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
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BOOK II

CAPITAL AS INSTRUMENT OF PRODUCTION

Book II, Chapter I

Introductory

II.I.1

In expounding the theory of capital as Instrument or Tool or Means of Production we have to describe and explain the emergence and effects of capital in the economic production of goods. What we have to say on this matter groups itself round two questions: How does capital originate? and what is the nature of its productive work? The first question has to do with the theory of the formation or accumulation of capital; the second, with the productive function of capital.

II.I.2

The reader who has waded with us through the dozen theories and dozen definitions of capital will scarcely be surprised at meeting a similar divergence of opinion on the question we have now to consider. Of course there is no dispute about the fact that capital is, in the highest degree, useful to production. But I am much afraid that this is the only proposition on which our economists are quite agreed. So soon as the further question is asked: In what does this usefulness consist, or what character does the co-operation of capital in itself bear?—agreement is at an end. One finds the utility of capital in putting labour in motion;*1 another, in saving or supplanting labour;*2 a third, in performing labour;*3 a fourth praises it as giving man the mastery over the powers of nature;*4 and a fifth, as enabling the labourer to "put an interval between the beginning and the end of an enterprise."*5 Some, like Lauderdale, see in it an independent, original factor of production along with land and labour; others, like Gide, call it an independent but still merely derivative factor. Kleinwächter looks on it simply as a "condition"; Carey, again, as an "instrument" or "tool" of production. Indeed, our theorists cannot even agree as to the way in which that useful auxiliary of production comes into existence. If we ask the question concretely: How is a plane, or a plough, or a steam-engine made?—they would probably be able, with perfect certainty, to give minute information as to how those concrete portions of capital come into existence. But whenever they have to generalise what they have observed, they divide into hostile camps. Capital originates in saving, says one; no, says another, it must be produced; while a third proclaims that it originates in the two together.

II.I.3

It is a much greater cause for wonder that economists came to no agreement in these and similar questions than that they remained apart in their theories of interest. The task here was quite different, and essentially easier. In the interest theory the difficulty is to give the proper explanation of facts which are really much entangled, while here there is almost nothing to do but to describe the facts correctly; and facts, moreover, with which everybody is quite familiar. As we have said, every one knows how a plane or a steam-engine comes into existence. Similarly every one has a sufficiently exact idea what and how a plane, a machine, a plough, a raw material, does in production. It was only necessary to leave out everything peculiar in those cases, and to describe in appropriate words everything universal and typical in them, and the theory of the formation and function of capital would almost have been written.

II.I.4

The reason why economists failed in this simple task was that they did not allow the facts to speak for themselves. Instead of simply describing them as they were, explanations were read into them and added to them; one feature was pushed into the foreground, another kept in the background, a third was quite overlooked, while perhaps a fourth was entirely absent, but was read into them. When every man had thus imported his own particular views bodily into the facts, it was, of course, no wonder that everybody got something different out of them.

II.I.5

To my mind the most important duty of the theorist in such a case is to avoid the faults we have just condemned. To make certain of this we shall make a clear distinction, even in outward form, between the statement of the facts and the interpretation of them. The next chapter, therefore, will delineate and describe the process of capitalist production. When a solid basis of fact has thus been obtained, the interpretation and construction will follow in the chapters on the productive function of capital, and on the theory of the formation of capital.*6


Notes for this chapter


1.
Adam Smith, book ii. chap v.
2.
Lauderdale, Enquiry, p. 181, passim.
3.
Lauderdale, ibid. So also J. B. Say, "Il faut, pour ainsi dire, que les capitaux travaillent de concert avec l'industrie" (Traité, i. 3).
4.
Strasburger, Hildebrand's Jahrbücher, vol. xvii. (1871), p. 325; and Carey.
5.
Jevons, Theory of Political Economy, second edition, 1879, p. 243.
6.
In economic literature the clearest views as to the nature of capitalist production are, in my opinion, to be found in Rodbertus, Jevons, and Carl Menger. The works of Rodbertus, where they are not directly disfigured by the influences of his one-sided Socialist standpoint, are of quite classical accuracy and clearness. Unfortunately there are certain features which very sensibly mar what he has said. This is true in particular of his omission to notice the share which the valuable natural powers take in production, and the influence of time—two things which, obviously, could not easily be fitted into the "exploitation" theory he maintained so vigorously, and so were suppressed. We shall see this more fully later on. Carl Merger, again, by his arrangement of goods according to "rank" (Grundsätze, p. 7), and his statement of the laws which connect together goods of various ranks, has given at once a brilliant proof of his clear insight into the developed phenomena of production, and an invaluable tool to the hands of succeeding investigators.

End of Notes


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