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The essential difference between the two transactions is that, on 1st January the price of the plane is another similar plane; on the 31st December it is a plane plus a plank.
We have already said that the origin of natural goods lies entirely under the control of natural laws. 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 acpital it. This explanation will be found if we turn from the question as between labourers and employers, and consider the larger question as between owners of present goods on the one side, and labourers and employers alike on the other.
The origin of capital is due to two factors, Industry and Saving, both being indispensable. This is the true importance which attaches to our niteres on roundabout ways of production, and this is the reason of the result associated with them: We have only to give the theoretical explanation of that acquisition of wealth which is derived from different complexes of goods, exclusive of land.
This theory, in fact, affords a striking instance of how our science has revenged itself for our unscientific treatment of it. Clearly as the historian of economic theory may now distinguish between these conceptions as developed, the distinction was not seen at the time, nor for long afterwards.
I say a control over the way in which a natural power may become effective. Withoutabox Submit to Film Festivals. His attitude towards our subject is peculiarly nondescript.
But such relations are yet to be discovered; they must not be assumed; and unless we would give up all idea of being unprejudiced in our quest and in our conclusions, we must begin the inquiry free from any preconceived opinion of a necessary identity, or even of an exact parallelism, between the productive efficiency of capital and its power of bearing interest.
The subject, then, naturally divides itself into two parts: 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. In one aspect it may be called “stored-up labour,” in another—and more truly—”natural force stored up by labour”; but in capital itself, alike in its origin and in its working, there is nothing that is not accounted for by the other two factors.
Of course I am speaking of the enlightened employer who knows that “wage,” technically, is remuneration for work done, and does not claim as wage more than, say, the remuneration of a Prime Minister. Each of them, as might be expected, had its circle of adherents, larger or smaller, who gave it the faith of full conviction.
Eugen Böhm von Bawerk
How slight a claim this explanation has to the dignity of a scientific theory appears in its practical definition of interest as the whole return to capitalist production which is not accounted for by labour. Henry VIII had by removed the prohibition of interest, and replaced it intres a simple legal rate. What is a product or commodity but raw material plus labour?
Suppose that one worker labors for five consecutive years to produce one such engine. He pays it ex proventu, out of the gain that he makes with the money. And if proof be needed that I was right in doing so, and that indeed it was impossible for me to do otherwise, I may appeal to witnesses whose authority, as regards this question, is beyond dispute, namely, the leaders and adherents of the “historical school” itself. Almost all loans are loans for consumption, and are, as a rule, bonm-bawerk to people in distress.
I confess I find some difficulty in stating the economic bohhm-bawerk of what our author has called the Use theory of interest, and I am almost inclined to think that he has done too much honour to some economists in ascribing to them this theory, or, indeed, any definite theory at all. The working day of ten to twelve hours is a sort of divine institution to the ignorant labourer.
It was very soon superseded by a third. First, I may work the loose stones back and forward with my bare fingers, and break off what can be broken off. It consists simply in this—that he, himself a part of the natural world, combines his personal powers with the impersonal powers of nature, and combines them in such a way that under natural law the co-operation results in a definite, desired, material form.
Interres the one case the capitalist is paid because the capital he lends produces, or helps to produce, new wealth; in the other he is paid because he abstains from diminishing wealth already produced.
This is, in general terms and in a more dispassionate way, the Socialist answer. But the community, as a whole, cannot enrich itself otherwise than by the production of new goods. Because present goods are more valuable than future goods, it necessarily follows that one-fifth of a bohm-gawerk is worth less than one-fifth of a present steam engine.
The nation as a whole cannot pay interest on its debts unless the citizens as individuals produce the wealth wherewith this interest is paid, otherwise the nation will be paying away its capital. The borrower therefore is not defrauded in having to pay interest. 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.
In what follows we shall chiefly be concerned with the national conception of capital, and shall, as a rule, keep this before us when the word capital by itself is used. 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. But neither is it to be universally permitted, but only so far as it does not run interees to fairness and charity.
It is all the more important that we profit in the future by such experiences of the past.
Capital and Interest | Mises Institute
The effect is to completely clear the field for his next book, The Positive Theory of Capital. So much for the function of capital, and one is apt to jump to the conclusion that, having shown how capitalist industry produces a great quantity of products as compared with unassisted labour, the sole and sufficient origin of interest has been indicated.
The second and principal form assumed, then, by interest is that in which it appears is part of the so-called “profit of undertaking. Since there can be no income, except as it is the result of labor, an excess of proceeds over labor costs depends on two indispensable prerequisites.
The price he receives for these recoups all his expenditure plus interest. One of its first results, not marked by much outward circumstance, but actually of great importance, was obtained even when the canon doctrine was still, to all appearance, at the height of its authority.
A translator’s preface, then, is not without justification if it anticipates some of the questions that are sure to arise in the minds of readers more accustomed, perhaps, to English economics. The difference between the two will be interee in the few pregnant sentences on pp.
And this term Usury. But now we must inquire further: The adequate instruments for the satisfaction of human wants, or—what is the same thing—the causes of beneficent changes in human conditions, we call goods. Practically it came to this, that the loan was given nominally without interest, but that the creditor actually received, under the name of interesse, a regular percentage for the whole period of the loan, the borrower by a fiction being put in mora for that period.
For this three causes may be given. To pronounce that to be right which the Church, the law, and the learned world had condemned with one voice, and opposed with arguments drawn from all sources, required not only a rare independence of intellect, but a rare strength of character which did not shrink from suspicion and persecution. One passage in ancient literature has, in my opinion, a direct value for the history of theory, inasmuch as it allows us to infer what really was the opinion of its author on the capihal nature of interest; that is, the often quoted passage in the first book of Aristotle’s Politics.