Capital and Interest: A Critical History of Economical Theory

Eugen v. Böhm-Bawerk, from the Warren J. Samuels Portrait Collection
Böhm-Bawerk, Eugen v.
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William A. Smart, trans.
First Pub. Date
London: Macmillan and Co.
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Book V, Chapter I

[The Labour Theories]
The English Group


Under the title of the Labour theories I group together a number of theories which agree in explaining interest as a wage for labour rendered by the capitalist.


As to the nature of the "labour" which furnishes the basis for the capitalist's claim of wage there is very material divergence among the various views. Thus I am compelled to distinguish three independent groups of Labour theories, and as it happens that their respective circles of adherents are marked out very much by nationality, I shall call them the English, the French, and the German group.


The English writers, chiefly represented by James Mill and M'Culloch, explain interest by tracing it to that labour through which real capital itself comes into existence.


James Mill*22 chances on the interest problem in his doctrine of price. He has put down the proportion that the costs of production regulate the exchange value of goods (p. 93). At the first glance capital and labour are seen to be constituents of the cost of production. But on looking closer Mill sees that capital itself comes into existence through labour, and that all costs of production may be traced therefore to labour alone. Labour then is the sole regulator of the value of goods (p. 97).


With this proposition, however, the well-known fact, discussed already by Ricardo, that postponement also has an influence on the price of goods, does not appear to agree. If, for instance, in one and the same season a cask of wine and twenty sacks of meal have been produced by the same amount of labour, they will of course, at the end of the season, have an equal exchange value. But if the owner of the wine lays it in a cellar and keeps it for a couple of years, the cask of wine will have more value than the twenty sacks of meal—indeed, more value by the amount of two years' profit.


Now, James Mill gets rid of this disturbance of his law by explaining profit itself as a wage of labour; as a remuneration for indirect labour. "It is no solution to say that profits must be paid, because this only brings us to the question, Why must profits be paid? To this there is no answer but one, that they are the remuneration for labour, labour not applied immediately to the commodity in question, but applied to it through the medium of other commodities, the produce of labour."


This idea is more exactly elucidated by the following analysis. "A man has a machine, the produce of a hundred days' labour. In applying it the owner undoubtedly applies labour, though in a secondary sense, by applying that which could not have been had but through the medium of labour. This machine, let us suppose, is calculated to last exactly ten years. One-tenth of the fruit of a hundred days' labour is thus expended every year, which is the same thing in the view of cost and value as saying that ten days' labour has been expended. The owner is to be paid for the hundred days' labour which the machine costs him at the rate of so much per annum, that is, by an annuity for ten years equivalent to the original value of the machine.*23 It thus appears (!) that profits are simply remuneration for labour. They may, indeed, without doing any violence to language (!), hardly even by a metaphor, be denominated wages; the wages of that labour which is applied, not immediately by the hand, but mediately, by the instruments which the hand has produced. And if you may measure the amount of immediate labour by the amount of wages, you may measure the amount of secondary labour by that of the return to the capitalist."


In this way James Mill thinks that he has satisfactorily explained interest, and at the same time maintained in its integrity his law that labour alone determines the value of goods. It is pretty obvious, however, that he has not succeeded in doing either.


It may be allowed to pass that he calls capital "hoarded" labour; that he calls the employment of capital employment of a mediate secondary labour; and that he considers the wearing out of the machine as a giving out of the hoarded labour by instalments. But why then is every instalment of hoarded labour paid by an annuity which contains more than the original value of that labour, namely, the original value plus the usual rate of interest thereon? Allowing that the remuneration of capital is the remuneration of mediate labour, why is the mediate labour paid at a higher rate than the immediate; why does the latter receive the bare rate of wages while the former receives an annuity higher by the amount of the interest? Mill does not solve this question. He takes the fact that a capital, according to the state of competition in the market, has equal value with a certain number of annual payments that already include the interest, and uses this fact as a fixed centre, as if he had not taken upon himself to explain the profit, and therefore also the extra profit, that is contained in the annuity.


He says, I admit, in an explanatory tone, Profit is wage of labour. But he has a very false idea of the explanatory power of this phrase. It might perhaps be satisfactory if Mill could show that there is here a labour which has not yet received its normal wage, and will only receive it in the profit; but it is in no way satisfactory to explain profit as an extra wage for a labour that has already been paid at the normal rate by means of the sum for amortisation contained in the annuities. It is always open to ask, Why should mediate labour be more highly paid than immediate labour? And this is a question towards the solution of which Mill has given not the slightest hint. Moreover by this artificial construction he even loses the advantage of remaining consistent with his Labour theory; for evidently the law that the amount of labour determines the price of all goods is rudely upset if a part of the price is traceable, not to the amount of the labour expended, but to the greater height of the wage that it receives! In this respect, therefore, Mill's theory comes considerably short of its professed object.


A very similar theory was put forward by M'Culloch, in the first edition of his Principles of Political Economy (1825), but omitted in later editions. I have stated it already on an earlier occasion, and need add nothing more to that statement.*24 Finally, the same idea was given out cursorily by Read in England and Gerstner in Germany, but these writers we shall have to consider later on among the eclectics.

The French Group


A second group of Labour theorists pronounce interest to be the wage of that labour which consists in the saving of capital (Travail d'Epargne). This theory is carried out most thoroughly by Courcelle-Seneuil.*25


According to Courcelle-Seneuil, there are two kinds of labour—muscular labour and the labour of Saving (p. 85). The latter conception he expounds as follows. In order that a capital once made should be conserved, there is need of a continual effort of foresight and saving, in so far as, on the one hand, one looks to future needs, and, on the other hand, refrains from present enjoyment of capital with the view of being able to satisfy future needs by means of the capital thus saved. In this "labour" lies an act of intelligence—the foresight, and an act of will—the saving that "refrains from enjoyment for a given period of time."


Of course, at the first glance, it appears singular to give to saving the name of Labour. But this impression, in the author's opinion, only arises from our usually looking too much at the material side of things. If we reflect dispassionately for a moment we will recognise that it is just as painful to a man to refrain from the consumption of an article when made, as to labour with his muscles and his intellect to obtain an article that he wishes; and that it really requires a special un-natural exertion of intellect and will to maintain capital in existence—an act of will which is contrary to the natural bias toward pleasure and idleness.


After attempting to strengthen this line of argument by pointing to the habits of savages, the author concludes with this formal deliverance: "We consider then that saving is really and not simply metaphorically, a form of industrial labour, and consequently a productive power. It demands an exertion which, it is true, is purely of a moral kind, but it is all the same painful. It has therefore as much right to the character of labour as an exertion of the muscles has."


Now the labour of saving demands remuneration in the same way as muscular labour. While the latter is paid by the salaire, the former obtains its payment in the shape of interest. The following passage explains the necessity of this, and shows in particular why the wage of the labour of saving must be a permanent one: "The desire, the temptation to consume, is a permanent force; its action can only be suspended by combating it with another force which, like itself, is permanent. It is clear that every one would consume as much as possible if he had no interest (si'l n'avait pas intérêt) to abstain from consuming. He would cease to abstain from the moment that he ceased to have this interest, so that it must continue without interruption, in order that capitals may always be conserved. That is why we say that interest" (l'intérêt: note the play upon words) "is the remuneration of this labour of saving and of conservation; without it capitals, whatever be their form, could not continue; it is a necessary condition of industrial life" (p. 322).


The height of this wage is regulated "according to the great law of supply and demand"; it depends, on the one side, on the wish and the ability to expend a sum of capital reproductively; and on the other, on the wish and the ability to save this sum.


To my mind all the pains which its author has taken to represent the Labour of Saving as a real labour cannot efface the stamp of artificiality which this theory bears on its very face. The non-consuming of wealth a labour; the pocketing of interest by those who toil not nor spin, a suitable wage for work;—what a chance for any Lassalle who cares to play upon the impressions and emotions of the reader! But, instead of stating rhetorically that Courcelle is wrong, I prefer to show on rational grounds why he is wrong.


First of all, it is clear that Courcelle's theory is only Senior's Abstinence theory clad in a slightly different dress. As a rule, where Senior says "abstinence," or "sacrifice of abstinence," Courcelle says "labour of abstinence," but really both writers make use of the one fundamental idea in the same way. Thus at the outset Courcelle's Labour theory is open to a great many of those objections raised to Senior's Abstinence theory, on the ground of which objections we have already pronounced that theory to be unsatisfactory.


But further, the new form which Courcelle gives it is open to special objections of its own.


It is quite correct to say that foresight and saving do cost a certain moral pain. But the presence of labour in anything by which an income is obtained is far from justifying us in explaining that income as a wage of labour. To do so we must be able to show that the income is really obtained for the labour, and only in virtue of the labour. Now this will be best shown if we find that the income emerges where labour has been expended; that it is wanting where there has been no labour; that it is high where much of the labour has been expended, and low where little has been expended. But of any such harmony between the alleged cause of interest and the actual emergence of interest, it would be difficult to discover a trace. The man who carelessly cuts the coupons of £100,000, or gets his secretary to cut them, draws a "wage of labour" of £4000 or £5000. The man who, with actual pain of foresight and saving, has scraped together £50, and put them in the savings bank, scarcely gets a couple of pounds for his "labour"; while the man who, with as much pain, has saved £50, but cannot risk them out of his hand because of some claim that may be made on him at any moment, gets absolutely no wage at all.


What is the reason of this? Why are wages apportioned so differently—differently as between individual classes of saving labourers; differently as compared with the wage payment of muscular labour? What is the reason that the owner of £100,000 gets £5000 for his "year's labour"; that the manual labourer, who suffers pain and saves nothing, gets £50; that the artisan, who suffers pain and saves £50 thereby, gets the sum of £52 for "muscular labour" and "labour of saving" together? A theory which pronounces interest to be wages of labour must undertake to make its explanation more exact. Instead of this, the nice question of the rate of interest is simply dismissed by Courcelle with a general reference to the great law of supply and demand.


Without meaning to be ironical, one might say that Courcelle would have had almost as much justification, theoretically speaking, if he had pronounced the bodily labour of pocketing the interest, or of cutting the coupons, to be the ground and basis of interest. These also are "labours" which the capitalist performs, and if it should be thought strange that, according to the law of supply and demand, this sort of labour is paid at such an unusually high rate, it is scarcely more strange than the fact we have just been considering—that the intellectual labour of inheriting a million of money is annually paid by so many thousands of pounds. One might say of this latter kind of labour, So few people have the "wish and the ability" to lay up millions of capital, that, in the existing demand for capital, the wages of such people must be very high; and similarly it might be said of the former, So very few people have the "wish and the ability" to pocket thousands of pounds in interest. Of "wish" there will be no lack in either case; but of ability—well, that rests in both cases principally on the fact of a person being so fortunate as to possess a million of capital!


If after what has been said a direct refutation of Courcelle's Labour theory still seems necessary, let me put the following case. A capitalist lends a manufacturer £100,000 at 5 per cent for a year. The manufacturer employs the £100,000 productively, and by doing so receives a profit of £6000. From this he deducts £5000 as interest due to the capitalist, and keeps £1000 as undertaker's profit to himself. According to Courcelle the £5000 which the capitalist receives are the wage for providing for future wants, and for the act of will which resists the temptation to consume the £100,000 immediately—an act of will directed to the refraining from enjoyment. But has not the manufacturer performed exactly the same, or even a greater labour? Was the manufacturer, when he had the £100,000 in his hands, not tempted to consume it immediately? Could he not, for instance, have squandered the capital, and gone through the bankruptcy court? Has he then not also withstood the temptation and asserted his will in refraining? Has he not by prudence and foresight done more than the capitalist to provide for future needs, in as much as he not only thought of future needs in general, but gave his stock of materials that positive treatment which changed them into products, and thus actually fitted them to satisfy human wants? And yet the capitalist for the labour of conserving his £100,000 receives £5000, and the manufacturer, who has performed the same intellectual and moral labour on the same £100,000 in still greater degree, gets nothing; for the £1000 which constitute his undertaker's profit are payment for quite another kind of activity.


It may be objected that the manufacturer would not have dared to use the £100,000, seeing that it was not his property; in his saving, therefore, there is no merit to deserve payment. But in this theory merit has nothing to do with the case. The wage of saving is great if only the sum saved and conserved be great, without the slightest consideration whether the conservation has demanded much moral striving or little. But that the debtor has actually conserved the £100,000, and has overcome the temptation to consume it, admits of no denial. Why then does he get no "wage of saving"? To my. mind there can be no doubt about the explanation of these facts. It is that people get interest, not because they work for it, but simply because they are owners. Interest is not an income from labour, but an income from ownership.


Quite recently Courcelle-Seneuil's theory has been, somewhat timidly, followed by Cauwes.*26


This writer states it, but not as his sole interest theory, and not without certain clauses and turns of expression which show that he finds this conception of the "labour of saving" not quite beyond question. "Since the conservation of a capital presupposes an exertion of the will, and in many cases even industrial or financial combinations of some difficulty, one might say that it represents a veritable labour such as has sometimes, and not without justification, been called Travail d'Epargne" (i. p. 183). And in another place Cauwes meets the doubt whether interest be due to the capitalist, since the loan costs no labour to justify the claim of interest, in the words: "In the loan, it may be, there is no labour; but the labour consists in the steadfast will to preserve the capital, and in the protracted abstinence from every act of gratification or consumption of the value represented by it. It is, if the expression does not seem too bizarre, a labour of saving that is paid by interest."*27 But besides this Cauwes brings forward other grounds for interest, particularly a statement of the productivity of capital, and thus we shall meet him again among the eclectics.


A slight approach to Courcelle's Labour theory is to be found in a few other French writers; as in Cherbuliez,*28 who pronounces interest to be wage for the "efforts of abstinence"; and in Josef Garnier, who gives a very parti-coloured explanation, in the course of which he uses the catchword "labour of saving."*29 But these last named do not carry the conception any farther.

The German Group


The idea that in France afforded material for a very artificial and elaborate theory of interest has been made use of—of course on freer lines—by a prominent school of German economists, the Katheder Socialists, to use a term which has been acclimatised.*30 The Labour theory of the German Katheder Socialists is, however, only loosely connected with the French theory in having the same fundamental idea. Both in origin and in manner of development it is entirely independent.


The origin of the German Labour theory may be found in a somewhat incidental remark that occurs in one of the writings of Rodbertus-Jagetzow. There he speaks of a conceivable state of society where there should be private property, but no rent-bearing private property; in which, therefore, all existing income would be income from labour in the shape of salary or wages. Such would be the state of things if the means of production, land and capital, were the common property of the whole society, private rights of property being still recognised over the income which each one would receive—in goods only—in proportion to his labour.


On this Rodbertus remarks in a note that, in economical respects, property in the means of production must be looked upon in an essentially different light from property in an income that accrues only in the shape of goods. As regards income-goods, all that is required is that the owner consume them economically. But property in land and capital is, besides, a kind of office that carries national economic functions with it,—functions which consist in directing the economical labour and the economical means of the nation in consonance with the national need, and therefore in exerting those functions which, in the ideal state of collective ownership, would be exerted through national officers. The most favourable view then that one can take of rent from this standpoint—land-rent and capital rent alike—is that it represents the salaries of such officers; that it represents a form of salary where the officer is strongly, even pecuniarily interested in the proper use of his functions.*31


Everything points to the belief that Rodbertus in no way intended in these words to put forward a formal theory of interest.*32 But the idea latent in them was seized on and developed by some of the prominent Katheder Socialists.


It was first taken up by Schäffle. As early as the third edition of his older work, the Gesellschaftliche System, 1873, he embodied the idea, that interest is a remuneration for services rendered by the capitalist, in his formal definition of interest. "Profit," he says, "is to be looked upon as the remuneration that the undertaker may claim for a national economic function inasmuch as, independently of any national organisation, he binds together the productive powers economically by means of the speculative use of capital."*33 This conception turns up repeatedly in different connections in the same book, and as a rule it occurs in those passages where interest is looked at from a broader point of view. Schäffle even defends it in one place as the only warrantable theory, and rejects in its favour the other interest theories in a body.*34 But, singularly enough, when he deals with the nicer details of the doctrine, the height of the interest rate and so on, he does not avail himself of this fundamental idea, but makes use of the technical machinery of the Use theory; although it must be admitted that he brings the Use theory very near to the Labour theory by the subjective colouring he gives to the conception of Use.*35


In his later work, the Bau und Leben, the conception of interest as the compensation for a "functional performance" on the part of the capitalist comes out more distinctly. This conception makes it possible for Schäffle to justify interest at least in the present day, and in so far as we are not able to replace the costly services of private capital by a more suitable organisation.*36 But even here the details of the phenomena of interest are not explained by means of this conception, and we still find reminiscences of the Use theory, although the conception of Use has now become objective.*37 Thus Schäffle, as it were, struck the key-note, but only the key-note, of a Labour theory. he has not carried it out in detail like Courcelle-Seneuil.


Wagner goes a little farther, but still only a little farther. With him too the capitalists are "functionaries of the whole community for the accumulation and employment of that national fund which consists of the instruments of production,"*38 and profit is an income they draw for this function, or, at least, in this function (p. 594). But the work of the capitalist, as consisting in the "accumulation and employment of private capitals," in "disposing activities and saving activities," he characterises more distinctly than Schäffle as "labours" (iii. pp. 592, 630) which form a part of the total costs expended in the production of goods, and in so far form a "constitutive element of value" (p. 630). In what way this element contributes to the formation of value in goods; how, from its efficacy, are derived the proportion between interest and sums of capital, the height of interest, and so on, Wagner tells us as little as Schäffle. He too has only struck the keynote of the Labour theory, though perhaps a little more distinctly.


This being the case, I should not venture to say positively whether the Katheder Socialists by this line of thought intended to give a theoretical explanation of interest, or only a justification of interest from the social-political side. In favour of the first view, there is (1) the embodying of the labour motive in the formal definition of interest; (2) the circumstance that Wagner at least has declared himself so positively against all other interest theories that, if he has not adopted the Labour theory, he has left interest, theoretically, quite unexplained; (3) that Wagner expressly pronounces the "labour of the capitalist" to be a constituent of the costs of production, and a "constitutive element of value"—a phrase which it is difficult to interpret otherwise than as meaning that the theoretical cause of the phenomenon of "surplus value" is the compensation demanded as return for the labour expended by the capitalist.


In favour of the second view, that the Katheder Socialists have pointed to the "capitalists' services" only as a ground for justifying the present existence of interest without meaning thereby to explain its existence, there is (1) the absence of any theoretical detail; (2) the circumstance that Schäffle, at least so far as he gives any explanation of details, makes use of another theory of interest; and (3) the great proponderance which, in the writings of the Katheder Socialists, is generally laid on the political element as against the theoretical.


In the circumstances it may be best to put my criticism hypothetically.


If it is the case that the Katheder Socialists, in pointing to the capitalists' "labours," wished to justify the existence of interest only from the social-political side, what they have said is, in the highest degree, worthy of attention. To go farther into this side of the question, however, is beyond my present task.


If it is the case, however, that the Katheder Socialists, in pointing to the capitalists' "labours," intended to explain interest theoretically, I should have to pass the same judgment on them that I passed on the French version of the Labour theory, viz. that the explanation is entirely inadequate.


It has so often been the case in the historical development of dogma that justification of interest from the social-political side is confused with theoretical explanations of interest, that it may be worth while to bring out very clearly and once for all the difference between the two. For this purpose let me put a parallel case which may at the same time give me an opportunity of showing at a glance the inadequacy of the Labour theory.


With the first acquisition of land there is generally connected a certain exertion or labour of the acquirer. Either it is that he must first make the ground productive, or that he must take a certain amount of trouble to gain possession of it; and this latter, in certain circumstances, may not be trifling, as, e.g. when it is preceded by a prolonged search for a locality suitable for settlement. The land now bears to its acquirer a rent. Can the existence of rent be explained by the fact of the labour originally expended? With the exception of Carey, and some few writers who share his perverse views, no one has ventured to maintain this. No one can maintain it who is not entirely blind to the connection of things. It is perfectly clear that, when a fruitful carse bears rent, it is not because its occupation has at one time or other cost labour. It is perfectly clear that if a rocky hillside bears no rent it is not because it has been occupied without trouble. It is, again, beyond doubt that two equally fruitful and equally well-situated pieces of land bear equal rents, even if the one that is fruitful by nature is simply taken occupation of at a trifling expenditure of labour, while the other has to be made productive by a great expenditure of labour. Further, it is clear that, if 200 acres bear twice as much rent as 100 acres, it is not because their first occupation was twice as troublesome. And finally, every one can see that, if rent rises with increasing population, the rising rent has nothing in the world to do with the original expenditure of labour. In short, it is clear that the emergence and the amount of rent do not in the least correspond with the emergence and amount of the labour originally expended in the occupation. It is impossible, then, that the principle which will explain the phenomenon of rent can be found in the original expenditure of labour.


Essentially different, however, is the question whether the existence of rent cannot be justified by this expenditure of labour. In this case one may quite well take up the position that he who makes a piece of ground productive, or even does no more than occupy it as the first pioneer of civilisation, has merited a wage as lasting as the advantage that thereby accrues to human society; that it is just and reasonable that he who has put a piece of ground under cultivation for all time should for all time receive a part of its productiveness in the shape of rent. I shall not maintain that this way of looking at the institution of private property in land, and of private land-rents based on that institution, must be conclusive in all circumstances, but it certainly may be so in some circumstances. It is, e.g. very probable indeed that a colonial government, anxious to expedite the settling of its territory, does wisely when it offers, as premium for the labour of cultivation and of first occupation, the ownership of lands brought into cultivation, and with that the right to a permanent rent. In this way the consideration of the labour put forth by the first occupant may furnish quite a plausible justification, and a conclusive social-political motive for the introduction and retention of rent, while none the less it is an entirely insufficient explanation of it.


It is exactly the same with the relation in which the capitalists' "saving and disposing activities" stand to interest. In so far as, in those activities, we see the most effectual means to the accumulation and proper employment of a sufficient national capital, and in so far as we could not expect that these activities would be forthcoming from private persons in sufficient amount, if such persons were not led to expect permanent advantages, these services may furnish a very substantial justification and a conclusive legislative reason for the introduction and maintenance of interest. But it is an entirely different question whether the existence of interest can also be theoretically explained by pointing to that "labour." If it can be so explained, then there must be shown some normal relation between the alleged result, the interest of capital, and the asserted cause, the expenditure of labour on the part of the capitalist. But in the actual world we should look for any such relation in vain. A million bears £50,000 of interest, whether the saving and employment of the million has cost its owner much, little, or no trouble. A million bears ten thousand times as much interest as a hundred, even if there should be infinitely more anxiety and vexation in the saving of the hundred than in the saving of the million. The borrower who guards another man's capital and employs it, notwithstanding this "expenditure of labour," receives no interest; the owner receives it although his labour be nil. Schäffle himself once was fain to confess: "A distribution of wealth according to amount and desert of work, obtains neither among the capitalists as compared with each other, nor among the workers as compared with the capitalists. The distribution is neither guided by any such principles nor yet does it harmonise with them accidentally."*39


But if experience shows that interest stands outside of any relation to the labour performed by the capitalist, how in reason can the principle of its explanation be found there? I believe the truth is too plainly told in the facts to need any long demonstration. Just as surely as interest bears no proportion to the labour put forth by the capitalist, does it stand in exact proportion to the fact of possession and to the amount of possession. Interest on capital, to repeat my former words, is not an income from labour, but an income from ownership.*40


Thus the Labour theory of interest in all its varieties is seen to be incapable of giving a theoretical explanation that will stand examination. No unbiassed person indeed could expect any other result. No one but a person who takes particular delight in far-fetched explanations could for a moment doubt that the economic power of capital has some other ground behind it than a "capacity for labour" on the part of the capitalist. It is impossible to doubt that interest, not in name only but in reality, is something different from a wage of labour.


That economists should fall into various kinds of Labour theories can only be explained by the custom prevalent ever since Adam Smith and Ricardo of tracing all value to labour. To enable them to force interest also into the unity of this theory, and ascribe to it the origin which they supposed to be the only legitimate one, they did not hesitate at the most far-fetched and artificial explanations.*41

Notes for this chapter

Elements of Political Economy, third edition, London, 1826. I was not able, unfortunately, to get sight of the first edition of 1821.
The author (as is evident from a parallel passage on p. 100) means annuities which replace the original value of the machine in ten years, and at the same time pay interest at the rate fixed by the condition of the market.
See above, p. 97. The doubtful honour of priority in this theory belongs to James Mill.
Traité théorique et pratique d'Economie Politique, i. Paris, 1858.
Précis du Cours d'Economie Politique, second edition, Paris, 1881, 1882.
ii. p. 189; also i. p. 236.
See above, p. 286. [Book IV, Chapter II, par. IV.II.38.—Econlib Ed.]
Traité d'Economie Politique, eighth edition, Paris, 1880. P. 522: "Le loyer rémunère et provoque les efforts ou le travail d'épargne et de conservation."
The name they themselves use is the "Social Political-School of National Economy."
Zur Erklärung und Abhülfe der heutigen Kreditnoth des Grundbesitzes, second edition, 1876, ii. p. 273, etc.
This follows from the tone of the passage, which suggests a simile and a comparison rather than a strict explanation; from its position in a note; from the fact of Rodbertus having another and a different theory; finally, from an explicit explanation which he makes in stating this other theory, that interest in the present day has not the character of (indirect) salary, but that of an immediate share in the national product (Zur Beleuchtung, p. 75).
ii. p. 458.
ii. p. 459, etc.
See above, p. 206. [Book III, Chapter II, par. III.II.57.—Econlib Ed.]
"Thus I cannot, in any case, agree with the absolute condemnation of capital and of profit as 'pure appropriation of surplus value'; it is a function of cardinal importance which private capital, whatever be its motives, now performs when it assists what Rodbertus called 'business left to itself,' " (second edition, iii. p. 386). "Historically then even capitalism may be fully warranted and profit justified. To remove the latter without having found a better organisation of production would be senseless." "We may therefore practically condemn profit as appropriation of 'surplus value' only if we are able to replace the economic service of private capital by a public organisation positively established, more complete, and less greedy of surplus value" (Mehrwerth schluckende), iii p. 422.
See above, p. 207. [Book III, Chapter II, par. III.II.57-59.—Econlib Ed.]
Allgemeine oder theoretische Volkwirthschaftslehre, part i. Grundlegung, second edition. Leipzig and Heidelberg, 1879, pp. 40, 594.
Bau und Leben, iii. p. 451.
It is much to be regretted that of Wagner's theoretical political economy the part which specially deals with the theory of interest has not yet appeared. It may be that this distinguished thinker would have given such explanations as make my present polemic,—which I have been careful to make hypothetical,—superfluous.
As appendix to this chapter I should like, shortly, to refer to J.G. Hoffmann. He also interprets interest as wage for certain labours. "Even those rents," he says, meaning rents from capital, "are only a wage for labour, and indeed for labour of great public benefit; for with the obtaining of this wage is bound up, essentially and peculiarly, the duty of free activity in the public welfare, in science and skill, in everything that lightens, ennobles, and adorns human life" (Ueber die wahre Natur und Bestimmung der Renten aus Boden—und Kapitaleigenthum, Sammlung der kleiner Schriften staatswirthschaftlichen Inhalts, Berlin, 1843, p. 566). As regards Hoffmann, even more than as regards the Katheder Socialists, we are justified in doubting whether the words quoted were meant as a theoretic explanation of interest. If they were so, his theory is unquestionably more inadequate than all the other Labour theories; if they were not, it lies outside my task to question their justification.

End of Notes

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