Schumpeter built his theory of ‘interest on capital’ on the foundation of
entrepreneurial activity and its profit. In this way, interest could be seen only as a part of
the process of economic development and from the Schumpeterian perspective the fact
“that interest is a value phenomenon and an element in price”(p 173) became an
‘elementary conclusion’. The mechanism from which interest arises is closely linked with
the entrepreneurs’ profit and without the need for a detailed exposition of the
complexity of his argument we can quote probably the most important aspect of the
process: “the entrepreneur is certainly the most important person in the whole matter;
not however, because he is the true, original, typical interest receiver, but because he is
the typical interest payer” (p 180). This is the field of conflict between capitalists and
entrepreneurs because their interests in it are divergent. The explanation offered by
Schumpeter regarding the question of the levels of interest paid in a market is
“expressed in terms of the marginal theory, just as in the case of any price-determining
process” (p 193).