Why Capital Needs Entrepreneurs

The productivity theory of capital dominates the popular view and public discussions. It presumes that capital generates the yield like a tree begets its fruits. In this view, more savings imply more investment, and more investment generates a higher capital stock, which in turn raises future yields. The belief is widespread that monetary assets grow and automatically render the returns. Yet already at the end of the 19th century, the Austrian economist Eugen von Böhm-Bawerk exploded the productivity theory of capital. He showed that without entrepreneurial action, capital is stale and useless.


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