Carl Menger
Encyclopedia
Carl Menger was the founder of the Austrian School of economics, famous for contributing to the development of the theory of marginal utility
, which contested the cost-of-production theories of value, developed by the classical economists
such as Adam Smith
and David Ricardo
.
in Austria
n Galicia, now in Poland
. He was the son of a wealthy family of minor nobility; his father, Anton, was a lawyer. His mother, Caroline, was the daughter of a wealthy Bohemian
merchant. He had two brothers, Anton and Max, both prominent as lawyers. After attending Gymnasium
he studied law at the Universities of Prague
and Vienna
and later received a doctorate in jurisprudence from the Jagiellonian University
in Kraków
. In the 1860s Menger left school and enjoyed a stint as a journalist
reporting and analyzing market news, first at the Lemberger Zeitung in Lwów, Ukraine
and later at the Wiener Zeitung in Vienna
.
During the course of his newspaper work he noticed a discrepancy between what the classical economics
he was taught in school said about price determination
and what real world market participants believed. In 1867 Menger began a study of political economy
which culminated in 1871 with the publication of his Principles of Economics
(Grundsätze der Volkswirtschaftslehre), thus becoming the father of the 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
, the Crown Prince of Austria
in political economy and statistics
. For three years Menger accompanied the prince in 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 (see the Mayerling Affair).
In 1878 Rudolf's father, Emperor Franz Josef, 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 Herrenhaus in 1900.
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 (Untersuchungen über die Methode der Socialwissenschaften und der politischen Oekonomie insbesondere). The book caused a firestorm of debate, during which members of the Historical school of economics
began to derisively call Menger and his students the "Austrian School
" to emphasize their departure from mainstream economic thought in Germany
– the term was specifically used in an unfavorable review by Gustav von Schmoller
. In 1884 Menger responded with the pamphlet The Errors of Historicism in German Economics and launched the infamous Methodenstreit
, 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
, and Friedrich von Wieser
.
In the late 1880s Menger was appointed to head a commission to reform the Austria
n monetary system. Over the course of the next decade he authored a plethora of articles which would revolutionize monetary theory
, 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.
Marginal utility
In economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
, which contested the cost-of-production theories of value, developed by the classical economists
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
such as Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
and David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
.
Biography
Menger was born in Nowy SączNowy Sacz
Nowy Sącz is a town in the Lesser Poland Voivodeship in southern Poland. It is the district capital of Nowy Sącz County, but is not included within the powiat.-Names:...
in Austria
Austrian Empire
The Austrian Empire was a modern era successor empire, which was centered on what is today's Austria and which officially lasted from 1804 to 1867. It was followed by the Empire of Austria-Hungary, whose proclamation was a diplomatic move that elevated Hungary's status within the Austrian Empire...
n Galicia, now in Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
. He was the son of a wealthy family of minor nobility; his father, Anton, was a lawyer. His mother, Caroline, was the daughter of a wealthy Bohemian
Bohemian
A Bohemian is a resident of the former Kingdom of Bohemia, either in a narrow sense as the region of Bohemia proper or in a wider meaning as the whole country, now known as the Czech Republic. The word "Bohemian" was used to denote the Czech people as well as the Czech language before the word...
merchant. He had two brothers, Anton and Max, both prominent as lawyers. After attending Gymnasium
Gymnasium (school)
A gymnasium is a type of school providing secondary education in some parts of Europe, comparable to English grammar schools or sixth form colleges and U.S. college preparatory high schools. The word γυμνάσιον was used in Ancient Greece, meaning a locality for both physical and intellectual...
he studied law at the Universities of Prague
Prague
Prague is the capital and largest city of the Czech Republic. Situated in the north-west of the country on the Vltava river, the city is home to about 1.3 million people, while its metropolitan area is estimated to have a population of over 2.3 million...
and Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
and later received a doctorate in jurisprudence from the Jagiellonian University
Jagiellonian University
The Jagiellonian University was established in 1364 by Casimir III the Great in Kazimierz . It is the oldest university in Poland, the second oldest university in Central Europe and one of the oldest universities in the world....
in Kraków
Kraków
Kraków also Krakow, or Cracow , is the second largest and one of the oldest cities in Poland. Situated on the Vistula River in the Lesser Poland region, the city dates back to the 7th century. Kraków has traditionally been one of the leading centres of Polish academic, cultural, and artistic life...
. In the 1860s Menger left school and enjoyed a stint as a journalist
Journalist
A journalist collects and distributes news and other information. A journalist's work is referred to as journalism.A reporter is a type of journalist who researchs, writes, and reports on information to be presented in mass media, including print media , electronic media , and digital media A...
reporting and analyzing market news, first at the Lemberger Zeitung in Lwów, Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
and later at the Wiener Zeitung in Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
.
During the course of his newspaper work he noticed a discrepancy between what the classical economics
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
he was taught in school said about price determination
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
and what real world market participants believed. In 1867 Menger began a study of political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
which culminated in 1871 with the publication of his Principles of Economics
Principles of Economics
Principles of Economics is a book by economist Carl Menger which is credited with the founding of the Austrian School of economics...
(Grundsätze der Volkswirtschaftslehre), thus becoming the father of the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
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
University of Vienna
The University of Vienna is a public university located in Vienna, Austria. It was founded by Duke Rudolph IV in 1365 and is the oldest university in the German-speaking world...
and spent the next several years teaching finance and political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
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
Crown Prince Rudolf of Austria
Rudolf , archduke of Austria and crown prince of Austria, Hungary and Bohemia, was the son and heir of Franz Joseph I, emperor of Austria, Hungary and Bohemia, and his wife and empress, Elisabeth...
, the Crown Prince of Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
in political economy and statistics
Statistics
Statistics is the study of the collection, organization, analysis, and interpretation of data. It deals with all aspects of this, including the planning of data collection in terms of the design of surveys and experiments....
. For three years Menger accompanied the prince in 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 (see the Mayerling Affair).
In 1878 Rudolf's father, Emperor Franz Josef, appointed Menger to the chair of political economy at Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
. The title of Hofrat was conferred on him, and he was appointed to the Austrian Herrenhaus in 1900.
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 (Untersuchungen über die Methode der Socialwissenschaften und der politischen Oekonomie insbesondere). The book caused a firestorm of debate, during which members of the Historical school of economics
Historical school of economics
The Historical school of economics was an approach to academic economics and to public administration that emerged in 19th century in Germany, and held sway there until well into the 20th century....
began to derisively call Menger and his students the "Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
" to emphasize their departure from mainstream economic thought in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
– the term was specifically used in an unfavorable review by Gustav von Schmoller
Gustav von Schmoller
Gustav von Schmoller was the leader of the "younger" German historical school of economics.-Life:Schmoller was born in Heilbronn. His father was a Württemberg civil servant. Young Schmoller studied Staatswissenschaften at the University of Tübingen...
. In 1884 Menger responded with the pamphlet The Errors of Historicism in German Economics and launched the infamous Methodenstreit
Methodenstreit
Methodenstreit is a German term referring to an intellectual controversy or debate over epistemology, research methodology, or the way in which academic inquiry is framed or pursued...
, or methodological debate, between the Historical School and the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
. During this time Menger began to attract like-minded disciples who would go on to make their own mark on the field of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, most notably Eugen von Böhm-Bawerk
Eugen von Böhm-Bawerk
Eugen Ritter von Böhm-Bawerk was an Austrian economist who made important contributions to the development of the Austrian School of economics.-Biography:...
, and Friedrich von Wieser
Friedrich von Wieser
Friedrich Freiherr von Wieser was an early member of the Austrian School of economics. Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war ministry he first trained in sociology and law...
.
In the late 1880s Menger was appointed to head a commission to reform the Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
n monetary system. Over the course of the next decade he authored a plethora of articles which would revolutionize monetary theory
Monetary theory
Monetary economics is a branch of economics that historically prefigured and remains integrally linked to macroeconomics. Monetary economics provides a framework for analyzing money in its functions as a medium of exchange, store of value, and unit of account. It considers how money, for example...
, 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.
External links
- Biography of Carl Menger The Founder of the Austrian School by Joseph T. Salerno
- Biography of Carl Menger The Concise Encyclopedia of Economics: Library of Economics and Liberty
- The Epistemological Import of Carl Menger's Theory of the Origin of Money Ludwig von MisesLudwig von MisesLudwig Heinrich Edler von Mises was an Austrian economist, philosopher, and classical liberal who had a significant influence on the modern Libertarian movement and the "Austrian School" of economic thought.-Biography:-Early life:...
in Human ActionHuman ActionHuman Action: A Treatise on Economics is the magnum opus of the Austrian economist Ludwig von Mises. It presents a case for laissez-faire capitalism based on Mises' praxeology, or rational investigation of human decision-making. It rejects positivism within economics...
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 InstituteLudwig von Mises InstituteThe Ludwig von Mises Institute , based in Auburn, Alabama, is a libertarian academic organization engaged in research and scholarship in the fields of economics, philosophy and political economy. Its scholarship is inspired by the work of Austrian School economist Ludwig von Mises...
. - Grundsätze der Volkswirtschaftslehre (Principles of Economics)
- Principles of Economics (PDF Spanish)
- On the Origin of Money (English Translation), online version provided by the Monadnock Press