Mises’s Redirection of Capital and Interest Theory Along Mengerian Lines Was Brutally Attacked by Knight

It was thus Mises, in his 1940 Nationalökonomie rediscovery and further development of Fetter’s pure time-preference theory of interest, who was to refine Böhm-Bawerkian theory and redirect it along Mengerian lines. In his slashing review article on Mises’s book, Knight (1941) perceptively recognized this — and saw it as grounds for dismissing Mises’s entire approach to the theory of capital and interest. In other words, Knight was attacking Mises not only because he was, like Böhm-Bawerk and Fisher, emphasizing the role of time in production (whereas for Knight the foundation of wisdom in this area consists in recognizing that ‘in a stationary economy, all production and consumption are strictly simultaneous; the waiting period is zero; there is none’: ibid., p. 420). Rather, he was attacking Mises for his ‘original and naive or absolute “Austrianism”’ (ibid., p. 422) — by which he apparently meant Mises’s Mengerianism. (This reading of Knight's attack is reinforced by his own explicit rejection of Mises’s frequent and favourable references to Menger’s conception of the ‘order’ of goods. On Knight's sweepingly dismissive attitude to this conception of Menger’s, see also his highly critical introduction to the 1950 English edition of Menger’s 1871 Grundsätze (p. 25).) For Knight, Mises’s cardinal sin was not so much is emphasis on the role of time per se, as his denial of primary explanatory significance to the objective productivity of time.

—Israel M. Kirzner, introduction to Essays on Capital and Interest: An Austrian Perspective (Cheltenham, UK: Edward Elgar Publishing, 1996), 4.