Eugen von Bohm-Bawerk Austrian economist Date of Birth: 12.02.1851 Country: Austria

Biography of Eugen von Böhm-Bawerk

Eugen von Böhm-Bawerk was born on February 12, 1851, in Brno, Czechia. While studying at the University of Vienna to become a lawyer, he came across Carl Menger's book "Principles of Economics." Although Böhm-Bawerk never studied under Menger, he quickly became a supporter of his theory. Joseph Schumpeter even described Böhm-Bawerk as being so enthusiastic about Menger's teachings that he hardly needed any other influence.

After completing his education in 1872, Böhm-Bawerk joined the Austrian Ministry of Finance, where he held various positions until 1880. He then became a qualified professor of political economy in Vienna. However, he soon began providing his services to the University of Innsbruck, where he remained until 1889 and became a professor in 1884. During this time, he published the first two volumes of his seminal work titled "Capital and Interest."

In 1889, Böhm-Bawerk became an advisor in the Ministry of Finance in Vienna and represented the government in the lower house on all taxation matters. He proposed a reform of direct taxes as the Austrian system at that time burdened production with excessive taxes, especially during times of war, which created significant obstacles for investment. His proposal was soon approved and met with great success.

Böhm-Bawerk then served as the Minister of Finance in 1895. He held this position for two terms, with a third term from 1900 to 1904. As the finance minister, he consistently fought for the strict adherence to the "gold standard" monetary system and a balanced budget. In 1902, he eliminated the "sugar" subsidies that had been a characteristic of Austria's economy for nearly two centuries. Finally, in 1904, he retired from his position when increased financial demands on the army threatened the budget.

While Böhm-Bawerk was criticized by economic historian Alexander Gerschenkron for his reluctance to implement public projects, Joseph Schumpeter highly appreciated his efforts, which brought financial stability to the country. Böhm-Bawerk twice helped Austria recover from financial crises. His image even appeared on the one-hundred-shilling banknote between 1984 and 2002, until the introduction of the euro.

Böhm-Bawerk criticized Karl Marx's economics in the 1880s and 1890s, as well as several prominent Marxists, including Rudolf Hilferding. In 1904, he returned to teaching and became the head of the department at the University of Vienna. Among his students were Joseph Schumpeter, Ludwig von Mises, and Henryk Grossman. The first volume of his work, "History and Critique of Interest Theories," published in 1884, was considered by Ludwig von Mises as the most outstanding contribution to modern economic theory. It discussed issues such as interest problems, productivity, use, moderation, exploitation, unpopular systems, and labor theory.

Böhm-Bawerk argued that Marxist theory of exploitation ignored the time dimension in production, which he discussed in his theory of "roundaboutness" of production. According to his findings, interest is the result of present consumer goods being exchanged for future goods, and the question remains as to why people are willing to pay more in the future for goods purchased today. The second volume, titled "Positive Theory of Capital," published in 1889, thoroughly examined concepts such as the nature and concept of capital, value, price, past and future, the source of interest, and interest rates. The third volume, "Further Essays on Capital and Interest" published in 1921, consisted of twelve excursions and served as an addendum to the second volume, addressing criticism of the entire work.

Böhm-Bawerk came under close scrutiny from Marxist economists, such as Nikolai Bukharin, who argued that the axiomatic approach chosen for Böhm-Bawerk's subjectivist theory was illusory. According to Bukharin, economic phenomena can only be explained through the lens of a sequential, contextual, and historical analysis of society, as Marx did.

Eugen von Böhm-Bawerk passed away on August 27, 1914, in Kramsach, Austria-Hungary.