Great Economists Since Petty and Boisguilbert
Edited by Gilbert Faccarello and Heinz D. Kurz
Chapter 43: Carl Menger (1840–1921)
Vienna, the capital city of Mitteleuropa, was at the turn of the nineteenth to twentieth century the place where modernity broke away from received ways of thinking in the fields of philosophy (Wittgenstein), psychology (Freud), architecture (Loos), painting (Klimt), literature (Musil), music (Schönberg) – and many more. Vienna also hosted the founder of the school later known as the “Austrian school of economic thought”, Carl Menger. At the same time as Léon Walras and William Stanley Jevons, Menger developed the marginalist method in economics and especially marginal-utility reasoning, and paved the way to the so-called “neo-classical” economics and provided a basis for a renewal of economic liberalism. Johann Heinrich von Thünen and Hermann Heinrich Gossen anticipated part of what the three authors were credited with, but Menger’s views on economic utility set him apart from these lesser-known predecessors as well as from his contemporaries; indeed, his stress on subjectivity and dynamics differentiates him from the other two founding fathers of marginalism. The way Menger incorporated the subjectivity of economic agents into a rigorous methodological individualism – a phrase coined by his disciple Friedrich von Wieser and popularized by Josef Schumpeter – made Menger stand against the German Historical School in the so-called “Methodenstreit” (“dispute over the methods”). The role Menger attributed to ignorance, time, human cognition and the environment set the Austrian mode of reasoning apart from the other strands of marginalism, a fact that has been overlooked for a long time, until “de-homogenization” of these views was undertaken (see...
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