- Interest is not the specific income derived from using capital goods; nor is it “the price paid for the services of capital.” Instead, interest expresses the universal (“categorical”) phenomenon of time preference and will therefore inevitably emerge also in a pure exchange economy without production.
- Since production takes time, the market prices of factors of production (which tend to reflect the market prices of the consumer goods they produce) are themselves subject to considerations of time preference. Thus the market in a production economy generates interest as the excess value of produced goods over the appropriately discounted values of the relevant factors of production.
- The concept of capital (as well as of its correlative income) is strictly a tool for economic calculation and hence has meaning only in the context of a market in which monetary calculation is meaningful. Thus, capital is properly defined as the (subjectively perceived) monetary value of the owner's equity in the assets of a particular business unit. Capital is therefore to be sharply distinguished from capital goods.
- Capital goods are produced factors of production; they are “intermediary stations on the way leading from the very beginning of production to its final goal, the turning out of consumers’ goods.”
- It is decidedly not useful to define capital as the totality of capital goods. Nor does the concept of a totality of capital goods provide any insight into the productive process.
- Capital goods are the results of earlier (i.e., higher) stages of production and therefore are not factors of production in their own right apart from the factors employed in their production. Capital goods have no productive power of their own that cannot be attributed to these earlier productive factors.
—Israel M. Kirzner, “Ludwig von Mises and the Theory of Capital and Interest,” in The Economics of Ludwig von Mises: Toward a Critical Reappraisal, ed. Laurence S. Moss (Kansas City: Sheed and Ward, 1976), 52-53.
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