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    RECENT LITERATUREON

    INTEREST(1884-1899)

    A SUPPLEMENT TO CAPITAL AND INTEREST"

    BY

    EUGENE v. BOHM-BAWERKAUSTRIAN MINISTER OP FINANCE, AND HONORARY PROFESSOR OF POLITICAL

    ECONOMY IN THE UNIVERSITY OF VIENNA

    TRANSLATED BY

    WILLIAM A. S C O TT, P H . D .DIRECTOR OF TUB SCHOOL OF COM MERCK AND TROFESSOR OF ECONOMIC

    HISTORY AND THEORY IN THE UNIVERSITY OF WISCONSIN

    ANO

    PROFESSOR DOCTOR SIEGMUND FEILBOGENUN1VERS1TATS-DOCBNT IN THE UNIVERSITY OF VIENNA

    Neto gotft

    THE MACMILLAN COMPANY.

    LONDON: MACMILLAN & CO., LTD.1 9 0 3

    All rights reserved

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    COPYRIGHT, 1903,

    BY T H E M A C M I L LA N C O M PA N Y.

    Set up, electrotyped, and published September, 1903.

    N o r f o o o t oJ. 8. Cuihlng 8c Co . Berwick & Sm ith Co.

    Norwood, Musa., U.S .A ..

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    T R A N S L AT O R ' S P R E FA C E

    T H I S little volume is intended as a supple-ment to the admirable translation of the firstedition of Professor Bohm-Bawerk's " Ge-schichte und Kritik der Capitalzins-Theorien,"given to the world by Professor William Smartof Glasgow in 1890. During the twelve years

    since this notable contribution to the criticalliterature of economic science has been avail-able to English-speaking students, great prog-ress has been made in the realm of economictheory, and for this Bbhm-Bawerk and Pro-fessor Smart's translation are in no slightdegree responsible. W hatever may be thefinal verdict of science regarding the agiotheory, no one can doubt that the splendidexample of criticism and analysis which iscontained in Bohm-Bawerk's work has raised

    theoretical discussion to a higher level andhas been a constant and powerful stimulusto investigation in this field.

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    vi TRANSLATOR'S PREFACE

    In the United States the appearance ofSmart's translation must be regarded as anevent of prime importance in the history ofpolitical economy. The work of some of ourtheorists1 had already been directed alongpractically the same line as that of Jevonsand the Austrians, and a new generation ofyoung economists had just entered the field.Bohm-Bawerk's masterly treatise gave supportand encouragement to the former, and guidanceand stimulus to the latter. It has been dis-

    cussed over and over again in the courses ineconomic theory and in the economic semi-naries of the country, and it is safe to saythat no candidate for the doctorate in ecpnom-ics during the last twelve years has beenabsolved from the requirement of familiarizing

    himself with this work.Abundant proof of Bohm-Bawerk's influence

    is furnished by our literature. A glance atthe files of the Political Science Quarterly,the Quarterly Journal of Economics, and theAnnals indicates that a large proportion of

    1 Notably Professor John B. Clark and Professor Simon N.Patten.

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    TRANSLATOR'S PREFACE vii

    the articles treating of economic theory areeither directly upon some phase of Bohm-Bawerk's work or theories, or have beenclearly influenced, if not directly inspired, bythem . Of the books on economic theorywhich have appeared during the last twelve

    years, not one that I can recall fails to takeaccount of his work, and few, if any, of themfail to show the effects of his influence. Itis impossible to say as much as this of anyother book or any other man. Great as hasbeen Marshall's influence, it has not approxi-mated Bohm-Bawerk's either in scope or in-tensity.

    In 1900 the second edition of the " Ge-schichte und Kritik der Capitalzins-Theorien "appeared, and the present volume contains

    in its nine main chapters a translation of theAppendix, in which Bohm-Bawerk reviews theliterature on interest which had appeared since1884, the date to which the first edition trans-lated by Sm art brought the subject. In thispreface we propose to give a summary of themost important of the other additions con-tained in the second edition. These are the

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    viii TRANSLATOR'S PREFACE

    author^ Preface, chapter XI on John Rae,and a supplement to the chapter on KarlMarx. To the author and the translators ithas not seemed necessary or desirable topresent a complete translation of these lessimportant additions. A brief summary is

    sufficient to indicate their general characterand scope, and the English-speaking readerwho is unfamiliar with German and whodesires more may avail himself of Miss AliceM. Macdonald's translation1 of Bohm-Bawerk'scriticism of the posthumous volumes of KarlMarx's "Das Kapital," of the author's replyto Walker's strictures in the QuarterlyJournal of Economics? and of Rae's bookitself. 8

    The Preface of the second edition treats

    1 "K arl Marx and the Close of his Sy stem ." A Criticism byEu ge ne v. Bohm-Bawerk. Translated by Alice M. Macdon ald,with a preface by James Bonar, M. A., LL.D Lon don, T . FisherUnwin, Paternoster Square, 1898.

    3 "The Positive Theory of Capital and its Critics." QuarterlyJournal of Economics April, 1895.

    8 Statement of some new principles on the subject of Political

    Economy, exposing the fallacies of the system of free trade, andof some other doctrines maintained in the 'Wealth of Nations.1"Boston, 1834.

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    TRANSLATOR'S PREFACE ix

    chiefly of the author's defence of his methodagainst the strictures of Alfred Marshall andof the late Francis A. W alker. These menhad charged Bohm-Bawerk with misinterpret-ing many of the authors whom he criticisedin " Capital and Interest," claiming that he fre-

    quently mistook " blunders of expression " forerrors of judgment. W alker was a firm ad-herent of the productivity theory, and wasunable to believe that any really able thinkercould have sought for an explanation of in-terest in any other direction. He, therefore,denied the separate existence of the abstinenceand the use theories. He claimed tha t theauthors of these so-called theories intendedthem only as a social justification of interest,"and did not themselves mistake them for

    adequate explanations of the causes of thisphenom enon. In this connection he men-tioned especially Hermann, Karl Menger, andSenior.

    Professor Marshall finds the explanation ofinterest in the cooperation of what he calls the" productiveness and the (prospectiveness ofcapital, the former determining the demand for

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    X TRANSLATOR'S PREFACE

    that factor of production, and'the latter limitingthe supply. He believes that most of thewriters on interest have had both these ele-ments of the problem in mind, and have dif-fered from each other chiefly in the fact thatsome have laid more emphasis upon the one

    element, and others upon the other. He hasexpressed the opinion that many of the au-thors criticised by Bohm-Bawerk would nothave accepted his statements as fair and com-plete presentations of their views.1

    In reply, Bohm-Bawerk says that the ques-tion at issue between himself and such criticsas W alker and Marshall does not so muchconcern the interpretation and estimation ofthe views of other authors as the real essenceof the interest problem, and the requirements

    for its solution. Regarding what the authorscriticised really meant, he is quite willing toleave the decision to the intelligent readers ofhis book, for whose benefit he has very oftenquoted their exact words; but in justificationof his view of the nature of the problem ofinterest, and the conditions necessary for its

    1 " Principles of Economics," 3d ed., pp. 142-664.

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    TRANSLATOR'S PREFACE xi

    solution, he submits some characteristic state-ments of W alker and Marshall to analysisand criticism.

    He disposes ' of W alker in a single para-graph. Referring to his statement regardingthe teachings of Hermann, Menger, and Senior

    that " they thus reached a social justification ofinterest which no one of them probably evermistook for a scientific ascertainment of thecause of interest," and that on account oftheir " blunders in expression " Bohm-Bawerkascribed to them independent, deeply thought-out theories which they never held, our au-thor says: " I do not think that I need waste asingle word to prove that, on the contrary, itwould have been most ungenerous, and fora true historian absolutely impossible, to have

    simply obliterated the use and abstinence theo-ries from the history of the development of in-terest theories and to have drawn the old storyof the productivity theory from the most widelydiffering methods of explanation, or, moreaccurately, to have forced that interpretationupon them."

    The criticism of Marshall bears upon two

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    xii TRANSLATOR'S PREFACE

    points chiefly. In Bohm-Bawerk's opinion heoverestimates the explanatory power of thecooperation of productiveness " and " pro-spectiveness," and is deceived regarding theactual relation in which the different groups oftheories stand to this cooperation. On the firstpoint Bohm-Bawerk refers to a passage in thechapter on the eclectics, in which he says that noimpartial observer could fail to see that interestis in some way connected with the productivityof capital, and with the abstinence requ