Eugen Böhm was born on 12 February 1851 in Brno (German: Brünn), Moravia, Austrian Empire.

After Vienna, he studied political economy and social science at the universities of Heidelberg, Leipzig and Jena,[2] under Karl Knies, Wilhelm Roscher and Bruno Hildebrand.

[3] After completing his studies in 1872, he entered the Austrian Ministry of Finance, holding various posts until 1880, when he became qualified as a Privatdozent of political economy at Vienna.

In 1889 Böhm-Bawerk became a counsellor in the Ministry of Finance in Vienna and represented the government in the lower house on all questions of taxation.

The Austrian system at the time taxed production heavily, especially during wartime, which resulted in huge disincentives to investment.

Böhm-Bawerk's proposal called for a modern income tax, which was soon approved and met with success in the next few years.

The economic historian Alexander Gerschenkron criticized his "penny pinching, 'not-one-heller-more policies'," and criticised Böhm-Bawerk's unwillingness to spend heavily on public works.

Böhm-Bawerk argued that capitalists do not exploit their workers; they actually help employees by providing them with an income well in advance of the revenue from the goods they produce, stating, "Labor cannot increase its share at the expense of capital."

He also attacks Marx for downplaying the influence of supply and demand in determining permanent price, and for deliberate ambiguity with such concepts.

In the first chapter of the first volume of Capital, Karl Marx explained that the value of any commodity was generally reflected by the quantity of labor required, inequality being only a temporary exception.

[11] However, the Marxist economist Conrad Schmidt statistically demonstrates that the level of profit is proportional to the quantity of capital of the company.

[13] Böhm-Bawerk's Positive Theorie des Kapitals (Universitätsverlag Wagner, 1889) (translated by William Smart as Positive Theory of Capital (1892)[14]),[15][16] offered as the second volume of Capital and Interest, elaborated on the economy's time-consuming production processes and the interest payments they entail.

Evidently our farmer would not be very wise if he thought of deducting the lost sack from his own consumption, and imperilled his health and life while using the corn as before to make brandy and feed parrots.

On consideration we must see that only one course is conceivable: with the four sacks that remain our farmer will provide for the four most urgent groups of wants, and give up only the satisfaction of the last and least important, the marginal utility—in this case, the keeping of parrots.

Böhm-Bawerk provided a variation of the theory that targeted the entrepreneurs, breaking up into three cases: 1. where the factor combination a + b exists such that neither a nor b as isolated piece produces any value at all.