Economics Dictionary of ArgumentsHome
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| Pure rate of interest: The pure rate of interest in economics is the theoretical interest rate that would prevail in a perfect market with no risk or uncertainty. It represents the compensation to lenders for the time value of money, meaning the opportunity cost of not having the money available for immediate use. See also Opportunity cost, Credit, Money, Free market._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Pure Rate of Interest - Dictionary of Arguments
Rothbard III 350 Pure interest rate/Evenly rotating economy/Rothbard: [in an evenly rotating economy], there is no entrepreneurial uncertainty, and the rate of net return is the pure exchange ratio between present and future goods. This rate of return is the rate of interest. This pure rate of interest will be uniform for all periods of time and for all lines of production and will remain constant in the evenly rotating economy. >Evenly rotating economy (ERE)/Rothbard. Rothbard III 449 Evenly Rotating economy/interest rates/Schumpeter/Rothbard: (…) Joseph Schumpeter pioneered a theory of interest which holds that the rate of interest will be zero in the evenly rotating economy. RothbardVsSchumpeter: It should be clear (…) why the rate of interest (the pure rate of interest in the ERE) could never be zero. It is determined by individual time preferences, which are all positive. To maintain his position, Schumpeter was forced to assert, as does Frank Knight, that capital maintains itself permanently in the ERE. >Frank H. Knight. Rothbard III 549 We are not asserting that the pure rate of interest is determined by the quantity or value of capital goods available. >Capital goods/Rothbard, >Interest/Rothbard. We are not concluding, therefore, that an increase in the quantity or value of capital goods lowers the pure rate of interest because interest is the “price of capital” (or for any other reason). On the contrary, we are asserting precisely the reverse: namely, that a lower pure rate of interest increases the quantity and value of capital goods available. For „pure rate of interest“ see >Evenly Rotating Economy/Rothbard. The causative principle is just the other way round from what is commonly believed. The pure rate of interest, then, can change at any time and is determined by time preferences. If it is lowered, the stock of invested capital will increase; if it is raised, the stock of invested capital will fall. >Time preference/Rothbard. Rothbard III 550 The pure rate, (…) abstracts from any entrepreneurial uncertainty. It gauges the premium of present over future goods on the assumption that the future goods are known as certain to be forthcoming. In the real world, of course, nothing is absolutely certain, and therefore the pure rate of interest (the result of time preference) can never appear alone. Rothbard III 774 Prices: An increased demand for money, (..) tends to Iower prices all around without changing time preference or the pure rate of interest._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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