Carl Menger on Böhm-Bawerk’s Capital und Capitalzins (1885)

Carl Menger’s review of the first division of Eugen von Böhm-Bawerk’s Capital und Capitalzins, published in 1884, assesses its history and criticism of interest theories as groundwork for a new theoretical explanation. Moving from the book’s rationale through its historical sequence and classification of doctrines to a concluding judgment, Menger locates its greatest achievement in clarifying the problem itself. Its importance does not depend on the success of the positive theory promised for a subsequent division.

The opening, extensively quoting Böhm-Bawerk, presents the puzzle of capital yielding a lasting net income without its owner’s personal activity and without exhausting the capital. Menger endorses the decision to examine existing explanations before adding another to an already divided literature:

Sicher scheint es uns auch, dass an die Lösung desselben mit einiger Aussicht auf Erfolg nicht geschritten zu werden vermag, bevor die bisherigen Lösungsversuche einer kritischen Sichtung unterzogen worden sind.

English translation: It also seems certain to us that its solution cannot be proceeded to with any prospect of success before the attempts at solution made hitherto have been subjected to a critical sifting.

Critical intellectual history thus becomes a condition of theoretical progress. Menger praises Böhm-Bawerk for reconstructing doctrines in their characteristic details rather than offering a schematic succession of opinions. Such precision makes criticism persuasive and supplies future researchers with an independently valuable resource.

A governing distinction separates the causes of interest from its justification. The historical account begins with ancient and canonist opposition to lending at interest, then follows the erosion of prohibition through economic practice, jurisprudence, and early modern defenses. Salmasius marks a decisive stage by treating interest as remuneration for the use of borrowed money, comparable to payment for the use of other goods. Yet defending the legitimacy of loan interest does not explain the full phenomenon of capital income.

Turgot’s advance lies in asking why capital earns income even when employed by its owner in production. His appeal to the possibility of purchasing rent-bearing land evades the explanation, but broadens the question decisively:

Indess, die Problemstellung Turgot's bedeutete jedenfalls einen bedeutenden Fortschritt zur theoretischen Erklärung des Capitalzinsproblems.

English translation: Nevertheless, Turgot's formulation of the problem in any case signified a considerable advance towards the theoretical explanation of the problem of interest on capital.

Menger’s emphasis on this distinction between an inadequate answer and a productive question anticipates his final assessment of Böhm-Bawerk. Adam Smith likewise matters less for a completed theory than for remarks that furnished starting points for conflicting successors: capital income could appear either as an addition generated by employing capital or as a deduction from labor’s product.

After Smith, the book shifts from chronology to doctrinal groupings. Menger follows its treatment of inherited, insufficiently developed explanations; productivity theories; abstinence theories; labor theories; and exploitation theories. Within this discussion, use theories explain surplus value through a separately remunerated use of capital, while productivity theories require a distinction between physical output and value productivity. Abstinence accounts invoke postponed enjoyment; labor accounts interpret interest as payment for saving or entrepreneurial activity; exploitation accounts treat it as a deduction from workers’ rightful remuneration. Eclectic combinations and recent proposals by George and Schellwien complete the survey.

These distinctions test whether theories explain interest or merely justify it, and whether an increase in goods actually explains a surplus of value. The concluding characterization of interest as a problem of value, rather than exclusively of production or distribution, gives the inquiry its wider theoretical significance.

Menger then turns explicitly from historical reconstruction to Böhm-Bawerk’s critical purpose:

Als letztes Ziel seiner Arbeit bezeichnet er vielmehr die Begründung einer neuen Capitalzinstheorie.

English translation: He designates rather as the ultimate aim of his work the establishment of a new theory of interest on capital.

The critique prepares the ground for that constructive project. Menger singles out the discussions of labor theories, Rodbertus, and Marx for exceptional analytical skill, but ranks even these achievements below the clarification of what a satisfactory explanation must accomplish:

Hierin, in der Klarstellung des von unserer Wissenschaft rücksichtlich des Capitalzinses zu lösenden theoretischen Problems, liegt das hervorragendste Verdienst des uns vorliegenden Bandes.

English translation: Herein, in the clarification of the theoretical problem which our science has to solve with regard to interest on capital, lies the most outstanding merit of the volume before us.

The review’s central judgment is therefore methodological as well as appreciative: enduring progress may consist in establishing the difficulty and scope of a question before resolving it. Menger closes by placing Böhm-Bawerk’s book alongside Wieser’s work on value as a lasting contribution to the theoretical understanding of social phenomena.