Alexander Mahr’s monograph revisits interest theory at the intersection of Austrian capital theory, marginal productivity, saving theory, money, and credit cycles. Its declared aim is critical as well as constructive:
Die vorliegende Arbeit bezweckt die Erörterung einer Reihe von Problemen der Zinstheorie, welche in der bisherigen Forschung keine entsprechende Berücksichtigung oder keine nach Ansicht des Verfassers einwandfreie Lösung gefunden haben.
English translation: The present work aims at the discussion of a series of problems in the theory of interest which have not received adequate consideration in the research so far, or for which no solution satisfactory in the author's view has been found.
Mahr first surveys modern theories, especially Böhm-Bawerk, then turns to Fisher, Fetter, Wicksell, Cassel, Schumpeter, Hahn, and others. His positive theory rejects any single psychological or abstinence explanation of interest. Interest arises from the interaction of production structure, saving behavior, capital demand, asset markets, and monetary institutions.
His starting point is the productivity of capitalistic production. Mahr keeps Böhm-Bawerk’s insight that time-consuming production matters, but he rejects simple formulas equating capital, subsistence funds, and wages. Interest theory must begin with the concrete conditions under which production yields surplus.
Die Kenntnis der Gesetze des Produktionsertrages ist eine unentbehrliche Voraussetzung der Zinstheorie wie überhaupt jeder Einkommenstheorie.
English translation: Knowledge of the laws of the yield of production is an indispensable prerequisite of the theory of interest, as indeed of any theory of income.
Mahr’s main technical distinction is between horizontal expansion, which repeats existing methods, and vertical expansion, which lengthens production through additional stages. The productivity of roundabout methods is not automatic: it depends on technology, market size, factor prices, and especially wages. Longer methods may become more profitable when they economize labor, so the wage level helps determine the shape of capital demand.
Against Böhm-Bawerk’s general claim that present goods are normally valued above future goods, Mahr argues for a more differentiated account of intertemporal valuation. In some cases future provision is valued as highly as present enjoyment.
Daher werden die gegenwärtigen Güter in solchen Fällen den künftigen gleichgeschätzt.
English translation: Therefore, in such cases present goods are valued equally with future ones.
The saving analysis follows from this point. People save, consume capital, or borrow for consumption in order to arrange satisfaction over a lifetime: old-age provision, family duties, future projects, status, security, and entrepreneurial ambition all matter. Hence the supply of capital cannot be reduced to a mechanical response to interest.
Das Angebot an Kapitaldisposition wird hingegen von den Veränderungen des Zinsfußes nur wenig beeinflußt, solange sich diese innerhalb der im tatsächlichen Wirtschaftsleben gewöhnlich zu beobachtenden Grenzen halten.
English translation: The supply of capital disposition, by contrast, is only slightly influenced by changes in the rate of interest, as long as these remain within the limits usually observed in actual economic life.
Mahr also criticizes Cassel’s view that interest must disappear as saving accumulates. Falling interest capitalizes rent-bearing assets at higher values, satisfying wealth aims and limiting further net saving before the rate reaches zero. The equilibrium of the capital market is therefore not explained by lifespan alone.
The later chapters give the book its institutional force. Mahr abandons the fiction of one capital market and one uniform rate. Money markets, bond markets, mortgage markets, stock markets, and long-term investment markets communicate imperfectly; their rates differ because of liquidity, maturity, risk, issue conditions, expectations, and cyclical circumstances.
His monetary theory extends this plural-rate approach. Inflation may temporarily raise profits when selling prices move before costs; deflation restricts credit and compresses margins. Modifying Wicksell, Mahr argues that the decisive comparison is not with a single “natural” rate but with the normal short-term money-market rate that would prevail without bank-credit disturbance.
Wenn jedoch der Diskontsatz der Banken längere Zeit hindurch unter dem Niveau des „normalen“ Geldmarktzinses gehalten wird, dann ist die Folge eine Belebung der Produktion und eine Steigerung der Preise.
English translation: If, however, the banks' discount rate is held for a longer period below the level of the "normal" money-market rate of interest, the consequence is a stimulation of production and a rise in prices.
The book’s contribution is a synthesis of Austrian capital theory with monetary and institutional realism. Mahr preserves the themes of roundaboutness, marginal yield, and intertemporal valuation, but embeds them in heterogeneous credit markets, variable money values, changing technology, and bank-driven cycles.
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