of depreciation during the shorter period. There would have been a smaller number of articles manufactured, smaller items in all respects. The final cost per unit would have been the same, but we decided to run through a full cycle, from the beginning to the end of a producing unit. But come, come, you are stalling for time. What about my note? You owe me one hundred shekels.”

Perry counted up his chips and grinned at him. “You’ll have to whistle for it. I have only ninety-two shekels. I have four playing cards you can have for the balance.”

“I’ve no use for playing cards. I’m a banker and I have your promise to pay.”

Perry shrugged his shoulders and did not reply.

Davis continued. “Very well let’s get on with the next stage of the game. You have four units of ‘over-production’ and can’t quite pay your note at the bank. But your banker respects your ability. Your original security is still good, and the banker says that conditions are essentially ‘sound’. He re-finances you to go into production again. You sign a new note, this time for one hundred and eight shekels and now have one hundred shekels to your account. But your banker cautions you not to be guilty of ‘over-production’. You go away, feeling somewhat confused as you don’t see where you made your mistake, but the banker must be right for you certainly were left with four playing cards that you could not sell. You decide that the market only requires fifty-nine cards instead of the sixty-three you produced. So you do it all over again, producing only fifty-five cards which with your carry over of four gives you fifty-nine to sell. What is the result?”

“Why, I come out even I suppose.”

“Do you? Last time you spent forty-four shekels on wages and thirty shekels on materials to build sixty-three playing cards. How much do you spend this time?”

“Let me see. Forty-four and thirty is seventy-four. The labor and materials cost per unit is one sixty-third of that.” Perry set it up on his slide rule. “It comes to one point one one seven five (1.1175) shekels per card. I’m producing fifty-five cards this time. Fifty-five times one point one seven five is sixty-four and seven-tenths shekels.”

“Those people bought thirty-seven cards with their seventy-four shekels last time. What can they buy this time?”

“Thirty-two and a fraction.”

“Exactly. You sell your best market five fewer cards than last time. As a result of doing the only reasonable thing, you have more cards left over than before, you’ve thrown some people out of work, you have created less real wealth for the community to use and you are even farther from being able to pay off your note at the bank for you now owe one hundred and eight shekels and have only ninety-one with which to pay.”

“Ninety-one? I figured ninety-two.”

“No, ninety-one? Perhaps you forgot that your interest is eleven shekels on a hundred and eight.”

“That’s right. I figured ten, like last time. Now what happens? It looks like I’m going broke.”

“Wait a bit. Do you see what caused the original ‘overproduction’?”

“Why yes, the banker got money out of me that he didn’t turn around and spend with me. Everybody else spent their money as it came in.”

“Then what’s the trouble?”

“Well, it looks to me as if it was the interest you expected me to pay. If I hadn’t had to pay you that interest I’d have come out even.”

“Not so fast. They weren’t exactly equal and could not therefore have been the same thing. Even bankers have to eat. Why should he run a bank if he isn’t paid to do it? Tell me, what would the effect have been if anyone else had saved part of his income instead of spending it?”