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Fisher and Mises on Zero Interest: A Reconsideration

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  • Pavel Potužák

Abstract

This article demonstrates that the pure time-preference theory of Ludwig von Mises is inconsistent. A productivity element is studied in the Fisher model, and it is shown that time preference is neither a necessary nor a sufficient condition for the existence of interest. An attempt is also made to reconcile the Austrian theory with the neoclassical theory of interest. It is suggested that the key difference lies in the definition of interest as such, and it is concluded that the Austrian theory is only a special case of a more general neoclassical framework.

Suggested Citation

  • Pavel Potužák, 2016. "Fisher and Mises on Zero Interest: A Reconsideration," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(2), pages 203-220.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:2:id:555:p:202-220
    DOI: 10.18267/j.pep.555
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    References listed on IDEAS

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    1. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1.
    2. Gilbert Ghez & Gary S. Becker, 1975. "A Theory of the Allocation of Time and Goods Over the Life Cycle," NBER Chapters, in: The Allocation of Time and Goods over the Life Cycle, pages 1-45, National Bureau of Economic Research, Inc.
    3. Harry G. Brown, 1913. "The Marginal Productivity Versus the Impatience Theory of Interest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 27(4), pages 630-650.
    4. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Goods Over the Life Cycle," NBER Chapters, in: The Allocation of Time and Goods over the Life Cycle, pages 46-82, National Bureau of Economic Research, Inc.
    5. Olson, Mancur & Bailey, Martin J, 1981. "Positive Time Preference," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 1-25, February.
    6. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time Over the Life Cycle," NBER Chapters, in: The Allocation of Time and Goods over the Life Cycle, pages 83-132, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Pavel Potužák, 2018. "Stimuluje spotřebu v situaci nulové nominální úrokové míry zvýšení inflačních očekávání? [Does an Increase in Inflation Expectations Stimulate Consumption at the Zero Lower Bound?]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(6), pages 751-775.
    2. Pavel Potužák, 2021. "The Optimum Allocation of Consumption of the Fisherian Shipwrecked Sailors," International Journal of Economic Sciences, European Research Center, vol. 10(2), pages 115-126, December.
    3. Pavel Potu?ák, 2021. "The Optimum Allocation of Consumption of the Fisherian Shipwrecked Sailors," International Journal of Economic Sciences, European Research Center, vol. 10(2), pages 114-125, December.

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    More about this item

    Keywords

    zero lower bound; time-preference theory; theory of interest; productivity of capital; Mises; Fisher;
    All these keywords.

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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