Carl Menger von Wolfensgrün (; ; 28 February 1840 – 26 February 1921) was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theories of marginalism and

marginal utility In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a Goods (economics), good or Service (economics), service describes how much pleasure or satisfaction is gained by consumers as a result o ...

, which rejected

cost-of-production theory of value In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can comprise any of the factors of production (incl ...

, such as developed by the

classical economists Classical economics, classical political economy, or Smithian economics is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam Smith ...

such as

Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...

and

David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British Political economy, political economist. He was one of the most influential of the Classical economics, classical economists along with Thomas Robert Malthus, Thomas Malthus, Ad ...

. As a departure from such, he would go on to call his resultant perspective, the

subjective theory of value The subjective theory of value is an economic theory which proposes the idea that the value of any good is not determined by the utility value of the object, nor by the cumulative value of components or labour needed to produce or manufacture it, ...

Biography

Family and education

Carl Menger von Wolfensgrün was born in the city of Neu-Sandez in Galicia,

Austrian Empire The Austrian Empire (german: link=no, Kaiserthum Oesterreich, modern spelling , ) was a Central-Eastern European multinational great power from 1804 to 1867, created by proclamation out of the realms of the Habsburgs. During its existence, ...

, which is now

Nowy Sącz Nowy Sącz (; hu, Újszandec; yi, Tzanz, צאַנז; sk, Nový Sonč; german: Neu-Sandez) is a city in the Lesser Poland Voivodeship of southern Poland. It is the district capital of Nowy Sącz County as a separate administrative unit. It has ...

in Poland. He was the son of a wealthy family of minor nobility; his father, Anton Menger, was a lawyer. His mother, Caroline Gerżabek, was the daughter of a wealthy

Bohemia Bohemia ( ; cs, Čechy ; ; hsb, Čěska; szl, Czechy) is the westernmost and largest historical region of the Czech Republic. Bohemia can also refer to a wider area consisting of the historical Lands of the Bohemian Crown ruled by the Bohem ...

n merchant. He had two brothers,

Anton Anton may refer to: People *Anton (given name), including a list of people with the given name *Anton (surname) Places *Anton Municipality, Bulgaria **Anton, Sofia Province, a village *Antón District, Panama **Antón, a town and capital of th ...

and Max, both prominent as lawyers. His son,

Karl Menger Karl Menger (January 13, 1902 – October 5, 1985) was an Austrian-American mathematician, the son of the economist Carl Menger. In mathematics, Menger studied the theory of algebras and the dimension theory of low- regularity ("rough") curves ...

, was a mathematician who taught for many years at

Illinois Institute of Technology Illinois Institute of Technology (IIT) is a private research university in Chicago, Illinois. Tracing its history to 1890, the present name was adopted upon the merger of the Armour Institute and Lewis Institute in 1940. The university has prog ...

. After attending '' gymnasium'' he studied law at the Universities of

Prague Prague ( ; cs, Praha ; german: Prag, ; la, Praga) is the capital and largest city in the Czech Republic, and the historical capital of Bohemia. On the Vltava river, Prague is home to about 1.3 million people. The city has a temperate ...

and

Vienna en, Viennese , iso_code = AT-9 , registration_plate = W , postal_code_type = Postal code , postal_code = , timezone = CET , utc_offset = +1 , timezone_DST ...

and later received a doctorate in jurisprudence from the

Jagiellonian University The Jagiellonian University (Polish: ''Uniwersytet Jagielloński'', UJ) is a public research university in Kraków, Poland. Founded in 1364 by King Casimir III the Great, it is the oldest university in Poland and the 13th oldest university in ...

Kraków Kraków (), or Cracow, is the second-largest and one of the oldest cities in Poland. Situated on the Vistula River in Lesser Poland Voivodeship, the city dates back to the seventh century. Kraków was the official capital of Poland until 1596 ...

. In the 1860s Menger left school and enjoyed a stint as a journalist reporting and analyzing market news, first at the ''Lemberger Zeitung'' in

Lemberg Lviv ( uk, Львів) is the largest city in Western Ukraine, western Ukraine, and the List of cities in Ukraine, seventh-largest in Ukraine, with a population of . It serves as the administrative centre of Lviv Oblast and Lviv Raion, and is o ...

, Austrian Galicia (now Lviv,

Ukraine Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inv ...

) and later at the in Vienna.

Career

During the course of his newspaper work, he noticed a discrepancy between what the classical economics he was taught in school said about

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...

determination and what real world market participants believed. In 1867 Menger began a study of

political economy Political economy is the study of how Macroeconomics, economic systems (e.g. Marketplace, markets and Economy, national economies) and Politics, political systems (e.g. law, Institution, institutions, government) are linked. Widely studied ph ...

which culminated in 1871 with the publication of his '' Principles of Economics'' ''('),'' thus becoming the father of the

Austrian School The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result exclusively from the motivations and actions of individuals. Austrian school ...

of economic thought. It was in this work that he challenged classical cost-based theories of value with his theory of marginality – that price is determined at the margin. In 1872 Menger was enrolled into the law faculty at the University of Vienna and spent the next several years teaching finance and political economy both in seminars and lectures to a growing number of students. In 1873, he received the university's chair of economic theory at the very young age of 33. In 1876 Menger began tutoring Archduke

Rudolf von Habsburg Rudolf I (1 May 1218 – 15 July 1291) was the first King of Germany from the House of Habsburg. The first of the count-kings of Germany, he reigned from 1273 until his death. Rudolf's election marked the end of the Great Interregnum which h ...

, the Crown Prince of

Austria Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...

in political economy and statistics. For two years, Menger accompanied the prince during his travels, first through continental Europe and then later through the British Isles. He is also thought to have assisted the crown prince in the composition of a pamphlet, published anonymously in 1878, which was highly critical of the higher Austrian aristocracy. His association with the prince would last until Rudolf's suicide in 1889. In 1878 Rudolf's father, Emperor

Franz Joseph Franz Joseph I or Francis Joseph I (german: Franz Joseph Karl, hu, Ferenc József Károly, 18 August 1830 – 21 November 1916) was Emperor of Austria, King of Hungary, and the other states of the Habsburg monarchy from 2 December 1848 until his ...

, appointed Menger to the chair of political economy at Vienna. The title of ''Hofrat'' was conferred on him, and he was appointed to the Austrian in 1900.

Dispute with the historical school

Ensconced in his professorship, he set about refining and defending the positions he took and methods he utilized in ''Principles,'' the result of which was the 1883 publication of ''Investigations into the Method of the Social Sciences with Special Reference to Economics (').'' The book caused a firestorm of debate, during which members of the

historical school of economics The historical school of economics was an approach to academic economics and to public administration that emerged in the 19th century in Germany, and held sway there until well into the 20th century. The professors involved compiled massive econ ...

began to derisively call Menger and his students the "Austrian School" to emphasize their departure from mainstream German economic thought – the term was specifically used in an unfavorable review by

Gustav von Schmoller Gustav Friedrich (after 1908: von) Schmoller (; 24 June 1838 – 27 June 1917) was the leader of the "younger" German historical school of economics. He was a leading '' Sozialpolitiker'' (more derisively, '' Kathedersozialist'', "Socialist of t ...

. In 1884 Menger responded with the pamphlet ''The Errors of Historicism in German Economics'' and launched the infamous '','' or methodological debate, between the Historical School and the Austrian School. During this time Menger began to attract like-minded disciples who would go on to make their own mark on the field of economics, most notably

Eugen von Böhm-Bawerk Eugen Ritter von Böhm-Bawerk (; born Eugen Böhm, 12 February 185127 August 1914) was an Austrian economist who made important contributions to the development of the Austrian School of Economics and neoclassical economics. He served intermittent ...

, and

Friedrich von Wieser Friedrich Freiherr von Wieser (; 10 July 1851 – 22 July 1926) was an early (so-called "first generation") economist of the Austrian School of economics. Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war m ...

. In the late 1880s, Menger was appointed to head a commission to reform the Austrian monetary system. Over the course of the next decade, he authored a plethora of articles which would revolutionize

monetary theory Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it ...

, including "The Theory of Capital" (1888) and "Money" (1892). Largely due to his pessimism about the state of German scholarship, Menger resigned his professorship in 1903 to concentrate on study.

Philosophical influences

There are different opinions on Menger's philosophical influences. But it is without discussion that there is a rudimentary dispute of Menger with

Plato Plato ( ; grc-gre, Πλάτων ; 428/427 or 424/423 – 348/347 BC) was a Greek philosopher born in Athens during the Classical period in Ancient Greece. He founded the Platonist school of thought and the Academy, the first institution ...

and a very meticulous one with

Aristotle Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Peripatetic school of phil ...

, especially with his ethics. "Plato holds that money is an agreed sign for change and Aristotle says, that money came into being as an agreement, not by nature, but by law." Also, the influence of Kant is provable. Many authors emphasize also

rationalism In philosophy, rationalism is the epistemological view that "regards reason as the chief source and test of knowledge" or "any view appealing to reason as a source of knowledge or justification".Lacey, A.R. (1996), ''A Dictionary of Philosophy' ...

and

idealism In philosophy, the term idealism identifies and describes metaphysical perspectives which assert that reality is indistinguishable and inseparable from perception and understanding; that reality is a mental construct closely connected to ide ...

, as is represented by Christian Wolff. Looking at the literature, most writers think that Menger represents an essential Aristotelian position. This is surprisingly a position that is contrary to his theory of the subjective value and his individualistic methodological position. Another entry is the use of deduction or induction. With his price theory can be shown that Menger is nominalistic and, stronger, anti-essentialistic. That is to say that his approach is inductionalistic.

Economics

Menger used his

to arrive at what he considered one of the most powerful insights in economics: "both sides gain from exchange". Unlike

William Jevons William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in eco ...

, Menger did not believe that goods provide "utils," or units of utility. Rather, he wrote, goods are valuable because they serve various uses whose importance differs. Menger also came up with an explanation of how money develops that is still accepted by some schools of thought today.

Works

* 1871 – '' Principles of Economics'' * 1883 – ''Investigations into the Method of the Social Sciences with Special Reference to Economics'' * 1884 – ''The Errors of Historicism in German Economics'' * 1888 – ''The Theory of Capital'' * 1892 – ''On the Origins of Money''

References

External links

The Epistemological Import of Carl Menger's Theory of the Origin of Money

Ludwig von Mises Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and Sociology, sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberali ...

in ''

Human Action ''Human Action: A Treatise on Economics'' is a work by the Austrian economist and philosopher Ludwig von Mises. Widely considered Mises' ''magnum opus'', it presents the case for laissez-faire capitalism based on praxeology, his method to under ...

'' on Menger's Theory of the Origins of Money
Profile on Carl Menger
at the History of Economic Thought Website
Principles of Economics
, online version provided by the

Ludwig von Mises Institute Ludwig von Mises Institute for Austrian Economics, or Mises Institute, is a libertarian nonprofit think tank headquartered in Auburn, Alabama, United States. It is named after the Austrian School economist Ludwig von Mises (1881–1973). It wa ...

.
''Grundsätze der Volkswirtschaftslehre'' (''Principles of Economics'')

Principles of Economics (PDF Spanish)

online version provided by the Monadnock Press
Carl Menger Papers, 1857–1985
Rubenstein Library, Duke University * {{DEFAULTSORT:Menger, Carl 1840 births 1921 deaths 20th-century Austrian economists 19th-century Austrian economists 19th-century Austrian writers Austrian School economists Charles University alumni University of Vienna alumni Jagiellonian University alumni Edlers of Austria German Bohemian people Austrian people of German Bohemian descent People from the Kingdom of Galicia and Lodomeria People from Nowy Sącz Neoclassical economists