Capital and Production

Richard von Strigl's Capital and Production, first published in 1934, integrates the theory of capital into an account of the whole economy. It asks how production that takes time can continue: what supports workers while products remain unfinished, how machines get replaced, how interest tells entrepreneurs which projects the available provision can carry, and what follows when bank credit finances commitments no saving supports. The 2000 Mises Institute edition presents the translation by Margaret Rudelich Hoppe and Hans-Hermann Hoppe, edited and introduced by Jörg Guido Hülsmann. The book repays its abstraction by teaching a reader to ask whether a project can be completed and renewed, a question separate from whether someone will finance it.

Strigl's opening hypothetical gives a rebuilding country a subsistence fund lasting one year, so a process lasting two must be shortened in time or halt when the fund runs out, yielding less either way. He then refines it into synchronized processes, staggered so that a batch finishes each week; the finished stock shrinks to a week's needs while goods at every stage of maturity stand behind it. The constraint survives: each batch must again support continued work, and a longer method raises output only when intelligently chosen.

With durable equipment the chain lengthens. Strigl's factories send part of each week's return upstream: to their workers, to raw material suppliers, and into a renewal fund that supports the machine makers, who pay their own workers, suppliers and replacements in turn. An owner whose machinery is years from replacement can lend that fund through an intermediary to support another process, provided that process returns it in time. Equipment, he concludes, counts as wealth only while it fits a structure able to supply complementary free capital and renewal. Sinking new capital into an obsolete plant to protect its value loses more than writing it off, and machines raise wages where those conditions hold.

Chapter 2 turns this into an entrepreneur's calculation. A longer process can bid up wages and, once its larger output arrives, lower product prices, narrowing the margin a more productive method promised. The capital market trades capital multiplied by time, so a project must return the wages it advanced plus interest for as long as they stay tied up. Interest thereby sets time limits on production: a lower rate admits longer methods with smaller marginal returns, a higher rate forces shorter ones. Strigl grounds interest in the marginal productivity of the subsistence fund and credits a smooth credit market with directing savers' capital toward its most productive uses and forming the uniform rate that reliable calculation needs.

Chapter 3 carries this into a money economy, where money finances production and saved monetary income stands for the consumer goods set aside to support workers. Genuinely additional credit breaks that correspondence: it finds borrowers only below the prevailing rate, reaching previously excluded projects and lengthening commitments. The larger wage bill raises demand for consumer goods, and Strigl allows that employment or real wages can rise. In his model the extra output comes from intermediate goods finished early, consuming capital while the longer processes still need provision; he treats forced saving as a passing friction. Continued expansion would have to accelerate and endanger the currency, so Strigl expects the central bank to raise its rate; a footnote treats rationing credit at a held-down rate as another restriction, allocating less efficiently where it serves borrowers unable to pay more and excludes those who could. Once additional credit stops, prolonged methods become unprofitable and must be shortened to fit saved capital. These results start from a stationary economy, and an output gain alone does not reveal capital consumption.

Strigl concedes a point his editor disputes: a central bank could in principle offset hoarded cash with compensatory credit. In practice, he notes, no indicator shows whether credit exceeds real savings, other banks create credit independently, and in a downturn firms borrow for liquidity or to delay liquidation. Hülsmann's introduction traces this departure from Mises to two features he criticizes: Strigl's view that money capital represents homogeneous physical capital and his tacit assumption of static expectations, which make any change in hoarding distort that representation. Hülsmann answers that expectations can adapt, while noting that Strigl's practical conclusions stay close to Mises's. The cycle appendix allows that external changes cause crises and treats shifts in saving, hoarding and investing as likely human responses that economic law alone cannot deduce.

The foreword asks for basic economics and a willingness to think abstractly through simplified models whose usefulness appears only later. On those terms, the publisher's English text lets a reader trace a longer production method back through interest and equipment renewal to the saved provision it requires, and Hülsmann's introduction marks which capital and expectation assumptions in that chain deserve testing.