The Austrian School and the Theory of Value

Abstract

I. The historical school of political economists in Germany, and the Austrian, or as it is frequently termed, the abstract, school are more nearly related than is at first sight apparent. Both follow the spirit of the age in rejecting speculative theory and in seeking their highest laurels on the field of observation. In art, as in science, naturalism must be distinguished from truth to nature, and we Austrians, while we have certainly no wish to be disciples of naturalism, are wholly set on being experimentalists. This is what I would remark in the first place to the readers of this Journal, in complying with the Editor's kind invitation to give some account of our theories. And on this point the method we employ must not be suffered to mislead. M. Leon Walras says very happily of this method, which he himself employes, that it idealizes. It does not copy nature, but gives us a simplified representation of it, which is no misrepresentation, but such as sharpens our vision in view of the complexities of reality, -like the ideal picture which the geographer draws in his map, as a means not to deception but to more effective guidance, he meanwhile assuming, that they who are to profit by the map will know how to read it, i.e. to interpret it in accordance with nature. The investigation of the Austrian school have not been restricted to the subject of value, but embrace the most comprehensive theories on economy in general. Accordingly I must confine myself to as brief a survey as may be of our views on value. I could not do justice even to this task in the space kindly alloted to me, were it not that I can find resource in referring English readers to Jevons. Thus I can omit a good deal from Professor Menger's theories, which, while to us they are fundamental principles, are in England known in substance through Jevons's 'theory of utility' and 'theory of exchange'. I can further refer my readers to Dr Bonars's excellent essay on 'The Austrian Economists' in the Quarterly Journal of Economics, October, 1888. An account of the Austrian school by Dr Bohm-Bawerk has appeared in the Annals of the American Academy. I regret that I have no space for the numerous comparisons which might be drawn between our views and the remarkable developments of the theory of value in England since Jevons. The works to which I shall chiefly refer in what follows are Professor Menger's Grundsatze der Vokswirthschafslehre, 1871, Dr BohmBawerk's Capital und Capitalzins, vol. i. 1884, vol ii. 1889 (of which the first volume has been recently translated by Mr Smart and the second volume is about to follow); also by the same author, 'Grundzuge der Theorie des wirthschaftlichen Guterwerths' in the Conrad'sche Jahrbucher, 1886; and Professor Sax's Grundlegung der theoretischen Staatswirthschaft, 1887. Besides these my own works, Ueber den Ursprung und die Hauptgesetze des wirthschaftlichen Werthes, 1884, and Der naturliche Werth, 1889. The Untersuchungen uber die Theorie des Preises by MM. Auspitz and Lieben is on Jevonian lines.