Yes, and he still tries to separate two different types of “value” for any given good. I don’t have the book near, but when I read it I felt that he was a great economist, and was very near the idea of STV and marginalism, but his ideas doesn’t sound that solid. I’m a big Bastiat fan and consider that “Candlestick maker’s petition” and “That which is seen, and that which is not seen” are incredible essays.
No, the natural rate is what Rothbard called “the price spread” and Hayek (more correctly) called “price margins”. In other words, the natural rate is the price premium added to goods preduced at a stage, when sold at the next stage. Determined by rate of time preference of the actors within society, not supply demand for capital in the loanable funds market. The key importance of the loanable funds market lies precisely in the fact that it is the only indicator to entrepreneurs of the time prefence of society, even it is wholly secondary and derived from the natural rate of interest.
Natural and Neutral Rates of Interest in Theory and Policy Formulation
Mises Daily by Roger W. Garrison | Posted on 4/21/2007
The definition I gave you came right out of Mises’ “Theory of money and credit,” on page 393, in chapter 20, “Money and Banking.” But I guess you know more than Mises? That was a very quick “No.” My definition and yours are the same by the way.
to be fair esuric, yours was a bit garbled. im not giles’ biggest fan at the moment but credit where it is due.
If you could just break this down. I will italicize all the parts I’m not sure I entirely understand.
“The level of the natural rate of interest is limited by the productivity of that lengthening of the period of production which is justifiable economically and of that additional lengthening of the period of production which is not justifiable; for the interest on the unit of capital upon whose aid the lengthening depends must always amount to less than the marginal return of the justifiable lengthening. The period of production which is thus defined must be such a length that exactly the whole available subsistence fund is necessary on the one hand and sufficient on the other for paying the wages of the laborers throughout the productive process.” pg 401
I think he is addressing one of the questions I had with capital theory. If the natural rate perfectly represents societies time preferences, and he borrows at the rate, and his remunerations are at that rate; how does he make a profit? (I know I’m not using “profit” correctly, but you know what I mean)
i could guess what you are trying to say, but then i’d probably end up strawmanning you and i’d rather not…
Well, it was more of a question. I think I’ll just wait for my positive theory and pure theory of capital to arrive in the mail.