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The Austrian School maintains that the capital intensity of any industry is due to the roundaboutness of the particular industry and consumer demand.
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Roundaboutness, or roundabout methods of production, is the process whereby capital goods are produced first and then, with the help of the capital goods, the desired consumer goods are produced.
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Nikolai Bukharin argued that Böhm-Bawerk's concept of roundaboutness was untenable in the context of the continuous, simultaneous production of a modern economy.Nikolai Bukharin, (1927) The Economic Theory of the Leisure Classes, ch. 4, part 3.
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Translated as Capital and Interest. II: Positive Theory of Capital with appendices rendered as Further Essays on Capital and Interest. Böhm-Bawerk's theory equates capital intensity with the degree of roundaboutness of production processes. Böhm-Bawerk also argued that the law of marginal utility necessarily implies the classical law of costs.
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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 exploitation in 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.
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In reality though time and profit do not have to be related in direct proportion across different industries; within a certain industry, the passage of time will allow for value to be added in the production process, in the absence of exploitation, while inefficient firms with inferior production systems may contribute the same value-added to output as superior firms with the same given inputs, but just in a longer period of time. Inefficiency therefore does not result in superior performance for a firm, but the passage of time that is necessary for all production processes to occur nevertheless is that feature of the process that explains value-added, not exploitation of labor. The concept has similarities to the later Keynesian theory developed in the 1930s. A disproof of roundaboutness in economies with compound interest was presented by Paul SamuelsonSamuelson, Paul A.(1966) "A Summing Up" Quarterly Journal of Economics 80:4, pp.568-583.
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