The Positive Theory of Capital

Eugen v. Böhm-Bawerk, from the Warren J. Samuels Portrait Collection
Böhm-Bawerk, Eugen v.
(1851-1914)
CEE
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Editor/Trans.
William A. Smart, trans.
First Pub. Date
1888
Publisher/Edition
London: Macmillan and Co.
Pub. Date
1891
Comments

BOOK I

THE NATURE AND CONCEPTION OF CAPITAL

Book I, Chapter I

Man and Nature

I.I.1

There is scarcely a system or a text-book of Political Economy which does not, at some point or other, bring in discussions of matters belonging to the physical sciences. Usually these are introduced in the chapter on Production. There we are taught that to create new goods does not mean to create new material, since matter is constant and cannot be increased. We learn what nature contributes to the work of production in the shape of materials and powers; what is done by the mechanical, what by the chemical, and what by the organic powers of nature; what importance climate, heat, moisture have on the development of production; on what physical and technical foundations the working of machinery rests; and many things of this sort.

I.I.2

To the principle of this custom no sensible person will object. It is the form in which, consciously or unconsciously, we pay homage to one of the weightiest principles of our knowledge, the unity of all science. Ever since Bacon we have recognised that no single branch of inquiry explains to the very end the facts with which it deals, but breaks off at some point or other, and passes on its facts to some sister science for further treatment, so that the total explanation is only given by the totality of all the sciences. Thus it is that if one would not set before his readers simply a collection of barren fragments, he must add to what is distinctively departmental at least so much as will connect it with the related sciences in the organic whole of human knowledge, and thus indicate the way in which the explanations begun by him may be concluded.

I.I.3

It would, however, be rather impertinent if we theorists were to think that such terminal truths—as we may appropriately call them—are added only for purposes of statement and for the good of our readers. Rightly employed they are of much greater use to ourselves as scientific inquirers. They may be an effectual means of preventing us from lightly building our whole system, or parts of it, on air, and unintentionally maintaining in the name of Political Economy something which, in its assumptions or conclusions, is, physically or psychologically speaking, nonsense. I must not be misunderstood however. It is not in the least my meaning that Political Economy should assume a nature foreign to it, and become natural science or psychology; what I do mean is that it must never be in contradiction with these sciences. What is false in natural science or psychology is false in all and every science. And to prevent us unwittingly running counter to certain fundamental truths, perhaps the best way is to put these truths explicitly in black and white before our eyes.

I.I.4

Now the subject with which we have to deal in this work is of such a nature that it very specially requires to be based on sound natural principles, and a very great deal may be lost by neglect of this. I have therefore strong reasons for following the good old custom, and prefacing my theory by some fundamental truths that stretch over into the neighbouring sphere of the natural sciences. I shall endeavour not to abuse the opportunity by inflicting a mass of learned scientific detail on the reader. The few truths I mean to start with would indeed, in a professional classification, be put within the sphere of the natural sciences, but they are of so general a character that, practically, they are outside departmental limits, and belong to the commonwealth of knowledge. They are known and recognised by everybody, and, in one form or other, they have been expressed all along in our economic literature. There is really only one thing that, I should like to think, will distinguish my use of them: I shall try so to put them that they will not be mere paragraphs introducing the theory, but will remain present and living in the spirit of it. Usually these excursuses into the domains of physics are placed in some corner of economical books rather for ornament than use. In one chapter they are made much of; in the next they are forgotten and contradicted. In what follows I shall try to avoid this error, and wherever anything depends upon these fundamental truths—which will very often be the case in a discussion on capital—to keep unobtrusively but firmly in touch with them. In this way, while there is no fear of our economical theory obtaining the character of a theory of natural science, it will not be one that runs counter to physical facts.


I.I.5

Men strive after happiness. This is perhaps the most general and, certainly, the most vague expression for a complex of strivings, all of which have for object the bringing about of such occurrences and conditions as we know and feel to be pleasant, and the averting of those we know to be unpleasant. Instead of "striving after happiness" we may use the expression "striving after self-preservation and self-development," or "striving after the greatest possible furtherance of life"; or we may, with equal propriety, use the words, "striving after the most complete possible satisfaction of wants"; for the expressions we are so familiar with in economic terminology, "want" and "satisfaction of want," mean, in the last resort, nothing else than, respectively, the unsatisfied craving of man to be put under conditions he thinks desirable or more desirable than those he has, and the successful obtaining of such conditions.

I.I.6

The whole world, as we know it, is subject to the law of cause and effect; no effect can take place without sufficient cause. From this law man and his conditions have no exemption; none of those beneficent changes of condition, which we call "satisfactions of want," can come about otherwise than as the effect of a sufficient cause; every satisfaction presupposes an adequate instrument of satisfaction. The adequate instruments for the satisfaction of human wants, or—what is the same thing—the causes of beneficent changes in human conditions, we call goods.*2

I.I.7

The man who "wants" finds goods in different spheres of the world in which he lives; he finds them in the world of persons as well as in the world of things. For obvious reasons, which need not be discussed here, we use the word "good" in somewhat different ways in these two spheres. On the one hand, we designate by the name of goods not the persons who are of use to us, but only the acts, the services, through which they are of use; on the other hand, we give the name to the impersonal material shapes themselves, and call them Material as opposed to Personal goods.

I.I.8

In what follows we have to do with material goods only.

I.I.9

Material goods are part of the external world; they are natural things. As such they are, in constitution and action, wholly and entirely natural products, and subject to natural laws. The fact that men's goods are instruments towards the personal ends of the "lord of creation" gives these goods no kind of immunity from complete subordination to the natural order, any more than man himself is able to emancipate the natural side of his being from similar control. Material goods, therefore, come into existence only as natural laws allow and demand that a material shape, thus and not otherwise constituted, should come into existence. They pass out of existence if a new combination of natural powers, working according to natural laws, results of necessity in the dissolution of their former material shape. They cannot exert the smallest effect, be it useful, hurtful, or indifferent to men, unless the given coincidence of materials and powers under natural laws produce this very effect and no other.

I.I.10

These seem peculiarly trifling propositions. They are trifling enough to require no formal proof; indeed, no one will seriously dispute them. But, simple and trifling as they are, on certain tempting occasions these fundamental truths have been lost sight of, and theories have been put in circulation which implicitly contradict them. The theorist, therefore, has good cause to emphasise them, and even follow out their logical conclusions to a certain extent into those departments where they have to do duty as, peculiarly, the fundamental truths of economic theory. These departments are the function of goods and the origin of goods; in other words, the theory of the Use of goods, and the theory of the Production of goods.

I.I.11

The theory of the use of goods I have already gone into at length in Capital and Interest.*3 I there showed that material goods are nothing else than such distinct forms of matter as admit of the natural powers residing in them being directed to human advantage. I showed how the "use" they afford is realised through concrete activities of these natural powers, and, therefore, by real forth putting of power. I showed how a use (Gebrauch or Nulzung) cannot be made of them otherwise than by taking the peculiar forms of the energy of the good at the proper moment, supplying the conditions necessary to render them available where they previously existed in an unavailable form, and then bringing these forms of energy into proper connection with that object in which the useful effect is to take place. On these considerations I based the conception of the "Material Services" (Nutzleistungen) which I believe to be the only one that corresponds with facts, and rejected certain shadowy ideas which connected the old theory of interest with the word "Uses" of goods. What remains for us here is, on the same lines, to lay down certain fundamental ideas as to the origin of material goods.

I.I.12

We have already said that the origin of natural goods lies entirely under the control of natural laws. No material good can come into existence except when a previous coincidence of materials and powers has made it necessary in physical law that exactly this form of matter should emerge. Looked at from the point of view of nature, the formation of goods is a purely natural process. Not so, however, from the point of view of man. Man has cause to lay emphasis on a distinction which is not visible from the purely physical standpoint. One great class of useful forms of matter comes into existence, without interference from man, as the product of favourable coincidences of matter and force—a product which, from the teleological human standpoint, we should call accidental. Thus originate fruitful islands in the courses of streams; thus the grass on natural pastures and prairies; thus berries and trees of the wood; thus deposits of useful minerals. But though in this way accident does much for man it does not do nearly enough. In nature left to herself we have on a large scale what we should have on a small one if we wished to make a definite picture out of coloured bits of stone, and, instead of piecing the picture together deliberately, were to put the bits of stone into a kaleidoscope and wait till accident shook the planless stones into the wished-for picture. Among the infinite number of ways in which the working materials and powers might combine there are, in the one case as in the other, a countless number of possible effects, but only a few favourable ones; and in the natural undisturbed course of things these few turn up too seldom for man, with all his wants, to rest content with them. Accordingly he interposes another factor in the natural process, his own consciously directed energies—he begins to produce the goods he requires.

I.I.13

To "produce": what does this mean? It has been so often said by economists that the creation of goods is not the bringing into existence of materials that hitherto have not existed—is not "creation" in the true sense of the word, but only a fashioning of imperishable matter into more advantageous shapes, that it is quite unnecessary to say it again. More accurate, but still exposed to misinterpretation, is the expression that in production natural powers are the servants of man, and are directed by him to his own advantage. If this proposition be taken to mean that man in any case can impose his sovereign will in place of natural laws, can at will "bully" natural law into making a single exception at his bidding, it is entirely erroneous. Whether the lord of creation will it or no, not an atom of matter can, for a single moment or by a hair's breadth, work otherwise than the unchangeable laws of nature demand. Man's rôle in production is much more modest. It consists simply in this—that he, himself a part of the natural world, combines his personal powers with the impersonal powers of nature, and combines them in such a way that under natural law the co-operation results in a definite, desired, material form. Thus, notwithstanding the interference of man, the origin of goods remains purely a natural process. The natural process is not disturbed by man but completed, inasmuch as, by apt intervention of his own natural powers, he supplies a condition which has hitherto been wanting to the origination of a material good.

I.I.14

If we look more closely at the way in which man assists natural processes, we find that his sole but ample contribution consists in the moving of things. "Putting objects in motion" is the idea which gives the key to all human production and its results;—to all man's mastery over nature and its powers.*4 And this is so simply because the powers reside in the objects. Now when man by his physical powers—the power of moving things—is able to dictate where the object shall be, he obtains a control over the place at which a natural power may become effective; and this means broadly a control over the way and over the time in which it may become effective.

I.I.15

I say a control over the way in which a natural power may become effective. Of course a pound weight acts as a pound weight and never in any other way; whether it be a paper weight on a writing-table, or a counterpoise on a scale-beam, or whether it keep down the valve of a steam-engine, it never ceases to exert the force of gravitation with which its mass is endowed. But just because the expression of one and the same natural power always remains the same, results that are extraordinarily different may be obtained by getting it to work in different combinations—just as by adding like to unlike a different sum may be got every time. And so our pound weight, while in itself constantly acting with perfect uniformity, will, according to the different surroundings in which we place it, sometimes hold together a heap of papers on a writing-table, sometimes indicate the weight of another object, sometimes regulate the pressure of steam in the boiler.

I.I.16

Again I say a control over the time in which a natural power may become effective. This proposition, also, must not be taken too literally. It must not be imagined that natural powers work intermittently; that man can sometimes bring them to a standstill, sometimes set them working again. On the contrary, natural powers are always at work; a natural power not active would be a contradiction in terms. But it is possible that several powers may be so combined that their activities may for a time mutually balance each other, and the resultant be rest—if not complete rest, still some movement so slight that, as regards human purposes, it may be neglected. When this is the case, before any new resultant can emerge that is of interest to man, there must be an entirely different combination of materials and powers. This suggests how man may get control of the point of time at which a definite resultant emerges. It is only necessary for him, by skilful use of his power to move objects, to provide the causes of the desired effect, all but one. So long as this one is not present the conditions are unfulfilled, and there cannot be the desired result. But when at the proper moment he adds the last condition, the movement hitherto held in leash, as it were, is suddenly set free, and the desired effect is obtained at the opportune time. Thus the sportsman moves powder and lead into the barrel of the gun; he shuts the breech; he raises the cock. Each of these things has for long possessed and expressed its peculiar powers. In the powder are present the molecular powers whose energy later on is to expel the shot from the barrel. The barrel now, as formerly, exerts its forces of cohesion and resistance. The trigger which is to let the cock smash down, strains and presses against the spring. Still the arrangement, the disposition of the collective powers, is such that the resultant of their mutual energies is rest. But the sportsman covers the wild fowl with the barrel: there is a slight pressure on the tongue, a little dislocation of the arrangements, and the shot flies.*5

I.I.17

The same considerations which show us the kind of mastery man has over nature show us at the same time the measure and the narrow limits of his mastery. As we have seen, man has a certain power to make natural forces act where, when, and how he will; but this power he possesses only in so far as he can control the matter in which these forces reside. Now the masses of matter, and therefore the masses of inert resistance, which have to be overcome before our purposes are served, are often immense, while the physical force which is at our command is very modest and comparatively trifling. Often, on the other hand, the matter is too fine to be manipulated by our rude hand. Our interests often call for infinitely delicate rearrangements of infinitely small pieces, and how unsuited are our clumsy fingers to deal with molecules and atoms! How entirely incapable is the human hand of imitating even one of those wonderfully delicate cellular tissues which nature flings out in thousandfold, every day, in every plant and leaf! Thus human powers are doubly deficient; they are too slight as against the mass, too rude as against the structure of the matter which they have to subdue.

I.I.18

In those circumstances we should be very badly off for the wherewithal of production if we had not some real allies behind these doubly insufficient powers. One of these allies is the human mind. In investigating the causal relation of things we come to know the natural conditions under which the desired goods come into existence: we thus come to learn where human force can be applied with advantage and where not; and thus we are taught to avoid exertions which are barren and choose those which are profitable. Human power so directed is like a small but well-officered army, which makes up in mobility, cohesion, and energetic use of opportunity, what it wants in numbers. Another powerful ally in the struggle against nature is nature herself. All that we are able to do in production would be wretchedly small were it not that, in the storehouse of nature, we find the means of dividing nature against herself and setting force against force. But here we touch on a subject which is, in itself, too important, particularly as regards our inquiry, to admit of merely a passing mention.


Notes for this chapter


2.
See Menger, Grundsätze der Volkswirthschaftslehre, p. 1. Vienna, 1871.
3.
P. 219 (German edition, p. 265). See also my Rechte and Verhältnisse, p. 51. Innsbruck, 1881.
4.
See Mill's Principles, i. 1. 2.
5.
If we were to carry our analysis of what man does in production a step further, we might appropriately distinguish three fundamental ways in which the producing man "moves things." The first is what, for want of a better name, we may call simple movements or changes of place—where men transport entire objects from one locality to another. Thus the miner brings the ore from the depths of the shaft to the upper air; the merchant takes his goods from the place where they are produced to the place where they are demanded and used. The second embraces those movements of parts of one and the same object whereby it experiences a change of form, as when nails are made from iron, statues from marble, pipes from clay, dials from ivory, combs from caoutchouc, tumblers from glass, furniture from wood. The third, and much the most common way, is where different objects are brought together in space to form combinations of matter. These combinations may be merely temporary, or they may be lasting. Instances of the one are where the stamp falls on the coin, the chisel chips at the marble, the carving tool is applied to the wood, the ore put into the furnace, the yarn into the loom, the paper under the printing press, the stuff under the shears, the plough through the clods. Instances of the other are where we build a house out of wood, stone, lime, iron, etc.; where we put together a watch out of wheels, springs, pendula, weights, stop-action and many other things; in fact in manufacture generally. I must warn the reader that this division into three fundamental forms neither has, nor is meant to have, the character of strict scientific classification. Indeed, these forms merge in many instances into one another. Temporary combinations, for instance, are very often half-way to changes of form, and what I have called a simple change of place is at the same time, in a certain point of view, a material combination, a bringing together of the thing moved and the object (personal or impersonal) to which it is moved. This division, however, will make it easier to find our reckoning, and will prove too, if necessary, the correctness of the general characteristics which I have ascribed in the text to productive processes. I mean to say that it is easy to see that every productive activity which one can think of ranges itself under some one of these three fundamental forms, and to that extent it is proved that such an activity must, a fortiori, range itself also under the general formula given in the text, where we have described the nature and method of the production of material goods as the mastery of natural powers by means of putting objects in motion.

End of Notes


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