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Pages de Kirzner Essays on Capital and Interest

Pages de Kirzner Essays on Capital and Interest

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Published by: Gu Si Fang on Jan 09, 2010
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Essay
1.
Introduction
The
republication
of
the
three
essays
which
make
up
thebody
of
this
bookoffers
an
opportunity
to
placethesepapers
in
thecontextofmorewidely
known
twentieth-centurydevelopments
in
theareaofcapitalandinteresttheory.
As
thesub-titleofthis
book
announces,each
of
thesepapers
was
writteninthespirit
of
the
Austriantradition
in
economics,
and
specificalIyinorder
to
clarify
and
developwhat1
have
understood
to
be
theMisesianposition
on
these
issues.
The
firstof
thethree
essays(Essay2inthisbook)
was
publishedin1966,anddealtonlywithcapitaltheory.Mises
was
stillaliveandactiveatthattime,and
he
reviewedtheessaybeforeitspublication.Thesecondessay,published
in1976
(Essay3
in
this
book)
bad
been
writtenin1974
as
acontribution
to
a
symposium
on
the
economics
of
_Ludwi,
von
Mises,
who
bad
diedaboutayearearlier;theessaycoveredWises's
views
on
bothcapitalandinterestThe
third
essay(publishedin1993)
bad
beenwritteninthelate
19808
in
an
attempt
to
clarify(as
much
formyself
as
forothers)whatMises(and
of
courseFetter)couldpossiblyhavemeant
by
atheory
of
interest
which
recognizedonlytimepreferenceastherootcause
of
thephenomenonofinterest,with
what
seems
to
be
DO
recognitionatallfor
any
productivity-of-capitalelement
in
causin,
the
interestphenomenon.At
the
time
the
first
of
these
three
essays
was
writtenthe
Austriantradition
was
widely
perceived
as
havin,
long
died
out
The
subjectivistconcerns
which
inspired
that
essay
wac
a1Dlost
invariably
brushed
uide
in
the
profes
siongenerally
as,
at
best,purist
worries
holdingonly
trivialimplications
for
economic
theory,
letalone
policy.
By
the
timethe
third
essay
was
published,Austriansubjectivism
had.
in
aresurgence
quite
remarkable
in
the
history
ofeconomicthought,oncea,aincaptuted
the
attentionof
tnaDY
(especially
yo-.nger)
economists.
The
insightsofLudwi,
von
Mises
aretoday
no
longerdismissed
as
old-fashionedeconomicphilosophizin,(orwone).It
is
now
recopizedthat
the
methodologicaltenets
which
have
shaped
the
course
of
mid-twontieth-centur)'
neoc1as&ical
economics
have
diverted
the
attentionofecoaomists
from
by
insights
whichare
essential
for
\IJ1derstanding
the
way
in
which
ecoaoDliesin
fact
work.
A
number
of
these
insights·
h a v ~ ,
durin,
the
pe$l
two
decades,
beenrediscovered
in
the
work:
of
Mises
and
the
Austriantradition(includin"particularly,
the
contributions
of
FriedrichHayek).
 
2
Essayson
capit4l
and
interest:
an
AIUIrian
perspective
For
the
most
part,
the
rediscovery
of
Misesiansubjectivism
bas
tended
to
illuminate
modem
Austrianunderstanding
of
the
market
process,withoutregard
to
intertcmporalconsiderations.RelativelylittlemodemAustrianattention
bas
been
paid
to
furtherdevelopingMisesianinsightsinto
the
role
of
capital
in
the
full
market
process,
and
into
the
theory
of
interest.
I
(A
good
deal
ofrecentattention
has
ofcoursebeenpaid
to
refining
and
restating
the
Hayekian
theory
of
the
businesscycle.
And
certainly
this
theoryisdeeplyembedded
in
BOhm-Bawerkian
capital-theoreticinsights.
However,
afairlystrongcase
can
be
made
that
when
Hayekdevelopedthat
theory
at
the
end
of
the
19205
from
the
sketchedoutlineoffered
manyyears
earlier
by
Milos,
he
was
not
yet
as
fully
alive
to
the
subjectivism
of
Misea'sgeneral
approach
ashe
was
later
to
become.
It
is
thiswhich,
for
this
writer,
explainl
why
the
recentAustrian
work
on
Hayekian
cycletheoryseems,on
the
whole,
to
fail
to
draw
on
the
subjectivist,Misesian,tradition
which
the
contemporaryAustrianresurgence
has
doneso
much
to
revive.)
So
the
Misesianapproach
to
problems
of
capital
and
interestdeveloped
in
the
essays
in
thisbook
maybe
able
to
make
acontribution
to
thatbroader,subjectivistunderstanding
of
economicprocesses
and
relationships
which
is
emerging
from
the
contempo
rary
revival
of
the
Austriantradition
in
economic
thought.
Duringthe
second
half
of
the
twentiethcentury(thatis,theperiodsiocethepublicationofMises's
Human
Action)
anumberofdevelopmentsin
the
treatmentofcapital
and
interestproblemsoccurred;ofcourse,outlide
Aus
trianeconomics.
In
particularacelebrated
'grand
debate'
arose(mainly
dur-
ing
the
196Os)
between
the
defendersofneoclassical
orthodoxy
in
the
theory
of
capitalistdistribution,
and
the
radicalcritics
of
that
theory
(the
latter
oftenidentified
asthe
Italian-CambridgeSchool-theCambridge
beiDa,
of
course,
the
UK
Cambridge),2
In
this
debate,withits
unmistakably
ideological
over
tones,3
the
neoclassicaldefenders
were
largelyrelying
on
IrvingFisher's
theory
ofinterest
with
itsrelatedframeworkofcapital
theory,
a
framework
in
which
productivityelements
were
prominentlypresent.
The
Austrian(that
is,
the
Bobm
..
Bawerkian)
roots
of
thisneoclassical
framework
were
to
some
extentrecognized
in
that
debate.
What
was
notrecognized
at
all
was
that
thatneoclassical'Austrian'
framework
wasbyno
means
theonly
intellectualprogeny
of
BOIun-Bawerk's
seminalwork
00
capital
and
interest.Alongsidethe
better
known
Fisherinedevelopment
of
BObm-Bawerkian
doctrine
there
emerged
an
entirelyseparate
filiation
of
Austrianideas
in
regard.especially,
to
thetheory
of
interest.
This
traditionemergedparticularly
in·
the
JMU'C
time-
preference
theory
,of
interestespoused
by
Fetter
and
laterMises.
While
this
secondAustriantradition,
too,
derived
in
large
part
from
B6Iun-Bawerk,its
more
consistentsubjectivism
seems
attributablealso
to
more
SODSitive
appre.-
ciation
of
the
Mengerian
legacy.
We
shallargue
below
that
the
failureof
the
two
sides
in
the
above
'grand
debate'
to
recognize
the
existenceandrel-
 
THE
MENGERIAN
LEGACY
ovance
ofa
third
option-
themore
subjective
version
of
Austrian
theoryrenderedthatdebate
both
incomplete
and
inconclusive.
For
theAustriantraditionsubjectivism
was,
ofcourse,
the
key,
revolutionary,
insight.Theclassicaleconomists
had
attributedtheregularities
governing
economicphenomena
to
the
objective
pbysical
and
biologicalconditionsunder
which
societies
exist.
The
Austrians,
on
the
other
band,found
theseresuJarities
tohave
their
roots
in
the
valuations
and
the
decisionsofactingbuman
b e i D g S ~
Forothermarginalistscbools
of
economic
thought
in
the
post
1870
era,economicregularities
reflected
the
interplayof
both
the
objectivephysicalconditions
governing
production
and
supply
and
the
subjectivepreferencesunderlyingconsumer
demand.
The
Mengerian
v.icw,
bowever,
rel
egated
the
objectiveconditionsgoverningproduction
to
the
passive
back
ground
upon
which
the
actionsofpurposeful
bumanbeingsimpinged.
What
actively
shapedsubsequent
economic
phenomena
was
seen
to
be
only
theactions
of
sucbpurposeful
human
beings.
This
way
ofseeing
theeconomic
process
was
expressed
perhapsmost
clearlyinMenger's
well-known
concep
tion
of
'orders'
.of
productive
factors.
Goodswhichconferutilitydirectly
to
the
consumer
are
'goodsof
lowest
order';resources
which
produceconsumer
goodsare
'goodsofhigherorder'(in
an
ascendingranking
whicb
treats
the
resources
mostremote
from
thefinally
consumed
good
as
goods
of
highestorder).ForMenger
the
signifi
cance,theeconomic
value,
attached
to
productivefactors
was
perceivedas
.beingderivednotdirectly
from
the
objectiveproductive
potential,
of
those
factors,
butstrictly
fromthe
resultingvaluations
whichconsumers
(ortheirsurrogates,
the
entrepreneurs)place
upon
them
as
being
usefulin
promotingconsumptionutility.Itisnotdifficult
to
see
bow
thisMengerianrefusal
to
accord
intrinsic
importance
to
the
productivityofresourcescarriesimplications(not
only
forthe
theory
of
value,in
which
theseimplicationshavebeenrecognized
from
thebeginning,butalso)for
the
theory
of
capital.
In
exactlythesame
way
asAustrianvalue
theory
had
no
placefor'cost
of
production'
as
an
independentexplanatoryelement(coordinatewith'consumerutility')
in
thecausation
of
economic
value,
aMengeriancapital
and
interesttheory
could
bave
no
placefor
the
productivity
of
capital
as
an
independentexplanatoryelementin
accOUQting
for
thestructure
of
prices(including,especially,
the
phenomenonofinterest).Allprices,including
interest.
arebrought
about
strictly
by
the
actionsexpressingthevaluationsofpurposefulhumanbeings.
3
ntroduction

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