The Interest Rate and the Length of Production: A Comment
Abstract
The Quarterly Journal of Austrian Economics 19, no. 4 (Winter 2016)
The Interest Rate and the Length of Production: A Comment
by David Howden
David Howden (dhowden@slu.edu) is professor of economics at Saint Louis University – Madrid Campus. In addition to Jeffrey Herbener and Shawn Ritenour, I would also like to thank, without implicating, an especially insightful referee.
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?
