THE CONTROVERSY OVER THE
an excerpt from "Capital and
Interest" by Eugen von Bohm-Bawerk
(Libertarian Press, South Holland, Illinois,
capitale dicitur bonum omne quod possidetur*
word capital is derived directly from the Latin capitale, the
adjective corresponding to the noun caput meaning "head."
It was originally used to designate the principal sum of a money loan, which
was termed the capitalis pars debiti, that is to say, the head or
chief part of the debt, as distinguished from the interest. It became
thoroughly naturalized in mediaeval Latin and appears to have remained the
only sense in which the word was used, well on into the modern era.
Accordingly, the word denoted the equivalent of "an interest-bearing sum
Gradually the meaning of the name underwent
important amplification, and at first this took place, it would seem, in the
normal course of the development of popular linguistic usage. For it became
the practice for capital sums of money not only to be loaned out but also to
be invested by the borrowers to whom it had been loaned, or alternatively, to
be invested directly by the owners in lieu of being put out to loan. Such
investing meant putting the money into mercantile or industrial projects,
into factories, seagoing vessels, farms, rentable dwellings and the like.
There then followed a thought transfer which was as easy to make as it was,
for some purposes, expedient. This transfer consisted in regarding the money
capital as if it were still in hand and operative, and, furthermore, in
looking upon the yield from the investment as interest on the invested
capital. One such purpose, for instance, would be computation of the rate of
earnings to be derived from the investment. A further step along the same line
of thought led to the application of this concept not only to such
income-producing sums as had come into existence through a literal conversion
of money capital, but also to cases in which the conversion had taken place
only in the mind, as it were, by virtue of the fact that the income-producing
aggregation of wealth was evaluated in terms of money. In either case the
yield-producing wealth could be looked upon as representing capital, and its
yield could be regarded as the interest derived from the capital. By means of
such a combination of ideas the point was gradually reached where not only
interest bearing sums of money were considered capitals, but all sorts of
other collections of wealth were so considered, provided only that it was
possible to link them as the embodiment of interest-bearing sums of money,
that is to say, as "money at work."
Goods which would lay claim to being capital must be a source of income.
The yield from these goods must be measurable in monetary terms.
Menger ... defines capitals as "such
aggregates of economic goods of higher order" which are at our present
disposal for use in future periods.
a characteristic mark of capital in the faculty he claims for it of lightening
the burden of acquisition, that is to say, of making productive labor
Walras .... divides all economic goods
into "capital" and "income." All kinds of goods which can
be used more than once he calls capital, irrespective of the purpose they
serve - in a word, all durable goods.
Kuhnast ... submits the emphatic
declaration that capital is incorporeal in nature, that it by no manner of
means consists of concrete objects, of the goods themselves, but only of
their value. "Capital is ... the value of the
production power residing in material goods ...."
B. Clark .... lays great emphasis on the necessity of distinguishing
"true capital" from the material capital goods of which it does,
indeed, consist. True capital .... is a durable permanent fund of
"productive wealth" or a "fund of value" which leads to a
permanent and continuous existence in contrast to the concrete capital goods
which comprise it and which are continually being destroyed or consumed.
Fisher .... says [capital] includes all the wealth in existence,
without exception of any kind. .... and .. not the stock of goods comprising
the wealth, but the value of those goods.
Marshall .... [became] ever more fully convinced, that any thoroughgoing
differentiation between "capital" and other forms of wealth is
bound to contain elements of artificiality.
economists reach agreement on the theory of capital they will shortly reach
agreement on everything. Happily, for those who enjoy a diversity of views
and beliefs, there is very little danger of this outcome" (Bliss,
dicitur bonum omne quod possidetur
~ Every good which is possessed is called capital