# Reply To: Bohm Bawerk's Capital and Interest….

#17361
jmherbener
Participant

He explains the division of payments a few pages after the quote you give. On page 268, he shows that if there are five workers each to be paid at the end of five years when the steam engine is sold for \$5,500 and the rate of interest if 0.05, then the payments would be.

1st worker who waits four years to be paid: \$1,200
2nd worker who waits three years to be paid: \$1,150
3rd worker who waits two years to be paid: \$1,100
4th worker who waits one year to be paid: \$1,050
5th worker who gets paid immediately: \$1,000

This division is necessary to make the total \$5,500 with the rate of interest 0.05.

The present value of the 1st worker’s effort four years before completion of the steam engine is \$1,000. That is \$1,000(1.05)(1.05)(1.05)(1.05) = \$1,215

The PV of the 2nd worker’s effort is \$1,000(1.05)(1.05)1.05) = \$1,157

For the 3rd worker \$1,000(1.05)(1.05) = \$1,102

The 4th \$1,000(1.05) = \$1050

The 5th \$1,000

As B-B says, his figures do not compound the interest.