The Stationary State and the Technological Superiority of Present Goods

Abstract

In an illuminating article on Austrian capital theory published recently in this Journal¹ Professor Robert Dorfman repeats with seeming approval Böhm-Bawerk’s ‘Third Ground’ for the existence of interest: an alleged technological superiority of present over future goods. He asserts, even more strongly than Böhm-Bawerk, the independence of this Third Ground from the prior two, which we shall categorize jointly as ‘time preference’. Dorfman says, ‘The validity of this dictum [the technological superiority of present goods] does not depend on time-preference or the perspective underestimation of future wants or any such subjective and perhaps irrational consideration.’ He continues: ‘It depends on the ability of present (consumer goods) to finance an accumulation of (capital goods) that will enhance the flow of future (consumer goods).’² It is not immediately apparent that future consumer goods do not possess this same capacity or that they possess it consistently to a lesser degree.

Published originally in Quarterly Journal of Economics, 76(1962), pp. 648–52, and reproduced with permission.