Roundaboutness, or "roundabout methods of production", is the term used to describe the process whereby
capital goodsare produced first and then, with the help of the capital goods, the desired consumer goods are produced.
The term was devised by the
Austrian Schooleconomist Eugen von Böhm-Bawerk, who maintained that it was consumer demand, and not necessarily the supply of savings, that would determine the capital investment in any industry.
The Austrian economist
Eugen von Böhm-Bawerkargued against both the Ricardian labor theory of price and Marx's theory of exploitation. On the former, he contended that return on capital arises from the "roundabout" nature of production. A steel ladder, for example, will be produced and brought to market only if the demand supports the digging of iron ore, the smelting of steel, the machines that press that steel into ladder shape, the machines that make and help maintain those machines, etc. Advocates of the labour theory of valuepoint out that every step in that process, however roundabout, involves labor. But Böhm-Bawerk said that what they missed was the process itself, the roundaboutness, which necessarily involves the passage of time.
Roundabout processes, Böhm-Bawerk maintained, lead to a price that pays for more than labor value. This makes it unnecessary to postulate
exploitationin order to understand the return on capital, although how the length of the production process in and of itself produces value remains unclear, as if Böhm-Bawerk's idea were correct, the more inefficient a capitalist manufacturer, the longer their production process and the more profit they would accrue. When in fact the additional costs they incur through their inefficient production process would prevent them from selling their output at the market price. Rather than accruing higher profits therefore, they would accrue none at all.
The concept has similarities to the later
Keynesiantheory developed in the 1930s. A critique of roundaboutness was presented by Paul Samuelsonduring the Cambridge capital controversy.
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Roundaboutness — Round a*bout ness, n. The quality of being roundabout; circuitousness. [1913 Webster] … The Collaborative International Dictionary of English
roundaboutness — index indirection (indirect action) Burton s Legal Thesaurus. William C. Burton. 2006 … Law dictionary
roundaboutness — noun see roundabout I … New Collegiate Dictionary
roundaboutness — round·about·ness … English syllables
roundaboutness — noun see roundabout II * * * roundˈaboutness noun • • • Main Entry: ↑round … Useful english dictionary
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