Carl Menger – Biography, who is he and what he did | 2021

Carl Menger (1840-1921) was born in Austria and is considered the founder of what is known in economics as the Austrian School. Considered one of the great neoclassical economists, he stands out for contributions such as the study of marginal utility.

Born in 1840 in the town of Nowy Saçz, then belonging to the Austro-Hungarian Empire (now Poland), Carl Menger studied law at universities such as Prague and Vienna. Eventually, he would end up earning a doctorate in law from the University of Krakow.

In his professional career he worked as a journalist and professor, orienting his academic profile towards a discipline such as Economics. In fact, in 1876, Menger himself came to teach Archduke Rudolf von Habsburg, heir to the Austro-Hungarian throne. Menger continued his teaching work until 1903.

The subjective value theory

Menger’s most prominent contribution is the subjective value theory. Thus, Menger proposes that the value of a good is not determined by its qualities, nor by the work that has been used to produce it. Therefore, the value of the property depends on the importance that an individual gives it when it comes to achieving their goals.

In this way, the goods will have a subjective value, depending on the perspective of each individual. Each of the parties involved in the trade will have a different perception of the money received and the work used. For this reason, it is possible to create value by transferring ownership of an asset to an individual who values ​​it to a greater extent. All of this implies that wealth depends on how individuals value their assets.

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Now, as individuals accumulate additional units of a good, the degree of satisfaction decreases. This is what is known as diminishing marginal utility. As the needs of a good are satisfied, they will be displaced to other goods.

In the subjective value theory, the free market and competition are two fundamental elements. Thanks to both factors, it is possible for individuals to acquire goods and services to which they give greater value. In other words, intermediaries will allow the creation of value by enabling trade. In this way, it can be concluded that the two parties involved in the exchanges win.

In distancing himself from William Jevons, Menger did not believe in measuring satisfaction by units of utility. For Menger, the value of an asset was determined by the uses that the asset in question might have.

His theory on the role of money in the economy still enjoys wide recognition among current currents of economic thought. And, according to Menger, money is a medium that facilitates business transactions.

Carl Menger’s Legacy and Works

Faced with those who were looking for an economy based on disciplines such as Mathematics, Menger is committed to an economy that is based on the perception of individuals.

Menger’s subjective value theory has become firmly established among liberal-minded economists. In fact, this subjective perspective places paramount importance on the individual and his preferences. Thus, the different individuals with their different desires turn the economy into an area of ​​knowledge focused on the formation and prediction of prices.

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His works include Principles of Economics (1871) and Investigations of the method of the social sciences with special reference to economics (1883). Precisely this last work supposed a rupture with the economic thought established until now, at the same time that it laid the foundations of the Austrian School.

In his articles On the Theory of Capital (1888) and The Origins of Money (1892), he provides a new vision of the role of the economy. It is here where Menger defends the great relevance that money has as a means of facilitating exchanges. Menger argues that, compared to barter, money makes exchange a simpler process.

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