One more clarification on the previous discussion about the natural rate in Austrian models. In his reply, Mr. Rallo suggests (in Spanish) that I confused the natural rate that can be derived from a barter economy with the one derived from intertemporal equilibrium model. So let's start by clarifying that barter refers to whether there is money or not, while the notion of intertemporal equilibrium is associated to the nature of equilibrium, whether it is short-term or long-term. You can have an intertemporal model of equilibrium with barter as several Arrow-Debreu models actually are.
Traditional notions of equilibrium, like the classical authors had, are not intertemporal, but several of those were based on barter ideas. Equilibrium in classical economics is a tendency associated to the process of competition that leads to a uniform rate of profit. Some authors had the real (meaning non-monetary) rate of profit govern the system and also the rate of interest, like Ricardo, while others like Tooke suggested that the rate of interest governed the rate of profit, and arguably there are elements in Marx analysis that suggest the possibility of an independent rate of interest.*
The notion of intertemporal equilibrium is relatively new and was developed by Hayek, Hicks, Lindahl, and Myrdal (see Milgate here; subscription required) in the 1920s and 1930s, before it become common after the capital debates on the basis of the Arrow-Debreu model. Intertemporal models do not require the notion of a uniform rate of profit, and some authors have suggested that as such they are not open to the capital critique. Because they do not require a uniform rate of profit these models are short-term.
So the relevant point is the notion of equilibrium and not whether it is a barter or credit system [additionally that would bring about the way money is introduced in the economy, as mere toke for exchange, or as a unit of account in which agents want to accumulate, but that is a different issue]. Mind you, one might think that Mr. Rallo is suggesting that in a short-term model (with no tendency ot a uniform rate of profit) there is no need in marginalist models for a natural rate of interest (although we'll see that's not his point).
Yet, the point made by Garegnani and Petri is that in an intertemporal model with disaggregated means of production (capital goods), it is still necessary for the equilibration of aggregate investment to full employment savings, and that requires a measure of the quantity of capital, and that means, and by necessity a rate of interest. That rate of interest that equilibrates savings and investment is a natural rate.
Mr. Rallo seems to believe that there is a difference between a situation in which there are "lenders (savers) lending at 5% for a year, and investors that demand 5% for 30 years" (or in Spanish "ahorradores que prestan al 5% a 1 año e inversores que piden prestado al 5% a 30 años"), which would be different if both lenders and borrowers had the same time period in mind, but different rates.
Again, this involves not the intertemporal nature of the model, but the term structure of interest rates.
So taking away the adjustment for risk associated to the longer-term that financial capital would be tied to investment, in the neoclassical theory arbitrage should still work. So presumably the rate would be more than 5% for the 30 year loan. This has nothing to do with the necessity in Austrian theory, as in any type of marginalist model, of a quantity of capital and a natural rate of interest. Neither barter nor the term structure of the rate of interest (or the more relevant discussion of the short-term nature of intertemporal models) relieves the marginalist (and Austrian) theories from a need for a natural rate of interest.
The only consistent way to get rid of the notion, is to abandon the marginalist approach, and like Sraffa assume that one distributive variable, in his case the monetary rate of interest, is given exogenously. Savings then is adjusted to investment by the multiplier process (i.e. Keynes and Kalecki's Principle of Effective Demand).
* Panico (1980, p. 269 here; subscription required) argues that: "Marx's analysis of the factors determining the rate of interest, he rejected any attempt to explain the determination of the average rate of interest on the basis of'laws of necessity'. He proposed instead, to investigate it by means of qualitative description, of those economic, conventional and institutional factors that, from time to time, affect this variable." So while its clear that Marx thought that the rate of profit determined the rate of interest, it is also reasonable to argue that there are contradictory propositions that suggest a determination of the normal rate of interest that is independent from the rate of profit.
Traditional notions of equilibrium, like the classical authors had, are not intertemporal, but several of those were based on barter ideas. Equilibrium in classical economics is a tendency associated to the process of competition that leads to a uniform rate of profit. Some authors had the real (meaning non-monetary) rate of profit govern the system and also the rate of interest, like Ricardo, while others like Tooke suggested that the rate of interest governed the rate of profit, and arguably there are elements in Marx analysis that suggest the possibility of an independent rate of interest.*
The notion of intertemporal equilibrium is relatively new and was developed by Hayek, Hicks, Lindahl, and Myrdal (see Milgate here; subscription required) in the 1920s and 1930s, before it become common after the capital debates on the basis of the Arrow-Debreu model. Intertemporal models do not require the notion of a uniform rate of profit, and some authors have suggested that as such they are not open to the capital critique. Because they do not require a uniform rate of profit these models are short-term.
So the relevant point is the notion of equilibrium and not whether it is a barter or credit system [additionally that would bring about the way money is introduced in the economy, as mere toke for exchange, or as a unit of account in which agents want to accumulate, but that is a different issue]. Mind you, one might think that Mr. Rallo is suggesting that in a short-term model (with no tendency ot a uniform rate of profit) there is no need in marginalist models for a natural rate of interest (although we'll see that's not his point).
Yet, the point made by Garegnani and Petri is that in an intertemporal model with disaggregated means of production (capital goods), it is still necessary for the equilibration of aggregate investment to full employment savings, and that requires a measure of the quantity of capital, and that means, and by necessity a rate of interest. That rate of interest that equilibrates savings and investment is a natural rate.
Mr. Rallo seems to believe that there is a difference between a situation in which there are "lenders (savers) lending at 5% for a year, and investors that demand 5% for 30 years" (or in Spanish "ahorradores que prestan al 5% a 1 año e inversores que piden prestado al 5% a 30 años"), which would be different if both lenders and borrowers had the same time period in mind, but different rates.
Again, this involves not the intertemporal nature of the model, but the term structure of interest rates.
So taking away the adjustment for risk associated to the longer-term that financial capital would be tied to investment, in the neoclassical theory arbitrage should still work. So presumably the rate would be more than 5% for the 30 year loan. This has nothing to do with the necessity in Austrian theory, as in any type of marginalist model, of a quantity of capital and a natural rate of interest. Neither barter nor the term structure of the rate of interest (or the more relevant discussion of the short-term nature of intertemporal models) relieves the marginalist (and Austrian) theories from a need for a natural rate of interest.
The only consistent way to get rid of the notion, is to abandon the marginalist approach, and like Sraffa assume that one distributive variable, in his case the monetary rate of interest, is given exogenously. Savings then is adjusted to investment by the multiplier process (i.e. Keynes and Kalecki's Principle of Effective Demand).
* Panico (1980, p. 269 here; subscription required) argues that: "Marx's analysis of the factors determining the rate of interest, he rejected any attempt to explain the determination of the average rate of interest on the basis of'laws of necessity'. He proposed instead, to investigate it by means of qualitative description, of those economic, conventional and institutional factors that, from time to time, affect this variable." So while its clear that Marx thought that the rate of profit determined the rate of interest, it is also reasonable to argue that there are contradictory propositions that suggest a determination of the normal rate of interest that is independent from the rate of profit.
PS: Thanks to Franklin Serrano for pointing my mistake on Quesnay (deleted; yes there is money in the Tableau as there is in Marx's simple reproduction system, derived from Quesnay) and the causality in Marx. Also, forgot the link to Milgate's paper, which is now in place.
