7. Capital, Interest, and the Structure of Production

Time preference says that individuals prefer satisfaction now to later, present to future. This explains the loan market. In the structure of production, the capitalist pays wages now, despite the fact that he himself does not get paid until the final stage when the product actually comes to market.

Consumption, saving, investment and spending occur in every production stage – across time. The interest rate is the rate of price spread. It is what the capitalist earns for time preference.

The seventh in a series of ten lectures, from Fundamentals of Economic Analysis: A Causal-Realist Approach.

Download the MP4 video.