Emil Kauder, “Böhm-Bawerk, Eugen von” (1968)

Emil Kauder’s biographical encyclopedia article offers a qualified reassessment of Eugen von Böhm-Bawerk as a theorist of value, capital, and interest. Following a brief account of his Austrian public service, it proceeds through sections on value and capital theory, concluding with their contested reception and bibliographies. Its organizing judgment challenges both contemporary acclaim and subsequent neglect:

Indeed, he was considerably overrated during his lifetime, but today he is insufficiently appreciated.

Kauder locates Böhm-Bawerk’s importance in his attempt to connect marginal utility, time-consuming production, and the distribution of income within a systematic economic framework. This achievement remained imperfectly integrated. Premature printing of the Positive Theory of Capital, followed by ministerial duties, teaching, and illness, restricted opportunities for revision. These circumstances help explain weaknesses of presentation and consistency without resolving the theoretical objections.

The account places Böhm-Bawerk within an Austrian intellectual and political setting shaped by Aristotelianism and confidence in enlightened bureaucracy. Kauder interprets his economics through final causation: value supplies the organizing force, while costs exercise derivative powers. This framework also allows government intervention, complicating any identification of Austrian economics with unrestricted competition. Böhm-Bawerk’s career as finance minister—including his resignation when military demands threatened budgetary balance—provides the institutional background to this intellectual portrait.

Carl Menger supplied the decisive Austrian theoretical influence, but Kauder emphasizes Böhm-Bawerk’s transformation of that inheritance. Menger explained the value of interchangeable goods through the utility lost when one unit disappears. Böhm-Bawerk extended substitution across different categories of consumption. Someone whose overcoat is stolen may replace it by sacrificing theater visits; the relevant loss is then the less essential consumption forgone, rather than the coat’s immediate usefulness. Value depends on the consumer’s possibilities of adjustment across a budget.

A second departure concerns total value. Against Wieser’s multiplication of marginal utility by the number of units, Böhm-Bawerk treated the value of a whole stock as the sum of its successive utilities. Kauder connects this analysis with Marshall’s consumer surplus, while reporting Schumpeter’s qualifications concerning constancy of marginal utility and measurability. Böhm-Bawerk’s cardinal conception of utility made such calculation admissible. Substitution and total-value analysis emerge as his principal additions to Menger; his broader ambition was to connect valuation with production and the revenues of wages, interest, and rent.

Capital theory gives that synthesis its material and temporal structure:

Capital goods are not permanent, and capital is therefore in need of continuous reproduction.

Capital is consequently a changing arrangement of produced goods, not an everlasting productive substance. Drawing on Thünen and Rae, Böhm-Bawerk argues that roundabout production increases output: making boats and nets takes time and subsistence but greatly improves the fisherman’s catch. Further extensions yield diminishing increments of productivity. His distinctive move combines this account with a wages fund, the consumer goods that sustain workers while production remains unfinished.

Kauder explains why staggered production matters. Since goods simultaneously occupy different stages of completion, the economy need not hold provisions sufficient to support every worker for the longest production period. More advanced processes deliver consumer goods while newer processes continue. The production period and subsistence fund can expand or contract, with their eventual configuration depending on resources, labor, productive opportunities, borrowing, saving, and economic attitudes. These conditions bring those needing present goods into exchange with those willing to accept claims on future production.

Böhm-Bawerk believed that a single axiom governs the difference in value between present and future goods: present goods have a higher value than future goods of equal quality, quantity, and form.

The interest theory explains this premium through three considerations: greater future abundance in a growing economy, psychological underestimation of future needs, and the technical advantage of beginning productive processes immediately. Kauder identifies the third as especially controversial. Bortkiewicz regarded technical preference as an application of the first reason rather than an independent explanation.

The article’s numerical reconstruction brings wages, employment, production time, and profit into one model. With a specified subsistence fund and numbers of workers and capitalists, the illustrated equilibrium selects a six-year production period, annual wages of $500, and a maximum return of 10 percent. Its significance lies in the attempted simultaneous determination of production and distribution:

For Böhm-Bawerk, this state of multiple equilibrium and maximal satisfaction is that toward which the forces of the market tend to gravitate.

Kauder closes by mapping disagreement rather than announcing a settled verdict. The conception of capital as exhaustible produced goods conflicts with theories treating it as a homogeneous, permanently service-yielding factor. Morgenstern finds roundaboutness unnecessary, whereas sympathetic successors question particular calculations, especially investment and wages-fund averages. Lachmann interprets the model as an economy whose limited progress comes exclusively from capital accumulation. Kauder’s case for renewed attention rests on this continuing analytical relevance: despite disputed assumptions and incomplete integration, Böhm-Bawerk made the temporal organization and reproduction of capital central to explaining economic coordination.