Monday, August 27, 2012

Rescuing Menger from the Austrians

I have written before of Carl Menger’s Lectures to Crown Prince Rudolf of Austria (trans. Monika Streissler and David F. Good; Aldershot, 1994).

That book shows that the founder of Austrian economics was worlds apart from the modern cult of anarcho-capitalism.

In chapter VII of Menger’s book, we find him endorsing the following:
(1) public works constructed by the state such as roads, railways and canals:
“Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state.” (Menger 1994: 121).
(2) government established agricultural and vocational training institutions (Menger 1994: 123).

(3) government subsidies to certain sectors:
“The state may also well support the various sectors of the national economy by actual subsidies, of course only when it is useful to the citizens but surpasses their individual means: strictly speaking, such subsidies are intended to become a useful public good, owned by the community as a whole.

This will occur, for example, if the state wants to promote agriculture and especially cattle breeding by purchasing prime quality breeding animals whose price exceeds most people's means; by becoming public property, the animals best serve their purpose, to serve all alike.” (Menger 1994: 123).
(4) state intervention to stop clearing of forests on private property in the mountains of Austria when this clearing had serious and bad effects on agriculture, such as soil erosion and floods on the plains:
“The Southern Tyrol, Istria, Dalmatia are sad object lessons of the blind greed of individuals and thoughtless negligence of former governments”. (Menger 1994: 131).
(5) government intervention to stop child labour (Menger 1994: 129).
All in all, the founder of Austrian economics appears to have accepted the existence of the state and a number of interventions, perhaps on utilitarian grounds.

The progressive liberalism and Fabian socialist sympathies of later Austrians like Eugen von Philippovich, Friedrich von Wieser and Richard von Strigl were not deviations from Menger’s ideas on the state, but a development of them.


Menger, Carl. 1994. Carl Menger’s Lectures to Crown Prince Rudolf of Austria (ed. by Erich W. Streissler and Monika Streissler; trans. Monika Streissler and David F. Good), E. Elgar, Aldershot.


  1. The specific political positions held by Smith, Menger, Mises, Hayek, Lachmann and etc do not matter, what matters is their analytical framework and what we can deduce from it. The same is true of Marx, Keynes, Minsky, and just about any other economist.

    I do not agree with the positions held by anarcho-capitalists, and i generally dislike the people who can't seem to tell "Austrian Econ" apart from "Rothbardian Libertarianism" and treat them like one and the same, but Menger's opinions don't really change a thing about their arguments.

    I'd bet the majority of "Austrians" doing work in academia, even if mostly being free-market minded economists, are much more moderate people than the an-caps at the Mises Institute. It's silly to take those guys as being the "standard Austrian" and think the school as a whole is distorting Menger.

    1. To some extent this should change their opinions. For one, we can conclude that Mengerian vision of spontaneous order plays an important, but limited role (spontaneous order is not absolute). An caps look at Mengerian spontaneous order without looking at the other side of the coin

      The ignorance is best shown when describing what people imply of Mengerian theory of money. For example, the recent article by The Economist states that Menger's theory provides no role for government, David Glasner essentially agrees. Basically they see Menger's theory of one of pure spontaneous order (as do most people), but this is not what Menger''a theory implies at all. And for the Mises Institute to basically describe the origins of money as one of pure spontaneous order, appealing to Menger as the source, is indeed distorting Menger and his ideas

    2. It would only change their view if they thought Menger was God, and could never be wrong. This sort of thing is like quoting Newton to disprove Einsteinian general relativity or quoting Einstein's opinon on quantum mechanics to refute the Heisenberg Uncertainty Principle. It fundamentally assumes that scientific analysis cannot advance and come to more correct conclusions (which are demonstrated logically as being such).

      It would be the same to quote some of Mises' classical liberal arguments as to why government is necessary for the production of property defense and certain aspects of social order.

  2. Catchy title. Also note Menger's views on progressive income (down below). It is known that Von Wieser justified the progression tax in a similar way in his book Social Economics. Thus perfectly consistent on what you say that the view of the social liberals of Austrian Econ are basically a development of Menger's existing views. I'm actually trying to find some debates between Wieser and Menger (if there are any) or related info on classical vs social liberalism. Wieser is known to say that "chaos (classical liberalism) has to be replaced by a system of order." But I wonder how Menger would have responded... Clearly Menger didn't view his system of lacking order, and his system had a key active role for the State.

    "If one says that only those people who can pay the money can send their children to school, it is diametrically opposed to the essence of the state. There are many people in the country who cannot pay this tax. With increase in income, one feels less sacrifice, even if the loss is the same amount. For this reason, we must not tax with the same proportion; but with increase in income, the percent rate must be also increased. This means that the percent rate must be progressive as in income tax, and there must be a tobacco tax whose price increases progressively. " - Carl Menger (translated by Takeshi Mizobata in "Transcript of Finanz-Wissenschaft von Prof. Carl Menger")

    1. Oops... I meant progressive tax, not progressive income

  3. Just as an interesting aside, I believe that Carl Menger's brother was Anton Menger, a law professor and socialist.

  4. Hey LK ,

    I'm sure you'll enjoy this... I got an Austrian to claim that Menger was a socialist here:

    In short though, his criticism of the lectures to Rudolf is completely ridiculous, given that Menger revised and corrected errors himself before publishing. Here is my post on it :

  5. Oh my goodness, yes:
    "I will say that such policies are certainly socialist. So, if Menger did indeed make such statements, then he certainly was recommending socialist policies in such an instance."

    It must come as quite a surprise for many modern Austrians that their founder was a dreaded **socialist**.

    Nice response too.

    1. That's a distortion. Support for a socialist policy is not the same as socialist in general.

      Nor is the acceptance or even support of the state of certain Austrians particularly relevant. Menger was an imperfect human being, as the rest of us are.

    2. LOL ... you're unable to understand irony and humour, so it would seem.

  6. I agree.

    Here’s a quote from the Road to Serfdom – “To create conditions in which competition will be as effective as possible, to supplement it where it cannot be made effective, to provide the services which, in the words of Adam Smith, “though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual or small number of individuals” – these tasks provide, indeed, a wide and unquestioned field for state activity.”

    Here’s Karl Popper – “[a] free market is paradoxical. If the state does not interfere, then other semi-political organisations, such as monopolies, trusts, unions, etc. may interfere, reducing the freedom of the market to a fiction.”