13-5b3b A landowner’s pre-income demand for money is practically inelastic unlike a laborer’s—the land will be rent out regardless of the height of interest

In other words, depending on the height of interest rate, the laborer will work less (or more)—with lower rate he will work more for present money (because he will be paid more as laborer when the time spread is tight) which will increase the supply of labor which in turn widens the time spread (i.e., higher interest rate), while with higher rate he will work less and can turn as a supplier of present money both of which bring about less supply in labor and increase in wage and both will tighten the time spread (i.e., lower interest rate).

“How can a laborer or a landowner be a demander of present goods, and then turn around and be a supplier of present goods for investment? The solution to this puzzle is that the two acts are not performed at the same time.” (p. 411)

“A landowner’s pre-income demand for money is likely to be practically inelastic, or vertical, while a laborer’s will probably be more elastic.” (p. 414)

Next:

• 13-5b3c The demand of landowners and laborers for present goods tend to be inelastic with respect to interest rates

Related:

• That interest rate is not that influential:revisit
  • 13-5f The interest rate is determined by the time-preference schedules, rather than vice versa
• As it relates to the first quote:revisit
  • 13-3b All the decisions to supply present goods on the present-future market to provide for the maintenance of the capital structure must be considered—various intercapitalist transactions cannot be netted out as duplications