GERRIT GORTER
The present study of economics did not, of course, come out of thin air. Although thinkers in classical Greece already reflected on what we now call economics, it was largely in the eighteenth century that systematic thought on the subject began.
Two conceptual tools—the economic cycle and the idea of the invisible hand—date from that century and are still in use today, both in academic research and in education.
This site contains twenty-five portraits of important economists. Each offers a biographical sketch together with an indication of his (and, in one case, her) significance for the development of economic thought. They claim no more than to provide a first introduction to the lives and works of these pioneers.
These articles originally appeared in Dutch in the Tijdschrift voor het Economisch Onderwijs and were published on the website of Gerrit Gorter. The English translations are by Folkert Gorter.
Index
François Quesnay
Adam Smith
Thomas Robert Malthus
Jean-Baptiste Say
David Ricardo
Antoine Augustin Cournot
John Stuart Mill
Karl Marx
Walras
Carl Menger
Alfred Marshall
Vilfredo Pareto Eugen von Böhm-Bawerk
Knut Wicksell
Max Weber
Irving Fisher
Sam de Wolff
John Maynard Keynes
Joseph Alois Schumpeter
Joan Robinson
Jan Tinbergen
John Hicks
John Kenneth Galbraith
Milton Friedman
Paul Samuelson
Carl Menger
Austrian Empire 1840–1921
Carl Menger’s life can hardly be called spectacular. He was born in 1840 in Galicia — now southern Poland, but at the time part of the Austro-Hungarian Dual Monarchy. He studied law in Kraków (which is located in Galicia), Prague, and Vienna. At the age of 27, he began to immerse himself in economics, perhaps because he was reporting on the ups and downs of the stock markets for a Viennese newspaper.
True to family tradition, he accepted a position as a civil servant. Meanwhile, he continued his studies in economics, and at the age of 31, published his Grundsätze der Volkswirtschaftslehre, which laid the foundation for what would become known as the Austrian School.
This new direction turned classical value theory on its head and was, to say the least, revolutionary. For the classical economists — Adam Smith, Thomas Robert Malthus, David Ricardo, and in this respect also Karl Marx — a product had value because labor had been expended on it. It was an approach to the concept of value from the supply side. Menger turned the matter around and approached value from the demand side. A product has value solely because people believe they need it. No matter how much labor has gone into producing something — if no one wants it, it is worthless in the literal sense.
To Menger, value was subjective — it existed in the human mind — whereas for the classical economists, value was an objective fact, determined by the amount of labor that had gone into producing a good.
Menger’s Grundsätze was by no means an immediate success. Still, it opened the door to a Privatdozent position in Vienna, where he succeeded in generating interest in his theories among a few people — notably Eugen von Böhm-Bawerk and Friedrich von Wieser, who, together with Menger himself, are counted among the Austrian School.
Little by little, Menger began to make a name for himself. A more or less official form of recognition came in 1876 with his appointment as private tutor to Crown Prince Rudolf. In 1883, Menger published Untersuchungen über die Methode der Sozialwissenschaften und der politischen Oekonomie insbesondere. In it, he drew a sharp distinction between economics as a theoretical science on the one hand, and economic history and statistics on the other. In short, he made a clear distinction between theory and empiricism. This did not sit well with the German economist Gustav Schmoller, who saw economics primarily as a historical phenomenon. Thus began the so-called Methodenstreit — a methodological dispute that at times took on rather heated proportions.
For us, the sharp contrast between theory (or deduction) and history (or induction) is not always easy to grasp. We tend to recognize the value of both. An institution like the Netherlands Bureau for Economic Policy Analysis, for example, fills its theoretical models with empirically obtained data.
The Methodenstreit grew increasingly personal. It ended with members of the Historical School — the movement to which Schmoller belonged — beginning to exclude Austrian economists from German universities. German academic life probably suffered more from this than that of Austria.
Menger continued to write on monetary issues into the 1890s. He died in 1921.