Negative Interest Rate: Toward a Taxonomic Critique

A basic principle of Austrian economics is that the originary rate of interest (the rate of discount of future goods compared to present, otherwise identical, goods) can never be negative. The reason for this arises not because capital is productive, nor out of man’s psychology. Nevertheless, in spite of the foregoing, there are many benighted souls who insist upon the possibility of a negative rate of originary interest. They are continually discovering cases which “prove” their conclusion. The number of such examples has reached such proportions that it seems advisable to take account of them in a systematic way. Accordingly, this paper is devoted to classifying them in a manner that makes the most intuitive sense: in accordance with the economic errors which are necessarily committed in their very statements

Volume 2, Number 2 (1978)