The Agio Theory of Interest: Explaining Interest as the Difference in Value Between Present and Future Goods

I have already remarked that in the most recent times some new opinions have been added to the old rivals. The most influential additions of this sort are represented by those theories which explain interest by a difference in value between present and future goods.

Remote allusions to this thought had already been made by Galiani and Turgot. A half-century later John Rae had given to it a very remarkable formulation, in spite of which, however, it was not his fate to exert any influence upon its further literary development. Again, forty years later, Jevons worked out in a masterly way most of the premises upon which that theory rests, but he neglected to develop the lines of thought which connect these premises with the phenomena of interest. . . .

In immediate connection with Jevons should be mentioned Launhardt and Emil Sax. Both of these authors excel Jevons in so far as they clearly express the concept, — involved, but not clearly expressed, in Jevons's work, and meantime announced in 1884 as the foundation of my interest theory, — that interest springs from the difference in value, resting upon psychological grounds, between present and future goods.

--Eugen von Böhm-Bawerk, Recent Literature on Interest: A Supplement to "Capital and Interest", trans. William A. Scott and Siegmund Feilbogen (New York: Macmillan Company, 1903), 6-7.