Böhm-Bawerk on Surplus Value

It's easy enough to find on the Internet simple people (e.g., commentators here on the side of their host) ignorant of clarifications over a century old:

"The first question is, 'What is meant by saying, "Capital is productive"?'

In its commonest and weakest sense, the expression may be taken to mean merely that capital serves for the production of goods, as distinguished from serving for the immediate satisfaction of wants. In that event we are conferring upon capital the rank of a 'productive' entity only in one particular sense. I mean the same sense which appears in our general division of all goods into 'producers' and consumers' goods.' And even if that degree of productive effect were so slight that the value produced failed to equal the value of the capital expended in the producing, yet even that slight degree would justify us in conferring the title of 'productive.' But it is clear from the first, that a power which has productivity in this sense alone is completely incapable of accounting for the rise of originary interest.

The adherents of the productivity theories do, as a matter of fact, invest the term with a stronger meaning. Expressly or tacitly they understand it as meaning that, by the aid of capital, more is produced, that is to say, that capital is the cause of a special productive surplus result.

But this meaning is further subdivided. The words 'to produce more' or 'a productive surplus result' may mean one of two things. They may mean either that capital produces more goods or that it produces more value, and these are by no means identical. To keep the two as distinct in name as they are in fact, I shall designate the capacity of capital to produce more goods as its physical or technical productivity, and its capacity to produce more value as its productivity of value. It is perhaps not unnecessary to say that, at the present stage, I am leaving the question entirely open, as to whether capital actually possesses such capacities or not. I am merely recording the different meanings which may be given, and have been given, to the statement that 'capital is productive.'

Physical productivity manifests itself in an increased quantity or, possibly, in an improved quality of the product. I might illustrate it by the well-known example given by Roscher: 'Let us imagine a nation of fisher-folk without private ownership or capital, dwelling naked in caves, and living on fish caught by hand in pools left by the ebbing tide. All the workers here may be considered equal, and each man is presumed to catch and eat 3 fish per day. But now one prudent man limits his consumption to 2 fish per day for 100 days, lays up in this way a stock of 100 fish, and makes use of this stock to enable him to apply his whole labor-power for 50 days to the making of a boat and a net. With the aid of this capital he catches 30 fish a day from that time on.'

In this instance the physical productivity of capital manifests itself in the fact that the fisher, with the aid of capital, catches more fish than he would otherwise have caught, namely, 30 instead of 3. Or, to put it more correctly, he catches somewhat fewer than 30 instead of 3. For the 30 fish which are now caught in a day are the result of more than one day's work. To calculate properly, we must add to the labor of catching fish a quota of the labor that went into the making of boat and net. If, for instance, 50 days of labor were required to make the boat and the net, and if the boat and the net last for 100 days, then the 3,000 fish which are caught in the 100 days, appear as the result of 150 days labor. The surplus production then, due to the employment of capital, is represented for the whole period by 3,000 - 450 = 2,550 fish, or for each single day by 20 - 3 = 17 fish. This surplus production is a manifestation of the physical productivity of capital.

Now how would the production by capital of 'more value' be manifested? The expression 'to produce more value' is, in its turn, ambiguous because the 'more' may be measured by various standards. It may mean that, by the aid of capital, a value is produced which is greater than the value which could be produced without the aid of capital. In the foregoing illustration it may mean that the 20 fish caught in a day's labor with the aid of capital are of more value than the 3 fish which were got when no capital was employed. But the expression may also mean that, with the aid of capital, a value is produced which is greater than the value of the capital itself. In other words, it may mean that the capital gives a productive return greater than its own value, so that there remains a surplus value over and above the value of the capital consumed in the production. To put it in terms of our illustration, the fisher equipped with boat and net catches 2,700 more fish in 100 days than he would have caught without boat and net. These 2,700 fish are to be termed the (gross) return of the employment of capital and, according to this alternative interpretation of the expression, these 2,700 fish are of more value than the boat and net themselves, so that after boat and net are worn out, there still remains a surplus of value.

Of these two possible meanings those writers who ascribe to capital a productivity of value usually have the latter in mind. When, therefore, I use the expression 'productivity of value' without qualification, I shall mean the capacity of capital to produce value exceeding its own value.

Thus we have for the apparently simple proposition that 'capital is productive,' no fewer than four interpretations which are clearly distinguishable from each other. In order to place them in proper perspective, I should like to array them side by side. The proposition may signify any of the following:

1. Capital has the capacity of serving to produce goods.
2. Capital has the power of serving to produce more goods than could be produced without it.
3. Capital has the power of serving to produce greater value than could be produced without it.
4. Capital has the power to produce value greater than that which it possesses itself.

It should be self-evident that such widely differing ideas, even if they can, perchance be designated by identical terms to summarize them, must not be considered identical. Even less permissible would it be to consider them interchangeable in one or more given syllogisms. For instance, it should be self-evident that even though I may have demonstrated a capacity on the part of capital to produce goods at all, or to produce a greater quantity of goods, I am still not entitled to consider that I have established its power to produce more value than could have been produced without its assistance, or to produce a value in excess of that which the capital itself possesses. To substitute the latter two concepts in a demonstration which may have established the correctness of a syllogism involving the former two would obviously be tantamount to proffering a sophism, where a logically sound proof cannot be found..." -- Eugen von Böhm-Bawerk, Capital and Interest, V. I: "History and Critique of Interest Theories"; Chapter VII: The Productivity Theories, Section A. Preliminary Survey, Part 1. Ambiguity of the Term, 'Productivity of Capital'

Of course, Sraffa showed Böhm-Bawerk's answers to his questions to be logically invalid.