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NOTE 8. Eugen von Böhm-Bawerk: Economist, Minister, Aristocrat

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Chapter 8, Eugen von Boehm-Bawerk, economist, minister, aristocrat. In Austria, hardly any

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other economist has achieved the same kind of fame as Boehm-Bawerk, and with no other

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have such wide sections of the population come into contact, admittedly in an altogether

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trivial sense. His portrait adorned the hundred shilling note that was in circulation from

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1984-2001. Eugen von Boehm-Bawerk was in many respects considered an exception in professional

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circles too. He was one of the most quoted economists of his time, earned an excellent

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reputation internationally, taught on the largest law faculty in the world, and more

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than once occupied the office of finance minister of a major European power. Along with Carl

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Menger and Friedrich von Wiese, he constituted the founding triumvirate of the Austrian School.

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Economist Ewald Schambs, a former military officer, recalled a glorious campaign characterized by

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harmonious cooperation and downright tactical unity. Menger had declared the fundamental principle,

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Wiese had provided the factual structure and Boehm-Bawerk had taken on the duty to fight.

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He was the fighter in the cause of modern theory. The third of four children, Eugen Boehm, was born

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in Brünn in 1851. His father was knighted as Ritter von Bawerk in 1854 while Vice-President

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of the Moravian governorship. Upon his father's early death, Eugen, only six years old, moved with

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his mother to Vienna. As mentioned in the previous chapter, he met Friedrich von Wieser with whom he

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The two friends always sought to outdo each other in school and later graduated at the

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same time with degrees in law. After his graduation, Boehm-Bawerk joined the lower Austrian finance

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department. With the help of Carl Menger, the two friends received two-year stipends

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toward study at the universities of Heidelberg, Leipzig and Jena in 1875. In Heidelberg, Boehm-Bawerk

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Karl Menger's work dealt for the first time in a seminar paper with the subject that would

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occupy him for the rest of his life, the relationship in economics between the present and the future.

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One year later, he put the prototype of his later agio theory into writing. Upon his return

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to Vienna, he continued working in the finance department and was the first of Carl Menger's

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students to receive his habilitation for Rechte und Verhältnisse vom Standpunkt der volkswirtschaftlichen

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and Güterlehre, 1881. In the same year, the young lecturer and civil servant married his

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friend's sister Baroness Paula von Wiese. The marriage, described as harmonious, remained

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childless. In 1882, Boehm-Bawerk was entrusted with teaching a course in economics at the

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University of Innsbruck. Compared with Vienna, then the world's fifth-largest city, the

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University of Innsbruck, having the smallest law faculty in the Austrian monarchy with

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with few more than 200 students and 16 lecturers did not appear as a particularly attractive

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career step.

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Sentenced to Czernowitz, pardoned to Innsbruck is an adage handed down to this day in university

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circles in Vienna.

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Nonetheless, the Innsbruck years were the happiest time of his life for the glowing

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Tyrol enthusiast.

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Before long he was appointed to a non-tenured and in 1884 to a tenured professorship.

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That same year saw the publication of Geschichte und Kritik der Kapitalzinstheorie, History

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and Critique of Interest Theory, Volume 1 of Capital and Interest, in which he dissected

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practically all theories of capital interest with tremendous rigor and astuteness.

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Though announced, the second volume was delayed, one reason being Boehm-Bawerk's election

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to Dean of Faculty, another was that combining the theory of subjective value with his theory

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of capital proved to be rather difficult.

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As a kind of preliminary study, he published a two-part essay about the theory of subjective

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value in Konrad's Jahrbücher in 1886.

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This would be modified slightly and included in the already promised second volume, The

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Positive Theorie des Kapitars, 1889.

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With this easy-to-read and polished presentation, Boehm-Bawerk was able to distinguish himself

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as a sword of the new direction and made a crucial contribution to the further promulgation

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of the Austrian School. The two volumes Geschichte und Kritik der Kapital-Sinns-Theorie and

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Positive Theorie des Kapitals, published several times under the single title Kapital und Kapital-Sinns,

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were translated into English and established Boehm-Bawerk's international reputation.

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This was boosted even more by lively controversies and polemics. Boehm-Bawerk fought on four

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academic fronts simultaneously against the historical school's aversion to theory,

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against the Marxist Exploitation Theory, against the various cost-value theories and against

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the efforts some were making to show that the Austrian School took no socio-political

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responsibility.

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Boehm-Bawerk's attempts to return to a professorship in Vienna and to be the successor of either

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Lorenz von Stein or Luiu Brentano were in vain.

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He finally took a post in the finance ministry, which at that time managed with a staff of

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of Just 121 Civil Servants and 67 Supporting Staff.

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One of his first tasks was to revive the abandoned preparations for a comprehensive tax reform.

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Boehm-Bawerk remained a civil servant up until 1904, three times he was finance minister

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– 1895, from 1897 to 1898, and from 1900 to 1904, and in 1899 he was awarded a lifelong

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membership of the Herrenhaus. Apart from working on the tax reform of 1886, in the course of which a

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progressive income tax of no more than 5% was introduced, he also succeeded in reducing the

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government's interest burden by converting public debt. A balanced budget was of particular

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importance to Boehm-Bawerk because he believed it was the only thing that would secure the

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stability of monetary value. He did not shy away from using all the tricks of an experienced

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His maxim was that a finance minister should always be prepared to resign, but at the same

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time should always behave as if his desire was never to resign.

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He resigned from the post permanently in 1904, when excessive demands from the military finally

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threatened to strain the budget.

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In addition to his work in administration, Boehm-Bawerk devoted two hours a day to research

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and maintained close ties with the University of Vienna initially as an examiner and, after

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1891, as an honorary professor.

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In 1892 he contributed to the founding of the magazine Zeitschrift für Volkswirtschaft,

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Sozialpolitik und Verwaltung, Journal of Economics, Social Policy and Administration, and also

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Boehm-Bawerk's lectures were masterpieces, thanks both to his systematic clarity throughout,

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and to his calm, considered, and one might say intellectually buoyant presentation. Among

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Among those who later met in his seminar, in which an unusually open discussion ethos

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was prevalent, were such eminent names as Ludwig von Mises, Franz Weiss, Richard von

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Striegel, Felix Zommary, Emil Lederer, Rudolf Hilferding, Otto Bauer, Nikolai Bukarin or

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Josef Schumpeter. All in all, Boehm-Bawerk came across as a somewhat formal but warm-hearted

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and empathetic person, the political economist in the true sense of the word, who from 1911

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Edward acted as president of the Kaiserliche Akademie der Wissenschaften, Imperial Academy

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of Sciences, died at the age of 63 while on vacation in Kramsach in the state of Tyrol

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in August of 1914.