Interest Rates and Financial Markets
Intertemporal Production and Exchange
The interest rate falls within the realm of intertemporal economics, or what Austrian theorist Eugen von Böhm-Bawerk called the “the present and future in economic life.”1 While the interest rate is not defined by everyone in the same way, it is useful to observe that the interest rate is intimately related to three intertemporal economic relationships: (1) the marginal productivity of capital; (2) the price of credit; and, (3) the marginal rate of time preference. Each of these phenomena has been employed in formulating a definition of the rate of interest. Understanding how these intertemporal phenomena are related to one another is central to the problem of ...
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