A critique of Friedrich Hayek’s argumentation in favor of a productivity theory of interest

Renaud Fillieule
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Renaud Fillieule: CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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Abstract: First in his paper «Utility Analysis and Interest» (1936) and then in two chapters of 'The Pure Theory of Capital' (1941), Hayek develops a model of the interest rate that combines productivity and time-preference in a graphical framework inspired by Fisher (1930). Hayek claims that his model supports a productivity explanation of interest, in which time preference plays no role at all or only a minor role. We show in this paper that the arguments he puts forward in favor of a productivity explanation do not prove his point at all, and that his neglect of the role of time preference remains therefore unjustified. The consequences for his model of fully taking time preference into account are then investigated.

Date: 2022-01-01
New Economics Papers: this item is included in nep-his, nep-hpe and nep-upt
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Published in History of Economic Ideas, 2022, History of Economic Ideas, 30 (1), pp.143-156. ⟨10.19272/202206101005⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04117743

DOI: 10.19272/202206101005

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