Carl Menger's obituary of Eugen von Böhm-Bawerk (1851 to 1914), published in 1915 in the Almanac of the Imperial Academy of Sciences in Vienna and expanded here with notes from Schumpeter's writings. The first part traces his life: studies in Vienna, his Habilitation in 1880, a professorship in Innsbruck, several terms as Austrian Minister of Finance, and finally President of the Academy. The second part pays tribute to his scholarly work, from his first publication "Rechte und Verhältnisse" (Rights and Relationships), through the "Theorie des Güterwertes" (Theory of the Value of Goods), to his principal work "Geschichte und Theorie des Kapitalzinses" (History and Theory of Capital Interest). Menger summarizes the positive theory of interest briefly (psychological and technical reasons for preferring present goods over future ones) and sets the at times fierce international criticism in context, without regarding it as diminishing Böhm-Bawerk's significance.
As a polemicist, he was one of the best, quick to concede his opponent's good points, but ever ready to destroy with dazzling displays of irrefutable logic the house of error constructed by antagonists. Surely the controversial nature of Austrian theory demanded such a skill if it were to be firmly established. (B. B. SELESMAN)
In politics as in science the same character proved itself: the same self-control and intensity, the same high standard of the fulfilment of duty that impresses itself upon subordinates and pupils alike, the same capacity to look very keenly into men and things without becoming cold and pessimistic, to fight without bitterness, to renounce without weakness — to hold fast, through all breakers and storms, to a plan of life that was at once great and simple.
Böhm-Bawerk's work in economic theory resembles that of Ricardo in both aim and method. In his case, however, the gifts of the originator were supplemented by the gifts of the critic. (J. A. SCHUMPETER)
One may reject the entire foundation upon which he built his theory of interest — I too do not regard the famous three grounds as convincing, just as it is in any case no recommendation for a theory if it required such voluminous writings for its defence — yet Böhm's fame and scientific significance are not thereby shaken. (O. WEINBERGER)
Eugen v. Böhm-Bawerk was born on 12 February 1851 at Brünn as the son of the Vice-President of the Moravian Governorship, Court Counsellor v. Böhm; there too he completed primary school and the grammar school. After concluding his studies in law and political science1 at the University of Vienna, he entered (1872) the Austrian financial service as a trainee, without, however, interrupting the studies in political economy for which he had already acquired a particular interest at university. After he had obtained the doctorate at the University of Vienna (1875), he continued his economic studies (1875 to 1877) at Heidelberg, Leipzig and Jena (under Knies, Roscher and Br. Hildebrand)2. In 1880 he qualified as a Privatdozent of political economy at the University of Vienna on the basis of his treatise «Rights and Relations from the Standpoint of the Economic Theory of Goods». Almost immediately afterwards he was called to the University of Innsbruck, where he occupied the chair of political economy3. In 1889 he gave up this post and followed a summons to Vienna as Ministerial Counsellor in the Austrian Ministry of Finance. Appointed Minister of Finance in 1895, he held this office only for a short time. From November 1897 to March 1898 he was Minister of Finance for the second time, and from 1900 to 1904 for the third time. After his resignation he took up a professorship of political economy at the University of Vienna, where he was active as a witty and stimulating teacher until his death4.
His tireless and outstanding political and scientific activity met with abundant recognition on the part of His Majesty the Emperor and of numerous scientific and political bodies. He was an Actual Privy Counsellor, a member of the House of Lords of the Austrian Imperial Council, holder of the Grand Cross of several high orders, holder of the Decoration for Art and Science, an actual member and subsequently (1907 to 1911) Vice-President and (1911 to 1914) President of the Imperial Academy of Sciences in Vienna, honorary Doctor of Philosophy of the University of Heidelberg, honorary citizen of the town of Spittal a. D., and much else besides.
Böhm-Bawerk was married (since 1880) to Paula Freiin v. Wieser (daughter of the Actual Privy Counsellor and Section Chief Leopold Freiherr v. Wieser), a lady of outstanding qualities of mind and temperament; his marriage remained childless5.
He died on 27 August 1914, during a holiday stay at Kramsach near Brixlegg in Tyrol, in his 64th year, unexpectedly, of an insidious illness (of venous thrombosis). The deceased was at first buried at the place of his death, only to be transferred from there (in November 1915) to the grave of honour dedicated to him by the Greater Municipality of Vienna in the Vienna Central Cemetery.
Böhm-Bawerk was of pleasing appearance, of amiable manners and of a consistently even and friendly bearing; his features reflected benevolence, intelligence and an uncommon measure of energy — qualities which, combined with great worldly wisdom, quickly won him the affection and confidence of all those with whom he came into contact. He belonged to that class of persons who always have a good portion of zeal, energy and benevolence to spare, ready to place it in the service of public interests and of those who stand in need of their support. Although a combative nature and unceasingly entangled in polemics, he had, to be sure, numerous opponents, but certainly not a single enemy.
An appraisal of Böhm's achievements, if it is not to fall under the reproach of one-sidedness, must not confine itself to his scientific publications. He repeatedly directed Austrian finance, and indeed under difficult circumstances, and in this function carried through great and important measures with success. His merits as Minister of Finance6 would alone suffice to secure him an honourable place in the history of Austria.
However highly, then, one may rate Böhm's achievements as Minister of Finance, the principal task of his industrious life Böhm found in his scientific works and in the teaching profession, to which he always felt himself drawn back and to which he returned whenever he had done justice to the duties of the responsible offices that had been entrusted to him.
As a scholar Böhm unfolded an exceedingly fruitful literary activity. A systematic work embracing the entire field of economic theory he did not, however, publish. He confined himself to the publication of monographs, and to no small extent of such as had a narrowly delimited theme. Yet he knew how to raise his monographic investigations to unusual significance by the acumen and the universality with which he approached them. In investigating the most insignificant partial problem he brought to bear the whole armoury of his erudition, his acumen and his mastery of economic theory, so as to leave no point in any way connected with the problem he treated undiscussed, no possible objection to his expositions unanswered. It is doubtless chiefly for this reason that he was frequently reproached by his numerous scientific opponents with excessive, indeed wearisome, prolixity, while his no less numerous admirers recognised in precisely this — in the exceedingly clear and penetrating exposition that forestalls every objection in advance — a principal merit of his publications, and to no small extent even the explanation of their great success.
In the first treatise published by Böhm (1881): »On Rights and Relations from the Standpoint of the Economic Theory of Goods«, he investigated the problem of whether the doctrine, frequently maintained especially in German political economy, was justified — namely that, alongside material goods and labour services, rights and relations as well (that is, claims, monopoly and patent rights, firms, customer bases, and so forth) are to be conceived as a special category of goods in the economic sense — or whether science here merely followed an outward appearance. They are, according to the author (p. 147), not goods in themselves, not goods in the objective sense, but only relations of (economising) subjects to particular goods and complexes of goods. To recognise the rights and relations — that is, mere relations of economic subjects to goods — and at the same time the latter as goods, would be a faulty »double computation«. One cannot, for example, bring into account both the »claim of the creditor« and at the same time the object of the claim, which is in the hands of the debtor, as a »good«. The economic theory of goods, »the economic concept of a good«, must therefore be purged of this category of pseudo-goods.
The small treatise, Böhm's first work, contains a wealth of stimulating ideas, especially formulations of problems that are of serious significance for the coming development of economic theory. Böhm's attempt at a solution of the above-mentioned problem found, on account of the conspicuous artificiality of the theoretical construction, but above all on account of the contradiction in which Böhm's fundamental conception stands to experience, only divided assent in the circles of economists.
All the greater was the success of his second publication, »Basic Features of the Theory of Economic Value of Goods«, which appeared in Conrad's widely circulated Yearbooks for Political Economy and Statistics (1886).
Whoever has attentively followed the development of the economic theory of value, and especially of the theory of use value, since Adam Smith knows what difficulties were encountered by those authors who endeavoured to win for this doctrine the important place that is its due in economic science. Adam Smith and the majority of his pupils (with the exception, perhaps, of Malthus!) touched upon the phenomenon of use value only fleetingly, and in part not at all. Individual authors who, already in the eighteenth and especially at the beginning and up to the middle of the nineteenth century, had pointed to this sensitive gap in economic theory and had attempted to remove it, had remained unappreciated and unnoticed. Only since the beginning of the seventies of the past century do there appear, at points of Europe far distant from one another (in Austria, England and French Switzerland), almost simultaneously, individual economists, and subsequently larger and smaller groups of such, who pointed energetically to the inadequacy of the previous attempts at the explanation of numerous economic phenomena — and indeed, to no small extent, of precisely the most important ones — and to the fundamental significance of a theory of use value for scientific political economy, and who proceeded to the reform of the Smithian theories on the basis of the subjective theory of value.
It was in this struggle of ideas — in which not only misunderstanding and misinterpretation of various kinds, but above all the dead weight of the existing, of the customary, had to be overcome, and in part still has to be overcome — that Böhm, first with his treatise on the »Basic Features of the Economic Value of Goods«, and subsequently also in his later writings, came forward for the new direction of economic science in a manner as brilliant as it was successful. Böhm, although in more than one respect he diverges from his predecessors, repeatedly took occasion to disclaim any pretension to originality in his conception of the theory of value. If, however, the new economic theory, built upon the psychological foundation of use value, unceasingly gains in significance and diffusion in all civilised countries, and its final victory over the inadequate older theories is today scarcely any longer in question, then to Böhm's energetic and brilliant advocacy of the new doctrine (Böhm took up into his exposition of the theory of value numerous elements of the older doctrine!) a substantial share in this success must certainly be ascribed.
Böhm's name had already become most honourably known in the circles of his professional colleagues through his masterly exposition of the theory of value.
The work, however, through which he established his reputation as a scholar and writer, a reputation reaching far beyond the borders of Austria and Germany, was his History and Theory of Capital Interest (two volumes, 1884 to 1889). In this his principal work, in which he undertook to solve the difficult problem of an explanation of capital interest, all the merits of Böhm-Bawerk's scientific individuality — his thoroughness, his erudition, his brilliant gift of exposition and his polemical power — came to their fullest realisation. The work, which treats a special problem of theoretical political economy in two, and finally (in the third edition, 1909 to 1915) in three stout volumes of together nearly 2000 printed pages, has, despite this extent unusual for a monographic exposition in the field of economic theory, gone through three editions during the author's lifetime and met everywhere, wherever scientific political economy is pursued, with the most earnest attention.
The same undivided recognition has not been accorded to the attempt at a positive solution of the much-disputed problem of capital interest, published by Böhm first in 1889 in one volume, and in the third edition in two volumes (1909 to 1912). This publication has, in a higher degree than perhaps any other of the last decades, become the object of a lively scientific discussion in the economic literature of all civilised countries, and in particular also of that of America. Its principal content may be summarised briefly (in as strict adherence as possible to the wording of the author) in the following propositions:
A number of reasons, partly psychological and partly technical, work together to confer upon present goods, in the valuations of men and consequently in the prices that result from those valuations, a certain advantage over future goods of the same kind and number. The psychological reasons are rooted chiefly in the uncertainty of the future and in the lesser regard which most men have for providing against future needs; the technical reasons are connected chiefly with certain conditions of production, in particular with the fact that the technically most productive methods of production are those which permit one to embark upon far-reaching and time-consuming Roundabout Production (the preparatory manufacture of suitable intermediate products, tools, aids, and the like). Inasmuch as only he can tread such time-consuming roundabout paths who already has in hand a sufficient sum of money or goods to defray the requirements of production over so long a period, the command over present sums of goods acquires in production a heightened significance, before which future sums of goods—which of course cannot render those services—must take second place.
As a consequence of all these circumstances, there arises between present and future goods a relation of valuation and exchange which regularly stands in favour of the former, so much so that, for example, 100 present marks or hundredweights of wheat are held to be of equal value not with 100, but with about 105 of next year's marks or hundredweights of wheat (becoming available, or payable, in the following year).
From this fundamental fact there follow, according to Böhm, »the interest on capital and the various forms in which it manifests itself«.
The theory of interest on capital here briefly summarised, that of Böhm-Bawerk, caused no small stir everywhere among learned economists, and indeed not only among those by whom interest on capital had been treated monographically, but also among the numerous authors of economic compendia, textbooks, systems, and so forth, all of whom had of course expounded the problem of interest on capital ex professo. All of them, whatever standpoint they adopted, found themselves—already after the appearance of the first volume of Böhm's work, that is, before they had yet become acquainted with the author's attempted solution—confronted with a trenchant criticism of their doctrines. The tension with which the appearance of Böhm's positive theory of interest on capital was awaited was under these circumstances just as understandable as the copious flood of attacks that poured down upon the head of the bold innovator after the work appeared. To this was added the circumstance that Böhm's theory did in fact offer many a point of attachment for justified criticism. Eminent economists, especially of England and America, have described Böhm's criticism of the theories hitherto current as one-sided, and his own attempted solution as artificial and unempirical, indeed as standing in contradiction to experience—while in doing so they frequently overlooked the important elements of truth in the theory they were combating.
The value of Böhm's principal work has been only slightly affected by the numerous antagonisms it called forth7. For what no one was able to call into question was the immense stimulus and deepening of economic research that proceeded from this work and its combative author, the integrity of Böhm's scientific striving, and the full dedication of his personality to the advancement of the science into whose service he had placed himself.
Notes: