The Double Emergence of the Modified Internal Rate of Return. The Neglected Financial Work of Duvillard (1755-1832) in a Comparative Perspective
European Journal of the History of Economic Thought, Autumn 2006
Posted: 10 Aug 2005
This article aims at enhancing current understanding of the history of investment evaluation criteria based on discounting. Their emergence constitutes a challenging issue for scholars devoted to the history of financial economics, as well as to fundamental tools of economic analysis.
We wish to analyse it in a comparative perspective, starting with the neglected contribution of Duvillard as a reference case. More than two centuries ago, this French language Scholar developed, with an optimizing analytical machinery, a financial measure technically analogous to Modified Internal Rate of Return (MIRR).
In order to assess his theoretical contribution in a comparative perspective, we will try to briefly account for the different contexts where the financial measure has been invented twice. This approach, indeed, is concerned with the institutional changes and the theoretical developments they fostered. It analyses concepts like time preference, techniques like discounting, and issues like reinvestment problem.
On the one hand, we explore the Past (especially around the Eighteenth Century) and Duvillard's contribution. On the other hand, we reconstruct the Present (in particular the late Fifties and later), especially the recent debate that re-invented the MIRR. Some comparative results conclude.
Keywords: Modified Internal Rate of Return, History of Financial Economics, History of Economic Analysis, Discounting, Investment Evaluation Criteria
JEL Classification: B31, G31
Suggested Citation: Suggested Citation