Acknowledgments
Paul Dower and Ryuichi Tanaka gave helpful comments on an early draft. I would like to thank Paul Samuelson and an anonymous referee for their suggested improvements.
Notes
1Some of the standard works on this front are Robinson (Citation1953–1954), Sraffa (Citation1960), and Pasinetti Citation(1966).
2Cohen (Citation1989) reaches a similar conclusion. For a more thorough discussion of the danger of the one-good model in capital and interest theory, see Murphy (Citation2005).
3For a verbal critique of Samuelson's argument against Schumpeter, see Kirzner (Citation1996, p. 142).
4It may clarify to use some hypothetical dollar prices. Suppose that the spot price of both rice and figs is $1 per unit in period 0, while the period 1 spot price of rice is $0.4545 … and the spot price of figs remains at $1. A capitalist in period 0 can then invest $200 in purchasing 100 of the commodity baskets. If the capitalist refrains from consuming any of his purchases, in the next period he will have 110 units of rice and 50 figs. At the stipulated spot prices, the capitalist can sell these products for a total of $100. The nominal money rate of return is hence negative 50 percent. However, this nominal figure understates his return, because prices in general have fallen; it is now cheaper to buy a basket of commodities. Indeed, because the spot price of rice has fallen to $0.4545…, the $100 in period 1 can purchase 68.75 units of rice and 68.75 units of figs, that is, 68.75 commodity baskets.
5In a different paper, Samuelson explicitly acknowledges the importance of constant spot prices for his critique of Schumpeter:
[I]t is definitely in contradiction to the usual notion of equilibrium to state that the price of corn is constant over time, and yet one hundred units of corn are today worth as much as one hundred and ten bushels are worth tomorrow. But this is what is implied in the Schumpeterian assertion that there will be reflected in today's corn the full value of tomorrow's output stemming from it… Equilibrium coexistent with a zero money rate of interest would be possible only if prices violated the constancy postulated of the stationary state. If capital in general had a continuing, real, net, own productivity, the money rate of interest could be zero only if prices were falling at a percentage rate equal to that of the productivity (Samuelson Citation1943, p. 65).
6Fisher himself acknowledges his debt to Frank Fetter, the author of the “capitalization theory” of interest. See Fetter (Citation1977).
7This argument was one of many Böhm-Bawerk advanced against the “exploitation theory” of interest (1881, I, pp. 250–80).