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Primer: The Rise of the Austrian School of Economics July 2, 2009

Posted by Will Thomas in EWP Primer, History of the Human Sciences.
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Ludwig von Mises (1881-1973)

Ludwig von Mises (1881-1973)

The “Austrian School” in economics traces its tradition to the work of Carl Menger (1840-1921).  Menger’s theoretical development of the origins of price has grouped him with the contemporary “Lausanne School” (identified with the axiomatic mathematical economics of Leon Walras) and the work of British economist William Stanley Jevons, all as part of the “marginalist revolution” in economics, which grounded the mechanism of price-setting in the value attributed to various quantities of goods by their buyers and sellers—a keystone of neoclassical economic theory and a critical element in the argument against the control of the economy by the state.

Menger developed his theories in opposition to the “German Historical School” headed by Gustav Schmoller (1838-1917), which gave Menger and his followers the label “Austrian”, intending the label as derogatory.  Schmoller insisted that theoretical economics disregarded essential differences in national traditions, and that only detailed historical investigations could arrive at a firm understanding of political and economic activity. The opening of the conflict between Menger and Schmoller occurred following the publication of Menger’s Principles of Economics (1871), a mere four years after Menger had received his law degree.  An anonymous review signed “G. Sch.” in a literary journal criticized the text’s scientific pretensions.  When Schmoller dismissed Menger’s Investigations into the Method of the Social Sciences with Special Reference to Economics (1883) in (more…)