Originary Interest

Discussion in 'Economics' started by Mut1ey, May 12, 2004.

  1. Mut1ey


    I'm struggling to understand what this is in "plain english".

    The quote I have from Mises is: "Originary Interest is the ratio of the value assigned to want-satisfaction in the immediate future and the value assigned want satisfaction in remote periods in the future."

    What does this ratio look like and what are the implications. Any examples would be great.

    Thanks in advance.

  2. Mut1ey


    I think I may have worked this out at a high level. Any views welcome.

    Assume we have a scale of 1-10 of value assigned to want satisfaction, with 1 being the lowest and 10 the highest.

    1) If people value near future want satisfaction @ 3 and remote future want satisfaction @ 8 then we have an orginary interest of 3/8 or 0.375.

    2) If other people value near future want satisfaction @ 3, as above, but remote future satisfaction @ 4 then we have originary interest of 3/4 or 0.75.

    People are more likely to save in the case of 1 than 2. Case 1 is the highest gap between now and future satisfaction, resulting in a low originary interest value, compared to case 2. Hence lower originary interest tends to lead to more saving and vice-versa.