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

0:00Chapter 8, Eugen von Boehm-Bawerk, economist, minister, aristocrat. In Austria, hardly any other economist has achieved the same kind of fame as Boehm-Bawerk, and with no other have such wide sections of the population come into contact, admittedly in an altogether trivial sense. His portrait adorned the hundred shilling note that was in circulation from 1984-2001. Eugen von Boehm-Bawerk was in many respects considered an exception in professional circles too. He was one of the most quoted economists of his time, earned an excellent reputation internationally, taught on the largest law faculty in the world, and more than once occupied the office of finance minister of a major European power. Along with Carl Menger and Friedrich von Wiese, he constituted the founding triumvirate of the Austrian School.

0:57Economist Ewald Schambs, a former military officer, recalled a glorious campaign characterized by harmonious cooperation and downright tactical unity. Menger had declared the fundamental principle, Wiese had provided the factual structure and Boehm-Bawerk had taken on the duty to fight. He was the fighter in the cause of modern theory. The third of four children, Eugen Boehm, was born in Brünn in 1851. His father was knighted as Ritter von Bawerk in 1854 while Vice-President of the Moravian governorship. Upon his father's early death, Eugen, only six years old, moved with his mother to Vienna. As mentioned in the previous chapter, he met Friedrich von Wieser with whom he The two friends always sought to outdo each other in school and later graduated at the same time with degrees in law. After his graduation, Boehm-Bawerk joined the lower Austrian finance department. With the help of Carl Menger, the two friends received two-year stipends toward study at the universities of Heidelberg, Leipzig and Jena in 1875. In Heidelberg, Boehm-Bawerk Karl Menger's work dealt for the first time in a seminar paper with the subject that would

2:17occupy him for the rest of his life, the relationship in economics between the present and the future. One year later, he put the prototype of his later agio theory into writing. Upon his return to Vienna, he continued working in the finance department and was the first of Carl Menger's students to receive his habilitation for Rechte und Verhältnisse vom Standpunkt der volkswirtschaftlichen and Güterlehre, 1881. In the same year, the young lecturer and civil servant married his friend's sister Baroness Paula von Wiese. The marriage, described as harmonious, remained childless. In 1882, Boehm-Bawerk was entrusted with teaching a course in economics at the University of Innsbruck. Compared with Vienna, then the world's fifth-largest city, the University of Innsbruck, having the smallest law faculty in the Austrian monarchy with with few more than 200 students and 16 lecturers did not appear as a particularly attractive career step.

3:17Sentenced to Czernowitz, pardoned to Innsbruck is an adage handed down to this day in university circles in Vienna. Nonetheless, the Innsbruck years were the happiest time of his life for the glowing Tyrol enthusiast. Before long he was appointed to a non-tenured and in 1884 to a tenured professorship. That same year saw the publication of Geschichte und Kritik der Kapitalzinstheorie, History and Critique of Interest Theory, Volume 1 of Capital and Interest, in which he dissected practically all theories of capital interest with tremendous rigor and astuteness. Though announced, the second volume was delayed, one reason being Boehm-Bawerk's election to Dean of Faculty, another was that combining the theory of subjective value with his theory of capital proved to be rather difficult.

4:07As a kind of preliminary study, he published a two-part essay about the theory of subjective value in Konrad's Jahrbücher in 1886. This would be modified slightly and included in the already promised second volume, The Positive Theorie des Kapitars, 1889. With this easy-to-read and polished presentation, Boehm-Bawerk was able to distinguish himself as a sword of the new direction and made a crucial contribution to the further promulgation of the Austrian School. The two volumes Geschichte und Kritik der Kapital-Sinns-Theorie and Positive Theorie des Kapitals, published several times under the single title Kapital und Kapital-Sinns, were translated into English and established Boehm-Bawerk's international reputation.

4:52This was boosted even more by lively controversies and polemics. Boehm-Bawerk fought on four academic fronts simultaneously against the historical school's aversion to theory, against the Marxist Exploitation Theory, against the various cost-value theories and against the efforts some were making to show that the Austrian School took no socio-political responsibility. Boehm-Bawerk's attempts to return to a professorship in Vienna and to be the successor of either Lorenz von Stein or Luiu Brentano were in vain. He finally took a post in the finance ministry, which at that time managed with a staff of of Just 121 Civil Servants and 67 Supporting Staff. One of his first tasks was to revive the abandoned preparations for a comprehensive tax reform.

5:42Boehm-Bawerk remained a civil servant up until 1904, three times he was finance minister – 1895, from 1897 to 1898, and from 1900 to 1904, and in 1899 he was awarded a lifelong membership of the Herrenhaus. Apart from working on the tax reform of 1886, in the course of which a progressive income tax of no more than 5% was introduced, he also succeeded in reducing the government's interest burden by converting public debt. A balanced budget was of particular importance to Boehm-Bawerk because he believed it was the only thing that would secure the stability of monetary value. He did not shy away from using all the tricks of an experienced His maxim was that a finance minister should always be prepared to resign, but at the same time should always behave as if his desire was never to resign.

6:47He resigned from the post permanently in 1904, when excessive demands from the military finally threatened to strain the budget. In addition to his work in administration, Boehm-Bawerk devoted two hours a day to research and maintained close ties with the University of Vienna initially as an examiner and, after 1891, as an honorary professor. In 1892 he contributed to the founding of the magazine Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung, Journal of Economics, Social Policy and Administration, and also Boehm-Bawerk's lectures were masterpieces, thanks both to his systematic clarity throughout, and to his calm, considered, and one might say intellectually buoyant presentation. Among Among those who later met in his seminar, in which an unusually open discussion ethos was prevalent, were such eminent names as Ludwig von Mises, Franz Weiss, Richard von Striegel, Felix Zommary, Emil Lederer, Rudolf Hilferding, Otto Bauer, Nikolai Bukarin or Josef Schumpeter. All in all, Boehm-Bawerk came across as a somewhat formal but warm-hearted and empathetic person, the political economist in the true sense of the word, who from 1911

8:17Edward acted as president of the Kaiserliche Akademie der Wissenschaften, Imperial Academy of Sciences, died at the age of 63 while on vacation in Kramsach in the state of Tyrol in August of 1914.