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Paul A. Samuelson’s (1966) capitulation with his Austrian model during the so-called Cambridge controversy on the phenomenon of re-switching of techniques in capital theory had implications not only in pointing at the supposed internal contradiction of the marginal theory of production and distribution but also in the pursuit of vested interests in the academic and political world to this day. The present paper is aimed at demonstrating that Samuelson’s capitulation was logically groundless from the point of view of the economic theory of production by considering the interest rate in the role of the real price of capital goods instead of the stationary real rental prices as correctly suggested by Leon Walras, Knut Wicksell, John Hicks, and others. Because of the non-linear effects of the interest rate on relative input prices, the Sraffian re-switching of techniques noted in the range of the interest rate always disappears in the space of the corresponding real input prices in the stationary equilibrium.

Menger made wants and goods the center of economic analysis. This paper locates his theory of wants and goods in the history of economic ideas, identifying major influences from the German subjective-value tradition of the 19th century. Our survey of select German economists prior to 1871 – Hufeland, Storch, Rau, Hermann, Mischler, Stein and Schäffle – discovers insights that highlight the subjective and processual nature of the wants-goods nexus, as does Menger’s approach. Menger’s process approach to economics had several precursors – the historical record is much more nuanced than previously recognized. Menger combined existing ideas on wants and goods into a novel, more coherent and productive framework. He portrayed human wants and the desire to satisfy them as the driving force propelling economic processes. Menger’s theory about wants and goods provided the foundations for his theory of subjective value. He showed how the simple idea that people value goods in light of their wants is the key to the most fundamental problems of economic theory, including value, price formation, production, distribution and economic development, and he applied this insight to explain complex economic processes in modern market economies. Menger’s work constitutes a major synthesis that advances earlier ideas (especially of Hermann, Mischler and Schäffle) on wants, goods and their interplay, and his focus upon complementarities of consumer goods constitutes yet a further advancement on German economics.

In this paper we contextualize Carl Menger’s work in relation to the transformations of German political economy from the 1860s to the 1890s. We demonstrate that his Grundsätze (1871) was a culmination of the German subjectivist tradition which had started in the early nineteenth century. Menger’s synthesis of this tradition is comparable to Adam Smith’s synthesis of earlier knowledge in the Wealth of Nations (1776). Menger’s contribution was continuous with the intellectual project of leading German economists, such as Wilhelm Roscher, to whom Menger had dedicated his book. Roscher, however, also promoted a historical turn, that was combined with a progressive policy agenda by a new generation of German economists after they founded the Verein für Socialpolitik in 1872. These divergent Roscherian legacies clashed vehemently in the Methodenstreit. During this debate Menger elaborated in his Untersuchungen (1883) an evolutionary and spontaneous theory of institutional change, in line with the legacy of the Scottish Enlightenment and in contrast to a more rationalist and constructivist theory of institutional change expounded by Gustav Schmoller and other Verein economists. The new policy-oriented direction of German political economy carried the day, also due the fundamental socio-economic transformations in the German and Austro-Hungarian Empires, and prompted Menger to restate in 1891 the social policy agenda of the classical political economists, most prominently Smith. Menger’s recurrent proximities to Smithian political economy – in the synthetic contribution of 1871, the theoretical innovation of 1883, and the policy agenda of 1891 – suggest that his arguments are best understood as a defense of what Boettke has called the “mainline” in economics.

The Austrian school of economics was well within the mainstream of economic thought into the 1930s. By mid-twentieth century the Austrian school had established a distinct identity, partly because of methodological developments in mainstream economics, but moreso because of its policy conclusions. Austrian school was best known for its claim that rational economic calculation was not possible without markets and market prices, challenging the mainstream view that looked favorably on central economic planning. In addition, the Austrian business cycle theory challenged the Keynesian macroeconomics that dominated macroeconomic thought up through the mid-1970s. While there were methological differences between the Austrian school and the mainstream, these policy differences defined the Austrian episode. By the end of the twentieth century, the Austrian school had won the economic calculation debate, Keynesian macroeconomics had been displaced, and the methodological differences between the Austrian school and the mainstream had narrowed. The Austrian episode had passed. In the twenty-first century, the Austrian school’s ideas, still relevant, have been combined with complementary ideas from other heterodox traditions, diminishing the distinctive identity the Austrian school had in the second half of the twentieth century.

The differences on value between Smith and Menger may be other from previously alleged if status is included as a need satisfied only by truly scarce goods. Given our innate desire to distinguish ourselves and be admired, Smith tells us that scarcity is what generates value. So, our desire for distinction is what drives our demand for “diamonds” and gives them value. But when “diamonds” become as abundant as “knitted stockings”, new forms of scarce status goods must be found. For Menger, value is also a dynamic, evolving “institution” that cannot be understood in a static analysis dealing only with supply and demand at a given moment. But abundance, for Menger, would simply allow us to fulfill higher-level needs. Thus, Smith, but not necessarily Menger, could explain why, as diamond rings, Prada shoes, and Gucci bags can be easily mass produced in identical but “fake” copies, irreproducible goods, such as charity donations and claims on digital art, are taking their place to indicate status in society.

Several scholars anticipated Ludwig von Mises's calculation argument against socialism. The present paper summarises the contributions by the members of the German Historical School of Economics who preceded Mises and provides several examples of anticipation that have not been discussed in the literature. Furthermore, the paper explains why it is not a coincidence that members of the Historical School claimed as early as the nineteenth century that socialism was unfeasible due to calculation and knowledge problems. In their attempts to understand historically specific features of capitalism, they developed an approach to capital that involved the institutions of private property, money, the market, the enterprise, and monetary calculation. Starting from this institutional approach to capital and capitalism, it was only a small step to the question of what it means for socialist systems that those institutions are lacking.

This paper analyses Carl Menger’s account of the origin of money as an example of an “invisible-hand explanation” of social phenomena. According to a distinction made by Edna Ullmann-Margalit, invisible-hand explanations can refer to two different aspects of such phenomena. First, they can describe how the aggregation of individual actions leads to the emergence of a social phenomenon. Second, they can show that the phenomenon performs a valuable function that secures its continued existence. Menger’s account of the origin of money is particularly satisfying because it includes both kinds of invisible-hand explanations: He describes how money could have emerged from the self-interested actions of many individuals and shows the social usefulness of the money phenomenon. This distinguishes Menger’s account from theories that focus on either one kind of invisible-hand explanation. The paper discusses the example of Friedrich Hayek’s theory of cultural evolution, which focuses only on the aspect of social usefulness.

Abstract Carl Menger’s objective in his seminal book, Principles of Economics, was to elucidate a unified account of price formation. This raises a question, which motivates our paper: to what extent, if any, can Menger account for production not directly organized by the price mechanism, and therefore a theory of economic organization and its formation through time? We argue that implicit to Menger’s account of price formation is an account not only of institutional formation, but particularly economic organization. Thus, there exists a symbiotic relationship that can be found in Menger between a theory of price formation and a theory of organizational formation, both of which are by-products of an increasing division of knowledge brought about by an increasing scope of market exchange. Moreover, our point illustrates that Menger’s work is an analytical point of departure for a shared understanding of parallel developments in Austrian economics and organizational economics that have followed.

W. E. B. Du Bois (1868–1963) is best known as a sociologist, historian, and civil rights leader, but he is also increasingly appreciated as an economist. Du Bois's work in economics was primarily empirical, drawing heavily on the German Historical School of Economics and later on Karl Marx. However, during his early economic studies at Harvard University, Du Bois was interested in marginalism as a theoretical solution to the problem of wage determination. In this paper, I explore the marginalist wage theory developed by Du Bois in his unpublished 158-page 1891 manuscript, A Constructive Critique of Wage Theory. I show that Du Bois developed a wage theory that was at the frontier of marginalist analysis in 1891 and that anticipated important developments in marginal productivity theory and the theory of labor supply. While he did not reengage marginalism after his time in Berlin, Du Bois's work on wage theory reinforces recent recognition of his contributions to economics.

Abstract Carl Menger advanced a narrow definition of exact or theoretical economics. Theoretical economics is the study of the self-interested aspect of human efforts made to meet needs. One implication of this definition, Menger argues, is a strict demarcation between ethics and economics. Menger advances this demarcation against what he calls the “ethical orientation” of the German Historical School. A problem with Menger’s demarcation is that one cannot easily define and operationalize the concept of “self-interest” so as to exclude issues reasonably considered “ethical.” Humans are ethical-rule-following beings. Following rules and abiding by social norms is a part of most people’s “interests” as they themselves understand them. From ideas in behavioral and experimental economics, we see that rules can be constitutive of one’s interests, not just constraining. Ethical sensibilities are not only part of the explanadum in economics, but are, in certain instances, an important aspect of the explanation. Insofar as self-interest interrelates with ethical phenomena, economists, even of the theoretical sort, should pay attention (as did a number of early modern political economists and philosophers) to the following: (1) the ways in which contextual norms of propriety and interests interpenetrate; (2) the sociological and psychological mechanisms by which ethical sensibilities and interests are transmitted; and (3) the differences that ethical sensibilities can make for material or economic outcomes.