Reply To: The Impact of Technology on Böhm-Bawerk's Interest Theories


Interesting questions!

Regarding BB’s claim: It’s a little tricky to see his point, but the *reason* an hour of 2017 labor is more physically productive than an hour of (say) 2027 labor, is that the former can be invested in a 10-year process. That means it can be integrated into a 10-year process of capital accumulation. So e.g. if you want to get water from the stream into your house, a short process is to cup your hands. A much longer process is to go make a shovel, then dig a trench, then build a bucket, etc.

So, you are setting up a false dichotomy between BB’s view and Tom’s observation that labor is more physically productive in the future. The *reason* it’s more physically productive is that workers augment their labor with more capital equipment. It is the very process BB was describing.

But you *have* made me stop and think about maybe describing his position a little more carefully, because I totally get what you’re saying. In isolation, there’s an obvious sense in which a marginal labor hour today is less productive than one in 2027.

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On your other point, yes that is standard stuff in this literature. In fact Schumpeter went so far as to argue that capital would accumulate until interest rates hit zero. Mises criticized him for saying this (in Human Action). These links show you what I mean: