For those interested in history, Menger’s Principles of Economics offers a way to unify gritty historical experience with pure economic theory.
At base, economics is an historical discipline—it is the study of how productivity and material resources, combined over time, satisfy human needs.
Menger concludes his second chapter with two key observations about higher order goods and a solution to a supposed paradox.
So far, Menger has gently revised Classical Economics. Once subjective and marginal utility enter the equation, though: a revolution is underway.
Menger proceeds with his unintended revolution of classical economics, working readers through the implications of subjective value.
Menger’s theory of the good rests on subjective values and the causal chain connecting material objects with the fulfilment of human needs.
Menger argues that Smith inflated the importance of the division of labor—rather, our mastery of cause and effect is the greatest source of wealth.
Continuing the theme of causal realism and economics as a process which always occurs through history, Menger explains the purpose of capital.
To the causal-realist, all economic production is linked in great causal chains to the fulfillment of individual human needs.
Finally, we arrive at the revolutionary moment when Carl Menger changed economics forever.
Menger’s second chapter invokes knowledge and society to connect causal chains of productivity from the individual to larger economic processes.
Menger takes a moment to address some of the implications resulting from subjective, marginal utility.
Menger makes one more stab at reforming Classical economics: Land, labor, and capital values are established just the same as any good.
Our series ends where Menger finishes his foundations—from his theory of exchange, he goes on to discuss market prices and money.
A founding influence of the Austrian School of economics, Carl Menger predominantly wrote on the subjects of prices, marginal utility, and money.
“The two approaches of the Methodenstreit…[represented] widely divergent views on the scope and logic of economic and social-scientific inquiry.”