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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Like Molinaeus, whom he often quotes with approval, he adduces on its behalf the analogy between the loan against interest and the hire against payment. The views of Salmasius on interest are put together most concisely and suggestively in the eighth chapter of his book De Usuris. This movement becomes observable about the middle of the sixteenth century, gathers impetus and power in the course of the seventeenth, and towards its end obtains so distinct an ascendency that during the next hundred years it has only to do battle with a few isolated writers who still represent the canon doctrine.

Capital and Interest does not only address economics, however.

Capital and Interest | Mises Institute

Let us take the case of a manufacturing company. In loan interest, and specially in loan interest derived from sums of money that are by nature barren, this characteristic is so peculiarly noticeable that it must excite question even where no close attention has been given it. But when wealth is put into the active forms of capital—of which machinery may be taken as instance and type—and capital becomes intermediary between man and his environment of nature, the result is that the production of wealth is indefinitely increased.

Merchants and practical men were, without exception, steadily on the side of interest. This task naturally fell interezt 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 capitao rise far into the eighteenth century.

The facts here are as stated: In these words Molinaeus sets himself in the most direct opposition to the Church’s doctrine. The contrary opinion, that interest in itself is absolutely objectionable, is foolish, pernicious, and superstitious Stulta illa et non minus perniciosa quam superstitiosa opinio de usura de se absoluta mala No.

On this point opinions are divided.

In view of the unsatisfactoriness of the answers hitherto given to our problem it is easy to see how another answer would arise. During the political and religious troubles among which the young free state was born, men had learned to emancipate themselves from the shackles of a slavish following of authority.

Of greater importance is the second phase, although neither as regards the number of its ajd nor the very imposing array of arguments they introduced. Thus Grotius takes a hesitating middle course between the old and the new doctrine. But now a step farther in this direction was bhn-bawerk, although under protest of the strict canonists, by the introduction of two contract clauses. Much more frequently is it the case that attention is first attracted by some particularly striking instance, and it is only gradually that the less striking phenomena come to be recognised as belonging to the same group, and are included in the compass of the growing problem.


The question now is whether, in interesr of this, we should not distinguish two quotas in the total sum of profit realised by the undertaking; one quota to be considered as result of the capital contributed, a second quota to be considered as result of the undertaker’s exertion.

This has been the case with the phenomenon of interest. Practically he does resile from the principle of prohibition by allowing and approving of many kinds of compensation for loss, for renunciation of profit, for lender’s trouble and risk,—describing these as “of the nature of capitaal.

The labourer, theoretically, is paid by what he makes—although this proposition requires more careful statement and limitation than can be given it here—and wages are supposed, prima facie, to represent an equivalent in value contributed to the product by the worker. For more than a hundred years any development there was consisted in nothing more than the adoption of it in wider circles, the repetition of it with more or less skilful variations, and the adapting of its arguments to the fashion of the time.

The amount of truth in the theory is that capital is a most powerful factor in the production of wealth, and that capital, accordingly, is highly valued. Finally, he is as little impressed by the passages in Holy Writ which have been interpreted as forbidding interest p.

Not that any one can get the monopoly of time, and not that time itself has any magic power of producing value, but that the preference by the capitalist of a future good to a present dapital enables the worker to realise his labour in undertakings that save labour and increase wealth.

But alongside of expressions like these we find the accepted Salmasian doctrine. First of all, we must distinguish between Gross interest and Net interest.

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William Smart translated this work. It is the explanation of Net interest with which the theory of interest naturally has to do. Thus, in course of time there appears a favoured class who are able not only to live without working, but to direct, control, and bhm-bswerk limit the labour of the majority. To put it another way.

He contends that there are certain things the use of which consists in the consumption of the articles themselves, such as grain and wine. Capital plus interest on 31st December is the full equivalent of capital alone on 1st January preceding.

They are not intended to forbid the taking of interest in general, but only such interest as violates the laws of charity and brotherly love. The goal of each section is to present the fairest possible case for the theory, examines its claims in detail, and finally reveals its most profound errors. In this category A’s gain is B’s gain. As the champion of the then-emerging marginalist school, this great work brought him more fame than even Carl Menger had in his day.


The creditor is usually rich, the debtor poor; and the former appears in the hateful light of a man who squeezes something from the little of the poor, in the shape of interest, to add it to his own superfluous wealth.

For in the case of the hire locatio the lender can take back his property at any moment, because he remains the owner of it. Capital and Interest German: Thus profit made from a sleeping partnership was, at least, not forbidden.

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Nevertheless the book made its way, was read, repeated, and published again and again, and so scattered a seed destined to bear fruit in the end. Libertarian Press’s edition was translated by Hans Sennholz and first published in 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.

Labour and capital co-operate in making it, and the individual form and share of each is lost in the joint product.

The national conception, if we except those few objects of immediate consumption lent at interest to other countries, includes merely the produced means of production belonging to a country.

Theory was too much the bond servant of practice. In fact the difficulties of determining a “just” wage are so great that the temptation is overwhelming to ascertain what labour is worth by cqpital easy way of capittal what inetrest will take, and if fifty women are at the gate offering their services for a half of what fifty men are earning, who is to determine what a “fair wage” is? Indeed it appears to me that there is no better way of coming to a correct decision on the question whether interest be a good thing, than by getting a proper knowledge of the causes which give rise to it.

And finally, he sells time, which belongs to the borrower just as much as it does to the lender and to all men. 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.