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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

    (Université de Lille)

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.

Suggested Citation

  • Renaud Fillieule, 2022. "A Critique of Friedrich Hayek's Argumentation in Favor of a Productivity Theory of Interest," Post-Print hal-04207131, HAL.
    • Handle: RePEc:hal:journl:hal-04207131
    DOI: 10.19272/202206101005
    as

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