Time-Preference and Productivity: A Reconsideration

“Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22–25.


“The question I wish here to reconsider is in the 1st instance the purely theoretical one of the relative importance, in determining the marginal productivity of investment, of the productivity schedule on the one hand and the so-called time preference factor on the other.  it will be remembered that on the whole the “Austrians,” emphasized the “time preference” factor while Wicksell and Knight  tended to stress almost exclusively the productivity factor. In my Pure Theory of Capital  I sided with the latter group, largely persuaded by Prof. Knight’s  arguments. I believe now that in this I have been partly mistaken. Professor Knight’s  arguments, although it seems to me still to prove its point so long as we confine ourselves to the consideration of an evenly progressing economy, does not necessarily apply to one in which the capital structure is not in full equilibrium. Though I had thought that I had made every effort to escape the “static” approach which has had such an unfortunate effect on the theory of capital, in this particular respect I seem still to have been misled by it—and that’s in spite of the fact that’s already earlier I had seen and described parts of the phenomenon I am now about to discuss.”