Kirzner’s Defense of the Pure Time-Preference Theory of Interest Amounts to an Affirmation of “Methodological Essentialism”

It will be observed that our defense of PTPT [Pure Time-Preference Theory of Interest] against the bewilderment evinced by its various critics, amounts to a partial affirmation of what has sometimes been termed “methodological essentialism.” Several historians of thought have noticed that for Menger, economic science is a search for the reality underlying economic phenomena— for their essence (das Wesen). In a letter to Walras, Menger asks, “How can we attain to a knowledge of this essence, for example, the essence of value, the essence of land rent, the essence of entrepreneur’s profit . . . by mathematics?” This search for essences, reflecting a philosophical approach attributed to Aristotelian influence, would focus, then, not on the land rent paid for a particular parcel of real-estate in a particular year, but upon those essential features of land rent that would be common to all examples of the phenomenon. Similarly an essentialist approach to the interest problem as posed by Böhm-Bawerk would focus not on the list of elements which together determine specific interest rates, but on those elements upon which the interest phenomenon essentially depends, elements without which the phenomenon could in fact not exist. PTPT finds these essential elements for the interest phenomenon in time preference.

—Israel M. Kirzner, “The Pure Time-Preference Theory of Interest: An Attempt at Clarification,” in Essays on Capital and Interest: An Austrian Perspective, ed. Peter J. Boettke and Frédéric Sautet, The Collected Works of Israel M. Kirzner (Indianapolis: Liberty Fund, 2010), 163-164.