Menger, Böhm-Bawerk, and Wieser: The Origins of the Austrian School

Abstract

The Austrian School of Economics, created by Carl Menger and continued by Eugen Böhm von Bawerk and Friedrich von Wieser, started as one of the three branches of the marginalist or neoclassical revolution of economics, slightly over 100 years ago (1871--1874). The Austrian branch derives its framework from one relatively slim volume, Menger's Grundsätze der Volkswirthschaftslehre (1871). Common to all three branches of the ''new'' theorizing is the microeconomic approach to economic problems, the stress placed on the individual decision-making process of economic agents in general, and that of the consumer in particular, as the starting point of all economic analysis; and, as to method, the use of a marginalist calculus, particularly the extensive use of the concept of the marginal utility of a commodity to the consumer. Although marginal utility plays a decisive role in all three branches, the actual term marginal utility (atleast in German) and thus the first use of the word marginal stems from Wieser. It is his felicitious German translation ``Grenznutzen'' of William St. Jevons' clumsy expression ``final degree of utility,'' which--- according to Alfred Marshall (1890; 9th ed., 1961, p. 93)---was then retranslated into English as ``marginal utility.'' Wieser, a coiner of happy phrases, prided himself on this verbal creation and, because of this and also because the Austrian school placed the greatest emphasis on marginal utility, even tried to preempt the term Marginal Utility School for the Austrian tradition.