by Menger
[Title Page and Publication Details]: The title page and publication information for Carl Menger's 'Zur Theorie des Kapitals', originally published as a separate reprint from the Jahrbücher für Nationalökonomie und Statistik. [Introduction: The Confusion in Capital Theory]: Menger introduces the problematic state of capital theory in political economy, attributing the confusion to the difficulty of the subject and poor terminological development. He critiques the tendency of scientists to repurpose popular words for new, abstract scientific categories, specifically blaming Adam Smith and his followers for abandoning the practical 'real-concept' of capital used by businessmen in favor of vague technical definitions. [Critique of Existing Capital Conceptions]: Menger outlines the three dominant scientific views of capital: as wealth devoted to income, as means of production, or as products destined for further production. He argues that artificial theories and the authority of past thinkers hinder an unbiased view of capital, and he proposes a return to how economic life actually defines the term to resolve the prevailing confusion. [Section I: Capital as Wealth for Income Formation]: Menger critiques the definition of capital as wealth devoted to income (werbendes Vermögen) versus consumption. He argues that this definition is too broad and arbitrary, as it would include land and labor as capital, contradicting common usage. He distinguishes between 'acquisitive wealth' and the specific concept of capital, noting that simply grouping all income-yielding assets together fails to provide a proper foundation for a theory of asset returns. [Section II: Capital as Means of Production]: Menger examines the view of capital as technical means of production (goods of higher order). He rejects this identification, pointing out that many means of production (like free natural resources or household raw materials) are not capital, while many capital goods (like merchant stock) are technically finished consumer goods. He concludes that the technical nature of a good is an insufficient criterion for its status as capital in an economic sense. [Section III: Capital as Produced Means of Production]: Menger provides an extensive critique of Adam Smith's definition of capital as 'produced' means of production. He argues that the distinction between natural resources and produced goods is economically irrelevant, as both can serve as capital if devoted to income generation. He demonstrates that Smith's classification is inconsistent (e.g., regarding land improvements and labor skills) and fails to account for intangible assets like usage rights. Menger asserts that Smith's theory is based on a technical-historical analysis of goods rather than their economic function in the present, leading to an unworkable theory of income distribution that separates 'pure' rent from capital interest in a way that practitioners never do. [Section IV: Capital from the Standpoint of the National Economy]: Menger critiques the concept of 'national capital' (Volkskapital) when viewed as a single entity belonging to a collective subject. He argues that the national economy is an organism of individual economies, not a single economy itself. Therefore, 'national capital' is simply the sum and organization of individual capitals, including rights and claims that some theorists try to exclude. He warns against using biological analogies or collective fictions to explain economic phenomena, advocating instead for understanding the whole through its constituent individual parts. [Section V: The Real Concept of Capital in Practical Life]: Menger defines the 'real concept' of capital as understood in practical business and law: capital is wealth devoted to acquisition, expressed as a sum of money in economic calculation. He distinguishes between effective money capital and the calculated money value of other productive assets. He argues that the scientific focus on 'capital interest' has obscured the broader and more fundamental problem of 'asset returns' (Vermögensertrag). Menger calls for a universal theory of returns that classifies assets based on how they generate income (e.g., land, buildings, enterprises) rather than just their technical nature, positioning interest on money loans as just one specific case within this broader theory.
The title page and publication information for Carl Menger's 'Zur Theorie des Kapitals', originally published as a separate reprint from the Jahrbücher für Nationalökonomie und Statistik.
Read full textMenger introduces the problematic state of capital theory in political economy, attributing the confusion to the difficulty of the subject and poor terminological development. He critiques the tendency of scientists to repurpose popular words for new, abstract scientific categories, specifically blaming Adam Smith and his followers for abandoning the practical 'real-concept' of capital used by businessmen in favor of vague technical definitions.
Read full textMenger outlines the three dominant scientific views of capital: as wealth devoted to income, as means of production, or as products destined for further production. He argues that artificial theories and the authority of past thinkers hinder an unbiased view of capital, and he proposes a return to how economic life actually defines the term to resolve the prevailing confusion.
Read full textMenger critiques the definition of capital as wealth devoted to income (werbendes Vermögen) versus consumption. He argues that this definition is too broad and arbitrary, as it would include land and labor as capital, contradicting common usage. He distinguishes between 'acquisitive wealth' and the specific concept of capital, noting that simply grouping all income-yielding assets together fails to provide a proper foundation for a theory of asset returns.
Read full textMenger examines the view of capital as technical means of production (goods of higher order). He rejects this identification, pointing out that many means of production (like free natural resources or household raw materials) are not capital, while many capital goods (like merchant stock) are technically finished consumer goods. He concludes that the technical nature of a good is an insufficient criterion for its status as capital in an economic sense.
Read full textMenger provides an extensive critique of Adam Smith's definition of capital as 'produced' means of production. He argues that the distinction between natural resources and produced goods is economically irrelevant, as both can serve as capital if devoted to income generation. He demonstrates that Smith's classification is inconsistent (e.g., regarding land improvements and labor skills) and fails to account for intangible assets like usage rights. Menger asserts that Smith's theory is based on a technical-historical analysis of goods rather than their economic function in the present, leading to an unworkable theory of income distribution that separates 'pure' rent from capital interest in a way that practitioners never do.
Read full textMenger critiques the concept of 'national capital' (Volkskapital) when viewed as a single entity belonging to a collective subject. He argues that the national economy is an organism of individual economies, not a single economy itself. Therefore, 'national capital' is simply the sum and organization of individual capitals, including rights and claims that some theorists try to exclude. He warns against using biological analogies or collective fictions to explain economic phenomena, advocating instead for understanding the whole through its constituent individual parts.
Read full textMenger defines the 'real concept' of capital as understood in practical business and law: capital is wealth devoted to acquisition, expressed as a sum of money in economic calculation. He distinguishes between effective money capital and the calculated money value of other productive assets. He argues that the scientific focus on 'capital interest' has obscured the broader and more fundamental problem of 'asset returns' (Vermögensertrag). Menger calls for a universal theory of returns that classifies assets based on how they generate income (e.g., land, buildings, enterprises) rather than just their technical nature, positioning interest on money loans as just one specific case within this broader theory.
Read full text