Eugen von Böhm-Bawerk

Eugen von Böhm-Bawerk was an Austrian economist and statesman and a leading theorist of the Austrian school of economics.

After graduating from the University of Vienna, Böhm-Bawerk worked in the Austrian Ministry of Finance (1872–75) and was allowed by the ministry to study at several German universities. In 1880 he moved to Innsbruck, and he became a full professor at the university there in 1884. In 1890 he returned to the Ministry of Finance and took part in the currency reform of 1892 and the adoption of the gold standard. He held several cabinet offices in succeeding years before resigning in 1904 to become a professor of economics at the University of Vienna.

Böhm-Bawerk was, with Carl Menger and Friedrich von Wieser, one of the three pillars of the Austrian school of economics. Starting from Menger’s work, Böhm-Bawerk developed a theory of the origin and determination of the rate of interest and the period of turnover of capital occurring with the attainment of the market clearing wage. This became the basis of the Austrian school’s theory of capital. Through its influence on later writers such as Knut Wicksell and Irving Fisher, this theory provided the basis for the modern treatment of interest, which is now seen as stemming from the interaction of (a) the preference for present goods (which inhibits savings and investment) and (b) the productivity of longer periods of turnover of capital (which causes investment funds to be demanded).

Böhm-Bawerk was the first economist to refute Karl Marx’s view that workers are systematically exploited. While Marx attributed productivity to labour, Böhm-Bawerk attributed productivity to an indirect, or “roundabout,” process based on an investment in land and labour. Many economists still accept this argument.