Albert Schäffle Characterized the Function of Capital and the Capitalist-Entrepreneur in Proto-Böhm-Bawerkian Terms; Capital Is Necessary for Exploiting the Benefits of the Division of Labor

In commenting on the debate over the fate of the working class under capitalism that raged in the 1860s between German social democrats led by Ferdinand Lassalle and German laissez-faire liberals led by Hermann Schulz-Delitzsch, Schäffle sought to illuminate the Wertfrei economic principles involved. In criticizing Lassalle’s position, he resorted to the concept of a “temporal structure of the economic process” developed by one of the eminent pioneers of the German subjective-value tradition, F. W. B. Hermann (1795-1868). Elaborating on this concept, Schäffle (quoted in Hennings 1997, p. 37) characterized the function of capital and the capitalist-entrepreneur in proto-Böhm-Bawerkian terms:

It is the particular way in which labour’s services are temporally structured, in which production is separated in time and space … which conditions the peculiar position of workers in the economy, and which points to the basic reason for the position of the entrepreneur … who advances out of his capital, in the form of wages, the value of labour’s services which are not yet consumable.

He went on to argue that if the capitalist did not perform this function, then the laborer would have to acquiesce in a lengthy wait for his labor product or else the division of labor would be impossible. Thus capital was necessary for exploiting the benefits of the division of labor. Furthermore, it is by virtue of his capital-advancing role that the entrepreneur becomes the director of production and pivotal agent of income distribution. Schäffle concluded that Lassalle’s call to abolish entrepreneurship was wrong because the entrepreneur was indispensable to the proper operation of the economic process.

--Joseph T. Salerno, “Böhm-Bawerk's Vision of the Capitalist Economic Process: Intellectual Influences and Conceptual Foundations,” New Perspectives on Political Economy 4, no. 2 (2008): 93-94.