Capital and Interest: A Critical History of Economic Theory

Menger’s Principles of Economics (1871) laid the groundwork for the subjective theory of value, which Böhm-Bawerk extended to capital and interest. Without Menger’s marginalist revolution, Böhm-Bawerk’s critical history and positive theory would not have been possible.

Böhm-Bawerk’s brother-in-law, fellow Austrian economist, and co-developer of marginal utility theory. Though his focus was more on value, imputation, and cost theory, Wieser’s ideas on opportunity cost and value theory helped frame the intellectual setting in which Capital and Interest was written. He sometimes diverged from Böhm-Bawerk, but the two shaped the second generation of Austrian economics together.

American economist who built the modern intertemporal theory of interest. Fisher’s The Theory of Interest (1930) explicitly drew on Böhm-Bawerk’s insights about time preference, refining them with mathematical rigor. Böhm-Bawerk’s historical-critical foundation made Fisher’s formalization possible, cementing the continuity between Austrian and American capital theory.

American marginalist and contemporary of Böhm-Bawerk. Developed the marginal productivity theory of distribution, which interacted with Böhm-Bawerk’s theory of capital. Their debates over the nature of capital and interest—particularly Clark’s insistence that capital is permanent and yields a “natural rate”—were central to clarifying the distinctiveness of Böhm-Bawerk’s approach.

Böhm-Bawerk’s student and later the towering Austrian economist who praised Capital and Interest as indispensable. Mises adopted and extended Böhm-Bawerk’s time-preference theory of interest into his broader system of praxeology. Through Mises (and later Hayek and Rothbard), Böhm-Bawerk’s influence permeated 20th-century Austrian economics.

There is a real intellectual link between Böhm-Bawerk’s Capital and Interest and Knut Wicksell’s Development of the Natural Rate of Interest, even though Wicksell is usually seen as working in a somewhat different tradition (the Swedish School).