Foreword (Richard von Strigl)

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. First and foremost, I sought to elaborate, starting from a relatively broad general foundation, the above-mentioned ideas, thus integrating the theory of capital into a theory of the macro-economy. Further, in contrast to a point of view which seems to me to adhere to a rather rigid conception of capital, I was especially interested in explaining the idea that capital is something that is employed in a permanent process of investment and release. The method that is applied is that of strict economic theory. For this reason, in addition to some knowledge of the basics of economics, understanding my arguments presupposes above all the ability and willingness to think abstractly. I must emphasize this here because perhaps more than is commonly done, I repeatedly build on simplified assumptions whose usefulness can be proved only in retrospect once the knowledge of the most general relationships can be used to explain more complex facts. That this method of economic theory also presupposes the ability and willingness to refrain from making value judgments and to inquire solely about relationships should be obvious. Regarding the topic treated here, let it be said explicitly that a study of the function of capital in the process of production has nothing to do with defending any particular organizational form of an economy. Although today—perhaps not solely out of resentment—the present economic order is often accused of letting the profit interest of capital work to the detriment of the economy, from the standpoint developed in the following study one can say that, in the process of an exchange economy, capital can only be conceived of as a subservient means in a process of the production of consumer goods. If the just-mentioned accusation has any justification, it can only be that through some institutional arrangements which are not an essential part of an exchange economy, an exemptory status has been granted to some—but not all—capital. Only then can it happen that this capital makes claims of the sort that goals which could otherwise be attained in the economy should be subordinate to its own interests. This has nothing to do with the subject of my study, yet I could not avoid occasionally making very brief remarks on relationships of this sort, though, without thereby discussing the vast, underlying problem exhaustively.

As far as presentation is concerned, it was necessary to first analyze a barter setting before analyzing an economy that uses money and credit. In so doing, I could not avoid occasionally reaching beyond the narrow realm of an analysis of the process of production. This is especially true of the first part of the second chapter. Here I had to follow the entire path, from the analysis of the supply of means of production up to the derivation of the law of marginal productivity, because in so doing I was searching for the formulation of a general principle which could also be applied to the theory of capital. I believe that only at this point has brevity of presentation been subordinated to the need for a comprehensive system built on a solid foundation. Apart from this, let it be said that my investigation only considers one large problem area; it should be accused neither of ignoring other problems nor of leaving out special questions which arise on lower levels of abstraction.

Richard von Strigl

Vienna, March 1934