A Theistic Analysis of the Austrian Theories of Capital and Interest

In this thesis I examine the Austrian School of economics' theories of capital and interest. In chapter two I describe the character of the school, its history, and the educational, environmental and social background of the main supporters. The school is characterised by an adherence to Menger's doctrines, with Böhm-Bawerk, Hayek and Mises as disciples who elaborated and developed the work. In chapter three I introduce and explain the philosophical position that I use in this study, the ontology and epistemology developed by Cornelius Van Til. In chapter four I propose that the main Austrian scholars hold epistemologies and ontologies that conflict, even with an apparent shared commitment to methodological individualism and subjectivism. I use Van Til's philosophy to elucidate the commitments of the Austrians and claim that differences in epistemology emerge from distinctive ontologies. In chapter five Carl Menger’s work on value, goods and price is assessed. He developed a subjectivist theory of capital, in which time demarcates the value of present and future goods, and value is determined by the want-satisfying individual. In chapter six I examine the development of capital theory by Böhm-Bawerk, Hayek and Mises. Productivity and value differentials over time are the elements that the Austrian capital theory attempts to explain. In chapter seven I examine how Böhm-Bawerk, Hayek and Mises produced distinctive theories of interest. Mises included elements of Menger’s, Böhm-Bawerk’s and Fetter's work within the framework of his epistemology of praxeology and affirmed a pure time-preference theory of interest. Mises's interest and capital theories are the representative theories of the Austrian School. In chapter eight I employ Van Til's philosophy to assess the school's capital and interest theories. I conclude that the Austrian School’s propositions on capital and interest are unsound as they are proposed, and established on the basis of the ontological and epistemological preconditions affirmed by the school and Mises. I provide a conclusion to the thesis, state my main contributions in the thesis and then offer suggestions for further research.

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