Capital and Interest: A Critical History of Economical Theory

Capital and Interest is Böhm-Bawerk’s critical history of interest theories — the destructive, ground-clearing half of the project he completes constructively in The Positive Theory of Capital.

What the Book Argues

The book is a systematic survey and critique of every major prior explanation of why interest exists: the productivity theories (capital is physically productive, so it earns a return), the use theories, the abstinence theory (interest rewards the saver’s restraint), and the socialist exploitation theory (interest is unpaid labor expropriated from workers). Böhm-Bawerk argues each fails to explain the phenomenon without circularity or category error — productivity theories in particular confuse physical product with value surplus. His running target is the Marxian exploitation account, which he treats at length and rejects; the demolition prepares the reader for the agio (time-preference) explanation, which locates interest not in capital’s productivity or in abstinence but in the systematic discount of future against present goods.

Why It Matters in This Wiki

It is the historical and polemical companion to The Positive Theory of Capital and a primary source for Time Preference and the Theory of Interest: it explains what the agio theory had to replace. Its critique of the exploitation theory also runs parallel to the value-theory critique in Karl Marx and the Close of His System.

Provenance: the ingested raw is uncorrected Internet Archive OCR; confirm any quotation against the scan before using quote marks.

See Also

• Karl Marx and the Close of His System — the parallel critique of Marxian value theory
• Eugen von Böhm-Bawerk - the author
• The Positive Theory of Capital - the constructive companion volume
• Time Preference and the Theory of Interest - the theory this history clears the ground for
• The Subjective Theory of Value vs. the Labor Theory of Value - The clash between value as objective embodied labor (Marx) and value as the subjective, marginal importance imputed by acting individuals (Menger, Böhm-Bawerk, Mises).