OPE-L message, Re: [OPE-L] Koopmans versus Kantorovich

> As Ludwig von Mises wrote:
>
> “As long as there is a more profitable employment available for the capital
> required for the expansion of production, it is reasonable for the
> entrepreneur to abstain from such a further expansion. It is at the same time
> reasonable from the viewpoint of the consumer […] If the additional capital
> required for this full capacity production can yield a higher return when
> used for another kind of production, it would be wasteful –both from he
> viewpoint of the entrepreneur and from that of the consumer as a totality– to
> use the plant’s full capacity. This would withdraw capital and labour from
> other lines of production for the products of which the demand is more
> intense […] It is the consumer who orders him not to use the “full capacity”
> of one design up to the limit at which the profit must disappear […]
> Standardization of products can go as far as the public is ready to buy the
> cheaper article rather than a more expensive article of another pattern.”
> Monopoly Prices, The
> Quarterly Journal of Austrian Economics, vol. 1, nº 2, 1998, pp. 14-15.

Cockshott: Mises here is confusing the rate of interest with the rate of return on
real capital as many non Keynesian economists do.

Why do you think Mises confuses the rate of interest with the rate of return? Maybe, because my Austrian influence, I’m not able to understand it.

Best regards,
Alejandro Agafonow

The point is that whilst from the standpoint of an individual capitalist it appears that when they deposit money at the bank and earn interest on it the capital is being ‘employed’, what is actually occurring is the creation of a relationship of debt. The rate of return on the debt will depend on monetary factors rather than the real rate of return ( identify the latter with the Sraffian maximal profit rate, or the V N growth rate ). The rate of return on debt will depend on the relationship between total debts of the banking system and its stock of primary money, this pair of variables undergoes change quite independently of the factors which change the real rate of return ( which relate either to technology if we consider Sraffa’s maximal rate or technology + income distribution otherwise ).

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