Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

274 Money, Bank Credit, and Economic Cyclesreach successive and increasingly time-consuming intermediatestages if he has first sacrificed the chance to undertakeactions which would produce a more immediate result. Inother words, he must give up the achievement of immediateends which would satisfy current human needs (consumption).To illustrate this important concept, we will use theexample given by Böhm-Bawerk to explain the process of savingand investment in capital goods carried out by an individualactor in an isolated situation, such as Robinson Crusoeon his island. 12Let us suppose that Robinson Crusoe has just arrived onhis island and spends his time picking berries by hand, hisonly means of subsistence. Each day he devotes all of hisefforts to gathering berries, and he picks enough to surviveand can even eat a few extra daily. After several weeks on thisdiet, Robinson Crusoe makes the entrepreneurial discoverythat with a wooden stick several meters long, he could reachhigher and further, strike the bushes with force and gather thenecessary berries much quicker. The only problem is that heestimates it could take him five whole days to find a suitabletree from which to take the stick and then to prepare it bypulling off its branches, leaves, and imperfections. During thistime he will be compelled to interrupt his berry picking. If hewants to produce the stick, he will have to reduce his consumptionof berries for a time and store the remainder in abasket until he has enough to survive for five days, the predictedduration of the production process of the woodenstick. After planning his action, Robinson Crusoe decides toundertake it, and therefore he must first save a portion of theberries he picks by hand each day, reducing his consumptionby that amount. This clearly means he must make aninevitable sacrifice, which he nevertheless deems well worth12 This is the classic example given by Eugen von Böhm-Bawerk, Kapitalund Kapitalzins: Positive Theorie des Kapitales (Innsbruck: Verlag der Wagner’schenUniversitäts-Buchhandlung, 1889), pp. 107–35. This work hasbeen translated into English by Hans F. Sennholz, Capital and Interest,vol. 2: Positive Theory of Capital (South Holland, Ill.: Libertarian Press,1959), pp. 102–18.