Joseph A. Schumpeter · 1913
Schumpeter’s German review assesses the French translation of Fisher’s work on capital and income, originally published in English in 1906. Its governing judgment combines admiration for conceptual precision with skepticism about its explanatory reach. Fisher’s distinctive achievement is a “philosophy of bookkeeping”—a phrase Schumpeter explicitly distinguishes from the translator’s erroneous reference to economic history.
In diesem Versuch, die wirtschaftlichen Tatsachen, die sich in der Buchhaltung spiegeln, begrifflich zu erfassen und deren Darstellungsweise theoretisch zu durchdringen, liegt die Bedeutung des Werkes.
English translation: The significance of the work lies in this attempt to grasp conceptually the economic facts that are mirrored in bookkeeping and to penetrate theoretically their manner of presentation.
Bookkeeping supplies both the material and the representational framework for Fisher’s conceptual analysis. Schumpeter praises his separation of values from goods, his clarification of discrepancies between economic theory and accounting practice, and his integration of risk and time discounting into a consistent vocabulary. Although such foundational distinctions make demanding reading, Schumpeter regards the book as nearly indispensable.
The review follows Fisher’s exposition from wealth, property, utility, and the history of capital theory to the distinction between capital as a stock at a given moment and income as a flow of services. Time provides the decisive differentiating dimension. Schumpeter traces this construction to Newcomb but disputes Fisher’s claim that his capital concept is already that of practical accounting. He then explains the aggregation of accounts: services expended on other goods cancel against corresponding debits, leaving consumable services per unit of time. These services ultimately yield satisfactions, so that net income resolves into subjective or psychic income. Accounting analysis thereby leads into the motivations underlying economic activity.
Fisher next distinguishes physical productivity from value productivity and develops the technical apparatus of interest and capital valuation. Capital value emerges as the discounted value of future returns, examined through different patterns and durations of income streams. Schumpeter notes that this exposition does not present an explicit interest theory; Fisher treated that question in his later The Rate of Interest. He also finds merit in excluding savings from income, since this sharply marks their distinctive economic function. Chapters on risk and diagrams, a concluding synthesis, a definitions list, and mathematical appendices complete the work. The appendices matter especially because they make the connection between theoretical concepts and business practice palpable.
The final assessment turns on the limits of that connection. Schumpeter acknowledges Böhm-Bawerk’s objection that Fisher’s conception of capital is unclear, while judging the ambiguity to have few consequences. His own deeper concern is that the apparent agreement between theory and bookkeeping does not establish the theory’s validity.
Denn sie geht nicht tief, und die Auffassung der Buchhaltung läßt sich auf Grund sehr verschiedener theoretischer Anschauungen gleich gut interpretieren.
English translation: For it does not go deep, and the conception of bookkeeping can be interpreted equally well on the basis of very different theoretical views.
The same accounting practices can accommodate different theoretical interpretations. Their fit with Fisher’s system therefore demonstrates less than its elegance might suggest. Schumpeter draws a sharp distinction between organizing scientific terminology and explaining economic phenomena:
Die Begriffe Fishers sind zunächst nur terminologische Festsetzungen, für die Erkenntnis der Phänomene leisten sie an sich nichts.
English translation: Fisher's concepts are at first merely terminological stipulations; for the cognition of the phenomena they accomplish nothing in themselves.
This reservation does not cancel the book’s contribution to clarity and rigor. It identifies the point at which conceptual order must give way to substantive explanation. In particular, defining capital as a stock cannot dispose of the problem of its distinctive income:
Keine Definitionen können z. B. die Tatsache aus der Welt schaffen, daß das Kapital, was immer es sonst sei, ein besonderer, von andern zu scheidender Träger eines eigenartigen Einkommens ist.
English translation: No definitions can, for example, do away with the fact that capital, whatever else it may be, is a particular bearer, to be distinguished from others, of a peculiar kind of income.
Schumpeter ultimately detects a particular interest theory behind definitions presented without an explicit theoretical derivation. Their usefulness depends on that theory’s correctness. The review’s enduring conceptual move is thus to separate terminological consistency, practical applicability, and explanatory validity while recognizing the value of all three. It closes with a brief adverse judgment on the French translation and recommends the English original.
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