Erich Schiff’s study is a compact intervention in early empirical business-cycle research, issued within the Austrian Institute’s series rather than as an abstract treatise. Its subject is the ambiguity hidden in the terms “capital formation” and “capital consumption”: in a boom, does society really accumulate productive wealth, or does it merely raise the monetary valuation of existing assets; in a downturn, is capital physically destroyed, or are inflated expectations written off?
BEITRÄGE ZUR KONJUNKTURFORSCHUNG HERAUSGEGEBEN VOM ÖSTERREICHISCHEN INSTITUT FÜR KONJUNKTURFORSCHUNG Nr. 4
English translation: CONTRIBUTIONS TO BUSINESS-CYCLE RESEARCH, PUBLISHED BY THE AUSTRIAN INSTITUTE FOR BUSINESS-CYCLE RESEARCH, No. 4
The central thesis is that the course of the conjuncture must be read through a distinction between real capital maintenance and extension, on the one hand, and changes in capital value, on the other. Schiff’s decisive conceptual move is to treat “capital” not as a self-evident stock of things or money, but as a value-form tied to expected future returns. The footnote to Wieser is therefore not incidental; it marks the theoretical basis of the argument.
¹ Vgl. Wieser: Theorie der gesellschaftlichen Wirtschaft, Wien 1924, S. 103.
English translation: ¹ Cf. Wieser: Theory of Social Economy, Vienna 1924, p. 103.
Schiff aligns the analysis with a theory that understands capital value as the capitalization of yield. In this framework, the same plant, inventory, or enterprise may acquire a different “capital” significance when profit expectations, interest rates, or market prices shift. Capital formation and capital destruction thus cannot be inferred mechanically from visible prosperity or depression.
Die Theorie, die das Wesen des Kapitalwertes als diskontierten oder kapitalisierten Ertrages vielleicht am meisten betont und die belangreichsten Folgerungen daraus ableitet, ist die Kapitaltheorie Fishers.
English translation: The theory that perhaps most strongly emphasizes the essence of capital value as discounted or capitalized yield, and that draws the most significant conclusions from it, is Fisher's theory of capital.
This yields the work’s main analytical distinction. A boom may contain genuine accumulation when current resources are diverted into replacement, improvement, and new productive capacity. But it may also generate only apparent formation: higher capital values arising from optimistic capitalization, credit expansion, or temporarily favorable returns. Conversely, crisis may register capital “destruction” as a fall in asset values, while the deeper question is whether society has actually consumed its productive substance through inadequate replacement, losses, or misdirected investment. Schiff’s title therefore names not two simple phases of the cycle, but two processes that can be concealed inside each phase.
The empirical material reinforces this caution. The table of money circulation places the argument in the post-stabilization monetary environment and shows why monetary magnitudes cannot be equated with capital accumulation. The figures matter because they document the liquidity and credit background against which capital values are formed and revised, but Schiff’s point is precisely that money circulation is not identical with real capital.
Gesamter Geldumlauf Millionen RM
English translation: Total money circulation, millions of RM
The movement from the early stabilization years toward the later 1920s gives the inquiry its historical urgency. Expanding circulation may accompany investment and rising valuations, yet the problem remains whether such expansion corresponds to saved and maintained productive resources or to a fragile capitalization of future proceeds.
In the table, November 1923 is listed at 1,488 million RM, while November 1926 is listed at 5,421 million RM.
The structure of the work follows from this problem. Schiff first fixes the theoretical meaning of capital value, then uses the business cycle to show how capital formation and capital consumption become difficult to separate in practice. The work’s empirical references, including monetary statistics, are not presented as a self-sufficient explanation of crises; they serve to discipline the conceptual analysis and to prevent the easy identification of prosperity with accumulation.
Its relevance lies in this refusal of simple cyclical moralism. Schiff does not merely say that booms create and crises destroy. He shows that the categories themselves are mediated by valuation, accounting, expectations, depreciation, and the relation between money and real productive capacity. The study therefore anticipates later concerns with balance-sheet revaluation, the difference between financial and real accumulation, and the cyclical masking of capital consumption. Its institutional setting also matters: it belongs to an ongoing program of conjuncture observation rather than speculative system-building.
Die Monatsberichte erscheinen seit Juni 1927.
English translation: The monthly reports have been published since June 1927.
Schiff’s contribution is strongest where it makes capital a dynamic category. Capital formation is not just the purchase of assets, and capital consumption is not only visible ruin. Both are processes revealed over time, through the relation between expected returns and the actual preservation or enlargement of the productive apparatus.
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