Freeman

PERSPECTIVE

Happy Birthday, Carl Menger

Austrian School Founder Was Key to Freedom Philosophy

FEBRUARY 01, 2001 by SHELDON RICHMAN

Filed Under : Austrian Economics

February 23 is the 161st anniversary of the birth of Carl Menger, founder of the Austrian school of economics. As the economist Joseph Salerno has written, “[I]n its method and core theory, Austrian economics always was and will forever remain Mengerian economics.”

It would be hard to overstate how important Menger was in the development of economic science and, indirectly, the freedom philosophy. He valiantly defended economic theory per se against those (the socialist German historical school) who insisted there is no such thing. Menger, who died in 1921, patiently demonstrated that indeed there are economic regularities—laws—defiance of which would have undesirable consequences.

Beginning with his Principles of Economics (1871), Menger outlined a new kind of economics, one that, for instance, rejected the labor theory of value. Israel Kirzner, dean of the modern Austrian school, points out that Menger radically undermined the prevailing Ricardian approach to economics. In David Ricardo’s influential system, Kirzner writes, economic phenomena are determined by “objective, physical realities. . . . In the explanation of such determination there is no place for any roles for human resourcefulness, human valuation, human expectations, human discoveries.

“Menger, on the other hand, glimpsed a way to understand economic history in diametrically opposed terms,” Kirzner continued. “[I]t is the impact of the actions of human beings that alone actively determines the course of human events. . . . It was Menger . . . who recognized that it is the consumer valuation of output that tends to be reflected in the market prices of the relevant inputs. . . . Every act of production, every market transaction, is set in motion and wholly governed by consumer preferences.”

Menger’s insight is intimately related to his other contributions: subjective value, methodological individualism, and marginal utility (which he is credited with originating independently, along with two other economists, Léon Walras and William Stanley Jevons).

It was Menger’s vision that inspired the great economists who followed him: Böhm?Bawerk (see below), Wieser, Mises, Hayek, Kirzner, Rothbard, and the later generations of Austrian economists who are today making their marks.

“What is common to the members of the Austrian School,” wrote F. A. Hayek, “what constitutes their peculiarity and provided the foundations for their later contributions is their acceptance of the teaching of Carl Menger.”

* * *

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Great Britain at last has a written bill of rights. What’s it all mean? Norman Barry sorts it out.

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One hundred fifty years ago this month, Eugen von Böhm-Bawerk, one of the founding fathers of the Austrian school of economics, was born. Richard Ebeling contributes an appreciation of this giant of an economist and debunker of Marx.

We are constantly being agitated by supposed threats to our privacy from corporations trying to sell us products that may make our lives more pleasant. Far less attention goes to threats originating with the protector of our privacy: the government itself. James Plummer counts the ways we are threatened by our protectors.

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This month’s columns cover a wide range of topics. Donald Boudreaux finds courage in neglected places. Lawrence Reed audits the government’s schools. Doug Bandow tells budget horror stories. Dwight Lee shows how the economy “equates at margin.” Mark Skousen rates economics encyclopedias. Charles Baird sees special privileges for public safety unions. And Andrew Coulson, reading an argument for the merits of a federal takeover of education, responds, “It Just Ain’t So!”

Our book reviewers evaluate volumes on the environment, political monopoly, life under Stalin, maritime power, school reform, and junk health science.

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February 2001

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SHELDON RICHMAN

Sheldon Richman is the former editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families.

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