Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book III: The Natural Imputation of the Return from Production

Chapter IX
The Imputation of Gross Return and of Net Return

NV-III-19.1 We have said that capital, rightly employed, shows itself productive, inasmuch as it reproduces itself with a surplus. This proposition, although undoubtedly correct as a conclusion, requires one essential modification.
NV-III-19.2 Do the arrows, bows, and nets – the capital of Thünen’s illustration – really reproduce themselves in the strictest sense of the term? Certainly not. They produce nothing but fish and the spoils of the chase; in this they exhaust their direct and proximate activity. They do not in the least degree themselves bring forth new arrows, bows, and nets, nor do they give direct assistance in doing so. The return which, in the first place, falls to be imputed to them is, consequently, a gross return in foreign things; things, that is, from among which they cannot replace themselves; things with which they may possibly be compared in value but not in quantity, and by means of which a physical net return cannot therefore be represented. But we cannot stop short in our consideration at this point: as a matter of fact the indirect efficiency of capital goes much further. The bows, arrows, and nets once obtained lighten the conditions of their reproduction, if they do not actually co-operate in it. They lighten it by means of the extraordinary increase in the gross return of fish and game, as consequence of which immensely more labour than formerly is free to be employed in the creation of capital. Therefore, in the total result, a net return does come in the end to be imputed to these concrete forms of capital, just as if they did directly reproduce themselves with a surplus.
NV-III-19.3 The same argument holds for capital in the developed economy, only that here the conditions are much more complicated and the process, consequently, more difficult to follow. No capital, even in the most highly developed economy, directly reproduces itself; each produces first a gross return in foreign things, in which, physically, its productivity cannot be seen. The capital of a baker produces bread, that of a miller, meal, that of a peasant, grain. In order that the baker may replace his capital again, he must turn to the miller, and to all the other persons who can provide him with the necessary materials and apparatus for his production. The gross return of every capital must be exchanged against the gross returns of other capitals, – indeed, against those returns which are attributed to land and labour, – in order that the capital may be replaced, and the net return become physically cognisable. The only imputation that ever takes place directly is an imputation of gross return, but from that follows, as a final consequence, an imputation of net return, however circuitous the route may be, – so long, I mean, as the efficiency of capital is considered undiminished, and so long as it is suitably employed. It is just as though every capital did directly reproduce itself with a surplus.
NV-III-19.4 In most cases the return to all the capital invested in one business or one undertaking is grouped in one estimate. It requires no proof, however, that, from the total return, each separate bit of capital (assuming suitable employment) will have its share. Every bit of capital, rightly employed, produces directly a gross return of goods different from itself, and finally, after the necessary exchange between similar gross returns, reproduces itself and yields a net return. In this sense machines, tools, raw materials, auxiliary materials, in short, all forms of concrete capital, the smallest and the most perishable, even those from which, materially speaking, nothing passes over into the product, replace themselves and yield a surplus. From this point of view every piece of coal which is burned for purposes of production creates, in the last resort, another similar piece of coal, and, beyond that, a perishable net return. And, inasmuch as the replaced portions of capital are employed again and yet again, each piece of capital – the smallest and most perishable – becomes the source of a permanent rent.1

NV-III-19.n1.1 1 In the exchanges necessary to procure the goods which are to replace the capital, in lieu of the directly obtained goods which form the gross return, goods are, of course, estimated according to their value. Capital goods, are, therefore, estimated at their capital value. To this extent it appears that the knowledge of the value of capital and of the laws which regulate it, must precede the imputation of net return. Only in such a simple instance as that given by Thünen can an imputation of net return be made without a previous knowledge of the value of capital, and this destroys our proof that the imputation of net return is fundamentally independent of the valuation of capital. It is, of course, practically impossible to employ this fundamental principle so soon as production becomes complicated. But whenever production becomes complicated every new calculation must practically be laid on the lines of the old ones; otherwise no conclusion could be come to. Every new determination of value practically presupposes old ones (compare Book III. chap. v. at end). As little, then, as the conclusion can be drawn from this, that theory requires value in order to explain value, so little can it be concluded that, theoretically, the value of capital conditions the imputation of net return.

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