Emil Kauder’s Review of Walter Eucken’s Kapitaltheoretische Untersuchungen (1955)

Emil Kauder’s review of the second edition of Walter Eucken’s Kapitaltheoretische Untersuchungen evaluates an ambitious reconstruction of roundabout production theory. The reviewed book brings together Eucken’s earlier work and later essays on capital, with Friedrich Lutz’s introductory history of the capital concept. Kauder follows three connected undertakings: defending time-consuming production, measuring the production period, and explaining interest. His judgment combines admiration for Eucken’s ingenuity with skepticism about the technological assumptions and measurement procedures sustaining his theory.

Kauder grants that Eucken identifies genuine weaknesses in capital theory. If capital consists of combinations of labor and land, treating it as an independent third factor raises the problem of explaining interest without apparently paying twice for the same productive inputs. Nor can anyone deny that establishing industrial plants takes time. But these concessions do not establish the stronger propositions on which roundabout production depends:

That production is time consuming does not necessarily imply that the theory of roundabout production is correct.

The decisive distinction is between production’s temporal character and the claims that greater use of intermediate goods lengthens production and that longer periods yield larger outputs, generally with diminishing increments. Eucken appeals to everyday experience in defending these claims; Kauder insists that their validity requires technological knowledge rather than economic intuition.

The engineer, not the layman and not the economists, has the last word in deciding about the validity of such assumptions.

Drawing on his observations of the American steel industry, Kauder notes that different production methods coexist, that older methods may take longer than newer ones, and that greater duration may accompany lower efficiency. Such evidence does not establish an opposite universal law; it shows why common sense cannot settle the proposed relationship between duration and productivity.

The second part examines Eucken’s effort to give the production period definite boundaries. Böhm-Bawerk’s method traces productive contributions indefinitely backward, making even ancient labor infinitesimally relevant to present output. Following Steindl, Eucken introduces “back transfer” (Rückversetzung): resources moving toward finished consumer goods are redirected into producing capital goods. The period would then extend from this diversion until the redirected resources mature into consumer goods.

Kauder argues that this device complicates rather than resolves the problem. For a pair of shoes, the starting point might be the allocation of pig iron to machinery, leather to manufacture, or a factory building to expanded production. Averaging offers no remedy unless the relevant starting points can first be specified. His objection is methodological: speculation about technological sequences has displaced the analysis of economic problems.

The review becomes more favorable when Eucken turns to interest. Rejecting Böhm-Bawerk’s discount theory, Eucken combines productivity with consumption-fund reasoning: saving supplies consumer goods that sustain longer production, while equilibrium connects the additional product with interest paid for the added saved resources. Kauder finds the later qualifications more valuable than this initial framework. Forced saving and hoarding distinguish capital supply from saving; Eucken’s final essay also reduces the interest rate’s governing role, emphasizing price expectations and the interdependence of investment across industries. Kauder identifies an accelerator-like mechanism in the way expanded foundry demand can induce investment in related facilities.

His remarks on interest are the most valuable part of his book.

This verdict defines the review’s relevance to capital theory. Eucken exposes unresolved problems without, in Kauder’s view, supplying a convincing general account of roundabout production or its measurement. His more promising contribution lies in the unfinished movement toward a less rigid explanation of interest and investment, attentive to expectations, monetary complications, and industrial interdependence.