Eugen von Böhm-Bawerk, 1851-1917, was an Austrian economic theorist, a public servant and Professor in different Austrian universities. He is considered to belong to the Neoclassical school of economics and was a leading figure inside the Austrian school. Böhm-Bawerk’s work had a great influence in other Austrian economists, such as Joseph Schumpeter and Ludwing von Mises.
His studies focus in the nature of capital and interest, and wrote a three-volume work, “Capital and Interest”, whose three volumes where entitled “History and Critique of Interest Theories”, 1884, “Positive Theory of Capital”, 1889 and “Further Essays on Capital and Interest”, published after his death, in 1921.
In his main theory he distinguishes between three different types of goods: first order goods, for final consumption. Second order goods, that are intermediate or capital goods. Third order goods, which are the goods in their original state. The relation between capital and goods is that capital allows goods to reduce their order, turning third order goods into first order goods. Regarding interest, he justified its existence with technical and subjective reasons, being the second ones where he provided new theories. He assumed people have a preference for present consumption over future and thus underestimate future goods.