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

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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)

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.

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  • Renaud Fillieule, 2022. "A critique of Friedrich Hayek’s argumentation in favor of a productivity theory of interest," Post-Print hal-04117743, HAL.
    • Handle: RePEc:hal:journl:hal-04117743
    DOI: 10.19272/202206101005
    Note: View the original document on HAL open archive server: https://hal.univ-lille.fr/hal-04117743
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    1. repec:ucp:bkecon:9780226274904 is not listed on IDEAS
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Renaud Fillieule, 2017. "Intertemporal Choice, Saving and Investment, and Interest Rate: Contributions from a Neglected Hayekian Model," Review of Political Economy, Taylor & Francis Journals, vol. 29(2), pages 307-328, April.
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