Natural interest rate

Discussion about the natural interest rate is lasting from centuries and will continue for centuries.

Eugen Ritter von Böhm-Bawerk (1861-1914), leading economist of the Austrial school, studying a static economy, demonstrated that the interest rate is positive. The assumption was that work productiveness increases when indirect production methods are used, whose measurement is given by the average production time span. In a simplified model, called point-input-point-output (see: von Weiszaecker, Teoria del capitale in condizioni di stato uniforme, ISEDI, 1974) the interest rate is calculated through the equation

dq/dt – rq(t) = 0

where q(t) is the production function and r is the interest rate