Eugen v. Böhm-Bawerk, “Macht oder ökonomisches Gesetz?” (1914)

Böhm-Bawerk’s 1914 essay intervenes between two one-sided doctrines of distribution. Classical economics had treated price and wage laws as quasi-natural necessities, most notoriously in wage-fund theory. Later writers, especially Stolzmann after Rodbertus and Wagner, reversed the emphasis and made “social” power decisive. Böhm-Bawerk rejects both absolutes. The question is not whether law, organization, monopoly, or the state can affect distribution; it is how far such power can operate and by what mechanism.

„Man müßte heutzutage ein Idiot sein, wenn man einen Einfluß der sozial geschaffenen Einrichtungen und Maßregeln auf die Güterverteilung leugnen wollte; es liegt auf der Hand, daß unter einer kommunistischen Rechtsordnung die Verteilung formell und materiell ganz anders verlaufen würde, als unter einer individualistischen, auf dem Prinzip des Privateigentums basierenden Rechtsordnung; und es zweifelt unter anderem auch kein Verständiger mehr daran, daß der Bestand der Arbeiterorganisationen mit dem Kampfmittel der Streiks auf die Gestaltung der Arbeitslöhne nicht ohne Einfluß ist.“

English translation: "Nowadays one would have to be an idiot to deny that socially created institutions and measures influence the distribution of goods; it is obvious that under a communist legal order distribution would proceed, both formally and materially, quite differently than under an individualist legal order based on the principle of private property; and no reasonable person any longer doubts, among other things, that the existence of workers' organizations, with the strike as their instrument of struggle, is not without influence on the shaping of wages."

The structure follows from this problem. The opening surveys the controversy; Section II states the central thesis; Section III tests it through the strike; Section IV asks which power-effects can endure; the close distinguishes functional from personal distribution. Böhm-Bawerk admits that marginal utility theory had left an unfinished “Torso” by analyzing mainly free competition. Yet he argues that the social theorists did not fill the gap: “Macht allein” is a slogan unless one explains the economic conditions that make power effective.

Auch in den Preis- und Verteilungsfragen wirkt die „Macht“ offenbar nicht außerhalb oder gegen, sondern innerhalb und durch Erfüllung der ökonomischen Preisgesetze.

English translation: In questions of price and distribution too, "power" evidently operates not outside or against, but within and through the fulfillment of the economic laws of price.

This is the essay’s main conceptual move. Economic power is not an independent force standing outside value theory. Usury depends on urgent need and absence of alternatives; monopoly depends on demand intensity and control of supply. The monopolist can choose among possible price positions, but cannot escape the relation between price and quantity sold. Extra-economic motives—generosity, hatred, patriotism—may disturb price laws; economic power instead realizes them under special conditions.

Nicht Leugnung, sondern kasuistische Fortbildung der vermeintlich rein ökonomischen Verteilungsgesetze muß die Lösung sein.

English translation: Not the denial, but the casuistic further development of the supposedly purely economic laws of distribution must be the solution.

The strike example gives the argument its force. Under full competition, wages tend toward the value of the marginal product of the last worker. Employer monopoly can press wages below this level. But a workers’ coalition may also force wages above the individual marginal product, without refuting marginal theory. In an ordinary bargain the employer asks what one more worker adds; in a strike he faces the loss of the whole labor force. Since labor is complementary with capital, the withdrawal of all workers may idle machines, spoil materials, miss market opportunities, or endanger the plant. The relevant valuation becomes the total loss avoided, not the isolated product of one worker. Strike power enlarges the bargaining zone through complementarity and total utility, not through exemption from economic law.

The hardest question is duration. Wages below subsistence or below common-labor alternatives cannot last. Wages held below marginal product by employer power invite exit, new entrants, outsider competition, and changes in technique. Conversely, wages forced far above marginal product cannot endure if they impose capital losses or absorb interest. If interest disappeared, saving would weaken while entrepreneurs would lengthen production processes without restraint; interest would re-emerge, fewer workers would be employed, and unemployment would undermine the coalition. Böhm-Bawerk therefore accepts power but denies its unlimited reach.

Im Gegenteile, ich glaube an eine Wirksamkeit, und zwar auch an eine bedeutungsvolle und tiefgreifende Wirksamkeit der Machteinflüsse; ich glaube nur nicht an ihre Omnipotenz; und da ferner ihre genauere Analyse mich darüber belehrt hat, daß diese ökonomischen Machteinflüsse selbst durch wirtschaftliche Interessenmotive hindurch wirken, darf ich die Augen nicht dagegen verschließen, daß die durch Machteinflüsse geschaffenen Situationen unter Umständen auch ihrerseits wieder Interessenmotive auslösen können, die dem unveränderten Beharren bei jenen Situationen entgegenstreben.

English translation: On the contrary, I do believe in the efficacy—and indeed in the significant and far-reaching efficacy—of the influences of power; I only do not believe in their omnipotence. And since closer analysis has further taught me that these economic influences of power themselves operate through economic interest-motives, I must not close my eyes to the fact that situations created by influences of power can, under certain circumstances, in their turn also give rise to interest-motives that work against the unchanged persistence of those situations.

Durable power-effects remain possible in three cases: when organization breaks an opposing monopoly and restores wages to marginal product; when it anticipates a wage rise already prepared by capital growth or technical progress; or when pressure induces innovations that raise productivity enough to make the new wage “natural.” This is how Böhm-Bawerk reads many modern strike successes: they occurred amid rapid technical advance, not because power suspended economic law.

Und noch eines kann, wie ich genügend anschaulich gemacht zu haben hoffe, auch das gebieterischeste Machtdiktat nicht: es kann nicht gegen, sondern nur innerhalb der ökonomischen Wert-, Preis- und Verteilungsgesetze wirken, sie nicht aufhebend, sondern bestätigend und erfüllend.

English translation: And one more thing, as I hope to have made sufficiently clear, even the most imperious dictate of power cannot do: it cannot operate against, but only within the economic laws of value, price, and distribution—not abolishing them, but confirming and fulfilling them.

The closing distinction, taken from J. B. Clark, limits the claim to functional distribution: the division of the product into wages, rent, interest, and profit. Personal distribution can be permanently altered by changing ownership “data,” as through land grants or socialism. The essay’s lasting relevance lies in this mediation: policy and organization matter, but they work through scarcity, valuation, substitution, complementarity, and competition.