ABSTRACT
Joseph Alois Schumpeter was a most attentive student of the history of economic analysis. He was brought up in the Austrian tradition of doing economics which typically consisted in first studying meticulously the received doctrines and their historical roots in the particular field under consideration, followed by an elaboration of the author’s own view on the matter. A particularly impressive case in point is Eugen von Böhm-Bawerk’s two-volume Kapital und Kapitalzins (Böhm-Bawerk [1885, 1889] 1959). While the first volume is devoted to a critical account of earlier and contemporary theories of capital and interest, in the second volume Böhm-Bawerk develops his own ‘positive’ theory. Schumpeter had studied with Friedrich von Wieser, Eugen von Philippovitch and Eugen von Böhm-Bawerk in Vienna and had acquired an intimate knowledge of their contributions. However, he hardly ever simply adopted an idea without adapting it to the specific purpose at hand. And he was not reluctant to oppose doctrines advocated by his former teachers when he felt they were flawed. He thought that the answer Böhm-Bawerk (and other Austrians) had given to the most heatedly debated question of the time – why are there profits, are they due to ‘exploitation’, as the socialist critics of capitalism maintained, and what determines their magnitude? – was at best incomplete if not outright wrong. Böhm-Bawerk, Schumpeter implied, had not really grasped the nature of capitalism.
