i was wondering about the following:
As capital is accumulated, the roundaboutness of the production structure increased, real incomes rise.
with a rising income most urgent wants are satisfied first. but the most urgent wants should be the ones which are also most present. over time, should not time preference fall and present consumption be given up for more future consumption? but this would indicate a falling real interest rate.
e.g. Robinson Crusoe would after landing on his island have a very high time preference until his bare needs of survival are satisfied and after some time for producing capital as fishing nets and bows, house and so forth his time preference would sink.
but some research on google suggests that the historic real interest rate is fluctuating around 3% and does not show a downward trend:
e.g. here http://www.spectrumeconomics.com/specpdfs/Realrate.pdf
i was wondering about the following: As capital is accumulated, the roundaboutness of the production structure increased, real incomes rise. with a rising income most urgent wants are satisfied first. but the most urgent wants should be the ones which are also most present. over time, should not time preference fall and present consumption be given up for more future consumption? but this would indicate a falling real interest rate. e.g. Robinson Crusoe would after landing on his island have a very high time preference until his bare needs of survival are satisfied and after some time for producing capital as fishing nets and bows, house and so forth his time preference would sink.
The interest rate on borrowed funds is determined by both the demand for and supply of capital. As the supply of capital increases over time, a downward pressure is exerted on interest rates but demand for new capital is never quenched by the available supply, that is, demand for new investments never reaches zero so the interest rate can never reach zero. People will always be willing to pay for the use of savers' money.
Of all the prices governments have controlled throughout history, the interest rate is the most universally and most heavily controlled. I doubt that you can learn very much about the economics of the interest rate from observing historical interest rate figures.
Clayton -