Richard von Strigl, „Zeit und Produktion“ (1935)

Strigl’s essay is a concentrated defense and reconstruction of Austrian capital theory after Knight’s critique of Böhm-Bawerk. He does not defend every Böhm-Bawerkian formula, especially not a rigid reading of “Produktionsumwege.” What must be preserved is precisely the view against which the Knight school directs its attack:

Der Angriff, der von Knight und im Anschluß an ihn von mehreren Autoren gegen die Lehre Böhm-Bawerks gerichtet ist, wendet sich vor allem gegen die Lehre von den Produktionsumwegen und damit gegen die Ansicht, daß dem Ablauf der Zeit in der Erklärung der kapitalverwendenden Produktion eine ganz bestimmte Rolle zuzuschreiben ist.

English translation: The attack directed by Knight, and following him by several authors, against Böhm-Bawerk's doctrine turns above all against the theory of roundabout methods of production, and thereby against the view that a quite definite role is to be ascribed to the passage of time in the explanation of capital-using production.

His point is not that capital goods can be historically traced back to labor without capital, nor that production always becomes physically longer. He accepts that capital goods are normally produced with other capital goods. But interest itself shows that time cannot be eliminated from capital theory, since even a schoolchild's rule makes the point:

Daß da ohne Rücksicht auf die Formulierung doch ein richtiger Kern gegeben sein muß, zeigt die schließlich jedem Schulkind bekannte Regel, daß man Zinsen niemals anders als mit der Formel Kapital mal Zeit mal Zinssatz berechnen kann.

English translation: That there must nevertheless be a correct core here, regardless of the formulation, is shown by the rule known in the end to every schoolchild: that interest can never be calculated except by the formula capital times time times the rate of interest.

To isolate this temporal element, Strigl constructs an artificial “vertical combination”: an autarkic trust that buys only labor, sells only consumer goods, and internally produces and replaces all capital goods. This abstraction removes the market price of capital goods so that the analysis can follow individual labor outlays to their eventual consumer-good results. The decisive concept is introduced here:

Wir wollen nun die Zeit, welche zwischen der Aufwendung einer Arbeitsleistung und dem Erzielen des individuellen Endproduktes derselben vergeht, die „Bindungszeit“ dieser Arbeitsleistung nennen.

English translation: Let us now call the time that elapses between the expenditure of a unit of labor and the attainment of its individual final product the “binding time” of that labor input.

“Bindungszeit” is the time for which labor-paid money capital is tied up before the corresponding product is sold. Capital goods are therefore not treated as autonomous productive powers but as crystallized stages in a temporal process of labor and capital commitment:

Das Kapitalgut ist auf einen „ursprünglichen“ Faktor zurückgeführt.

English translation: The capital good has been traced back to an “original” factor.

The main thesis recasts Böhm-Bawerk’s “greater productivity of roundabout methods” in stricter cost-theoretic language:

Bei einem gegebenen Produktionsaufbau bedeutet die Verlängerung von Bindungszeiten eine Vermehrung der Produkte, eine Verkürzung von Bindungszeiten eine Verminderung der Produkte.

English translation: Given a fixed structure of production, a lengthening of binding times means an increase in products, and a shortening of binding times a diminution of products.

This does not mean every technically longer process is better. It means that, under rational choice and a given production structure, the ability to bind capital for longer permits uses of labor that yield more product. What is scarce and productive is not “capital” as a stock of things, but the command of capital over time. Hence the “interest-cost element,” (K \cdot t), must be treated like any other scarce production factor:

Es ist außer Zweifel, daß in der Wirtschaft das Kapital in Hinblick auf seine Bindungszeit bewirtschaftet wird, daß in der Produktion nach Maßgabe der Formel Kapital mal Zeit ein Kosten-element eingesetzt wird, daß — kurz gesprochen — das, was nach der Formel Kapital mal Zeit berechnet wird, kein freies Gut ist.

English translation: It is beyond doubt that in the economy capital is husbanded with regard to its binding time, that in production a cost element is expended in accordance with the formula capital times time — in short, that what is calculated according to the formula capital times time is not a free good.

From this Strigl derives interest by marginal productivity. The cost of a product contains labor cost and interest cost, expressed as (A \cdot L + K \cdot t \cdot Z), or, since wages are the invested capital in his simplified model, (K + K \cdot t \cdot Z). The rate of interest is the price of the marginal “Zinskostenelement,” just as the wage is determined by the marginal product of labor.

In the fourth section Strigl reintroduces markets for capital goods by decomposing the trust into separate firms. A capital good now appears as an intermediate cost item, priced by labor costs plus interest for elapsed binding time and equal to its discounted yield. But this does not solve the capital problem, because capital goods must constantly be replaced. Their existence at the beginning of a calculation proves only imputable yield, not ultimate productivity.

Das Problem des Kapitalgutes liegt — auf eine kurze Formel gebracht — darin begründet, daß das Kapitalgut reproduziert werden muß, wobei die Kosten, welche die Möglichkeit dieser Reproduktion beschränken, nicht nur aus der Aufwendung von originären Produktionsmitteln, sondern auch aus der Aufwendung von Zinskostenelementen entstehen.

English translation: The problem of the capital good — put in a brief formula — lies in the fact that the capital good must be reproduced, whereby the costs that limit the possibility of this reproduction arise not only from the expenditure of original factors of production but also from the expenditure of interest-cost elements.

This is why Strigl rejects analyses that begin with a stock of finished capital goods. Only by asking how they are reproduced can one explain why returns are not wholly competed away into labor costs. The limiting factor is scarce capital-time.

He also warns against reading capital intensity from visible machinery or “production duration.” More capital may alter earlier stages without changing the final process; a better machine may shorten the last stage while increasing total bound capital. Thus he prefers the more exact formulation:

Ich glaube allerdings, daß die Formel Vermehrung der Zinskostenelemente bedeutend exakter ist.

English translation: I do believe, however, that the formula “increase of interest-cost elements” is considerably more exact.

The final section distinguishes capital goods from original factors such as labor and land. Original factors yield continuing services without their regular reproduction becoming the entrepreneur’s problem; capital goods are perishable products whose replacement must pass the test of cost and yield. Strigl’s relevance lies in this modernization of Austrian capital theory: he preserves Böhm-Bawerk’s temporal insight while replacing the ambiguous metaphor of roundaboutness with the analytically sharper categories of binding time, interest-cost elements, reproduction, and marginal productivity.