Carl Menger (1840-1921), economic theorist and founder of the Austrian school of marginal analysis, was both the most influential and the least read of the major figures who gave economic theory the shape it preserved from about 1885 to 1935. There is little doubt that it was his immediate disciples who cast microeconomic theory into the form which, in its essentials, it still retains. Of the three founders of modern utility analysis, he alone not only based his work on a long tradition and presented the outlines of his theory in a form which for some time could not be bettered, but also succeeded in creating a school which continued to develop his ideas. Menger exerted a widespread influence, mainly through his avowed disciples in many countries, despite the fact that his two main books were not reprinted for 50 years or translated into English for 79 years. His work also had an effect on the only important rival school of the period—the neoclassical Cambridge tradition. At an early stage, Alfred Marshall, founder of the Cambridge school, had evidently studied Menger’s work much more assiduously than is suggested by the few references to Menger (most of which were dropped from later editions) in Marshall’s Principles. (Marshall’s personal copy of Menger’s Grundsdtze, with a detailed marginal commentary in Marshall’s hand, is preserved in the Marshall Library at Cambridge.)
Menger was born in Neu Sandec, Galicia (then in the Austrian part of Poland), the descendant of a professional family that had earned the prefix “von” (Menger himself dropped it in early adulthood). In the well-stocked library of his father, a practicing lawyer, Menger and his two brothers became acquainted early with the literature on social and economic questions; one brother, Anton Menger, was a legal philosopher and historian of socialist doctrine.
Menger studied law at the universities of Vienna and Prague and finally took his doctorate at the University of Cracow in 1867. Apparently he had done some journalistic work in Vienna and Lemberg before taking the degree, and afterward he entered the press section of the prime minister’s office in Vienna, a position which was frequently a springboard to high public office. In that position, apparently as a result of having to write market reports, Menger developed an interest in price theory. The recent publication of his annotations to Rau’s Grundsdtze der Volkswirthschaftslehre ( 1963) suggests that it was mainly his critical analysis of this textbook exposition of classical doctrine that led Menger, from 1867 on, to develop his own value theory. In his extensive reading, Menger must have found ample material in the early nineteenth-century German and French economic literature on which to build a fully developed utility analysis. (The utility tradition was not as strongly preserved in the English literature.) It now appears that the literature on which he was able to draw included also the work of an Austrian economist, J. Kudler (whose textbook, Die Grundlehren der Volkswirthschaft 1846, he had probably used at the university), and one work by Cournot. Menger’s sources, however, did not include the work of the author who had the most completely anticipated him, Gossen’s Entwickelung der Gesetze des menschlichen Verkehrs . . . , published in 1854.
The results of Menger’s studies appeared in his Principles of Economics (1871), the work on which his fame mainly rests. Described as the “first, general part” of an intended comprehensive work on economic theory, it remained his sole major publication in this field during his lifetime. In somewhat copious but always clear language, it provided a much more thorough account of the relations between utility, value, and price than is found in any of the works of Jevons and Walras, who at about the same time laid the foundation of the “marginal revolution” in economics.
The book gained for Menger first a lecturership and, in 1873, the position of extraordinary professor at the University of Vienna. For some years he published nothing more, apparently because of his appointment in 1876 as tutor to the 18-year-old crown prince of Austria, the ill-fated Archduke Rudolf. For two years Menger accompanied Rudolf on extensive travels through Germany, France, and the British Isles. He seems to have assisted the crown prince in the composition of a pamphlet (anonymously published in 1878) which attempted a critical examination of the role played by the higher Austrian aristocracy. The pamphlet caused some stir when in 1906, 17 years after the death of the archduke, his authorship was discovered.
The real beginning of Menger’s long and very effective career as a teacher came with his appointment in 1879 to a full professorship at the University of Vienna. During the next 24 years he ex-pended most of his energy on his general lectures to law students (which he appears to have rewritten every year), and he was particularly attentive to those few students who voluntarily chose economics as their field of special work. His teaching was interrupted only twice by bursts of literary activity. The first of these was connected with his second major book, Problems of Economics and Sociology (1883). Here he undertook to vindicate the importance of theory in the social sciences. This was an effort that seemed necessary to him in view of the complete indifference or even hostility which most of his German colleagues, influenced by the antitheoretical attitude of the “younger historical school” in economics, had shown toward his attempt in the Principles to reconstruct economic theory.
To understand the aim of the Problems and the nature of the great controversy to which it gave rise, it is necessary to appreciate the character of the school against which it was directed. The “younger historical school” is somewhat misnamed: unlike von Savigny and the older historical school of jurisprudence, or even Roscher and the “older historical school” in economics, this “younger” school was not interested in history as the study of unique events but regarded historical study as the empirical approach to an eventual theoretical explanation of social institutions. Through the study of historical development it hoped to arrive at the laws of development of social wholes, from which, in turn, could be deduced the historical necessities governing each phase of this development. This was the sort of positivist-empiricist approach which was later adopted by American institution alists (differing from similar, more recent efforts only in that it made little use of statistical technique), and which is better described (as by Popper) as historicism.
It was against this use of history as a means of discovering empirical laws that Menger undertook to defend what he considered to be the proper function of theory—reconstructing the structure of social wholes from their parts by the procedure called methodological individualism by Schum-peter, or the “compositive method” by Menger him-self. It is essentially what today is called micro-theory. Menger was greatly interested in history and the genesis of institutions, and he was anxious mainly to emphasize the different nature of the task of theory and the task of history proper and to prevent a confusion of their methods. The distinction, as he elaborated it, considerably influenced the later work of Rickert and Max Weber. Perhaps the most important part of his discussion was the clear recognition, first, that the object of all social theory is the tracing of what are now usually called the unintended consequences of individual actions (Menger’s term was the unbeabsichtigte Resultante), and, second, that in this effort the genetic and the functional aspects could not be separated ( 1963, pp. 163, 180, 182, 188). In expounding and illustrating this view he went far beyond the limit of economics and dealt particularly with the genesis of law.
The nature of the dispute has often been confused by the fact that Menger, in arguing against what he regarded as the dominant pseudohistorical school in economics, maintained ideas which had reached him through the historical school in law.
These ideas can be traced back to Mandeville, David Hume, and the later eighteenth-century Scottish philosophers, although the degree to which Menger was directly acquainted with these eighteenth-century sources is not clear. It is worth noting that Menger always had a great interest in the history of economic theory and used it with much didactic skill in his lectures as an introduction to the problems of modern economic theory.
The Problems was unfavorably and condescendingly reviewed by Gustav Schmoller, the head of the younger historical school of economists; Menger replied to Schmoller’s criticism in a passionate brochure, Die Irrihumer des Historismus in der deutschen Nationalökonomie(1884). This was the beginning of the celebrated Methodenstreit (dispute on method). Emotions ran high; younger men on both sides joined in; and the dispute produced a cleavage between German and Austrian economics, traces of which were to be felt for decades. In a number of articles during the following few years Menger dealt mainly with problems arising out of the dispute, except for his only other contribution to pure economic theory, the article “Zur Theorie des Kapitals,” published in 1888 (see Collected Works, vol. 3, pp. 133-183).
Menger emerged a second time from his academic seclusion in 1892 to join the discussion on the reform of the Austrian currency. His active participation in discussions of policy was foreshad-owed in the very same year by his article on money (see Collected Works, vol. 4, pp. 1-2) for the new German encyclopedia of political science. The article was itself a substantial treatise, which devoted much space to the evolution of money but also emphasized the factors determining the amount of money held by individuals, and which laid the foundations for a theory of the value of money on which later Austrian economists, such as Wieser, Von Mises, and Weiss were able to build. No less important, however, are his memorandum and his oral evidence to the Austrian currency commission and various articles which he published in 1892 and in the next few years.
But while such special occasions led Menger to literary production, his teaching appears to have precluded progress on the great treatise which he hoped would replace his first work. Therefore, in 1903, he prematurely resigned his professorship in order to devote himself entirely to this task. But although he continued to work on it during the remaining 18 years of his life and at one stage seems to have come close to his goal, he continued his efforts after his powers had begun to fail, with the result that he left nothing that was readily publishable at his death. His son included part of the manuscript material in a second edition of the Grundsätze, which appeared in 1923. But the publication of more of the manuscript material has proved to be a very difficult task which so far has not been accomplished.
Menger built up over the years one of the greatest private libraries in the field of social science, which in 1911 he estimated at something like 25,000 volumes. The sections dealing with the social sciences and anthropology were sold after his death to the Commercial University (now Hitotsubashi University) in Tokyo, which published a catalogue of it in two parts, one in 1926 and the other in 1955.
In an assessment of Menger’s influence it should be noted that his ideas were introduced into anthropology by Richard Thurnwald, one of his students.
Friedrich A. Von hayek
[For the historical context of Menger’s work, seeEconomic thought, articles onThe historical school, The AUSTRIAN SCHOOL, andThe institutional school; and the biographies ofCournot; Gossen; Jevons; Schmoller; Walras.
(1870) 1963 Carl Mengers erster Entwurf zu seinem Hauptwerk Grundsatze geschrieben als Anmerkungen zu den Grundsätzen der Volkswirthschaftslehre von Karl Heinrich Rau. With an Introduction by Yuzo Yamada. Tokyo: Bibliothek der Hitotsubashi Universitat. -↓ Written in 1870 and published posthumously.
(1871) 1950 Principles of Economics: First General Part. Edited by James Dingwall and Bert F. Hoselitz, with an Introduction by Frank H. Knight. Glencoe, III.: Free Press. -→ First published as Grundsatze der Volkswirthschaftslehre. The second complete German edition was published in 1923.
(1883 ) 1963 Problems of Economics and Sociology. Edited with an introduction by Louis Schneider. Urbana: Univ. of Illinois Press. -→ First published as Untersuchungen uber die Methode der Socialwissenschaften und der politischen Oekonomie insbesondere.
1884 Die Irrthümer des Historismus in der deutschen Nationalökonomie. Vienna: Holder.
1892 Beitrage zur Währungsfrage in Oesterreich-Ungarn. Jena (Germany): Fischer.
Carl Mengers Zusdtze zu Grundzüge der Volkswirthschaftslehre. With an introduction by Emil Kauder. Tokyo: Bibliothek der Hitotsubashi Universität, 1961. -→ Published posthumously.
The Collected Works of Carl Menger. 4 vols. Series of Re-prints of Scarce Tracts in Economic and Political Science, No. 17-20. London School of Economics and Political Science, 1933-1936. -+ Volume 1:Grundsatze der Volkswirthschaftslehre (1871) 1934. Volume 2:Untersuchungen uber die Methode der Socialwis-senschaften . . . , (1883) 1933. Volume 3:Kleinere Schriften zur Methode und Geschichte der Volkswirthschaftslehre (1884-1915) 1935. Volume 4: Schriften iiber Geldtheorie und Wdhrungspolitik . . . (1889-1893) 1936. Contains a biographical introduction by von Hayek in Volume 1, and a complete list of Menger’s known writings in Volume 4 1933-1936.
Antonelli, éTIENNE 1953 Léon Walras et Carl Menger ä travers leur correspondance. économie appliquée 6:269-287.
Block, Henri S. 1937 La théorie des besoins de Carl Menger. Paris: Librairie Générate de Droit et de Juris-prudence.
Block, Henri s. 1940 Carl Menger: The Founder of the Austrian School. Journal of Political Economy 48: 428-433.
Feilbogen, S. 1911 L’école autrichienne d’économie politique. Journal des économistes Sixth Series 31:50-57, 214-230, 375-388.
Howey, Richard s. 1960 The Rise of the Marginal Utility School: 1870-1889. Lawrence: Univ. of Kansas Press.
Kauder, Emil 1953 The Retarded Acceptance of the Marginal Utility Theory. Quarterly Journal of Economics 67:564-575.
Kauder, Emil 1957 Intellectual and Political Roots of the Older Austrian School. Zeitschrift fur Nationalökonomie 17:411-425.
Kauder, Emil 1959 Menger and His Library. Keizai kenkyu (Economic Review), Hitotsubashi University 10:58-64.
Kauder, Emil 1961 Freedom and Economic Theory: Second Research Report on Menger’s Unpublished Paper. Hitotsubashi Journal of Economics 2:67-82.
Kauder, Emil1962 Aus Mengers nachgelassenen Papieren. Weltwirtschaftliches Archiv 89:1-28. SCHUMPETER, JOSEPH A. (1921) 1960 Carl Menger:
1840-1921. Pages 80-90 in Joseph A. Schumpeter, Ten Great Economists, From Marx to Keynes. New York: Oxford Univ. Press. -↓ First published in German in Volume 1 of Zeitschrift fur Volkswirtschaft und Sozialpolitik, New Series.
Stigler, George J. 1941 Production and Distribution Theories: The Formative Period. New York: Macmillan. -↓ See especially pages 134-157 on “Carl Menger.” WEISS, FRANZ X. 1924 Zur zweiten Auflage von Carl
Mengers Grundsdtzen. Zeitschrift fur Volkswirtschaft und Sozialpolitik New Series 4:134-154.
Wieser, Friedrich 1923 Karl Menger. Volume 1, pages 84-92 in Neue österreichische Biographic: 1815-1918. Vienna: Wiener Drucke.
Yeager, Leland b. 1954 The Methodology of Henry George and Carl Menger. American Journal of Economics and Sociology 13:233-238.