The Positive Theory of Capital

By Eugen Von Böhm-Bawerk; William Smart | Go to book overview

CHAPTER III
THE FUNCTION OF CAPITAL IN PRODUCTION

AFTER what has been said in the preceding chapter it should not be difficult accurately to indicate the rôle which capital plays in economic production.

Capital has, first, a symptomatic importance. Its presence is always the symptom of a profitable roundabout production. I say, deliberately, "symptom" and not "cause" or "condition" of profitable methods of production; for, as a fact, its presence is rather the result than the cause. If men to-day are fishing with boats and nets instead of picking the fish out of pools on the shore with their hands, it cannot be said that they have adopted those more fruitful methods because they possess boats and nets. Obviously they possess boats and nets because they have adopted these methods. They must have already chosen the roundabout way of production before these goods, speaking generally, come into existence.1

This, however, does not exhaust the importance of capital. It is, secondly, -- and herein lies the chief point of its productive efficiency, -- an effective intermediate cause of the consummation of this profitable roundabout process. Every piece of capital is, to a certain extent, a store of useful natural powers, the working of which helps to bring to a successful issue the roundabout process in the course of which the piece of capital has come into existence. I say "intermediate cause," not

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1
It would be somewhat different if we were to adopt the other conception of capital, and understand by it, not intermediate products only, but the entire national subsistence fund, which would therefore include the labourers' subsistence. In that case, but only in that case, one might say that capital was the cause of these profitable roundabout ways of production being adopted.

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