A strong member of the “second generation of the Austrian school of economics,” Eugen von Böhm-Bawerk (1851–1914) and his works are discussed by Peter Klein. Böhm-Bawerk did much to extend and further develop Menger’s theories of value, price, capital, and production. Included in his work of the two volume Capital and Interestis a devastating critique of Marx’s exploitation theory. Böhm-Bawerk explained that far from being exploited, the workers are actually accommodated, being paid in advance of the produced goods being sold.
In the second volume of Capital and Interest, Böhm-Bawerk explained the time consuming nature of production and how it relates to interest. Roundabout production methods are more productive but come at a cost of forgoing current consumption during the process of accumulating the capital. This became the basis for his time preference theory of interest as well as the foundations for the Austrian theory of the business cycle. Böhm-Bawerk also presented a clear example diminishing marginal utility and explained how real prices, as opposed to hypothetical equilibrium prices, are determined.