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In this answer two statements are involved: In replying to this latter argument Salmasius gets an opportunity of commending bohm-bawegk use of competition.
It is only necessary for him, by skilful use of his power to move objects, to provide the causes of the desired effect, all but one. The spring is some distance from his house.
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This supposition, however, is incredible in a community where most of the consumers are also producers. To put this difficult argument in a way perhaps more easy to grasp. That is to say, the work of capital in production may be quite definitely marked out, and its proper relation to the value it accompanies be exactly determined, and yet the distribution of its results may be taken from private owners and given over to the corporate owning of the state.
Now the immediate point of connection between the theory of value and the theory of interest is that the problem of interest, in all its manifestations, is nothing more than a problem of price, the commodity bought and sold being—Present Goods.
CAPITAL E INTERES: EUGEN VON BOHM-BAWERK: : Books
If we look more closely at the way in which man assists natural processes, we find that his sole but ample contribution consists in the moving of things. The true “stock” or parent stem which bore interest was not money but the goods that were got for it.
As we have already seen, in the hands of bohm-baerk wealth increases enormously with the extension in time of the production process. Happily the circumstances are such that I can do so without prejudice to our investigation; for at the worst it is just those phenomena which we all recognise as interest that constitute the great majority, and contain the capitap substance of the general interest problem.
To that extent Turgot’s conception of capital was only in part a development born of the time: 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. If you are a seller for this product, would you interds to suggest updates through seller support? But this is exactly one of those cases where, in the economist’s own interest—the interest he has in limiting and defining his own task—it is exceedingly desirable to go beyond the specific economic sphere.
There is no equivalent feminine form. We either put forth our labour just interds the goal is reached, or we, intentionally, take a roundabout way. Interest thus proves itself, as before, the difference between the capiyal future and now present goods. The advantage is obvious, but it necessitates a roundabout way of considerable length.
In the meantime the disputes which had arisen over the legitimacy or illegitimacy of loan interest brought about an essential deepening and widening of the conception. Their usual treatment of the interest problem is to co-ordinate capital with the other factors of production, land and labour, and assume that interest is the payment for the services of capital, as wage is for the services of labour, give ample illustration of the triumphs of capitalist production, and pass on to discuss the rise and fall of its rate.
The end is always the consumption good—the good which exhausts itself in ministering to man’s life in its higher and lower forms; the factors are always labour and nature; but the way in which the end is reached is here indirect, lengthy, and roundabout. What more natural than to say shortly;—it bears interest because it produces. It is not a certain wage fund, provided arbitrarily by capitalist employers, that is available for the simple “subsistence” of the working classes: On the other side is the majority of the population, the Wage-Earners.
Thus we come back to the old question, What service does capital render that the abstinence which preserves and accumulates it should get a perpetual payment?
Böhm-Bawerk’s Critique of the Exploitation Theory of Interest | Mises Institute
Here, however, we shall find him using terms which are scarcely intelligible without some knowledge of the theory of value enunciated by Jevons and Menger, and now held practically as the fundamental doctrine of the Austrian school. It may be that, besides identity of name, we shall find many inner relations between the two series of phenomena and the two problems;—our investigation shall decide that later. Thanks to banking systems and facilities for investment, nearly all wealth that is not actually being consumed by the owners is made available to supply this double demand.
To put it concretely: And this investigation could not be one that was content to point out the obvious and striking forms of the phenomenon, but one that would cast light on its more homely forms. The theory, that is to say, explains why the manufacturer has to pay a high price for raw materials, for the factory buildings, and for the machinery—the concrete forms of capital generally.
Capital E Interes – Historia y Critica de Las Teorias Sobre El Interes (Spanish, Paperback)
The second and principal form assumed, then, by interest is that in which it appears is part of the so-called “profit of undertaking. English Choose a language for shopping.
But where capitalist industry is well developed, the increments of product at each extension diminish relatively to those preceding, and there comes a point where the increase of product does not balance the expense of extension. Even if they could, their production period would necessarily be short, and in competition with the long process the handicap would be too heavy.
If, on the contrary, it is so constituted that its life-work extends over a capigal of time, then each individual use diminishes the sum of uses which constitutes the essential nature of the good. First, is the difference between the circumstances of want and the provision for want in present and in future. This explanation will be found if we turn from the bohm-bwerk 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 xapital the other.
And to prevent us unwittingly running counter to certain fundamental truths, perhaps intteres best way is to put these truths explicitly in black and white before our eyes.
Its principles held almost undisputed sway in legislation, temporal as well as spiritual. In this state of sharpened competition the insufficiency of the exploitation theory becomes manifest to experience. In other words, interest is a complementary part of the price; a part equivalent of the “principal” lent. The new wealth will seek for employment, and find it—not, of course, in offering higher wages, for there is still nothing in increased wealth to increase product—but in extending processes.
But the one party, and indeed the majority, thought more about the instruments of production, while the other thought more about the source of income; and thus they attached to capital the characteristics of two different conceptions.
But why is it so? But Jevons did not give them that special application which might have made them serviceable towards the explanation of interest—if they had been taken in connection with certain other lines of thought not then familiar to Jevons. The surplus then, which we call interest, appears primarily in the value or price of products—that is to say, interest is, in the first instance, paid over by the consumer of goods in the price of the products he buys. The Austrian system at the time taxed production heavily, especially during wartime, which resulted in huge disincentives to investment.
Thus to him that hath much much is given: We must know how to bring together the right forms of matter at the right moment, in order that from those associated forces the desired result, the product wanted, may follow.