Quotable (#25)

Eugen von Böhm-Bawerk introduces the concept of roundabout production in The Positive Theory of Capital (1889), Book I, Chapter II (The Nature of Capital):

The end and aim of all production is the making of things with which to satisfy our wants; that is to say, the making of goods for immediate consumption, or Consumption Goods. The method of their production we have already looked at in a general way. We combine our own natural powers and natural powers of the external world in such a way that, under natural law, the desired material good must come into existence. But this is a very general description indeed of the matter, and looking at it closer there comes in sight an important distinction which we have not as yet considered. It has reference to the distance which lies between the expenditure of human labour in the combined production and the appearance of the desired good. We either put forth our labour just before the goal is reached, or we, intentionally, take a roundabout way. That is to say, we may put forth our labour in such a way that it at once completes the circle of conditions necessary for the emergence of the desired good, and thus the existence of the good immediately follows the expenditure of the labour; or we may associate our labour first with the more remote causes of the good, with the object of obtaining, not the desired good itself, but a proximate cause of the good; which cause, again, must be associated with other suitable materials and powers, till, finally, — perhaps through a considerable number of intermediate members, — the finished good, the instrument of human satisfaction, is obtained.

If not quite the Alpha and Omega of economic intelligence, this is the closest thing we have to it. Time-structure of production, origin and primordial definition of capital, techonomic integrity, and teleological subversion are all contained here in embryo.

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