I couldn’t get through the first bits of Eduard Braun’s Finance Behind the Veil of Money without first re-reading Mises’ chapter in Human Action, “Action in the Passing of Time”, and Prof. Hülsmann’s 2002 QJAE article, “A Theory of Interest”. Braun refers to both liberally in his reformulation of interest theory. Time preference, à la Mises, is cast aside as the source of value spreads over time and new explanations are offered.
Hülsmann tries to pinpoint the value spread as existing between means and ends. The thinking goes like this: means are employed to satisfy ends. Means are always employed prior to the satisfaction and are “given up” in exchange for the end. Therefore, means are valued less than the ends they attain. I will only give up present means for a future satisfaction if I value the means less than the ends.
The problem with this is that means aren’t directly valued on their own. They receive only derivative value based on the ends they can achieve for the actor. Means are never placed in a preference ranking except as a convenient way to describe the end they satisfy. When “$100 in the present” occupies a place in my preference ranking, it actually stands for “the ends I would/could satisfy with $100 in my pocket right now”. So Hülsmann’s language,
Originary interest is the fundamental spread between the value of an end and the value of the means that serve to attain this end.
is confusing and nonsensical. One cannot separate the value of an end and the value of the corresponding means. It’s more than an equality between the two (which Hülsmann criticizes along familiar lines as the criticisms against the concept of indifference), it’s that they are the same thing. The value of any means is the value of the end it can satisfy–in a literal, substantial sort of way, not a mathematical, quantitative sort of way.
Braun strikes Hülsmann with the flat of the blade, saying that the value spread comes from the categories of cost and revenue, not means and ends, and then goes on to his own reformulation of the fundamentals of action in time. The differences may just be semantics, but that remains to be seen. My current research interest is in the subsistence fund/wages fund theories (featured in Braun’s book), and Hülsmann’s and Braun’s departure from Misesian/Rothbardian time preference theory of interest may just be tangential rabbit-chasing, but maybe it deserves more dedicated and serious inquiry.