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Irving Fisher’s Capital and Interest

In: The Economics of Optimal Growth Pathways

Author

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  • S. Niggol Seo

    (Muaebak Institute of Global Warming Studies)

Abstract

The theory of capital and interest rate by Irving Fisher at the dawn of the twentieth century has turned out to be much influential beyond his time. Fisher defined the concept of capital and income in a lucid manner, which are still the standard ways to understand them by contemporary economists. Even more prominently, Fisher developed the theory of interest rate which explicated the mechanisms that determine the rate of interest in the market economy. According to him, the interest rate is determined by the characteristics of technologies such as diminishing returns to scale, individuals’ preferences such as impatience, and the market exchanges through the debt market. He showed that the lending/debt market is Pareto welfare improving for the society. The theories of capital, income, and interest as clarified by Fisher have become fundamental concepts to the economic growth theories that followed.

Suggested Citation

  • S. Niggol Seo, 2023. "Irving Fisher’s Capital and Interest," Springer Books, in: The Economics of Optimal Growth Pathways, chapter 0, pages 161-179, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-20754-9_7
    DOI: 10.1007/978-3-031-20754-9_7
    as

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