Fructification theory

The fructification theory is an economic theory to explain the interest . It goes back to the French economist and finance minister Anne Robert Jacques Turgot .

At its core, the fructification theory is based on a simple arbitrage argument. Savers can invest their capital in land, which, due to its scarcity, yields a basic rent . For example, if a saver buys a piece of forest, the trees and their market value grow without any further action. Fields and building land can be leased for a fee. Because of these natural returns from the land, savers are only willing to put their money in a bank or lend it if they are offered interest on it. Without interest, a real estate investment would be more profitable than a financial investment and there would be no credit market.

Turgot recognized the scarcity and indestructibility of land and the fact that land is productive or useful as the root cause of positive interest rates. He illustrated this with the following thought experiment: With an interest rate of zero, it would be profitable to buy an unlimited amount of land because the rental income is not offset by loan costs. This would increase the demand for credit to infinity, which contradicts the idea of ​​a market equilibrium.

Later authors have generalized the fructification theory in such a way that the interest rate exceeds the growth rate of the economy in the long run. In this way, the land ensures dynamic efficiency .

literature

• Jacques Turgot (1770) Reflections on the Formation and Distribution of Wealth. German translation 1981, edited by Marguerite Kuczynski, Berlin: Akademie-Verlag.
• Stefan Homburg : Efficient Economic Growth , Berlin 1992, p. 78 ff.
• Gerhard Stavenhagen: History of Economic Theory , 4th edition, Göttingen 1969, p. 46.