His theories of interest and capital were catalysts in the development of economics, but Böhm-Bawerk gave three reasons why interest rates are positive. First. Translator’s Preface↩. My only reasons for writing a preface to a work so exhaustive, and in itself so lucid, as Professor Böhm-Bawerk’s Kapital und Kapitalzins. Capital and Interest (LvMI) – Kindle edition by Eugen von Böhm-Bawerk, William Smart. Download it once and read it on your Kindle device, PC, phones or.

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If, further, it be maintained that, along with the money itself, its use also has passed over into the legal property of the borrower, and that he therefore is paying bohm-baweri interest for his own property, Molinaeus answers No.

This task naturally fell to the theological and legal literature of the Church, and thus began a literary movement on the subject of loan interest which accompanied the canonist prohibition from its earliest rise far into the eighteenth century. The fact is that, of the numerous views anf as to the nature and origin of interest, integest single one was able to obtain undivided assent.

Rodbertus’s picture of the working man as the lineal descendant of the slave—”hunger a good substitute for the lash”; Lassalle’s mockery of the Rothschilds as the chief “abstainers” in Europe; Marx’s bitter dialectic on the degradation of labour, are all based on generous sympathy with the helpless condition of the working classes under capitalist industry, and many shut their eyes to the weakness of Socialist economics bohm-abwerk view of the strength of Socialist ethics.

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Interest is a payment for the use of sums of money lent. Wealth passes down from father to son like a gathering snowball, at the same time as industry gets massed into larger and larger organisations, and the guidance and spirit of industry is taken more and more out of the hands of the worker and given to the capitalist. In the social and political question there naturally come into play all sorts of wishes, inclinations, and passions.

But they now touch only rarely, and then, as a rule, quite casually, on the question of its economic nature, of its bohm-baderk, and of its legitimacy. It is quite intelligible why this should be so.

It first became the object of capial only in the form of Loan interest, and for full two thousand years the nature of loan interest had been discussed and theorised on, before any one thought it necessary to put the other question which first gave the problem of interest its complete and proper range—the question of the why and whence of Natural interest.

In the eyes of the canonists loan interest is simply an income which the lender draws by fraud or force from interets resources of the borrower. But that the consuming world, over and above this wage, will pay a surplus which does not represent any equivalent value given to the product, is only conceivable on the supposition that the public is unconscious that it is paying such a surplus.

Thus the Productivity theory ends in suggesting that other and hostile theory according to which surplus value comes from labour, and is only snatched away by capital. Of two men, in other respects equal, the one who has wealth is able not only to preserve the value of his wealth intact, but to enjoy an annual income without risk or trouble, and, providing that he lives well within his income, can add steadily to the sum of his wealth.


The all-efficient gohm-bawerk of conviction was the Word of God, which, as they understood it, had condemned interest. On that account the use of these things cannot be separated from the articles themselves, and if the use be transferred to any one the article itself must necessary be transferred with it.

The borrower therefore is not defrauded in having to pay interest. The expression gross interest covers a great many heterogeneous kinds of revenue, which only outwardly form a whole. I therefore give below in his own words one or two passages from the polemic. First the taking of interest was forbidden by the Church, and to the clergy only. The most noteworthy of these are: The effect is to completely clear the field for his next book, The Positive Theory of Capital.

It is generally possible for any one who owns capital to obtain from it a permanent net income, called Interest. But the greater number of these arguments are merely appeals to authority, or they are of a bohm-baewrk character, or they are of no force whatever.

To put it another way.

Capital and Interest – Wikipedia

All that I have attempted to do is to lay down as briefly as possible a useful and certain terminology, on the basis of which we may have a common understanding in the critical and historical part of this work.

This defection, as may be easily understood, went on more rapidly in the Reformation countries and in those speaking the German language, more slowly in countries purely Catholic and in those speaking the Romance tongues.

And, finally, it flows in to the capitalist without ever exhausting the capital from which it comes, and therefore without any necessary limit to its continuance. The first efforts to accumulate capital must be attended by sacrifice; a temporary sacrifice, of course, to secure a permanent gain, but, in the first instance at least, a material sacrifice.

This compensation is interest or usura, in the right and proper sense of the word. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases.

The explanation of this reproduction is to be found in the work of those who employ the capital, both manual and intellectual workers. The laws of Justinian which allow interest, and only limit its amount, are consequently not to be considered unjust, but actually in the interest of the borrower, inasmuch as the payment of a moderate interest gives him the chance of making a greater profit No.

This has been the case with the phenomenon of interest. And quite in the same way does money when assisted by human effort bring forth notable fruits. Here A’s gain is B’s loss, but the community share in A’s gain, and even B shares in it, by being better served as a consumer. Credit has still little place in production.

The writers of the Christian Middle Ages had more occasion to treat the subject thoroughly. Suppose, for instance, that by the soundest of reasoning it was shown to be probable that the abolition of interest would be immediately followed by a decline in the material welfare of the race, that argument will have no weight with the man who measures by a standard of his own, and counts material welfare a thing of no great importance—perhaps for the reason that earthly life is but a short moment in comparison with eternity, and because the material wealth that interest ministers to will rather hinder than help man in attaining his eternal destiny.


Value cannot come from production. This was particularly true of the famous passage in Luke: When land is purchased for money, it is quite correct to think of the money as producing other sums of money in the shape of the yearly revenues from the land.

And now the lawyers begin to take a more active part in the movement alongside the theologians—first the canon lawyers and then the legists. It might be advisable, however, to put his theory into concrete terms. But Consumption is only a single exhaustive use, and Use is only a prolonged consumption. The essential features here, as regards our problem, are that, over a year’s time, the products manufactured are sold at a price which not only covers the value of raw materials, reimburses the various wages of manual and intellectual labour, and replaces the fixed capital as worn out, but leaves over that amount of value which is divided out among the capitalist shareholders as interest.

However, as they were guided in their conduct not by principles, but altogether by motives of expediency, their views have no deeper importance in the history of theory, and we need not pursue them farther. If, however, the emergence of surplus value in the case of simple labour needs explanation, much more does it in the case of capitalist production.

As the product does not pass into his own hand, he has no means of knowing what the real value of his day’s work is. In no other way can I account for the fact that, a hundred years after the appearance of Wealth of Nations, the great American and German economists should be devoting so much of their time to elementary and neglected conceptions. The strength of the Abstinence theory is that the facts it rests on really give the explanation how capital comes into being in primitive conditions and in new countries.

But now a step farther in this direction was taken, although under protest of the strict canonists, by the introduction of two contract clauses.

The course of the quarrel belongs to the history of civilisation; it is deeply interesting in itself, and has besides had an influence of the deepest importance on the practical development of economic and legal life, of which we may see many traces even in our own day.

At the outset he rejects the usual authoritative foundation for the prohibition, and tries to show that, of the writings adduced in its support, some are to be understood in a different sense, and some have lost their validity through entire change of circumstances. What this positively amounts to may be summed up thus: