Carl Menger still woth reading
Today is the birthday of Carl Menger, born February 23, 1840. Menger was, of course, the founder of the Austrian School of Economics. His , a great achievement for its time, is still well worth reading. It conveys like no other book at the time (and unlike most basic texts today) the importance of mind, knowledge, ignorance, causal relationships between goods and wants, and of course marginal utility. I think we can still learn from Menger鈥檚 book today, especially about the importance of knowledge in economic development. Austrians should be pleased to have such a great mind as the founder of their school.
Menger鈥檚 work has garnered respect from even those who have not considered themselves Austrians. George Stigler, for example, wrote a very appreciative essay on Menger in his For a long time Menger鈥檚 contributions were not clearly distinguished from those of Jevons and Walras, the other leaders of the 鈥渕arginalist revolution.鈥� We have to thank for his de-homogenization of the three great economists. But, really, a moment鈥檚 perusal of the three books should make the differences obvious. Walras is concerned about mathematical elegance and Jevons is so enamored of hedonistic psychology that he gives the appearance, at least, of casting marginalism as an application of Jeremy Bentham鈥檚 philosophy 鈥� thus unduly limiting it.
Menger also made contributions to the Scottish Enlightenment project of spontaneous order, especially with respect to the evolution of money and of common law. In this he shows himself a worthy successor to Adam Smith in a way that Walras and Jevons are not.
Personally, I find the legacy in the Methodensteit (鈥淲ar of Methods鈥�) to be a mixed one. On the one hand, he was obviously correct in his criticism of the na茂ve historicist method of Gustav von Schmoller and others of the 鈥測ounger鈥� German Historical School. On the other hand, much of his philosophy of science is a confusing mix of nineteenth-century scientific philosophy and Aristotelianism. I don鈥檛 think this is a good approach to imitate in the twenty-first century. Nevertheless, Menger was right in believing that theory (鈥渆xact laws鈥�) was critical in understanding the economic world.
Postscript: When won the Nobel Prize in economics in 1982, I sent him a letter congratulating him and said jokingly that I understood he received it in large part because of his essay praising Menger. He wrote back saying that I was incorrect. He received the prize for his essay criticizing Eugen von Boehm-Bawerk! (It should be noted that Menger himself did not like Boehm-Bawerk鈥檚 capital theory.)
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