4. Menger and Böhm-Bawerk

Carl Menger, 1840-1921, founded Austrian economics. Eugen von Bohm-Bawerk was the most important student.  Weiser was his brother-in-law, but was fairly pre-Keynesian. Mises was the great successor to Bohn-Bawerk.

With Adam Smith, and with especially Riccardo, we shift toward the theory which still plagues us to the present day – namely that the real determinant of value, of prices, is not consumer subjective utility, but objective labor pain – labor toil.

Menger in Austria, Jevons in England, and Walras in Switzerland created the Austrian discussion of marginalism.  Menger brought back the scholastic tradition, the praxeological method of focus on individual action, entrepreneurship, time, structure of production, and the fact that the expected values of the consumers determine the value of the factors of production that entrepreneurs are willing to invest in.

Menger and Bohm-Bawerk were steeped in natural law and natural rights and Aristotelian epistemology in general. That’s a very different tradition than either the Germans or the British.

Marx essentially gave up the labor theory of value. He had to admit that profits tend to be equalized on the market. Marxists would shift the debate whenever faced with defeat. There is no one to tell us what Marx thought he meant by value. The entire Marxian canon is essentially a prophetic religious movement of a weird kind.

The fourth in a series of six lectures on the History of Economic Thought.