Digital Library of the Carl Menger Collection: 
the author's copy of Grundsätze der Volkswirtschaftslehre and others


essay

Menger’s Attempt to Revise his Grundsätze: An Aborted Trial*

IKEDA Yukihiro
(Professor of Keio University)

1. Introduction

Although known as a masterpiece of the Marginal Revolution, the first edition of Grundsätze underwent revision by Menger, who was obviously not satisfied with the edition, soon after its publication in 1871. Using his own copy for revision, Menger sometimes inserted new words and sentences to his original, while adding marginal notes. These additional comments (hereafter referred to as Fragment) are readable in the following form thanks to the efforts of Emil Kauder, a German historian of economic thought, who later taught in the US: Menger, Carl (1961) Carl Menger’s Zusätze zu Grundsätze der Volkswirthschaftslehre, Tokio: Hitotsubashi Universität. The original copy, now housed at Hitotsubashi University, Tokyo, casts a new interpretation of Menger’s works and his thoughts after the publication of Grundsätze. As Kiichiro Yagi indicated, two other copies of the same type, called “No. 1” and “No. 2”, respectively, by Menger, exist in the Manuscript Department, William Perkins Library, Duke University. The Fragment at Hitotsubashi University has the mark of “No. 3” on the title page. 1 Although it is necessary to compare these copies with each other to understand in detail how Menger revised his 1871 work, I will concentrate on the Hitotsubashi Fragment in this paper.

At least three researchers were seriously concerned with the Fragment. First, I must mention Kauder, who has contributed a great deal to the Menger scholarship by transcribing the Fragment. He wrote a substantial essay as an introduction to the transcription (Kauder, 1961: xi-xxv), which is a starting point for further research. Kauder explained the chronology of the Fragment as follows:

There is reason to believe that Menger began to work on this fragment shortly after the publication of his Grundsätze. Apparently he wrote down the greatest part between 1872 and 1880, for most of the books of references and all the enclosed newspaper clippings have been published before 1873. Some notes have been added much more recently. A few pertinent facts make it likely that Menger may have ceased working on this fragment between 1892 and 1890. On the original title page the book carries an advertisement for the case of los. The honest finder is promised 100 crowns for returning this copy to the owner. Austria-Hungary introduced the crown currency in 1892. Karl Menger, the son, had only used manuscripts written after 1901 (“Vorrede” of the second edition.) In the posthumous edition no traces of the Hitotsubashi fragment can be found. The Hitotsubashi fragment is a documentation of Menger’s development from 1872 to about 1892.
(Kauder, 1961: xix-xx)

I agree with the basic presumption that Menger “wrote down the greatest part between 1872 and 1889”, but whether he had stopped adding annotations between 1892 and 1990 is still arguable. Kauder’s tentative conclusion, which I share with him, is that “although some thoughts of the fragment have been further developed in the second edition (e.g. the theory of needs) it would be wrong to conclude that the Hitotsubashi fragment is a preliminary stage of the Grundsätze published in 1923” (Kauder, Ibid.: xx).

Second, Yagi, a Japanese scholar mentioned above, has been concerned with Menger scholarship for a long time. He interprets the Fragment as a halfway house between the 1871 book and the 1923 edition published after Menger’s death. The Fragment shows a new direction, a new attempt to overcome the framework of neoclassical economics that Menger had shared in his 1871 book. (Yagi, 1988, 2010). Yagi divided the revision of the Grundsätze into two stages. In his own words:

The second stage of the attempt at revision seems to have occurred in the mid-1880s, after the pause in the Debate on Method (Methodenstreit) enabled Menger to return to theoretical investigation....I suppose it is rational to assume that the main part of the posthumous edition of the Grundsätze actually derived from this period. Since the first stage of an attempt at revision is seen in the Hitotsubashi copy, so the main body of the 1923 edition, with the exclusion of the additions after the ‘new plan’ in the mid-1890s, is representative of the second stage.
(Yagi, 2010: 26)

Thus, Yagi claims that the Fragment belongs to the first stage of the attempt in the 1870s and possibly continues into the earlier 1880s.

Gilles Campagnolo’s new book (2010: 174) includes some important findings based on his research in Japan. One of them is Menger’s relationship with Lorenz von Stein. Although Menger was diplomatic enough to write an obituary of Stein, he did not succeed in avoiding straight expressions in the Fragment and in his annotations to Stein’s Lehrbuch, as Campagnolo shows. In part III of Campagnolo’s book (2010), the author attempts to give us a new picture of Menger by taking a close look at the economist’s annotations including the ones made in his own copy of Grundsätze.

Based on the above-mentioned scholarship and on my own research at Hitotsubashi University and in Vienna, I will provide a general introduction of the Fragment and proceed as follows. First, I investigate when the Fragment was written based on some information that I came across in my archive work in Vienna. Then, I consider some methodological problems, Menger’s relationships with the German Historical School and his criticism of the English Classical School. Furthermore, I introduce Menger’s comments on Lorenz von Stein, a senior professor at Vienna University, who played a role in recruiting Menger. In the last section, I claim that interpreting the Fragment as a totally new attempt at constructing a broader version of general economics is incorrect, without denying that Menger added some important elements not found in the first edition of his work. In the appendix, I mention some problems in Kauder’s transcription. I hope that this paper will serve as a stepping stone for future scholars who have research interest in the development of Menger’s thoughts after the publication of Grundsätze.

2. When Was the Fragment Written?

It is extremely difficult to answer the question of when the Fragment was written, because it was presumably written in different periods after the publication of his 1871 book. Logically, it can be inferred that the comments and quotes were written after 1871, but it is generally impossible to know when a specific comment was inserted. Furthermore, it is possible that Menger inserted comments iteratively by revisiting the earlier part of Grundsätze. In this case, although it is certain that the comments were inserted after the publication of the book in 1871, a relatively well-defined period in which they were written cannot be identified. However, some clues can help us to begin our investigation. Let me quote the following, which occurs at the beginning of the Fragment:

Dr. Carl Menger (I Schottenbastei No. 1)
Der redliche Finder wolle dies Buch gegen eine Belohnung von 5 fl ÖW beim Eigentümer abgeben.
(Menger, 1961: 1)

This is Menger’s address in Vienna. From his brief diary located in the Menger Papers at Duke University, we know that he had moved to Schottenbastei in May 1872. Schottenbastei is the name of a street in the first Area (Bezirk) of Vienna. If this remark had been made before he began to write the main part of the Fragment, it can be reasonably assumed that the Fragment was written after May 1872. The following quote occurs soon after the above:

Wien IX/3 Fuchsthalerg. 2 Währingerstr. 12
(Ibid.: 2)

This is again his address in Vienna. From the material of the Vienna City Archive, it is certain that Menger moved to Währingerstr 12 from Berggasse 3 in 1895. Then, he permanently moved to Fuchsthalgergasse 2 in 1911. These addresses indicate his latest addresses, demonstrating that the entry above was added only after he had moved to Währingerstrasse. However, it does not provide any detailed information about when Menger wrote down the entire Fragment.

Are there some other methods with which we can identify the period? One of the books often referred to and quoted is Essays on Political Economy. Theoretical and Applied by John Elliot Cairnes (London: Macmillan and co., 1873). Since the collected essays were published in 1873, it is highly possible that the Fragment was written in 1873 or later. The quotes from Cairnes’s Essays were definitely made in 1873 or later. The other clue comes from Wilhelm Roscher. As a prolific writer in the field of economics, Roscher continued to revise his Grundlagen der Nationaloekonomik, his well-read textbook on economic theory. Menger used the edition Wilhelm Roscher, Die Grundlagen der Nationaloekonomie, 10th edition, Stuttgart, 1873 in the Fragment. This fact also contributes to the conjecture that all or at least most part of the Fragment was written in 1873 or later. Although most of the literature quoted or mentioned in the Fragment was published in the 1870s or earlier, Menger did refer to later literature or editions published in the 1880s. One of the examples is Buckle’s Civilization in England. Menger used in the Fragment the following German edition: Henry Thomas Buckle’s Geschichte der Civilisation in England, Deutsch von Arnold Ruge, Sechste rechmässige Ausgabe, Erster Band. I. Abtheilung, Leipzig und Heidelberg, 1881. Although a German edition had been published earlier, the pagination provided by Menger supports the fact that he used the 1881 edition, as shown by Kauder. These conjectures support Yagi’s inference that the Fragment was written from the 1870s to the 1880s. If Menger wrote all the comments and notes in a relatively limited time span, as opposed to what I have presumed above, it was from the 1870s to the 1880s.

3. Some Methodological Problems: Menger and the German Historical School

It is an established fact that Menger was deeply embedded in the tradition of the German Historical School, although he did not share every point with its members. The Fragment begins with the following summary and quotes from Karl Knies’s main work: 2

Das “Dogma” vom Privategoismus vom Standpunkt der historischen Methode beleuchtet sehr ausführlich Knies Pol. Oek 147 ff. “Privatinteresse als Hebel der wirtschaftenden Thätigkeit” wird von Smith hingestellt, nicht so das unerwünschte Walten desselben das Gemeinwohl am besten fördern Smith Inquiry B. Ch. X Part II Die Landbewohner werden leicht durch das Geschrei und die Sophismen der Kaufleute und Gewerbetrebenden überredet, dass das Privatinteresse eines Theiles und obendrein eines untergeordneten Theiles der Gesellschaft das allgemeine Interesse des Ganzen sei.
(Ibid.: 2)

The quote and summary are taken from Die politische Oekonomie vom geschichtlichen Standpuncte by Karl Knies (Brauschweig, 1882). The sentence beginning with “Die Landbewohner” is itself a quote from a German translation of The Wealth of Nations. Knies’s point is simple and straightforward: while it is true that Smith was a supporter of economic liberalism, he still discussed many cases where free behaviours of economic agents do not lead to a socially optimal solution. Quoting directly from Smith, Knies attempted to show that the popular image of Smith is incorrect. In the contemporary context of German economics, this certainly would have been a supportive argument for Smith and his followers. Along with Jacob Viner’s detailed analysis provided later, Knies’s case is a typical example of a rather pessimistic image of the father of political economy. Menger continued to summarize various sources concerning this point, one of which is the following: J. E. Cairnes’s Essays on Political Economy, Theoretical and Applied (London: 1873). 3 His summary in German is as follows:

Da man zum Pricip des laissez-faire gekommen, so meinen viele dass die politische Economie aufgehört habe einen praktischen Wert zu haben. Ja manche glauben, dass sie geraduzu den Fortschritt der Gesellschaft hemme, dort wo das Eingreifen der Staatsgewalt in wirtschaftlichen Dingen nötig sei (Cairnes 188, 238 ff.)
(Ibid.: 5)

Furthermore:

Dass das Princip des Laissez faire keine wissenschaftliche Basis habe ibid. P. 244. 251
(Ibid.: 6)

He also added:

nur ein praktisches Princip ist von dem es viele Ausnahmen giebt
(Ibid.: 6)

Now, let us confirm that Menger accurately interpreted Cairnes’s views. Cairnes’s book consists of an essay entitled “Political Economy and Laissez-Faire”, which Cairnes read at University College in 1870. The above summary corresponds to the following part of the essay:

It follows that there is no security that the economic phenomena of society, as at present constituted, will always arrange themselves spontaneously in the way which is the most common good. In other words, laissez-faire falls to the ground as a scientific doctrine. I say as a scientific doctrine; for let us be careful not to overstep the limits of our argument. It is one thing to repudiate the scientific authority of laissez-faire, freedom of contract, and so forth; it is a totally different thing to set up the opposite principle of State control, the doctrine of paternal government. For my part, I accept neither one doctrine nor the other; and as a practical rule, I hold laissez-faire to be incomparably the safer guide. Only let us remember that it is a practical rule, and not a doctrine of science; as a rule in the main sound, but like most other sound practical rules, liable to numerous exceptions; above all, a rule which must never for a moment be allowed to stand in the way of the candid consideration of any promising proposal of social or industrial reform.
(Cairnes, 1873: 250-251)

Cairnes did not accept laissez-faire as a rigid doctrine. For him, the laissez-faire policy is only a practical guide allowing many exceptions. However, as can be inferred from the above quote, he certainly supports economic liberalism when faced with the alternative of state control. This is, in a nutshell, one of the conclusions of “Political Economy and Laissez-Faire.” Therefore, this corresponds to Menger’s understanding of economic policies, which can be noticed from his published and unpublished works, as I have shown elsewhere. Menger’s liberalism was moderate and more balanced compared with the type of liberalism advocated by later Austrians economists. 4 His summary of Knies and Cairnes in the Fragment shows that Menger was deeply concerned with the problems of economic liberalism.

From the Fragment, we know that Menger was deeply concerned with the methodological problems after the publication of Grundsätze. Although the period when the remarks below were written is uncertain, it is quite possible that they were written during the preparation period of Untersuchungen. Using Cairnes’s Essays on Political Economy, Theoretical and Applied, Menger revealed how Auguste Comte criticized Smithian economics. The summary below is based on the 8th essay of the Essays on Political Economy, Theoretical and Applied, entitled “M. Comte and Political Economy”, originally published in Fortnightly Review in 1870.

Comte (bei Cairnes p. 267 285) leugnet dass die Smithische Nationaloekonomie eine Wissenschaft ist. Er findet dass die wirtschaftlichen Tatsachen von verschiedenartigen andern Tatsachen durchwoben sind und die Gesellschaftswissenschaft deshalb als ein Ganzes betrachted werden muss.
(Menger, 1961: 4)

The words in the parenthesis denote corresponding pages of the above-mentioned Cairnes’s book. So, as Menger indicated, let us first of all turn to J. E. Cairnes’s Essays on Political Economy, Theoretical and Applied, p. 267. Thus, it can be concluded that the above summary is based on the following characterization of Comte’s perspective by Cairnes:

It was M. Comte’s opinion that political economy, as cultivated by the school of Adam Smith’s successors in this country and in France, failed to fulfil the conditions required of a sound theory of positive philosophy and was not properly called a science. He pronounces it to be defective in its conception, “profoundly irrational” in its method, and “radically sterile” as regards result. Such an opinion, proceeding from a philosopher of M. Comte’s eminence, ought not to be lightly passed by. M. Comte, moreover, has supported this unfavourable judgment by a train of elaborate argumentation; but, so far as I know, his arguments have not yet been seriously grappled with.
(Cairnes, 1873: 267)

Auguste Comte was a well-known figure in the social sciences, who attempted to show the possibility of “unified science”. Comte argues that in the social sciences, every phenomena is intertwined with other factors, making it difficult to divide them into specific disciplines. Thus, according to Comte’s criteria, arguments of the followers of Adam Smith cannot be called “positive philosophy”. Let us confirm once again that in Menger’s comments, emphasis was laid on the attempt to understand the various phenomena in totality. Cairnes attempted to answer the Comtian problem, defending the position of the English Classical School. After telling a story about the development of the natural sciences, Cairnes now turned to political economy:

This has been the course of development in physical science, the method by which the secrets of external nature have been unlocked. It has been a method, not of study in the ensemble, but of study through the elements of analysis followed by synthesis. In perfect analogy with this mode of proceeding is the political economist’s conception of the path of inquiry to be followed in dealing with the facts of social life. He proposes to break them up into their elementary groups, and he takes one of these groups-the phenomena of wealth-as the subject of his special investigation.
(Ibid.: 272)

Cairnes was sceptical of Comte’s assertion about dealing with social phenomena in their totality. His scepticism was based on the belief that each discipline has its own field requiring its own methodology, and he attempted to defend the methodology of the English Classical School against Comte. Clearly, Cairnes was a forerunner of Menger in a sense; both of them supported a piecemeal methodology, in which only parts of the whole phenomena could be known.

Although Menger did not clarify his position on the above quote in the Fragment, Comte’s position was clearly diametrically opposite to Menger’s in Untersuchungen. In his 1883 book, he defended the English Classical School, saying that the totality of social phenomena could not be captured, indicating that collecting and investigating information in a piecemeal manner was the best method. In Untersuchungen, Menger criticized the German Historical School concerning this point, while he criticized Comte in the Fragment. It is interesting to note that Comte was one of the main targets of criticism in The Counter-Revolution of Science by F. Hayek, a dominant member of the later Austrian School of Economics.

Later (?) in Untersuchungen, Menger stated his own position as follows:

Eine solche Theorie, ein Theorie, welche uns die Aeusserungen des menschlichen Eigennutzes in den auf die Deckung ihre Güterbedarfes hinzielenden Bestrebungen der wirthschaftenden Menschen in exacter Weise verfolgen und verstehen lehrt, ist nun die “exacte Nationalökonomik”, eine Theorie somit, welche nicht die Aufgabe hat, uns die socialen Erscheinungen oder gar die Menschheitserscheinungen, ja nicht einmal jene Socialphänomene, welche man gemeinglich “die volkswirthschaftlichen” nennt, überhaupt und in ihrer Totalität verstehen zu lehren, sondern uns nur das Verständniss einer besonderen, allerdings der wichtigsten, der wirthschaftlichen Seite des Menschenlebens zu verschaffen, während das Verständniss der übrigen Tendenzen desselben zum Bewusstsein bringen würden (z. B. under dem Gesichtspunkte des Gemeinsinnes, des strengen Waltens der Rechtsidee u. s. f.).
(Menger, 1883/1969: 78-9)

In the above quote, he opposed those who attempted to capture economic phenomena in their totality. In Menger’s opinion, capturing the economic phenomena in their totality was impossible. According to Menger, all sciences are partial in the sense that they show us only some aspects of the world from certain perspectives. What can be seen completely depends on the standpoint of each researcher. The system of the English Classical School is based on important hypotheses such as the concept of “homo economicus”. Although its methodology was later criticized by German economists, so far the English Classical School remained unchallenged. It can be inferred that the above quote in Untersuchungen is clearly opposed to the Comtian way of thinking, which had interested Menger in the Fragment.

Another methodological problem is the neutrality of economic science. Referring to Cairnes, Menger emphasized that economics is a neutral science that investigates what is, not what should be. The following short remark occurs in the Hitotsubashi Fragment: 5

Dass politische Econ. eine ganz neutrale Wissenschaft ist, weder katherdersocialistisch noch Freihändler, noch communistisch vide (Cairnes 252ff.)
(Menger, 1961: 7)

Here, we have three categories, namely, socialists of chair, free traders and communists. The first two categories were closely related to the arguments of economic policies in Germany at that time. Menger’s short summary above reminds us of the political debates in the second half of the 19th century, although he did not provide the names of the economists engaged in the debate. Later in the Fragment, Menger opposed F. Bastiat and the socialists, critical of their confusing explanations and value judgments. In Menger’s own words:

Bastiat einerseits und die Socialisten andererseits wollen nicht die Dinge darstellen, beziehungsweise erklären wie sie sind, sondern dieselben verfolgen praktische Zwecke und ersterer will die Thatsachen rechtfertigen (das ist kein wissenschaftliches Problem), die letzteren sie als schreiende Ungerechtigkeiten darstellen, daher ihre Fälschung der Tatsachen, ganz zu schweigen von ihren Gesetzen! Bastiat will die grundverschiedenen Anschauungen von “Tatsache” und “Recht”, “das was ist” und “das was sein sollte” in einander zu verschmelzen. Das ist eine falsche Methode. (Kathedersocialisten u. Freihändler in Deutschland!) Bastiat ist ein Advocat.
(Ibid.: 9)

From the above quote, it can be inferred that at least three or four categories existed: socialists, F. Bastiat, socialists of chair and free traders in Germany. The expression “Kathedersocialisten” or “Kathedersozialismus” was first used by H. Oppenheim in 1871 to refer to economists such as Gustav von Schönberg and Adolph Wagner. 6 Such economists thought that they needed some type of state inventions in the form of social policy to prevent poverty. Without targeting anyone in particular, Menger opposed this group for using an inadequate method. The same can be said of free traders in Germany.

The above opinion had been obtained from Cairnes as Menger indicated. The following explanation on page 252-3 of Cairnes’s Essays on Political Economy provides a clear reference:

It matters not what the proposal be, whether wide or narrow in its scope, severely judicious or wildly imprudent, - if its object is to accomplish definite practical ends, then I say it has none of the characteristics of a science, and has no just claim to the name. (Cairnes, 1873: 252-53)

Comparing this quote with Menger’s reproduction above, it can be observed that it is highly possible that Menger completely accepted Cairnes’s view that economic science itself must be value free.

Let us confirm that all of this is a repetition of his statement in Grundsätze. In the introduction of Grundsätze, he wrote:

Die theoretische Volkswirthschaftslehre beschäftigt sich nicht mit praktischen Vorschlägen für das wirthschaftliche Handelnt, sondern mit den Bedingungen, under welchen die Menschen die auf die Befriedigung ihrer Bedürfnisse gerichtete versorgliche Thätigkeit entfalten.
(Menger, 1871/1968: IX)

Menger’s relationship with the German Historical School in the Fragment was not always negative. 7 It appears that he sometimes accepted the latter’s arguments, as I shall demonstrate.

In the 1st edition of Grundsätze, the 1st chapter is divided into the following six sections:

  1. Ueber das Wesen der Güter
  2. Ueber den Causal-Zusammenhang der Güter
  3. Die Gesetze, unter welchen die Güter in Rücksicht auf ihre Güterqualität stehen
  4. Zeit - Irrthum
  5. Ueber die Ursachen der fortschreitenden Wohlfahrt der Menschen
  6. Der Güterbesitz

In the Fragment, we confirm that he tried to insert a new section after the 4th section. Menger wrote:

Nach Zeit-Irrtum könnte ein §kommen “Ueber Einfluss ethischer Momente” (als modificatorische Momente)
(Menger, 1961: 59)

It is obvious that Menger intended to place a new section concerning the influences of ethical moments. The following quote helps to explain Menger’s views in detail:

Zwischen einem Weibe und einem andern Genussmittel, zwischen einem Sklaven und einem Lastthiere lässt sich vom Standpunkte der Bedürfnisbefriedigung durchaus kein principieller Gegensatz erkennen. Beide sind Güter und werden so von Millionen Menschen betrachtet. Unser sittliches Bewusstsein aber sträubt sich gegen diese Betrachtungsweise und wir heben die obigen Dinge um ihrer Persönlichkeit willen aus dem Kreise der Güter heraus, und betrachten sie unter wesentlich andern Gesichtspunkten.
(Ibid.: 59-60)

Menger explained that there are no differences between women and other means of enjoyment in the sense that both are means of enjoyment. However, as he admited, our ethical consciousness is against this way of including women in the world of goods. It is possible that he intended to introduce the opinions of the school affirmatively under the heading of “Ueber Einfluss ethischer Momente”.

In a review article written by F. Hack, the reviewer criticized Menger, stating that a means-end relationship should be understood not as a causal relationship, but as a teleological one. We know from the Fragment that Menger accepted this criticism. The heading of the 2nd section of the 1st chapter was changed from “Ueber den Causal-Zusammenhang der Güter” to “Betrachtungen über den Zusammenhang der Güter”. “Ursächlichen Zusammenhang” and “Causal-Zusammenhang” were simplified to “Zusammenhang”.

These changes show that Menger accepted Hack’s criticism at least partially and that he was ready to abandon the method based on the natural sciences. Ludwig Mises, an influential Austrian of a later time, emphasized that instrumental relationships between means and ends can also be understood as teleological relationships, thus dissenting from methodology based on the natural sciences. The marginal remarks above suggest that Menger was shifting into this direction after the publication of Grundsätze. The following footnote in the second edition of Grundsätze is of importance in the context:

Diejenigen verkennen die Aufgaben der Wirtschaftstheorie, welche den Kausalzussamenhang der Güter ins Auge fassen und die Feststellung der Kausalgesetze deselben anstreben. Diese Aufgabe lösen die Naturwissenschaften einschlieβlich der Psychologie. Wir dagegen haben die Güter als Mittel für menschliche Zwecke zu erfassen, ihren Zusammenhang im Zweckbewuβtsein der wirtschaftenden Menschen (ihren teleologischen Zusammenhang) zu erforschen und die Gesetze desselben festzustellen. (Menger, 1923: 21)

Menger attempted to interpret economic phenomena within the framework of teleology. The starting point of the analysis must be economic agents with some purposes. This method of looking at social phenomena is different from the traditional method of the natural sciences including psychology, where all aspects can be analysed in terms of causal relationships. It is still arguable whether the differences in methodology contribute to the different economic theories found in the two editions of Grundsätze. Hence, I now turn to the economic theories and related problems in the next section.

4. Did Menger Give up His Position as a Protagonist in the Marginal Revolution?

Historians of economic thought know that the Robbinsian definition of economics in his famous Nature and Significance of Economic Science is derived from the Austrian School of Economics. An exceptional British economist at that time, Robbins understood continental economics well. As one of the founders of the scarcity definition, Menger severely criticized the materialist definition in his 1871 book and elsewhere. In this section, I consider how Menger dealt with the problem in the Fragment. Menger noted with dismay that the concept ‘goods’ was absent in the English Classical School: 8

Der Mangel an einem dem Begriffe “Gut” entsprechenden Worte im englischen und die Herrschaft des Wortes commodity (Sache) hat viel Unklarheit bei den englischen Nationaloek. zur Foge. Sie können weder Bodennutzungen, noch Arbeit, noch Capitalnutzungen commodities nennen nur wahre Sachgüter und zwar bewegliche. Dieser Mangel zeigt sich in den mangelhaften allgemeinen Lehren. Arbeit ist ihnen bei der Preistheorie was wesentlich anders als eine commodity, ebenso Capital und Bodennutzung. Sie kommen gar nicht auf den Gedanken die Preise dieser vershiedenen Güter unter einen gemeinsamen Gesichtspunkt zusammen zu fassen. Es bedeutet einen grossen Rückschritt in der modernsten französischen Nationaloek., dass man den Begriff “bien” fallen lässt… Die Materialität der ‘commodity’ bewirkte überhaupt die einseitige Beschränkung auf materielle bewegliche Sachgüter. Say erklärt bereits Arbeit, Boden=u Capital-Nutzungen für immaterielle Güter und doch für oekonomische.
(Menger, 1861: 32-3)

In this quote, there are several points worth mentioning. First, the concept of commodity in the English Classical School is severely criticized for excluding land services, labour services and capital services. This, according to Menger, led to the serious shortcoming of the English Classical School, namely failure to investigate price phenomena under the unified principle. Let us reconsider that, in the traditional classical economics, the value of a commodity is explained using the labour theory of value, while those of rent and wage by the differential rent theory and subsistence level. Menger has already mentioned this problem in his 1871 book:

Eine besondere Aufmerksamkeit haben wir der Erforschung des ursächlichen Zusammenhanges zwischen den wirthschaftlichen Erscheinungen an den Producten und den bezüglichen Productions-Elementen zugewandt und zwar nicht nur wegen der Feststellung einer der Natur der Dinge entsprechenden, alle Preiserscheinungen (somit auch den Kapitalzins, den Arbeitslohn, den Grundzins u. s. f.) unter einem einheitlichen Gesichtspunkte zusammnefassenden Preistheorie, sondern auch wegen der wichtigen Aufschlüsse, welchen wir hiedurch über manche andere bisher völlig unbegriffene wirtschafliche Vorgänge erhalten.
(Menger, 1871/1968: IX-X)

Apart from the terminology “ursächlichen Zusammenhanges”, this remark corresponds completely to the above criticism in the Fragment in that the members of the English Classical School did not study price phenomena under one single principle. Third, Menger asserted that not only material goods but also immaterial ones must be integrated into economic science. This can be interpreted as a manifesto of the scarcity definition of economics. He was disappointed that the concept “biens” did not exist any more in modern French economics.

In some parts of the Fragment, he continued to emphasize the importance of his discovery. The following quote seems to be a rehearsal of one of his main arguments in the Grundsätze:

Man könnte in dieser Beziehung leicht Experimente machen, man stell einen Gelehrten vor ein altes Buch seines Faches, eine Modedame vor eine moderne prächtige Robe, oder vor einen schönen Schmuck, einen Kunstfreund vor gute Gemälde, einen Antiquitätensammler von ein Bronzewerkzeug und setze diesen Personen gleich Wasser vor. Sie werden im Falle der Wahl jedenfalls (unter normalen Verhältnissen) zu den erstgenannten Gütern greifen. Man lasse sie aber 3 Tage dursten und stelle sie dann vor das Wasser, ein grosser Theil, alle aber am 4 u 5 Tage werden zu den Nahrungsmitteln greifen. (Menger, 1961: 120)

In case of scholars, the choice is between a book and water, while in that of painters, it is between a beautiful picture and water. In general, we are more or less satiated with water, even if it is essential for our subsistence. Where the water supply is uncertain, everyone would without a doubt prefer having a cup of water to a book or a picture. This is an old argument, which Menger called “Quantitätsgesetz” in his marginal annotations to Rau’s Grundsätze der Volkswirtschaftslehre.

In this connection, it is interesting to know how Menger interpreted Roscher’s Grundlagen:

Roscher I 102 teilt die Güter ein je nachdem sie einem Natur-, einem Anstands oder Luxusbedürfnisse dienen und meint dass ein vernünftiger Mensch nur den Ueberschuss der ersten Classe auf die zweite und nur den abermalingen Ueberschuss auf die 3. Classe verwenden werde. (Ibid.: 121)

Roscher’s argument in the above quote can be interpreted as a forerunner of the Menger Table. Here, we have three different categories of goods: the first one comprises goods crucial for human survival, for instance, water; the second category is of minor importance compared with the first; and the third comprises luxury commodities. One directs his or her first efforts to pursue the first category of goods. As consumption of the first category of goods reaches the satiation point, he or she will move on to pursue the second and then third categories of goods. This is a miniature of Menger’s argument in the 1871 work. In his Grundsätze, Menger did not provide the name of Roscher as a forerunner of the “Quantitätsgesetz”. It is interesting to know that Roscher’s Grundlagen can be understood in this manner.

In the Fragment, Menger repeated his critique against the English Classical School, which he had extended in the Grundsätze. Menger found no arguments on value in general in the English Classical School:

Die Untersuchungen über Wert im allgemeinen finden sich nicht in der streng Smith’schen Schule. Hier ist der Taschwert so sehr der Angelpunkt, dass Say Mélange pag 186 über Smith’s Werk sagen kann: Ce qui sountiendra éternellement cet excellent livre, c’est qu’on y proclame à toutes les pages que la valeur échangeable des choses est le fondement de toute richesse.
(Ibid.: 116)

What is important for the Smithian School is the concept of exchangeable value, which is not equivalent to the concept of value itself. The starting point of our research must be the latter concept, as argued by Menger. Furthermore, the critique would also be valid for future economists. He wrote:

Die neuesten Schriftsteller behandeln gar nicht Mass des Wertes überhaupt, sondern gehen sofort an dei Lösung des complicierten Problems “Mass des Tauschwertes” natürlich ohne Erfolg.
(Ibid.: 126)

Recent economists have the habit of directly taking on the measurement of exchangeable value, without having discussed the concept and measurement of value itself. Menger believed that this procedure was a fatal error. These critical comments show that Menger used the same theoretical framework in the Fragment as the one used in his 1871 work. As far as his relationships with the English Classical School and other economists are concerned, one does not find any substantial differences in his evaluations.

One thing that might be relevant to our understanding of the Fragment is the fact that Menger himself crossed out his famous Table. Unfortunately, we do not have any information whatever about the meaning of these lines, as Kauder already pointed out. 9 Did he cross out the Table because he was thinking of inserting a new table using other numerical examples? Or did he do so because he did not believe in the maximization model of economic science any more? If the latter was the case, does it mean that Menger gave up his position as a shining star of the Marginal Revolution? This remains a puzzle.

5. Lorenz von Stein and Menger 10

Lorenz von Stein was a major figure in the field of Staatswissenschaften when Menger was recruited as a Privatdozent (Private Lecturer) at Vienna University. He continued to be an important player in the faculty even after Menger was given a chair of economic science. As indicated elsewhere, Stein attempted to block him in the process of habilitation. Given the relationship between the two, one reads understandably harsh comments about Stein in the Fragment. Menger followed Robert Mohl’s critique of Stein when he wrote:

Darin aber der begabte Verfasser jedenfalls sein eigener schlimmster Feind, dass er seine Sätze in eine ganz ungeniessbare und nur oft völlig unverständliche scholastische Sprache hüllt.
(Ibid.: 129-130)

This is almost a verbatim reproduction of the following passage in Robert Mohl’s Geschichte und Literatur der Staatswissenschaften, Bd. 1, Erlangen, 1855, p. 158. Robert Mohl was a scholar of Staatswissenschaften, who taught at Tübingen University. As seen from the above quote of Menger, Mohl emphasized the scholastic style of Stein’s writing. Obviously, Menger agreed with Mohl’s critique of Stein. One further comment quoted below is also worth mentioning:

p. 159. Unsere Nationalliteratur kann nie zur vollem Anerkennung und Wirksamkeit gelangen, so lange sie nicht die barbarische Geschmacklosigkeit unserer angeblich philosophischen Sprachweise ablegt.
(Ibid.: 130)

The above comment appropriately captures the essence of Stein’s theory of economics. Economics cannot be generally accepted as far as it is not free from too much philosophy in its discourses; one of the negative examples is Stein, Mohl argued. On the basis of these arguments, Menger continued his critique of Stein:

Bei Stein ist ein nutzloses Philosophiren in schwerfälliger Form die Ursache von grosser Weitläufigkeit, getrübter Einsicht in das Gewollte und ärgerliche Enttäuschung über die Entdeckung, dass zu längst Bekanntem und Alltäglichem auf so grossen Umwegen und mit so vieler S. 660 Anstregung gelangt werde…
(Ibid.: 130)

Stein’s extremely philosophical statements lead to redundancy, confusion and disappointment, Menger argued. To him, Stein obtained with great efforts and by unnecessary detour research results that were simple facts of a well-known daily experience. Nothing shows the difference between the two scientists more clearly than the above quote. At least from Menger’s viewpoint, Stein’s method was useless philosophy. Menger continued:

Gern möchte ich das Wort parodiren, dass die Sprache zur Verdeckung der Gedanken bestimmt sei, und sagen: die Wissenschaft sei bestimmt, das Bekannte unerkenntlich und das Einfache unbegreiflich zu machen.
(Ibid.: 130)

As Menger himself indicated, the old poem cited above was taken from Wilhelm Freyherr von Schrödern, Fürstliche Schatz- und Rent- Kammer Nebst sinem Tractat vom Goldmachen, Leipzig 1713, p. 401. Languages are designed to obscure thoughts, so the poem goes. Using the poem, Menger dismissed Stein’s method as making totally incomprehensible what was simple and well-known. 11 Seen from an analytical economist who attempted to grasp economic phenomena in a clear-cut way, Stein adopted a way of doing state sciences including economics that was completely unacceptable. Menger went on to criticize Stein, saying that the latter’s method had much in common with scholastic philosophy.

After the poem, Menger further his critique of Stein, this time by quoting Jean Baptist Say, a French economist:

Say sagt von gewissen Schriftstellern Ils répandent sur la science les nuages de leur esprit ; ils obscurcissent ce qui commencait à s’éclaircir (Traité I Discours prel. p. 72)
(Ibid.: 131)

Then, Menger returned to German literature. The following comment is reminiscent of the remark cited above by Mohl, but it is based on another source:

Stein is deductiver Philosoph u hat als solcher sehr viel mit den Scholasten gemein: die vielen absurden Quaestionen die unnöthigen u zurfälligen Distinktionen…
(Ibid. : 131)

As Menger indicated in the Fragment, this statement is based at least partially on the following remark by Albert Schwegler:

Selbst die Mißgestalt und Schattenseite der Scholastik, die vielen absurden Quästionen, auf welche die Scholastiker zum Theil verfielen, selbst ihre tausendfältigen unnöthigen und zufälligen Distinktionen, ihre Curiositäten und Subtilitäten müssen aus einem vernünftigen Prinzipe, aus ihrem Lichtdurste und Forschungsgeiste, der sich unter der drückenden Herrschaft des alten Kirchengeistes nur so und nicht anders äußern konnte, abgeleitet werden.
(Schwegler, 1848: 92)

Menger’s negative comment about Stein is based on the above characterization of scholastics, to be sure, but the nuance is different as to his motivation and evaluation of the mediaeval discipline. While Menger was critical of the scholastics, Schwegler suggested that it had come out of the sincere and rational motivation to understand the natural as well as social phenomena.

A brief summary of this section: Apart from the official comments about Stein, it is quite certain that he continued to be Menger’s bête noire in the true sense of the word. As one can easily tell, these comments cannot be seen in the official obituary by him.

6. The Fragment as an Attempt at pointing to a New Direction of Economics?

As Yagi emphasized, the Fragment does include new arguments that do not exist in the 1871 edition, such as an attempt to include a section on ethics and economics. Furthermore, Menger had begun to interpret economic phenomena from a teleological viewpoint. These were new elements, to be sure. But my overall impression is that the general tone was the same as that in his previous book, as far as the more narrowly understood economic theories are concerned. Thus, the Fragment takes a step towards a new direction of economic discourse while keeping the original theoretical framework of Menger’s 1871 book.

At this stage of research, it is not easy to say anything definite about the relationship between the Fragment and the second edition of Grundsätze. The new edition published after Menger’s death was compiled from many drafts with different dates, which makes it difficult to interpret it as a coherent body of thought. Furthermore, we have to compare multiple versions of the author’s copy at Duke University with one another and with the Fragment to identify the development of Menger’s thought after the publication of his 1871 book in more detail. Much more work needs be done in the near future.

Appendix: Kauder’s Transcription

Although Kauder’s transcription is a very good starting point for our research, there are some points that one has to keep in mind reading his transcription. First, one has to be aware that Kauder avoided using Menger’s rule of abbreviations. This is relatively unimportant, but let me give some examples in what follows.

p.2
Kauder’s Transcription
allgemeine
Menger
allgem.
(In what follows, after showing the pagination of Hitotsubashi edition, I give Kauder’s transcription and Menger’s original)

In the above case, Menger wrote “allgem.”, using the period to denote the abbreviation. Kauder’s transcription expressed this as “allgemeine”. The same problem can be found in the three cases below:

p. 4
Kauder’s Transcription
Tatsachen
Menger
Tats.

p. 8
Kauder’s Transcription
Finanzwissenschaft
Menger
Finanzwiss.

p. 29
Kauder’s Transcription
Philosophen
Menger
Philos.

By adding an abbreviation list, we can avoid the above problem and keep Menger’s spelling, including some of his short notes.

Second, Kauder often rewrote what Menger had written, using today’s rule of Rechtsschreibung. See the following example:

p. 10
Kauder’s Transcription
komplicierten
Menger
complicirten

As is often the case with the writers in the 19th century, Menger did not make any substantial distinction between c and k. If we try to keep the original spelling, c is better than k. Below are more examples:

p.12
Kauder’s Transcription
gibt
Menger
giebt

p. 16
Kauder’s Transcription
zitiert
Menger
citiert

These cases above are rather minor compared to the mistakes in transcription, as I will show in what follows. In the marginal notes, Menger sometimes referred to Cairnes writing out of his own interest in methodological problems. See the following mistake in transcription:

p. 16
Kauder’s Transcription
It is by such knowledge that man becomes the minister, ruler and interpreter of Nature, and learns to control Nature by obeying her.
Menger
It is by such knowledge that man becomes the minister, and interpreter of Nature, and learns to control Nature by obeying her.

The above quote comes from Cairnes’s Essays in Political Economy. Cairnes did not use the word ‘ruler’, nor did Menger. Somehow Kauder inserted this word in the Hitotsubashi edition, without giving any reason. I must say that this is a serious error in transcription. Unfortunately, I find more of this kind of error in Kauder’s transcription. Let me list some below:

p. 17
Kauder’s Transcription
Hildebrands Zeitschrift 6 B 1856
Menger
Hildebrands Zeitschrift 6 B 1866

p. 19
Kauder’s Transcription
Er sagt Naturkräfte keiner Zunahme
Menger
Er sagt ferner Naturkräfte keiner Zunahme

p. 30
Kauder’s Transcription
Identifizierung des Staates mit der Religion in verschiedenen
Menger
Identifizierung des Staates mit der Religion in vorchristlichen

p. 31
Kauder’s Transcription
Physiokraten
Menger
Physiokratie

p. 69
Kauder’s Transcription
Nicht durch Anwendung der Arbeit
Menger
Nicht durch Ausbeutung der Arbeit

Indeed, Kauder did a good job during his stay of several months in Tokyo. I have no intention of underestimating his contribution. However, the above mistakes should be eliminated.

Notes

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