Joseph A. Schumpeter: Irving Fisher: The Nature of Capital and Income [Rezension] (1909)

Schumpeter’s review of Fisher’s 1906 book combines strong praise for its technical analysis with a fundamental objection to its conception of capital. Opening against Marshall’s relatively reassuring assessment of progress in capital theory, Schumpeter suggests that the essential theoretical work remains unfinished. Fisher’s contribution matters especially for its careful treatment of capital and income calculation: actuarial methods and commercial accounting can renew economic theory without replacing it.

Und jeder Ökonom sollte es lesen, denn zahllose Mißverständnisse und schiefe Auffassungen kann seine klare Analyse verscheuchen.

English translation: And every economist ought to read it, for his clear analysis can dispel countless misunderstandings and distorted conceptions.

This endorsement frames the review’s selective examination of definitions, capital, and the distinction between capital and income. Schumpeter first challenges Fisher’s restriction of wealth to owned material objects. Although definitions may be arbitrary, such a definition does not explain the phenomenon of wealth, whose essential characteristics include power over goods and people. He likewise rejects the valuation of total wealth by multiplying existing quantities by market prices: prices established for particular quantities sold cannot straightforwardly value all quantities held.

The central disagreement concerns Fisher’s definition of capital as the stock of concrete goods possessed at a given moment. Schumpeter acknowledges that identifying capital with wealth can serve certain analytical purposes, but denies that this captures capital as it operates in economic life. Fisher’s appeal to businessmen willing to call a full cigar box capital proves little; their accounts register monetary sums, not cigars, machines, or raw materials as physical objects.

Liegt denn wirklich der Gedanke so ferne, daß es beim Kapitale nicht auf konkrete Güter ankommt, sondern auf Kaufkraft, auf wirtschaftliche Macht? Und diese ist nichts Körperliches.

English translation: Is the thought really so remote that in the case of capital what matters is not concrete goods but purchasing power, economic power? And this is nothing corporeal.

Here the review advances its distinctive conceptual alternative: capital should be investigated through purchasing power and economic power rather than corporeal possessions. Schumpeter does not develop a complete rival theory, but identifies the direction in which he believes prevailing capital concepts fail.

He nevertheless admires Fisher’s distinction between a stock existing at an instant and a flow of services through time. Its analytical importance survives difficulties in its application, including Fisher’s inclusion of human beings within wealth and capital.

Aber er führt seine Unterscheidung logisch strenge durch und gelangt zu einer sehr wertvollen Analyse im Kapitel vom „Psychic Income“.

English translation: But he carries his distinction through with logical rigour and arrives at a very valuable analysis in the chapter on "Psychic Income".

The closing judgment returns to the book’s technical detail as its principal achievement. The review’s significance lies in this separation of methodological gain from conceptual assent: Fisher clarifies calculation and income analysis, while Schumpeter insists that explaining capital requires moving beyond material stocks toward the economic power they do not themselves define.