Eugen von Böhm-Bawerk · 1882
Böhm-Bawerk’s short review assesses Goldschmidt’s 1880 study of German mortgage banking as a knowledgeable contribution to reform whose critical insights are stronger than its tendency toward extreme conclusions. The review moves from the book’s origins through its diagnosis and proposals to a qualified endorsement, including its potential relevance to Austrian credit institutions.
Goldschmidt’s book grew out of a presentation to a conference of mortgage-bank directors in 1876. Its deeper impetus, Böhm-Bawerk explains, was the deterioration of business at most Prussian mortgage banks since 1875. Goldschmidt identifies three principal causes: lending limits derived from inappropriate external measures, such as fire-insurance valuations and tax assessments; competition that makes sound banking practices difficult to sustain; and abuses in the agency system used to distribute mortgage bonds.
The proposed remedies correspond to this diagnosis. Goldschmidt calls for revised valuation and lending rules supported by reliable real-estate statistics, alongside a common organization of existing institutions linked to a central German real-estate credit institution. He places little confidence in legislation securing bondholders through a possessory pledge over banks’ acquired claims, regarding it chiefly as reassurance for public prejudice and potentially an obstacle to practical business. Böhm-Bawerk also records his rejection of Rodbertus’s rent theory and his insistence that loans secured on real estate retain their character as capital debts.
The reviewer explicitly acknowledges the book’s analytical merits:
Das Buch ist unstreitig mit Scharfsinn und grosser Sachkenntniss geschrieben und enthält — namentlich im kritischen Theil — viele werthvolle Beobachtungen.
English translation: The book is indisputably written with acumen and great expert knowledge and contains — particularly in the critical part — many valuable observations.
This praise is strongest for the diagnosis, not an unqualified endorsement of the remedies. Böhm-Bawerk’s central evaluative distinction is between a justified criticism and the excessive inference drawn from it:
Die Hauptschwäche desselben dürfte in der Uebertreibung liegen, zu der der Verfasser sichtlich hinneigt und die ihn theils im stark gewürzten Ton der Polemik, theils im Inhalt seiner Behauptungen oft über's Ziel schiessen lässt.
English translation: Its chief weakness may well lie in the exaggeration to which the author visibly inclines and which often makes him overshoot the mark, partly in the strongly seasoned tone of his polemic, partly in the content of his assertions.
His concrete example concerns compulsory sales. In an otherwise legitimate polemic against Rodbertus, Goldschmidt claims that transfers of real estate through forced sale would become economically indifferent if enforcement procedures were improved. Böhm-Bawerk rejects that sweeping conclusion and detects a similar inclination toward extremes in some proposed remedies. The review thus endorses reform without equating administrative improvements with the elimination of broader economic consequences. Its final judgment remains favorable: the book should stimulate mortgage-bank reform and offer useful lessons for Austria, despite its primary German focus.
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