Background
Eugen von Böhm-Bawerk was born on in Brünn, Moravia, then part of Austria-Hungary, later called Brno in the Czech Republic.
He died in 1914 in Kramsach, Tirol, now in Austria.
Eugen von Böhm-Bawerk was born on in Brünn, Moravia, then part of Austria-Hungary, later called Brno in the Czech Republic.
He died in 1914 in Kramsach, Tirol, now in Austria.
He was trained in the University of Vienna as a lawyer. There he read Carl Menger's Principles of Economics. Though he never studied under Menger, he quickly became an adherent of his theories. During his time at the University of Vienna, he became good friends with Friedrich von Wieser, who later became Böhm-Bawerk's brother-in-law.
After completing his studies he entered, for a short period of time, the Austrian ministry of finance. Afterwards, he spent the 1880s at the University of Innsbruck (1881-1889). During this time he published the first two (out of three) volumes of his magnum opus, entitled Capital and Interest. In 1889, he was called to Vienna by the finance ministry to draft a proposal for direct-tax reform. The Austrian system at the time taxed production heavily, especially during wartime, providing massive disincentives to investment. Böhm-Bawerk's proposal called for a modern income tax, which was soon approved and met with a great deal of success in the next few years.
He then became Austrian Minister of Finance in 1895. He served briefly in the position and then again on another occasion, although a third time he remained in the post for four years, from 1900-1904. As Finance Minister, he fought continuously for strict maintenance of the legally fixed gold standard and a balanced budget. In 1902, he eliminated the sugar subsidy, which had been a feature of the Austrian economy for nearly two centuries. He finally resigned in 1904, when the increased fiscal demands of the army threatened to unbalance the budget, and returned to teaching with a chair at the University of Vienna. Böhm-Bawerk taught many students including Joseph Schumpeter, Ludwig von Mises and Henryk Grossman.
Böhm-Bawerk’s contribution to the field of economics involved insights into the nature of capital and its expansion, the theory of wages, prices, and interest. Additionally, he provided a devastating refutation of Marxist theories on capital.
Böhm-Bawerk made two major contributions refuting Marxism: his extensive critiques of Karl Marx's economic theories in the 1880s and 1890s, and his examination of Marx's theory of labor value. The most significant element of his devastating critique of the exploitation theory, as embraced by Karl Marx and his forerunners, is as follows: Capitalists do not exploit workers; they accommodate workers-by providing them with income well in advance of the revenue from the output they helped to produce (Böhm-Bawerk 1949). Böhm-Bawerk discovered the error in Marx's system to have resulted from a self-contradiction in Marx's law of value, namely how the rate of profit and the prices of production of the third volume of Marx's Capital contradict Marx's theory of value in the first volume. He also attacked Marx for downplaying the influence of supply and demand in determining permanent price, and for deliberate ambiguity with such concepts.
The first volume of Böhm-Bawerk's (1959) Capital and Interest, entitled History and Critique of Interest Theories (1884), which is an exhaustive study of the alternative treatments of interest, including use theories, productivity theories, cost evaluation theories, wages, and so forth, was decreed by Ludwig von Mises as "the most eminent contribution to modern economic theory." Von Mises even indicated that "No one could claim to be an economist unless he was perfectly familiar with the ideas advanced in this book," and he even went so far as to suggest (as only Mises could) that "no citizen who takes his civic duties seriously should exercise his right to vote until he has read Böhm-Bawerk!"
Fundamentals of the theory of economic value of benefits (1886)
Capital and interest (1884—1889)
By the end of the Marxist system (1896)
