Carl Menger and the Austrian School of Economics
Carl Menger
Carl Menger (1840–1921) was a pioneering Austrian economist, notable for founding the Austrian School of Economics. Born in the Austrian Empire, Menger's work laid the foundational principles that would influence economic thought and policy well into the 20th century and beyond.
Menger's seminal work, "Principles of Economics," published in 1871, introduced the concept of the subjective theory of value. This idea posited that the value of goods is not inherent but is determined by the importance an individual places on them, emphasizing human perception and choice over objective measures. This was a departure from the classical labor theory of value and was one of the critical aspects of what later became known as marginalism, a concept that underlies much of modern economic theory.
Austrian School of Economics
The Austrian School of Economics originated in Vienna in the late 19th century and evolved significantly through the contributions of its early figures, including Carl Menger, Eugen von Böhm-Bawerk, and Friedrich von Wieser. The school is characterized by its emphasis on methodological individualism, the importance of time and uncertainty in economic decision-making, and the critique of centralized planning.
One of the Austrian School's key contributions is the development of the subjective theory of value, which asserts that the value of a good is based on the subjective judgment of individuals rather than intrinsic measures. This theory was pivotal during the marginal revolution alongside the works of economists such as William Stanley Jevons and Léon Walras.
Additionally, the Austrian School is noted for its business cycle theory, often called the Austrian Business Cycle Theory. This theory explores how cycles of economic expansion and contraction are influenced by changes in the money supply and interest rates, typically catalyzed by central bank policies.
Menger's Influence and Legacy
Carl Menger's influence extended beyond his lifetime, impacting various economists and scholars. His theories on value, price formation, and the nature of economic goods continue to be fundamental to economic study and discourse. His advocacy for methodological individualism laid the groundwork for future Austrian economists, such as Ludwig von Mises and Friedrich Hayek, who further developed and popularized Austrian economic principles in the 20th century.
Menger's intellectual pursuits led to the famous Methodenstreit, a methodological dispute with the German Historical School over the appropriate approach to economics, which emphasized theoretical analysis against historical contextualism.