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CAPITAL &

PRODUCTION

Richard von Strigl

Translated from the German by
Margaret Rudelich Hoppe and
Hans-Hermann Hoppe

Edited with an Introduction
by Jörg Guido Hülsmann

MISES

INSTITUTE

Copyright 2000 by The Ludwig von Mises Institute

Index prepared by Richard Perry.

All rights reserved. Written permission must be secured from the publisher to use or reproduce any part of this book, except for brief quotations in critical reviews or articles.

Published by The Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832-4528.

I

The 1920s and 1930s were a glorious era in the history of the Austrian School of economics. In those days, the city of Vienna saw the first genuine culture of scholars working in the tradition established by Carl Menger, and this culture radiated throughout the rest of the German-speaking world and into other countries.

The following investigation of the role of capital in production is based on the law of the higher productivity of roundabout methods of production and on the closely related theory of the wage fund. It thus grows out of propositions which have long been known to economic theory, and it is not our task to add much new to the various theorems that can be found in the realm of the theory of capital.

1. Factors of Production

Since nature has not provided man with all that he needs for his livelihood and to satisfy his further-reaching needs, he must constantly strive to produce consumer goods. The process of production was accurately described by Eugen von Böhm-Bawerk when he spoke of a combination of human labor and the gifts of nature.

1.   The Price System

The market process moves between two poles: the supply of factors of production and the demand for consumer goods. Insofar as this process is solely determined by the principle of exchanging real goods (including labor expenditures), the people demanding consumer goods and the people providing factors of production are necessarily identical.

1.   Price System and Price Level

In the static course of an exchange economy, the prices of all goods are integrated into a system according to the laws of the vertical and horizontal connectivity of prices. For this system of prices, the monetary expression of prices is completely irrelevant.

1. Prenote

There are as many causes for fluctuations in economic life as there are external conditions of economizing. Each of these conditions can change and thereby effect a change in the course of the economic process. If the economy is affected to a greater extent, if farther reaching changes prove necessary and, in particular, if a lasting change in an external determinant of the economy causes disruptions in the economy for a longer period of time, then one can speak of an economic crisis.