Carl Menger von Wolfensgrün
|Born||28 February 1840|
Neu Sandez, Galicia, Austrian Empire
(now Nowy Sącz, Poland)
|Died||26 February 1921 (aged 80)|
|Alma mater||University of Prague|
University of Vienna
|Other notable students||Prince Rudolf|
|Contributions||Marginal utility, Subjective theory of value|
Carl Menger von Wolfensgrün (/ˈmɛŋɡər/; German: [ˈmɛŋɐ]; 28 February 1840 – 26 February 1921) was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theories of marginalism and marginal utility, which rejected cost-of-production theory of value, such as developed by the classical economists such as Adam Smith and David Ricardo. As a departure from such, he would go on to call his resultant perspective, the subjective theory of value.
Carl Menger von Wolfensgrün was born in the city of Neu-Sandez in Galicia, Austrian Empire, which is now Nowy Sącz in Poland. He was the son of a wealthy family of minor nobility; his father, Anton Menger, was a lawyer. His mother, Caroline Gerżabek, was the daughter of a wealthy Bohemian merchant. He had two brothers, Anton and Max, both prominent as lawyers. His son, Karl Menger, was a mathematician who taught for many years at Illinois Institute of Technology.
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 Lemberg, Austrian Galicia (now Lviv, Ukraine) and later at the Wiener Zeitungcode: deu promoted to code: de 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 Volkswirtschaftslehrecode: deu promoted to code: de ), 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 two years, Menger accompanied the prince during 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.
In 1878 Rudolf's father, Emperor Franz Joseph, 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 Herrenhauscode: deu promoted to code: de 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 insbesonderecode: deu promoted to code: de ). 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 German economic thought – 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 Methodenstreitcode: deu promoted to code: de , 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 Austrian 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.
There are different opinions on Menger's philosophical influences. But it is without discussion that there is a rudimentary dispute of Menger with Plato and a very meticulous one with Aristotle, especially with his ethics.
"Plato holds that money is an agreed sign for change and Aristotle says, that money came into being as an agreement, not by nature, but by law."
Also, the influence of Kant is provable. Many authors emphasize also rationalism and idealism, as is represented by Christian Wolff. Looking at the literature, most writers think that Menger represents an essential Aristotelian position. This is surprisingly a position that is contrary to his theory of the subjective value and his individualistic methodological position.
Another entry is the use of deduction or induction. With his price theory can be shown that Menger is nominalistic and, stronger, anti-essentialistic. That is to say that his approach is inductionalistic.
Menger used his subjective theory of value to arrive at what he considered one of the most powerful insights in economics: "both sides gain from exchange". Unlike William Jevons, Menger did not believe that goods provide "utils," or units of utility. Rather, he wrote, goods are valuable because they serve various uses whose importance differs. Menger also came up with an explanation of how money develops that is still accepted by some schools of thought today.
Menger believed that gold and silver were the precious metals that were adopted as money for their unique attributes like costliness, durability, and easy preservation, making them the "most popular vehicle for hoarding as well as the goods most highly favoured in commerce." Menger showed that "their special saleableness" tended to make their bid-ask spread tighter than any other market good, which led to their adoption as a general medium of exchange and evolution in many societies as money.