Professor Hayek’s Theory of Interest

Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310


“In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real” terms that is to say, almost one-half of the book (from chapter XVII onwards, with the exception of chapter XIX) will be neglected. This second half of Hayek’s study, containing the theory of capital accumulation and the influence of money on interest rates, is in my opinion excellent. But since it is the first part of the book which raised the most questions in my mind, I shall select that part for comments. The discussion of the theory of capital has become so involved that students of the problem now have considerable difficulty in understanding each other’s language. It would not therefore surprise me if my interpretation of Hayek’s theory were not always accepted by Hayek himself as the correct one. I can only plead that I went to considerable trouble in my attempt to understand his theory of interest.”