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Carl Menger and the Origins of Austrian Economics.

Carl Menger and the Origins of Austrian Economics. By Max Alter. Boulder, Colorado and Oxford, England: Westview Press. Inc., 1990. Pp. viii, 256 $74.00.

At last, a book-length treatment of the founding father of Austrian economics. Alter has done just what we would like him to do for an authoritative book on Menger. He has read all of Menger's works in the original German, as well as many other German works in philosophy and economics that were influential at the time Menger wrote. Many of Alter's conclusions will be surprising to those with only a passing acquaintance with Menger, and some conclusions will be surprising to those, like this reviewer, who know Menger well, but are unable to read him in German. Unfortunately, some of the most important of those conclusions are wrong.

Alter's main conclusion is not wrong: Austrian economics, as it came to be understood, was not the economics of Menger, but the economics of Weiser and Bohm-Bawerk, both of whom jettisoned most of Menger's economic foundations, as well as his philosophy and methodology. Their writings are the basis on which Menger has been interpreted as one of the three founders of marginal utility theory. In fact, Alter demonstrates that Menger's economic system was radically different from that of Jevons and Walras, and incompatible with modern marginalism.

The introduction is unusually substantial, reviewing the literature and laying out Alter's conclusions more dramatically than they appear in the main text. The book's motivating premise is that Menger's conceptual framework is rooted in 19th-century German thought, and that thought was a completely different intellectual universe than ours. Since the English translation of Menger's Principles obliterates that universe, Alter says, it "is not a reliable tool for serious work." The translators forced Menger's thought into "Walrasian English," translated away "the Aristotelian dimension" of his language, and made sense "of passages which are contradictory in the original."

Thus it was with some indignation that I encountered Alter's statement (in the next paragraph) that he would leave all quotations from Menger in the original German--"rather than to produce another inadequate translation." If the English translations of Menger are inadequate. Alter had to correct the translations, at least of the passages he quotes. Otherwise, how is the reader to follow or confirm his interpretation?

As it turns out, with the help of the English translations (whose) page numbers Alter references), there are only a few significant sections that the non-German speaking reader cannot follow (particularly the exegesis at the end of chapter two) A bigger source of frustration is that Alter constantly uses German words instead of their English equivalents. It was not until page 151 that I finally learned the meaning of geistesgeschichtliche, a word that appears at least nine times before, and for whose meaning I had repeatedly searched.

Following the introduction, the main body of the book consists of three chapters. Chapter one, "Background," presents the philosophical ideas current in Germany at the time Menger wrote, and also the background and significance of the Historical School. The idea is to present the context for Menger's conceptual framework and to identify his roots. Alter argues that those roots are German Romanticism, Idealism, and Historicism. This quite unconvincing and the exposition in this section is confused and confusing. primarily because Alter does not see or present the intellectual movements he discusses in terms of essentials.

German Romanticism, Idealism (i.e., Hegel), and Historicism all sprang directly from Kant's conclusion that man's reason cannot know reality "as it really is." With reason removed from the scene, anything goes, and subsequent German philosophy simply screams irrationalism, as in fact is clear from Alter's presentation of their leading ideas. Identifying Menger with these movements is absurd. Menger was a conscious and deliberate follower of Aristotle, as Alter shows in chapter two, and Aristotle was the father of logic. More than any other historical figure, it is Aristotle who championed the power of reason to know the world.

Alter makes much of the fact that the concept "need" was important to both Menger and Hegel. But a word in common proves nothing. The important fact is that Menger's use of "need" is devoid of the mysticism attached to that term by Hegel. There is such a thing as looking at reality for one's ideas. That is what Menger did when he identified man's needs as the base of man's economic life.

The second chapter. "Methodology," is better. Alter analyzes Menger's methodology in detail, primarily based on the method Menger actually used in the Principles. His methodology was not Menger's best feature, and many of the problems Alter identifies with it actually are problems.

In chapter two, Alter also takes up Menger's definition of value and and the importance of needs to Menger's theory. "Bedurfnis [need] and satisfaction of Bedurfnisse [needs] are the central concepts on which Menger constructs his economic theory and from which most of his analytical arguments flow." This is a major theme of Alter's analysis, repeated and elaborated throughout the book, and one with which I completely agree.

Moreover, because needs are "imbedded in our nature [2]," their central role in Menger gives his analysis an objective than a psychological base. This has been largely unrecognized (Kauder is an exception [1]), and it goes unrecognized in Alter as well. Instead, Alter portrays Menger as a subjectivist in the modern sense, i.e., values as pure phenomena of consciousness independent of reality. I do not think this interpretation can be justified. Menger thought value was rooted in the requirements for human life and well-being, as determined by man's nature and the nature of reality. This is a concept of value best designated "objective." It is as far as it can be from the modern notion of value as arbitrary subjective preference.

In chapter three, "Value Theory," Alter analyzes in detail this fundamental element of Menger's economics, including an extended (mathematical) discussion of whether Menger's value theory can be integrated with the approach of modern economics. Alter's conclusion is that it cannot, and his discussion makes clear that it is Menger's approach that is superior.

This book is deeply flawed in both form and content. But it is a work of high scholarship, and by far the deepest and most comprehensive analysis of Menger available. While it is difficult to read, and must be read very critically, it is worth it. From now on, anyone who wants to write about Menger will have to deal with Alter's analysis. M. Northrup Buechner St. John's University, New York


[1]Kauder, Emil. A History of Marginal Utility Theory. Princeton, New Jersey: Princeton University Press, 1965, p. 68. [2]Menger, Carl. Principles of Economics Translated by James Dingwall and Bert F. Hoselitz. New York and London: New York University Press, 1981, p. 77.
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Author:Buechner, M. Northrup
Publication:Southern Economic Journal
Article Type:Book Review
Date:Apr 1, 1992
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