The Proto-Neoclassics

The reduction of human experience to “human nature” and the “mechanistic” interpretation of the Verstand/Vernunft go together with the “reduction” of science to “sufficiency” and therefore to the e-limination of “adventitious” or “unnecessary” aspects of ethical reflection in favour of “observable” behaviour (quod homines facere solent nec debeant) – whence the focus on “regularity of behaviour” beyond the “motivations”, historical and “moral”, that Schop. equates with “rationalizations” behind the primal “force” of “Egoism” derived from the Will. Here is the “mechanicism” and “utilitarianism” of Hobbes applied to human society, but now no longer in terms of “Power” which is a throwback to “labour” and the division of „social labour‟, but rather to the “subjective” perception of Lust und Leid which springs from the primordial (ursprungliche, Simmel) “force” or Energie (Simmel) of the Will. That is why Schump will admire the “elegance” of Bohm-Bawerk, itself a remnant of Karl Knies‟s “statistical” method. (Wolowski, intro. to Roscher, deplores JB Say‟s neglect of history and praises A.Smith‟s tribute to “Moral Sciences” [c.p28]. The Intro seeks to counter the “rationalism” of “scientific” approaches to Political Economy. This is an illustration of the “emanationism” that Weber rejected in the GHS. Brief biography of Roscher who taught at an agricultural college, p30. R. wrote on Socialism and Communism. Mention of Knies [p31] forced to exile at Schaffhausen – 1848 again; and Hildebrand [critic of Proudhon] and Rau. There follows argument contra Rossi‟s mathematical approach in favour of unrestrained laissez faire and production against the interests of the polity. Defence of Smith, p42, against the charge of “egotism”, to which he joins “communism”, and in favour of “sympathy” contra Mandeville [this reminds us of Schop.‟s ethics] and particularly for “free labour” [p43] with reference to Knies‟s defence of Smith, and “social housekeeping” [Volkswirtschaft, p45]. Pp47ff show how Wolowski equates “progress” with production which, in turn, is the “free labour” of Quesnay and Smith that leads to “wealth”. This is the “equation” that the proto-neoclassics will begin to loosen in favour of a direct link between production and “consumption” that avoids “labour value” altogether [see above our comments on Weber].) Gossen‟s theorems or laws, initially aimed at “measuring” the “exchange” between labour power (Kraft) and “utility”, soon dropped the link with “effort” or Kraft to focus on “the utility derived from goods for consumption”. Kraft becomes “pain” (Schmerz/Leid) and every exchange is therefore a calculus of pleasure and pain. Thus, Gossen moved from the “Fundamental Theorem” to the “Two Laws”, which place the emphasis on “consumers”, that is, “the sphere of exchange”, away from “production” (see Hagenberg below). Ekelund („Pre-History of Neocl Microecon‟) highlights the role of “engineers and agrarians” as well as statisticians in the “evolution” (Jaffe‟s preferred word to “Marginal Revolution”, see Fontaine on „Jaffe‟, fn2) of neoclassical “microeconomics”. So the analysis shifts from “the value embodied in commodities” in the process of production, to the “subjective utility of goods in exchange” which obviously refers to “the individual”. Engineers close to the political standpoint of the bourgeoisie would be keen to develop a theory that would present economic analysis from the point of view of “the consumer” and justify the “universal social role” of “industry” against the “sectoral interests of workers”, especially the Gelernt clashing with capitalist restructuration in mass production (the second industrial revolution).

Note that Roscher never understands “wealth” as accumulation as Weber already did (but retrospectively with regard to the work ethic) and seems to think that an “excess” of wealth beyond personal needs or “wants” is simply a “resource” similar to a nation‟s. wealth becomes “resources”. p139 ff.oder Nationaloekonomie” with particular regard to “the labour market” and the “egotistic-communist” Gelernt. With “the proto-neoclassicals” the emphasis shifts to “the individual” and to “goods for exchange”. He also senses the danger in the Smithian antithesis between the “Theory” and the “Wealth” and opts for the “historicist” reliance on “social institutions” (family. This latter view is distinctly Gossenian and of clear Schopenhauerian derivation. state) as the “convergent” forces in society (in which presumably the economy plays a balancing role. and to dismiss Jevons‟s theories as “curious” (p103.The Utilitarians still used “utility” as the foundation of a broad calculus of pleasure and pain that related to life experience in general. Wonowski will make a similar “moral” point. Weber wrote an important methodological piece on „Roscher and Knies‟. it is impossible to carry out “the Copernican revolution” claimed by Gossen. Already. may well have had on Roscher down to Knies in German university circles. The latter retains a “moral” character in Roscher: production can be its own goal (p130). Here is a clear example of the opposition between Gelernt and Ungelernt: skilled workers wish to control output to maintain wages and standards. Roscher raises the problem of “legal rights” to use values and the “relativity” of wealth when “labour” is not freely available [“everyone would have to be their own tailor or baker” – thus annulling the division of labour]. wealth becomes “renunciation”. Like Knies with Marx (see Papadopoulos. He is ready to dismiss “the ideological method” for privileging reductive “personal interests” and seeking to describe them “in algebraic form”. fn4). they do not consider “labour as „dis-utility‟”. perhaps a reduction in the division of labour through rising living standards (reference to Smith). perhaps in reaction to the “Prussian bureaucracy” after the failed 1848 uprising. given the intellectual proximity of “exchange values” or “goods” satisfying individual “wants” [Roscher] against the “political” demands of the “Volks. Dupuit. where workers‟ apparent “control” of their pro-duce yields higher productivity – but Roscher does not notice that “putting-out” lowers wages. the unskilled fall prey to “individualism” that reduces their control over production and wages in exchange for apparent “freedom”. Roscher‟s factors of production include “external natural” elements capable of “exchange” (where ownership is essential) and Arbeitskraft. in particular. being confined to the sphere of satisfying individual “wants”).championing the Gelernt‟s “artisanal” leadership role (Vanguard) but unable to represent the interests of the new class composition . he upbraids Ricardo for neglecting “use value” which hinges on the “utility of goods in satisfying wants”. “K. For nations. says that the only utility worth considering is “that for which people are prepared to pay” (Ekelund)! So “rarete‟” or “scarcity” needs to be taken into account as well given that people would not pay for goods that are freely available – which is what differentiates use values from exchange values since Smith. church.Knies”). Austro-German Sozialdemokratie will struggle to deal with this dilemma .and therefore postponing the confrontation with capital until its “final collapse” (Zusammensbruck) whilst in the meantime “managing” reformistically the “transition to socialism” intended as “economic planning”. Wealth has a “leveling” effect and leads to independence. consistently with labour value. But at that stage we already have the “circularity” of equilibrium analysis whereby “legal ownership rights” have to be a component of the analysis – . And this is an effect that Schop. More important. See important section on “piecewages”. He defines wealth as goods in excess of one‟s personal needs – hence. Roscher stresses the role of “exchange” in furthering the division of labour. So long as “labour” is seen as the “creator” of “value” as an “objective measure”.

The first author who has quoted the Fundamental Theorem in the context of the discussion on the labour theory of value was Tugan-Baranovsky in his (Tugan-Baranowsky. However. 53. In my research I found striking similarities in John Bates Clark's writings with those in Gossen. which are blatantly “legal” categories. This not only because this university holds a copy of the first edition of Gossen but also the style of his theorems invited them to be published as decorations in the famous wine bars of the town.”(ibid. 1905. In Gossen this theorem is introduced with the following phrase: “If we take into account that the means of enjoyment must be produced by labour..against Menger‟s and Jevons‟s purely subjective stance -. 6) . Jevons‟s claim not to have had any knowledge of Gossen's book is doubtful as the Library of the British Museum holds a copy since 1865 (Hayek. is that by necessarily “regressing” the problematic of “use values” and “exchange values” back to “endowments” and “scarcity”. who apparently established the link between Gossen and Jevons.11 . translated and emphasized by the editor). p. Theorem”: 5 The general neglect of Gossens 'Entwickelung' in Germany is part of a well cultivated saga promulgated by the counter-revolutionaries of the 1870ies and later. whereupon we end up with Blaug‟s “total equilibrium” (in Caldwell. „Menger‟s Legacy‟). the fundamental theorem of the theory of pleasure is that . although not solely on the “sphere of production”. it must be said that the “analysis” is “meaningful” but “purpose-less” because at equilibrium we have “non-action” and before equilibrium we have “indeterminacy” given that we cannot “exchange” anything if “prices” can be fixed only at equilibrium! Equilibrium analysis is therefore “meaningful” as a language game. Clark defines his unit of wealth as: “this commodity will promote me by one degree in the scale of happiness. Contra Myrdal. p. Incidentally another one of the 'Festgaben zu Karl Knies' is Boehm-Bawerk's “The Close of the Marxian System”. but “abulic” like one as well! The most interesting and essential point of this line of reasoning.'” (Gossen. (See discussion above in „Smith Weber Schop. however. When Clark honours Karl Knies for having led him to seek to discover a unit of measurement of Wealth in 'Festgaben zu Karl Knies' (Clark. as well as John Bates Clark had studied at Heidelberg University in the 1870ies. From Hagendorf. p.”(ibid. p. man must distribute his time and energy among the preparation of various pleasures in such a way that the value of the last atom yielding each pleasure shall be equal to the magnitude of discomfort experienced by him if this atom had been created in the very last moment of the employment of force. And this offers me the opportunity to add a further hypothesis to the explanation of the mystery surrounding Gossen's work. the whole question of the effectiveness of “the market and price mechanism” shifts onto the “political sphere”. “Critique of Gossen’s Fund. 158): “This relationship between the labour effort for the production of a good and its value was very clear to the founder of the marginal utility school. 1927. XII).) and more explicitly he demands “taking marginal labor as the test of cost”(ibid. Hermann Gossen: 'In order to maximize his life pleasure. translated by the editor)10 . 1983. Robert Anderson. This university is wellknown for its hospitality and was certainly one of those places where students could practice Gossen's Theory of Pleasure. 1896.. 3) this is only of secondary importance. It is worth one unit of my collective labor.‟) And this opens the way to the various branches of “new institutional economics” (quem vides). Pantaleoni has accused Carl Menger of plagiarism of Gossen.

One must add that the so called Second Law of Gossen (Gossen. over Hayek (1927) and Krelle (1988) express their admiration towards Gossen and at the same time suppress Gossen's labour theory of value and his basic goal: “To Each According to His Work (Pain)”. Gossen redefines pain as negative utility and so the marginal pain functions become upward sloping as we have defined them above. hat der Mensch seine Zeit und Kräfte auf die Bereitung der verschiedenen Genüsse der Art zu vertheilen. 45) 12 It is particularly humiliating for Gossen how the bourgeois economists. The revolutionary alternative that Gossen presented had been adumbrated by Turgot and by writers of the Italian Enlightenment such as Galiani. but also Recktenwald and Krelle (1987. daß der Werth des letzten bei jedem Genuß geschaffenen Atoms der Größe der Beschwerde gleich kommt. p. 93. [He] completed the mutation to the 10 psychological basis of economic value not because he elucidated the new concept (which . terms created by the Austrian economist von Wieser 12. 8). in particular Hayek in his introduction to the 3 rd edition (Hayek.” (p15). “In order to easily equalize marginal utility and marginal pain. 1983. 1854. It is then very curious that the followers.(Georgescu-Roegen. 13 Nicholas Georgescu-Roegen's remark in his very stimulating but controversial introduction to the English translation of Gossen's work on the non-italicizing of the Fundamental Theorem (Gossen. p. „Gossen was the insurgent who achieved the fundamental rupture with the physicalist conception of economic value held by the reigning classical school. 1983. wenn er dieses Atom in dem letzten Moment der Kraftentwicklun schaffte. 1927). 1988). xcvii).“ (Gossen.This shows clearly that we have here the core of the Theory of Pleasure.14 Bourgeois economists since Jevons always speak of marginal productivity of labour instead as “labour value” is considered a “dangerous” concept. This point has also escaped Georgescu-Roegen when he wonders about the banning of the Fundamental Theorem 10 The translation differs from (Gossen. It postulated that value is measured by the amount of pleasure an object or service provides. The reason for the banning of the Fundamental Theorem is clear: The bourgeois economists have done everything to keep the concept of “marginal labour” secret as it is the pendant to the concept of “marginal cost” and therefore it is the key to the correct understanding of the labour theory of value. 94. 14 An exception from this rule is John Bates Clark (for example (Clark. see below) is not even emphasized in Gossen13. 1983) to emphasize the labour theoretical meaning. Apparently he was confusing it with the non-italicizing of Gossen's Second Law. [It‟s funny how Hagenberg and Tugan-Baranovski totally and blithely fail to see the lethal importance of the transformation of “labour” into “Kraft” and then into “pain” (Leid)! Worthy of true Stakhanovites!] From Maneschi: Georgescu–Roegen hailed Gossen as the first individual who broke with the concept of value in terms of embodied labor espoused by the classical economists. p. including Karl Marx. p. 1896) but his reasoning is not formulated in mathematical terms and somewhat contradictory . die es ihm verursachen würde. xcvii) is not correct. p. 11 The original German text: „Mit Rücksicht auf die Nothwendigkeit der Beschaffung der verschiedenen Genüsse durch Arbeit lautet daher der oben gefundene Hauptgrundsatz der Genußlehre: Um ein Größtes von Lebensgenuß zu erhalten. beginning with Wieser (1893. don't mention this theorem at all and refer only to the so called 2 Laws of Gossen. 1854. As Georgescu–Roegen stated.

as Georgescu–Roegen referred to The Laws of Human Relations.. pp. discomfort is incurred that Gossen set against the enjoyment derived 12 from the commodities themselves. p. cxlvii). namely that money should be allocated „ between the various pleasures . bold in the original). pp. while the „second . Gossen alone saw that what is ultimately scarce is time alone. It was on that scarcity as a foundation that he erected the first pillar of his system: “Enjoyment must be so arranged that the total pleasure during one‟s entire life should be a maximum”‟ (pp. 1983.11]. p.. 1993. and illustrate graphically. lxiv). Moreover.. „my discoveries enable me to point out to man with unfailing certainty the path that he must follow in order to accomplish the purpose of his life‟ (1983. Part I of the Entwickelung contains the outline of consumer theory for which Gossen has now become justly famous. „his optimism about the future of humanity is matched only by the present dogma of the cornucopian economists: Nature has an unlimited power to generate wealth: hence the human species will never cease to progress through ar t and science‟ (1983. explicitly. Georgescu–Roegen aptly noted that „the Entwickelung is dominated by an unlimited optimism. Moreover. In his book Gossen enunciated many other theorems and showed „mathematical acumen‟ (p. „Georgescu–Roegen‟s [concept of utility] subscribes to a Gossenian. „ then there is nothing further wanting in the world to make it a perfect paradise ‟ (Gossen. lxv).. but. It implies that after an interval of time the desire to repeat a past enjoyment occurs again. p. p. 984). Georgescu–Roegen points out that „in the history of economic thought Gossen stands alone in many respects. While all [economists] have identified scarcity with some material shortage of some sort or another. The enjoyment of this repetition is lower than before. who claims that „there can hardly be any doubt that Gossen was the true discoverer of this law‟ (p. Gossen‟s consideration of time allowed to him to formulate. whom George Stigler ([1950] 1965) once described as the „unsuccessful discoverers‟ of the principle of diminishing marginal utility.he well did). unless a sufficient time interval has elapsed. 298. what is sometimes denoted as the „law of the recurrence of wants‟. not a Jevonian. but because he built the first extensive analytical system on it‟ (1983. other anticipators of the marginal utility principle include William Lloyd and Jules Dupuit. the persiflage should turn against the ridiculers‟ (1983. given the exceptional value of his contribution. view of utility maximisation. but. Foster has argued that Mirowski (1988) was wrong in claiming that Georgescu–Roegen‟s utility theory was essentially neoclassical: in fact. the former incorporates time and can deal. with time irreversibility and evolutionary change‟ (Foster. lxxxiv). emphasis in the original). p. lxv–lxvi). we have often smiled at Gossen and even ridiculed him. In the preface to the Entwickelung. Gossen claimed: „I believe I have accomplished for the explanation of the relations among humans what a Copernicus was able to accomplish for the explanation of the relations of heavenly bodies‟. Georgescu–Roegen chooses instead to refer to the optimum allocation of money as Gossen‟s „first fundamental theorem‟(1983. If they only took his advice. 108–109. xc–xciv). highly surprising in view of how tormente d Gossen‟s life was‟. He argued that time is needed not only to produce commodities but to enjoy their consumption. p. Besides Galiani and Turgot. one view that sets him apart has been overlooked completely . This was labeled „the second law‟ by Georgescu–Roegen. 1983. In producing them. theorem [7. Georgescu–Roegen‟s admiration for Gossen derives in part from the fact that Gossen‟s treatment of time in consumer welfare maximization is reminiscent of the importance of the time dimension in Georgescu–Roegen‟s own theories.. lxx) by providing algebraic derivations of his consumer theory and illustrating his analytical findings with twenty-four diagrams. The latter neglects time. Georgescu–Roegen drily remarked that „because of that self-glorification.7 The term „Gossen‟s second law‟ has been used in the literature to denote the theorem for which he has received the greatest praise. lxvi). As regards his self-comparison to Copernicus. strangely. Gossen‟s mission was to indicate the paths 11 that humans ought to follow to improve their lives. in such a manner that the last atom of money spent for each pleasure offers the same amount of pleasure‟ (Gossen.

In one of the imaginative diagrams (Figure 3. cv). Moreover. but this diminishes more and more until in the end any further contemplation of the topic results in boredom (Gossen 1983 [1854]. This is attested to first of all by Gossen‟s didactic choice to start his explanation of the laws of pleasure with reference to artistic and intellectual enjoyments: “Who does not remember the pleasure he has derived from the discovery.4] have been ignored. we know that „Gossen would have not otherwise become interested in economics. p. about the optimal budget‟ (p. some pleasure is derived from dwelling on the subject for a while. the second does not taste quite as good. A similar decrease of the magnitude [intensity] takes place if we repeat a previously experienced pleasure. each day is divided into three parts. He wonders „why both [Gossen‟s] theorem about the optimal allocation of time and his ingenious diagram [Figure 2. p. (p15) Nistico on Gossen‟s Time Element in Consumer Theory: A. cxxxviii–cxxxix). in his previous work on utility (1968). emphasis added)…. and so on until. real or fancied. A. in that they emphasise the negative effects of reiterating the same enjoyment through time. xcvii) with which he complemented Gossen‟s own diagrams. even less. express the idea that the main objective of mankind is not so much to enact defensive actions against needs but rather to enforce pro-active choices intended to fill up life with pleasures. pp. of a new truth! Subsequently. The magnitude [intensity] of pleasure decreases continuously if we continue to satisfy one and the same enjoyment without interruption until satiety is ultimately reached. Gossen‟s dream to become a mathematician was thwarted by his father‟s desire to turn him into a bureaucrat in spite of himself.6).). the first mouthful tastes best. a serious error of which I have become aware while preparing the present essay‟ (pp. Experience confirms beyond doubt that repeated satiation with the same fare causes a decrease of pleasure and a reduction in the quantity of the enjoyable consumption similar to the contraction of the period of the intellectual pleasure” ( ibidem. He rather emphasizes the mental satiation induced by repetition through time of the same enjoyment and hence the risk of being overwhelmed with boredom when satisfying a recurrent need: “To the man who allays his hunger with one single dish. If one accepts that the total pleasure accruing to the consumer within a given time span can be measured by the sum of the areas (or parts of them) below the curves falling within that time period.1. when extending his argument to the more typical case of material goods. the sooner the repetition. Gossen does not even mention the physical satiation induced by an increase in consumption. and that for pure leisure. xcv–cv) outlines the optimum allocation of time. Georgescu–Roegen remarks that.11 Gossen‟s axioms on consumers‟ behaviour. although that theorem represents a far more profound finding than his other theorem [theorem 7. t he time of production of commodities. it was his hatred of the bureaucratic environment that led him to fight its economic philosophy by formulating in opposition to it a new economic outlook‟ (ibid. Not only does the initial magnitude [intensity] of the pleasure become smaller. emphasis added). the third.12 then the two diagrams show that the total pleasure . Moreover. so that satiety is reached sooner. „I ignored the consumption time. the smaller the initial magnitude [intensity] and the shorter the duration (Gossen 1983 [1854]. but also the duration of the pleasure shortens.2.13 fundamental theorem‟ (pp. when he has nearly reached satiety.7. he is almost indifferent as to whether he takes the last bite.11]. Thanks to his nephew Kortum. that taken to enjoy their consumption. 7-8. p.

He was highly influential on the work of Carl Menger and was also one of the only German economists who treated Marx‟s work seriously (he was deeply critical of Marx‟s theory of value for ignoring value in use).A. (p6-7) In his elaborate explanation of marginalist thought in German economics. Menger understands Knies to attribute inherent value to goods. which obviously cannot correspond to the psychology of the newly born (Austrian) neoclassical methodology14. Finally. however. p. Eugen von Böhm-Bawerk. and John Bates Clark. 43-44/Knies. p. Secondly. (pp8-9 In the quest to find Karl Knies‟s contribution to the emergence of marginal utility theory. Menger specifically states his disagreement with Knies‟s concept of “a classification and scale of human needs to which corresponds a classification and scale of species of goods. p. several parts of his theory. Principles of Economics13. acknowledges the fact that Knies later differentiates between abstract value and concrete value. but yet have no actual price-value in the market (ibid.R. pp. He praises Knies‟s efforts to formulate a principle for the estimation of value based on the “fundamental concepts of value itself. the founder of the Austrian branch of neoclassical economics. Seligman. p. as in the case where Knies argued that “value and price moved in the same direction. E. Together with his second law. but he still does not seem satisfied with Knies‟s treatment of the measurement of value because of the latter‟s “[failure] in formulating a principle for determining the magnitude of use value in its concrete .293). the total pleasure decreases with either more or less frequent repetition” (Gossen 1983 [1854]. Gossen‟s connected principle of „optimal frequency of consumption‟ has also gone into oblivion. however. Streissler mentions Knies‟s work with regard to how German economists combined supply and demand when discussing utility and prices. one can find a reliable source in the writings of Carl Menger himself. p. He demonstrates how subjective utility plays a central role for Knies‟ analysis by citing Knies‟ precondition for exchange that “exchange takes place not because two quantities of two kinds of goods are equal.” to which he objects because he says that it confuses the nature of value with the measurement of value: “the measurement of value belongs as little to the nature of value as the measure of space or time to the nature of space or time ” (Menger 1950.49).” where Knies uses the concepts of subjective utility and diminishing marginal utility.467). According to Gossen‟s principle: “With each specific pleasure. (pp14-5) The founder of the Austrian School does. give credit to Knies for “mak[ing] a penetrating attempt to solve the problem [of the measurement of value]” (ibid. Streissler presents three significant citations of “Die nationaloekonomische Lehre vom Werth.” but he considers some of the assumptions arising from this analysis mistaken. namely that the further increase of a quantity of a good will result in the decrease of the individual‟s marginal utility for the additional units produced (Streissler. Menger. and also educated some of the leading nineteenth century figures in both Austrian and American economics: Friedrich von Wieser.” since Knies‟s concept cannot account for public goods such as water or air. Ely. which sa tisfy some of the most essential needs of mankind. but because they are on both sides in opposite ways esteemed unequal” (Streissler. he alludes to Knies‟s definition of value as “the degree of suitability of a good for serving human ends . p. RichardT. Menger makes direct reference to Knies‟s aforementioned “richly suggestive essay” on value. p.enjoyed with a delayed repetition of consumption can be greater than that enjoyed with a frequent repetition. „value‟ being identified by all Germans since Rau with utility” (Streissler.299). On the one hand. Once this maximum is attained.13). that will lead to a maximum of pleasure. Knies was one of the founders of the Older German Historical School.13 On Karl Knies: (Papadopoulos) But if the facts of his life are straightforward. Thus. he locates Knies‟s use of diminishing marginal utility in the notion that Knies shared with Hildebrand about the process of production. his ideas are rich and complex. determined chiefly by the frequency of the repetition of that enjoyment. He was immensely influential upon Max Weber.299-300). since they derive from Knies‟s confused original definition of value.” First. which he evaluates as leading to “doubtful conclusions.44). there is one definite manner of enjoying it. In Appendix C of his first and most famous publication. nonetheless. criticizing.

he marks a „transition […] from human needs in general to the needs of a certain individual” (ibid. p. which he perceives as unclear. This view of value – from the perspective of the individual with regard to the satisfaction of his own human needs – allowed Knies to reach great insights regarding utility theory that were later to become part of the foundations of neoclassical economics. contrary to Menger‟s criticism. as he focused on the individual consumer to draw more general inferences about economic behavior. p. Trade should not be free but controlled by the state for its own purposes. especially regarding the definition of the measurement of value. the German Empire of which Prussia was the principal constituent. hence. Here they continued the tradition of the German mercantilists of the seventeenth and eighteenth centuries. p.) (pp15-6) It appears that Knies put a lot of emphasis on subjective utility for the purpose of his analysis. The members of the group rejected laws of economics. P1 Hegel saw the state as the director of the economy.429). when he perceived of use-value and exchange-value of goods as dependent on the relationship between the available amount of those goods to the "quantum of the needs" which they satisfy. They were less interested in economic theory than in the advancement of the power of the state. the economy should be manipulated to enhance the state's power. p. relative to the demand in the market. Mises in Omnipotent Government has described in detail the way in which German economists before World War I advocated the use of the economy as a means to advance the power of the state. even such basic principles as the law of supply and demand. the so-called Cameralists. but rather on the relation of this quantity to the quantum of the need that it must satisfy” (ibid. The term subjective scarcity describes the condition according to which the value of goods depends neither on their costliness to produce. who characterized economics as the study of household management. Knies also mentions water as an ownerless good once it exists in great abundance (ibid. In addition.towards the establishment of neoclassical economics. His major problem with Knies‟s theory. the German economist viewed use-value as a result of people‟s individual preferences for the satisfaction of human desires.4 53)17. Knies denies use-value as an inherent quality of goods. Knies understands that the value that goods gain in exchange depends on the variability of utility estimations that the exchanging parties make (Knies. To allow unrestricted scope to the supposed laws of classical economics was to subordinate a higher entity. one can say that Knies had made a decisive step towards the clarification of the meaning of value and – perhaps unwittingly . Early in his analysis. we see that Menger notices several unresolved ambiguities in Knies‟s essay. Somewhat in the manner of Aristotle. (pp20-1) From Gordon." though not a part of the state. 441). Instead. deals with the fact that it lacks a precise way of calculating utility. the economy. or. to a lower. Hence.455). referring to Knies at p. fell under its authority. Thus. particularly the Prussian state. in order to closely examine the several features of use-value. although he comes close to it at one point” (ibid. they thought of economics as the science of state management. and even relates to the most fundamental concept of subjective scarcity. a task. They regarded economics as a historical and practical discipline. [6] . nor on their mere rarity. Knies made extensive use of the concept in his attempt to describe the determination of concrete use-value and concrete exchange-value in the national economy. Furthermore.467). but on their availability relative to people‟s desire for them – that is. that the Historical School favored precisely the same views. p. since only “the property of usefulness for human ends is inherent to objects” (ibid. „Ph Or of Aust Sch‟ The Historical School's view of economics differed not only from the Austrian school but from classical economics as well. the state. as Streissler (1990) has demonstrated.472) which answers Menger's questioning of Knies's definition of value.127). p. exchange will take place only if the good that A tries to sell has a greater use-value for B than the good that the latter is selling to A. Hence. It is no accident.300 – italics in original. At several instances in the essay. I suggest. p. He explicitly states that “the concrete use-value of goods […] is not based […] on the quantity in circulation. thus. "Civil society. after 1871. which the Austrian author himself undertakes in the main part of his work (ibid. This notion of use-value as a subjective conception reaches to the crux of neoclassical economics and Menger‟s theory.form.

as Brentano's system is rather murky on the point. it follows that not “labour” but “prices” must provide the “subjective” index of exchange values. (p4) In view of the importance of intentionality. or a physical object. An intention is a mental going out or grasping an object: it can be diagrammed as an arrow going from mind to object. In slightly different terms. The judgment in question is an act of preference: as the intentionality of thought grasps an object. He thought that an object created a certain number of units of pleasure in a person's mind when he came into the appropriate form of contact with it. He resolutely rejected the doctrine of internal relations. a strictly objective matter. [8] Menger applied the concept of intentionality to economic value. was ipso facto the more valuable. Most of his economic ideas were conceived in long periods of solitude in Australia. Jevons could then move to the “substance” that market agents were “exchanging”. (Keynes later reminds us. He equated value with utility or pleasure. to prefer something is to evaluate it: to rank it on one's scale of values. Taking “prices” as given. William Stanley Jevons had an entirely different notion of value. An object of an intention can be either a mental object. one might expect substantial differences in philosophical background. Whatever created more units of pleasure. Jevons always organized his material in such a fashion to ensure “the discovery of regularities and tendencies” (p268). By contrast. e. He sought to locate the incidence of investment cycles with the turnover of large fixed capital assets (p272).) Because labour is not “exchanged” with particular goods but rather with money wages.The Austrian School stood diametrically opposed to the German Historical School. The person as such really has little to do in regard to evaluation. whereas Marshall sat down and wrote a plan. measurable in units.) Again. In speaking of "object. this reminds us of the “engineering circles” that first promoted marginal utility and the “personal ties” that went into its spread. He approached economic statistics and fluctuations from the perspective of a “meteorologist” (p267). but in “negative” form – in terms of “dis-utility” – which then requires “non-produced” goods to have utility as well! This is where Walras came to the rescue! (See Keynes‟s spiffy summary on pp284-5. p343 on Mary Marshall) that the Marshalls spent time is Sudtirol with the VonWiesers and Bohm-Bawerk. Does the intentional act extend "out of" the mind to make direct contact with the actual world? This is a difficult issue to answer. let us risk laboring the point." I have been guilty of an ambiguity. the ideas of the empiricists. He had already written in his diary in 1852 about not believing in “moral sense” separate from “animal feelings”. This would seem to be a “special case” because it still posits the “centrality” of labour. “A hedonistic calculus [obviously based on Bentham‟s utilitarian notions] allows us to balance the utility of consumption against the disutility of labour” (p282). along with the remainder of the Hegelian system. Jevons‟s idea was to explain prices by a series of mathematical axioms. He did not take value to be a feeling of pleasure or pain that comes into one's mind automatically when one perceives an object. This is indeed what one does find. with whom Marshall had corresponded on the theory of interest. [7] In view of the vast divergence of the two schools in economics. so does a judgment of preference "move" toward an end. The leading philosopher who influenced Carl Menger was Franz Brentano. Price-indexing was his specialty (p269). Then came the theory of “solar valuations” (p274). . and postulating the “origin of species” from one prototypical organism (p255). He obviously worked backwards from “the Law of Supply and Demand” (pp280-1). (p5) From Keynes – „Essays in Biography‟ on WS Jevons Keynes traces the biography of an engineer who avidly sought “regularities” or econometric patterns as “causal links” in everything from trade cycles and sun spots to Malthusian coal-production indices of production to the effect of gold production on prices.g.. Quite the contrary. a preference in Menger's system is a judgment: I like X (or I dislike X). Recall Keynes‟s slingshot at Jevons‟s passion for steam engines – jumping in joy like a child.

(b) The Austrian School and Machism “Purpose-lessness” or “aimlessness” or “a-bulia” (Kant would call it „heteronomy‟ as against „autonomy‟ of „transcendent‟ system that explains trans-crescence) of equilibrium as “Kreislauf” or “end-state” or “stagnation” or “non-action”.). if “the science of choice” is a technique applied to allocation of resources. as with Gossen!! But you cannot “equalize” even marginal utilities unless these are “represented” by prices. Meaninglessness of “co-ordination” or “efficient allocation of resources” because either achieved “teleologically” ex ante (ratio abscondita. (Again. (P. But the reason why we do not exchange all of our money for one particular type of good is that we “compare” or “select” the goods we need to satisfy all of our “utilities”. the delay in publication severely hurt Jevons‟s claims to priority (see Hagendorf about possibility he took notes from Gossen!).284) Keynes then examines the differences that emerged between Marshall and Jevons over their “dissimilarities” of attitude toward Ricardo-Mill with the latter cited in two loci about his opposition to the labour theory of value (pp290-1) – “violence pursued to the point of morbidity” against Mill. a „given‟ that can be determined or calculated or “discovered” (homo quaerens) ex ante. But at that stage “marginal utility” will become a “metaphysical” notion relying on the “unobservable preferences” of market agents – “observable” only in terms of “prices” – which defeats the purpose! Thus Jevons‟s system still relies on the “wage fund” notion. of course. Hayek-Robbins is “empiricist” because it sees growth as “immanent” and reducible to “information” because it is “heteronomous/empiric”data. Stigler. at which the utility to be derived from each purchased good must be calculated not “absolutely” but in terms of the effect of the purchase of one more unit on the corresponding “change” in the utility of one more unit of the other goods – until these “marginal utilities” are equalized: “until an increment… will be more painful…” (p282). So here we have “Arbeitskraft als Leid”. Worse. it then needs to define “resources” and “ends” which it is not possible to do in purely “technical” terms because both the “inputs” (resources including technologies) and . Finally. theoretically. a throwback to Ricardo-Mill (Robbins). The “science of choice” is a “technique” that needs to be “applied” to heteronomous “processes” (means-ends) that preserve „autonomy‟ (choice and transcendence) only in their evolutionary/processual/empirical “spontaneity” (hence antinomic with transcendence and autonomy as an immanent/empirical “order” and with equilibrium as the rational/transcendent goal. he turns to his most negative views on charity – reminiscent of Mandeville‟s (pp300-1). date of Jevons‟s first draft. petitio principii of intertemporal equilibrium). Then Keynes refers briefly to Jevons‟s work in Logic. this will be “quantitatively” impossible. because this is a petitio principii – see Stigler‟s first article) the market price in terms of “money” from the “exchange” that it enables. invisible hand) or “tautologously” a posteriori (hindsight. wherein its “spontaneity” is eclipsed in the attainment. It follows therefore that a point must be reached. Something that Walras cured by eliminating money and nominating a “numeraire”. to 1871.It‟s quite obvious that if we seek to compare the utilities derived from the consumption of disparate goods. But if we consider their “prices”.) From 1861. So the “utility” of the purchased good must be equal to the utility of the quantity of money exchanged for it. as Mises warned. The “price” is prima facie evidence of the “fact” that two goods are “equivalent” at the time of their exchange. then we can isolate (illicitly. These are important because they help understand Jevons‟s “individualist” frame of mind – not much Schopenhauerian “Mitleid” there! But he redeemed himself with more balanced views in “The State in relation to Labour” where he is cautious about state intervention in the economy (p303).

thereby undermining the transcendent autonomy of “homo agens” reducing him to the “heteronomy” of equilibrium (Kant.1). hence scientific.7.8. an antinomic “ideal end-state” to Hayek-Robbins to found “spontaneity”. We can conclude that equilibrium analysis was an antinomic necessity for Mises to found his “logic”.2 of „Essay‟).KPV.I. Hayek‟s lucid analytical mind could see that ultimately the “economic choice” involved in “pricing” of “resources” can be defined satisfactorily only as “transcendent or political choice” that cannot be determined by instrumental means such as the market mechanism of equilibrium analysis on which Robbins‟s “science of choice” must be founded in order to avoid having to specify “the ends” to which its supposedly “scientific” application of means to ends pertains. In both cases. then “the science of choice” must forsake its claim to “scientificity” and return to the status of being itself an arbitrary or political “choice of technique” against its wishes! Hayek makes this same point against the Socialists! See our „Eq&MkPr‟. which reduces his “praxeology” to empty technique devoid of “practice”.4. despite his atavistic reliance on equilibrium as a crutch. Schumpeter instead elegantly and perceptively distinguishes between an immanent “transformation mechanism” that is “technical” and an exogenous transcendental “entrepreneurial spirit” that is evidently autonomous and thereby over-comes or sur-passes or sup-plants Machism.I. Mises seeks to establish an autonomous/rational transcrescence by applying a “praxeology”(or “practical logic”.Hence Mises‟s need to retain equilibrium as a technical foundation for his “logic”. pricing” of “resources” which could then be applied (scientifically) to achieving “chosen ends” (see revealing footnote in ch. and totally superfluous for Schumpeter who was careful to avoid equilibrium entirely. ibid. . a contradictio in adjecto!) that is only “logico-mathematical” and therefore “apodictic-technical” or “applied” to a separate reality and can never be “practical” because devoid of “choice” or “action” in itself (Kant. . Robbins mistakenly thought that equilibrium analysis did provide the basis for the “science of choice” by permitting the “value-neutral.the “outputs or ends” cannot be so defined without first making “explicit” the “choices” that apply to the determination of “inputs”. p39ff) or to a decisionism/voluntarism without any “economic” foundation.I. p32 fn. But given that equilibrium analysis itself can only “price resources” in a politically charged manner (through its “assumptions”).

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