The Positive Theory of Capital
The Positive Theory of Capital is Böhm-Bawerk’s constructive statement of Austrian capital-and-interest theory, the companion to his critical history Capital and Interest. It argues that production is roundabout, that capital is the stock of produced intermediate goods that makes longer methods possible, and that interest is the agio on present over future goods.
What the Book Argues
Böhm-Bawerk builds the theory in three moves. First, roundaboutness: more productive methods of production are also more time-consuming — they reach consumable goods by a longer detour through produced intermediate goods — so output rises with the length of the production period, though at a diminishing rate. Second, capital: capital goods are precisely those produced intermediate goods, “stored-up” land and labor that bridge the time the roundabout method requires; capital is therefore not a third original factor but a produced, dependent one. Third, interest: because present goods command more want-satisfaction than future goods of the same kind and number, they trade at a premium — an agio — and that agio, persisting in a developed economy, is originary interest. He grounds the premium in three causes (different provision for present vs. future wants, systematic underestimation of the future, and the technical superiority of present goods for roundabout production).
Why It Matters in This Wiki
This is the primary source behind the wiki’s Capital concept and the new Time Preference and the Theory of Interest concept. The roundabout, time-structured view of production is also the foundation later carried into Austrian Business Cycle Theory, where credit-distorted interest misdirects the time structure of capital. Mises and Rothbard restate and revise this line — Mises rebuilds interest on pure time preference, dropping the third (technical) ground.
Provenance: the ingested raw is the clean, proofread Econlib edition (William Smart translation); quotations can be verified directly against it.
See Also
- Capital and Interest — the critical-history companion volume
- Eugen von Böhm-Bawerk - the author
- Capital - the concept this book grounds
- Time Preference and the Theory of Interest - the agio theory set out here
- Austrian Business Cycle Theory - the time-structure-of-production foundation it carries forward