Munich Personal RePEc Archive

The Interest Rate and the Length of Production: A Comment

Howden, David (2017): The Interest Rate and the Length of Production: A Comment. Published in: Quarterly Journal of Austrian Economics , Vol. 4, No. 19 (2017): pp. 345-358.

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Abstract

Machaj (2015) does a great service in pointing out a key assumption, heretofore unaddressed, in Filleule (2007) and Hülsmann (2010). Machaj errs, however, in stating that who saves will have an ambiguous effect on the interest rate and that where savings are directed can have ambiguous effects on the length of production. In this brief comment I will first show that who saves will have no effect on the interest rate. I then turn my attention to what it means to “lengthen” the structure of production. Although extended production time or additional “stages” of production make convenient placeholders for increased roundaboutness, they fail to grasp the core concept as it pertains to capital theory – what is it about production processes that makes more or better consumer goods?

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