Eugen von Böhm-Bawerk, “The Nature of Capital: A Rejoinder” (1907)

This file is a single-author journal rejoinder. Böhm-Bawerk intervenes in his dispute with Professor Clark over capital, interest, and distribution. Its thesis is that Clark’s “true capital”—a permanent entity supposedly persisting through changing goods—is a reified abstraction. The article moves through four questions: the identity of capital and capital goods; the difference between noticing and explaining a return on capital; whether distribution theory may restrict itself to the present; and whether capital really “synchronizes” production.

Böhm-Bawerk first welcomes Clark’s admission that capital is a mass of capital goods, but treats it as fatal to Clark’s larger theory. If capital and capital goods are identical at an instant, then no second material thing remains to perform the work Clark assigns to “true capital.”

At any mathematical instant, “capital” and the “capital goods” which compose it are, in his opinion, identical things.

The rejoinder’s central conceptual move is to define capital as the set of goods standing in a temporary productive relation to human wants. Goods enter and leave that relation; the class persists only through replacement. Continuity of the class does not imply an independent, permanent substance behind the goods.

Capital is not, and never can be, anything other than the whole of these goods.

Clark’s mistake, as Böhm-Bawerk presents it, is logical before it is economic: he mistakes abstraction for reality. A farm later represented by a stock of silks, or a repaired and rebuilt house, may be called “the same” only from a selected practical standpoint. Such identity depends on the purpose of description, not on the existence of another material entity.

Thus the formula as to the “continuance” of house and of capital rests not upon the solid basis of literally and unmistakably identical facts, but upon fluctuating subjective points of view.

The second part turns to interest. Böhm-Bawerk concedes the accounting facts Clark invokes: receipts replace tools, pay wages, and leave a surplus. But he insists that this merely states the phenomenon. Clark has shown that a net return appears, not why it appears.

That a net return on capital exists is obvious enough, and I have asked no question about it. Why a net return on capital exists is not obvious, and all Professor Clark’s experiences with his plough factory do not suffice to tell us.

This distinction between ascertainment and explanation drives the critique of Clark’s imputation theory. Böhm-Bawerk argues that Clark attributes the gross product to concrete capital goods, then silently subtracts replacement costs when speaking of self-perpetuating capital. The causal question is thereby evaded: wear and replacement explain business continuity, not the origin of net interest.

A part of the product, which is in fact produced by a “mass of capital goods,” he fails to ascribe to that mass.

The third movement disputes Clark’s methodological restriction of distribution theory to the present. For Böhm-Bawerk, Clark’s own principle—that factors receive according to contribution—requires tracing the whole temporal chain of production. A coat ready today embodies the shepherd, spinner, weaver, and tailor; prior payment does not erase prior contribution.

Distribution, in its economic sense, takes place among those who have taken part in the creation of the product and in such quotas as correspond to their contribution.

Here the article’s relevance to Austrian capital theory is clearest. Production is not an instantaneous simultaneity but an ordered process through time. To exclude earlier stages because they are “past” deprives distribution theory of the very causal foundation on which Clark relies.

Is it not always the fruit of a process of production which runs through time and in which the cooperating factors succeed each other?

The final section rejects Clark’s doctrine that capital synchronizes production so that today’s preparatory labor can be treated as yielding today’s consumption goods. Böhm-Bawerk accepts that society can consume without waiting, but only because earlier labor has already filled the pipeline. Present labor maintains future supply; it does not create the goods already available.

What the labor of the instant secures is not a present provision of completed commodities, but the continuance of provision at some time in the future.

The rejoinder’s lasting force lies in its demand that capital theory distinguish material goods from abstractions, description from explanation, and present availability from temporal causation. Against Clark’s elegant aggregate language, Böhm-Bawerk insists on heterogeneous capital goods, time-structured production, and an explicit account of interest rather than a verbal transformation of continuity into causality.