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The Genius of Carl Menger, by F. A. Hayek

October 24, 2011

This article, written by F. A. Hayek, was published at Mises.org on 30th September 2011.

[Introduction to Carl Menger’s Principles of Economics (1934)]

The history of economics is full of tales of forgotten forerunners, men whose work had no effect and was only rediscovered after their main ideas had been made popular by others, of remarkable coincidences of simultaneous discoveries, and of the peculiar fate of individual books. But there must be few instances, in economics or any other branch of knowledge, where the works of an author who revolutionised the body of an already well-developed science and who has been generally recognised to have done so, have remained so littleknown as those of Carl Menger. It is difficult to think of a parallel case where a work such as the Grundsätze has exercised a lasting and persistent influence but has yet, as a result of purely accidental circumstances, had so extremely restricted a circulation.

There can be no doubt among competent historians that if, during the last sixty years, the Austrian School has occupied an almost unique position in the development of economic science, this is entirely due to the foundations laid by this one man. The reputation of the School in the outside world and the development of its system at important points were due to the efforts of his brilliant followers, Eugen von Böhm-Bawerk and Friedrich von Wieser. But it is not unduly to detract from the merits of these writers to say that its fundamental ideas belong fully and wholly to Carl Menger. If he had not found these principles he might have remained comparatively unknown, might even have shared the fate of the many brilliant men who anticipated him and were forgotten, and almost certainly would for a long time have remained little known outside the countries of the German tongue. But what is common to the members of the Austrian School, what constitutes their peculiarity and provided the foundations for their later contributions is their acceptance of the teaching of Carl Menger.

The independent and practically simultaneous discovery of the principle of marginal utility by William Stanley Jevons, Carl Menger, and Léon Walras is too well known to require retelling. The year 1871, in which both Jevons’ Theory of Political Economy and Menger’s Grundsätze appeared, is now generally and with justice regarded as the beginning of the modern period in the development of economics. Jevons had outlined his fundamental ideas nine years earlier in a lecture (published in 1866) which, however, attracted little attention, and Walras began to publish his contribution only in 1874, but the complete independence of the work of the three founders is quite certain. And indeed, although their central positions, the point in their system to which they and their contemporaries naturally attached the greatest importance, are the same, their work is so clearly distinct in general character and background that the most interesting problem is really how so different routes should have led to such similar results.

To understand the intellectual background of the work of Carl Menger, a few words on the general position of economics at that time are required. Although the quarter of a century between about 1848, the date of J.S. Mill’s Principles, and the emergence of the new school saw in many ways the greatest triumphs of the classical political economy in the applied fields, its foundations, particularly its theory of value, had become more and more discredited. Perhaps the systematic exposition in J.S. Mill’s Principles itself, in spite or because of his complacent satisfaction about the perfected state of the theory of value, together with his later retractions on other essential points of the doctrine, did as much as anything else to show the deficiencies of the classical system. In any case, critical attacks and attempts at reconstruction multiplied in most countries.

Nowhere, however, had the decline of the classical school of economists been more rapid and complete than in Germany. Under the onslaughts of the Historical School not only were the classical doctrines completely abandoned — they had never taken very firm root in that part of the world — but any attempt at theoretical analysis came to be regarded with deep distrust. This was partly due to methodological considerations. But even more it was due to an intense dislike of the practical conclusions of the classical English School — which stood in the way of the reforming zeal of the new group which prided itself on the name of the “ethical school.” In England the progress of economic theory only stagnated. In Germany a second generation of historical economists grew up who had not only never become really acquainted with the one well-developed system of theory that existed, but had also learnt to regard theoretical speculations of any sort as useless if not positively harmful.

The doctrines of the classical school were probably too much discredited to provide a possible basis of reconstruction for those who were still interested in problems of theory. But there were elements in the writings of the German economists of the first half of the century which contained the germs for a possible new development.[2] One of the reasons why the classical doctrines had never firmly established themselves in Germany was that German economists had always remained conscious of certain contradictions inherent in any cost or labor theory of value. Owing, perhaps, partly to the influence of Condillac and other French and Italian authors of the eighteenth century a tradition had been kept alive which refused to separate value entirely from utility. From the early years of the century into the ‘fifties and ‘sixties a succession of writers, of whom Hermann was probably the outstanding and most influential figure (the wholly successful Gossen remaining unnoticed), tried to combine the ideas of utility and scarcity into an explanation of value, often coming very near to the solution provided by Menger. It is to these speculations, which to the more practical minds of the contemporary English economists must have appeared useless excursions into philosophy, that Menger owed most. A glance through the extensive footnotes in his Grundsätze, or the author’s index which has been added to the present edition, will show how extraordinarily wide a knowledge he possessed of these German authors and also of the French and Italian writers, and how small a role the writers of the classical English school plays in comparison.

But while Menger probably surpassed all his fellow-founders of the marginal utility doctrine in the width of his knowledge of the literature — and only from a passionate book collector inspired by the example of the encyclopaedic Roscher could one expect a similar knowledge at the early age the Grundsätze was written — there are curious gaps in the list of authors to whom he refers which go far to explain the difference of his approach from that of Jevons and Walras.[3] Particularly significant is his apparent ignorance, at the time when he wrote the Grundsätze, of the work of Cournot, to whom all the other founders of modern economics, Walras, Marshall, and very possibly Jevons,[4] seem to have been directly or indirectly indebted. Even more surprising, however, is the fact that at that time Menger does not seem to have known the work of von Thünen, which one would have expected him to find particularly congenial. While it can be said, therefore, that he worked in an atmosphere distinctly favourable to an analysis on utility lines, he had nothing so definite on which to build a modern theory of price as his fellows in the same field, all of whom came under the influence of Cournot, to which must be added, in the case of Walras, that of Dupuit[5] and, in the case of Marshall, that of von Thünen.

Continue reading. Footnotes are in the original article at Mises.org.

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