Capital and Interest Theory

Booms and busts are brewing in the real economy, but computers that can quickly solve math problems won’t tell you much about how business cycles w

Ingo Pellengahr’s doctoral dissertation, The Austrian Subjectivist Theory of Interest, focuses on one small aspect of these ongoing debates.

Originary interest does not spring from the passing of time, but from the value relationship between means and ends.  the means of action are inherently less valuable than the ends they serve.  

Engelhardt’s analysis implicitly assumes away the presence of diminishing returns. Diminishing returns have long been at the heart of growth theory 

Garrison's Time and Money picks up where Hayek left off, developing a macroeconomic model based on Austrian capital theory that provides significant insights into macroeconomic phenomena. 

In a recent paper, Guido Hülsmann (2002) advances the revolutionary idea that Austrian economists ought to base their concept of originary interest on the spread between the value of an end and the value of the means used to achieve the end. He points out that this idea stands in opposition to Ludwig von Mises’s argument that the concept should be based on the assumption of time preference, as presented in Human Action (1966). He also argues that whereas his idea enables one to link originary interest, as he defines it, to market interest, Mises’s idea does not. Hülsmann uses most of his paper to articulate his new idea. The first part of his paper, however, is largely a critique of Mises’s theory.

Hayek’s works have continued to influence Foss, so it is only appropriate, therefore, that the author pay homage to him. Specifically, Foss pays homage by addressing a favorite Hayek topic—namely that of capital theory.

As substantial as economist as Schumpeter could claim that interest is a disequilibrium phenomenon and fantasize about a long-run equilibrium where market forces have pushed the interest rate to zero. 

Time and Money is a multifaceted achievement. Within its pages the reader will encounter business cycle theory, capital theory, comparative economic thought

Roger Garrison (2001) provides a welcome diagrammatic exposition of Austrian, capital-based macroeconomics. The exposition attempts to account not only for Austrian business cycles (ABCs), but also for long-run, secular growth.