| Profile | Major Works | Resources |
Eugen von Böhm-Bawerk, 1851-1914
Austrian economist, statesman, leading member of the Austrian School and creator of the Austrian theory of capital.
Eugen von Böhm-Bawerk (Boehm-Bawerk, sometimes shortened to just Böhm)
originated from a prominent family in Brünn (Brno), then part of the
Austro-Hungarian province of Moravia. Hs studied at the local schools in
Brünn before enrolling at the University of Vienna, where he came under
the influence of Carl Menger.
Böhm-Bawerk was in Vienna when Menger published his revolutionary Grundsätze,
launching the Marginalist Revolution and the "Austrian
School". It was also at Vienna that Böhm-Bawerk met his
comrade, colleague and future brother-in-law, Friedrich von
Wieser.
After obtaining his law degree in law from Vienna in 1872, Böhm-Bawerk
joined the finance section of the Austrian civil service, while
continuing his economic studies on the side, completing his doctorate in
1875. Böhm-Bawerk (along with Wieser) proceeded to study economics
further at universities of Heidelberg, Leipzig and Jena, attending
the lectures of Karl Knies, Wilhelm Roscher
and Bruno
Hildebrand, the leaders of the German
Historical School.
After submitting his habilitation at Vienna in 1880 (pub.1881), Böhm-Bawerk embarked on an academic career, taking up a job as associate (extraordinary) professor at the University of Innsbruck in 1880. It was during this time that he produced the first two volumes of magnum opus, Capital und Capitalzins.
He resigned his chair in 1889 and returned to the Ministry of Finance
in Vienna, where he led a section on tax reform. In 1895, Böhm-Bawerk
was appointed Minister of Finance in the Austrian government of
Kielmansegge, but held this only briefly. He became minister of finance
again from November 1897 to March 1898 (Gautsch cabinet), then a third
time from 1900 to 1904 (Körber cabinet). Although a
classical liberal, and
associated with the liberal societies, he was not a formal member of any
political party.
In 1904, Böhm-Bawerk returned to academia, succeeding to
Menger's chair as professor of political
economy at the University of Vienna. Over the next decade,
alongside Wieser, Böhm-Bawerk presided over the education of the next
generation of Austrian economists, including Ludwig von
Mises, Friedrich von Hayek
and Joseph Schumpeter among his students.
Böhm-Bawerk died in 1914.
Eugen von Böhm-Bawerk is best for his three volume work, Capital und Capitalzins, introducing what has become characterized as the Austrian theory of capital. It was begun largely in response to Karl Marx's challenge to the Classical theory of interest. Böhm-Bawerk's first volume ("History and Critique", 1884) reviewed various theories of interest, and agreed that interest could not be based on cost (discarding the Senior-Mill theory of abstinence), and posited instead that interest must rest on the superiority of future goods over present goods - what he called the agio. He contemplated various possible reasons for it (including time preference). This was developed in more detail in his second volume, "Positive Theory of Capital" (1889), where he decided to rest it on the productivity of time. Picking up from where J.H. Thünen, John Rae and W.S. Jevons left off, Böhm-Bawerk characterized capital as time, a "roundabout" process of investment into labor and land. Crudely put, the more investment (i.e. time) put into building tools and equipment, the greater the resulting output. As roundabout production is more productive than direct simple production, time has a productivity dimension all its own, thus providing the justification for interest. Böhm-Bawerk tried to quantify this by proposing the "Average Period of Production" (APP).
Böhm-Bawerk's work was quickly translated into English by William T. Smart, and helped introduce the Austrian School (and indeed the Marginalist Revolution) to American economics. But the theory of capital itself was immediately criticized by John Bates Clark, who had his own competing theory of capital. This led to a series of polemics in US journals in the 1890s. The Austrian theory was defended by Thomas N. Carver and Frank A. Fetter. Frank H. Knight continued the polemics against the Austrian theory of capital through the 1930s. Irving Fisher would pick up several essential components of it to build his own theory of capital and interest, which was much better received. Elsewhere, Böhm-Bawerk's theory of capital was picked up, cleaned up and improved by Knut Wicksell in Sweden.
The reception of Böhm-Bawerk's theory of capital by the rest of the Austrian school was lukewarm at first. Friedrich von Wieser distanced himself from it, while his mentor Carl Menger was never enthused by it, and predicted that "the time will come when people will realize that Böhm-Bawerk's theory is one of the greatest errors ever committed." (C. Menger, as quoted by J. Schumpeter, 1954: p.847). It was given a blistering critique by Emil Sax in 1916. Nonetheless, it was embraced by Böhm-Bawerk's students, Ludwig von Mises and Friedrich A. von Hayek. Hayek in particular made the theory of capital the centerpiece of his work on business cycles in the 1920s and 1930s.
Böhm-Bawerk also authored a significant 1896 critique of volume III of Karl Marx's Capital, disputing his resolution of the "transformation problem".
[Clarification on Böhm-Bawerk's editions: the general title was Capital und Capitalzins. The first volume had specific title Geschichte und Kritik der Capitalstheorien ("History and Critique of Interest Theories") was first published in 1884. English translator William Smart published it under general title Capital and Interest (1890). Second volume had specific title Positive Theorie des Capitals ("Positive Theory of Capital") and was published in 1889, and Smart translated it under specific title Positive Theory of Capital in 1891. A substantially revised second German edition of the first volume was published in 1900, containing an appendix reviewing the literature published since 1884. This edition was not translated, but an English translation of its appendices was published in 1903 as Recent Literature on Interest. A revised second German edition of the second volume was published in 1902, this was not translated. Böhm-Bawerk then began a third edition of the second volume, which appeared in two parts - the first in 1909, the second in 1912. Each of these parts contained additional new appendices known as the Exkurse ("Essays"). In 1914, Böhm-Bawerk published a revised third edition of the first volume. Everything was reorganized in 1921, for a new posthumous German edition, edited by Friedrich von Wieser. It was now organized into three volumes under the general title of Capital und Capitalzins and referred to as the fourth edition. The first volume was just the 1914 third edition of the Geschichte und Kritik unchanged. The second volume was 1909 & 1912 parts of the third edition of the Positive Theorie bound together in one volume. The third volume collected the additional essays of the 1909 and 1912 parts separately into one volume, with particular title Exkurse zur Positive Theorie des Capitals. It was only in 1959 that a new English translation of the 1921 German three-volume edition was undertaken by George D. Huncke and Hans F. Sennholz, with general title Capital and Interest and specific titles "History and Critique of Interest Theories" (v.1, orig. 1884), "Positive Theory of Capital" (v.2, orig. 1889) and "Further Essays on Capital and Interest" (v.3, orig. 1909 & 1912).]
|
Major works of Eugen von Böhm-Bawerk
|
Top
HET
|
|
Resources on Eugen von Böhm-Bawerk Contemporary
Modern
|
All rights reserved, Gonçalo L. Fonseca