Böhm-Bawerk’s Vision of the Capitalist Economic Process

Abstract

This paper is a prologue to Böhm-Bawerk’s mature vision of the capitalist economic process which he elaborated in The Positive Theory of Capital originally published in 1889. It deals with the intellectual influences and fundamental concepts that conditioned and infused this vision. By scrutinizing these influences in conjunction with his obscure first monograph published in 1881, we gain important insights into a number of heretofore neglected or under-appreciated aspects of his later work. First, Böhm-Bawerk’s theoretical system emerged from the nineteenth–century German subjective-value tradition in which he was immersed, and he saw his first task as correcting and completing the German “theory of goods” in order to provide a solid conceptual foundation for his planned future analysis of capital and interest. Second, the economists who had a formative influence on his thought extended beyond Carl Menger. Third, the Böhm-Bawerkian theoretical structure was founded on a view of the economic world pervaded with non-calculable, systemic uncertainty in which the facts and values relating to future goods were a matter of subjective interpretation and conjecture. This latter point is particularly important because many modern Austrians treat Böhm-Bawerk as an equilibrium theorist deficient in mathematical skills. Finally, the theory of goods as reconstructed by Böhm-Bawerk was clearly the point of departure for formulation of economics as a science of human action by his student Ludwig von Mises.