“James makes a plane, lends it to William on 1st January for a year. William gives him a plank for the loan of it, wears it out, and makes another for James which he gives him on 31st December. On 1st January he again borrows the new one; and the arrangement is repeated continuously. The position of William therefore is, that he makes a plane every 31st December, lends it to James till the next day, and pays James a plank annually for the privilege of lending it to him on that evening. This, in future investigations of capital and interest, we will call, if you please, ‘the Position of William.’ “You may not at the first glance see where the fallacy lies: (the writer of the story evidently counts on your not seeing it at all). “If James did not lend the plane to William, he could only get his gain of a plank by working with it himself, and wearing it out himself. When he had worn it out at the end of the year, he would, therefore, have to make another for himself. William, working with it instead, gets the advantage instead, which he must, therefore, pay James his plank for; and return to James what James would, if he had not lent his plane, then have had--not a new plane, but the worn-out one. James must make a new one for himself, as he would have had to do if no William had existed; and if William likes to borrow it again for another plank, all is fair. “That is to say, clearing the story of its nonsense, that James makes a plane annually, and sells it to William for its proper price, which, in kind, is a new plane. But this arrangement has nothing whatever to do with principal or with interest.” I fear Ruskin is wrong. He forgets a sinking fund for depreciation. His error lies in supposing that a plane can be used for a year, and worn out, for no return but a plank. If planes only last a year and are of advantage, their value in use is equal to that of the cost of a plane plus a plank, plus some more. That is, the cost of making a plane is less by a plank and more than the benefit a workman can get out of it before it is worn out, after paying for his labour. The benefit in a year to the user is more than plane plus plank, or William would not go on. That is the point of the service of all capital, intelligently used. William has to pay his tax of a plank per annum because he is not beforehand with his needs. He gets the advantage of the plane every year twelve months before he can afford to make it; and the advantage of being in advance of his needs goes to James. The element of Time is everything. A plane at the beginning of a year is of more service than a plane you have to wait for till the end. Ruskin begins his sequence of time on December 31st of the first year, avoiding the whole point. And the position of William is therefore not unfair; though it is one to be avoided.