IDEAS home Printed from https://ideas.repec.org/a/taf/eujhet/v13y2006i3p311-335.html
   My bibliography  Save this article

The double emergence of the Modified Internal Rate of Return: The neglected financial work of Duvillard (1755 - 1832) in a comparative perspective

Author

Listed:
  • Yuri Biondi

Abstract

This article aims at enhancing current understanding of the history of investment evaluation criteria based on discounting. Their emergence constitutes a challenging issue for scholars devoted to the history of financial economics, as well as to fundamental tools of economic analysis. Their history is analysed in a comparative perspective, starting with the neglected contribution of Duvillard as a reference case. More than two centuries ago, this French language scholar developed, by an optimizing analytical machinery, a financial measure technically similar to Modified Internal Rate of Return (MIRR). In order to assess his theoretical contribution in a comparative perspective, the author will try to briefly account for the different contexts where the financial measure has been invented twice. This approach, indeed, is concerned with the institutional changes and the theoretical developments they fostered. It analyses concepts such as time preference, techniques such as discounting and issues such as the 'reinvestment problem'. On the one hand, the Past (especially around the eighteenth century) and Duvillard's contribution is explored. On the other hand, the Present is reconstructed (in particular the late Fifties and later), especially the recent debate that re-invented the MIRR. This article will conclude with some comparative results.

Suggested Citation

  • Yuri Biondi, 2006. "The double emergence of the Modified Internal Rate of Return: The neglected financial work of Duvillard (1755 - 1832) in a comparative perspective," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(3), pages 311-335.
    • Handle: RePEc:taf:eujhet:v:13:y:2006:i:3:p:311-335
    DOI: 10.1080/09672560600875281
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09672560600875281
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09672560600875281?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. James H. Lorie & Leonard J. Savage, 1955. "Three Problems in Rationing Capital," The Journal of Business, University of Chicago Press, vol. 28, pages 229-229.
    2. Arrow, Kenneth J & Levhari, David, 1969. "Uniqueness of the Internal Rate of Return with Variable Life of Investment," Economic Journal, Royal Economic Society, vol. 79(315), pages 560-566, September.
    3. Reghinos D. Theocharis, 1983. "Early Developments in Mathematical Economics," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-04949-3, December.
    4. George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine.
    5. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-193, Fall.
    6. Sen, Amartya, 1975. "Minimal conditions for monotonicity of capital value," Journal of Economic Theory, Elsevier, vol. 11(3), pages 340-355, December.
    7. Parker, Rh, 1968. "Discounted Cash Flow In Historical Perspective," Journal of Accounting Research, Wiley Blackwell, vol. 6(1), pages 58-71.
    8. Tubaro, Paola, 2002. "A Case Study in Early Mathematical Economics: Pietro Verri and Paolo Frisi, 1772," Journal of the History of Economic Thought, Cambridge University Press, vol. 24(2), pages 195-214, June.
    9. Geoffrey Poitras, 2000. "The Early History of Financial Economics, 1478–1776," Books, Edward Elgar Publishing, number 2151.
    10. Flemming, J S & Wright, J F, 1971. "Uniqueness of the Internal Rate of Return: A Generalisation," Economic Journal, Royal Economic Society, vol. 81(322), pages 256-263, June.
    11. Daniel Teichroew & Alexander A. Robichek & Michael Montalbano, 1965. "Mathematical Analysis of Rates of Return Under Certainty," Management Science, INFORMS, vol. 11(3), pages 395-403, January.
    12. Ezra Solomon, 1956. "The Arithmetic of Capital-Budgeting Decisions," The Journal of Business, University of Chicago Press, vol. 29, pages 124-124.
    13. Ross M. Robertson, 1949. "Mathematical Economics before Cournot," Journal of Political Economy, University of Chicago Press, vol. 57(6), pages 523-523.
    14. Fama, Eugene F, 1996. "Discounting under Uncertainty," The Journal of Business, University of Chicago Press, vol. 69(4), pages 415-428, October.
    15. Paul A. Samuelson, 1937. "Some Aspects of the Pure Theory of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(3), pages 469-496.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vélez Pareja Ignacio, 2012. "Ranking and optimal selection of investments with internal rate of return and benefit-cost ratio: a revision," Contaduría y Administración, Accounting and Management, vol. 57(1), pages 29-51, enero-mar.
    2. Magni, Carlo Alberto, 2016. "Capital depreciation and the underdetermination of rate of return: A unifying perspective," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 54-79.
    3. Weber, Thomas A., 2014. "On the (non-)equivalence of IRR and NPV," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 25-39.
    4. Carlo Alberto Magni, 2010. "Average Internal Rate of Return and investment decisions: A new perspective," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0021, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    5. Kierulff, Herbert, 2008. "MIRR: A better measure," Business Horizons, Elsevier, vol. 51(4), pages 321-329.
    6. Lambert Jerman, 2013. "La Juste Valeur : Une Comptabilite Actuarielle Pour Les Marches ... Ou Les Comptables ?," Post-Print hal-00991877, HAL.
    7. Yuri Biondi, 2009. "Capital budgeting under relational contracting: optimal ranking and duration criteria for schemes of concession, project-financing and public-private partnership," Post-Print hal-00442716, HAL.
    8. Cuthbert, James R. & Magni, Carlo Alberto, 2016. "Measuring the inadequacy of IRR in PFI schemes using profitability index and AIRR," International Journal of Production Economics, Elsevier, vol. 179(C), pages 130-140.
    9. Zanini, Andrea, 2021. "Pratica degli affari e prescrizioni morali: interesse e sconto nei manuali di aritmetica mercantile (secoli XVI-XVIII) [Business practices and moral precepts: interest and discount in commercial ar," MPRA Paper 108308, University Library of Munich, Germany.
    10. Rao, Xudong & Hurley, Terrance M. & Pardey, Philip G., 2012. "Recalibrating the Reported Rates of Return to Food and Agricultural R&D," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124581, Agricultural and Applied Economics Association.
    11. repec:dau:papers:123456789/13729 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Magni, Carlo Alberto, 2016. "Capital depreciation and the underdetermination of rate of return: A unifying perspective," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 54-79.
    2. Weber, Thomas A., 2014. "On the (non-)equivalence of IRR and NPV," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 25-39.
    3. Yuri Biondi, 2009. "Capital budgeting under relational contracting: optimal ranking and duration criteria for schemes of concession, project-financing and public-private partnership," Post-Print hal-00404305, HAL.
    4. Carlo Alberto Magni, 2010. "Average Internal Rate of Return and investment decisions: A new perspective," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0021, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    5. Carlo Alberto Magni, 2009. "Accounting and economic measures: an integrated theory of capital budgeting," Proyecciones Financieras y Valoración 5983, Master Consultores.
    6. David Promislow, S. & Spring, David, 1996. "Postulates for the internal rate of return of an investment project," Journal of Mathematical Economics, Elsevier, vol. 26(3), pages 325-361.
    7. Petr Marek, 2007. "Notes about Study on History of Theoretical Approaches to Investment Decision [Poznámky ke studiu historie teoretických přístupů k investičnímu rozhodování]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2007(4), pages 23-29.
    8. John Quah & Bruno Strulovici, 2011. "Discounting, Patience, and Dynamic Decision Making," Economics Series Working Papers 555, University of Oxford, Department of Economics.
    9. Mária Illés, 2020. "The Positive Net Present Value of Loss-making Projects: Economic Content of the Two Internal Rates of Return," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 16(02), pages 41-50.
    10. Sonin, Isaac M. & Whitmeyer, Mark, 2020. "Some nontrivial properties of a formula for compound interest," Finance Research Letters, Elsevier, vol. 33(C).
    11. Lambert Jerman, 2013. "La Juste Valeur : Une Comptabilite Actuarielle Pour Les Marches ... Ou Les Comptables ?," Post-Print hal-00991877, HAL.
    12. Vital Anderhub & Werner Gäuth & Wieland Mäuller & Martin Strobel, 2000. "An Experimental Analysis of Intertemporal Allocation Behavior," Experimental Economics, Springer;Economic Science Association, vol. 3(2), pages 137-152, October.
    13. Leiser, David & Azar, Ofer H. & Hadar, Liat, 2008. "Psychological construal of economic behavior," Journal of Economic Psychology, Elsevier, vol. 29(5), pages 762-776, November.
    14. Osborne, Michael J., 2010. "A resolution to the NPV-IRR debate?," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(2), pages 234-239, May.
    15. Ernst Fehr & Peter K. Zych, 1998. "Do Addicts Behave Rationally?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 643-661, September.
    16. Elisha A. Pazner & Assaf Razin, 1976. "On Expected Present Value Vs. Expected Future Value: Further Remarks," Discussion Papers 196, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Massimo Egidi, 2002. "Biases in human behavior," CEEL Working Papers 0205, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    18. Alexander Alexeev & Mikhail Sokolov, 2011. "A Note on Indices of Return," EUSP Department of Economics Working Paper Series Ec-02/11, European University at St. Petersburg, Department of Economics, revised 21 Feb 2011.
    19. Alexandr V. Zhevnyak, . "Reference," NEW CONCEPT OF RETURN ON BORROWED AND INVESTMENT PROJECTS,, Socionet.
    20. Wigniolle, Bertrand, 2013. "Fertility in the absence of self-control," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 71-86.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eujhet:v:13:y:2006:i:3:p:311-335. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REJH20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.