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Home | Mises Library | The Interest Rate and the Length of Production: A Comment

The Interest Rate and the Length of Production: A Comment

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Tags Capital and Interest TheoryProduction Theory

02/28/2017David Howden

Quarterly Journal of Austrian Economics 19, no. 4 (Winter 2016)

ABSTRACT: Machaj (2015) does a great service in pointing out a key assumption, heretofore unaddressed, in Filleule (2007) and Hülsmann (2010). Machaj errs, however, in stating that who saves will have an ambiguous effect on the interest rate and that where savings are directed can have ambiguous effects on the length of production. In this brief comment I will first show that who saves will have no effect on the interest rate. I then turn my attention to what it means to “lengthen” the structure of production. Although extended production time or additional “stages” of production make convenient placeholders for increased roundaboutness, they fail to grasp the core concept as it pertains to capital theory: what is it about production processes that makes more or better consumer goods?

KEYWORDS: capital theory, interest, production structure, roundaboutness, labor intensity
JEL CLASSIFICATION: B13, B53, D24, E43
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

Cite This Article

Howden, David, "The Interest Rate and the Length of Production: A Comment," Quarterly Journal of Austrian Economics 19, no. 4 (Winter 2016): 345–358.

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