Introduction to Austrian Economic Analysis

7. Capital, Interest and the Structure of Production

06/20/2006 Joseph T. Salerno

The seventh of ten lectures from Joseph Salerno’s Introduction to Austrian Economic Analysis seminar.

All action takes time. Humans use time as a tool. Time preference ranking is now, not later, although time preferences will differ over time and for different people, like children who want things right now.

Capitalists give up present money in order to pay labor present wages and in order to acquire the resources for the capital production stages. The capitalist has an expectation of future money at the end of the stages of the structure of production. Consumption and investment takes place in every stage of production. The capitalist can only invest. He cannot yet consume. The price spread is the difference between what the capitalist invests and what he receives. The interest rate determines what the capital value of the machine is.

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