An Economics Reading List

Böhm-Bawerk, Eugen V., The Positive Theory of Capital

    • The second and most famous of Böhm-Bawerk’s classics on the theory of interest and capital, this meticulous book works through the meanings and motivations of capital, investment, and savings.

Contemporaneously with Jevons, Walras, and Clark, Böhm-Bawerk was one of the primary contributors to the marginal revolution in economics: that is, the clear exposition of why it is the marginal, rather than the average, economic agent whose actions count. He also brought the concept of discounted present value out of the insurance/accounting industries and into economics. Particularly illuminating readings include Book III, with its clear explanation of marginal utility even in complex situations of complementary goods; Book IV, covering price-determination in situations from the workings of E-bay auctions to perfect markets; Book V, on the subjective rate of time preference; and Book VI, Chapter X, on industrial organization under Socialism were it to ignore discounted present values in paying laborers.

Although Böhm-Bawerk’s theory of average periods of production lost out to John Bates Clark’s marginal productivity theory, that exposition involves only a small, stand-alone portion of this book (Book VI, Chapters II-VI).


Lachmann, Ludwig M. Capital and Its Structure

    The theory of capital, alas, has made little progress since 1941. This book was written about a dozen years later in an attempt to make economists aware of the existence and urgency of these structural problems. It went out of print fairly soon and was not reprinted.