Friday, July 22, 2011

Friedrich von Wieser (1851 - 1926)

Friedrich von Wieser (1851-1926)
Eighty-five years ago today Austrian economist Friedrich von Wieser breathed his last. He was a second generation Austrian economist who assumed the chair of economics at the University of Vienna vacated by Carl Menger. Much important information about Wieser and his place in the Austrian economic tradition can be found in Guido Hulsmann's Mises: The Last Knight of Liberalism.

Wieser was born in Vienna of aristocratic parents, the son of a civil servant.  At age 17 he entered University of Vienna and studied law and government science. He studied under and became follower of Menger, graduating in 1872.

Wieser had a thorough knowledge of art and literature and was an accomplished piano player. He worked briefly for the government and then received a travel grant, traveling with Bohm-Bawerk to study economics at Heidelberg, Jena and Leipzig.

He was ranked lower than others on Menger’s list of followers, so had to wait longer to be placed in full professorship. Menger had known of Weiser’s writings on value for some time, but had great reservations about them so did not recommend them for publication. Menger did, however, urge him to submit his work to Univisity of Vienna to obtain his Habilitation, which he received in 1883.

Wieser was subsequently appointed professor of economics at the German University in Prague in 1884 and inherited Menger’s position at the University of Vienna in 1903. Wieser never debated or discussed views other than his own and was an extremely slow reader and thinker. He rarely quoted anyone, only broadly acknowledging his intellectual debt to Menger and Jevons in prefaces of early works.

His important economics works were On the Origin and Leading Laws of Economic Values (1884), Natural Value (1893). He became Minister of Commerce in 1917, but returned to teaching after WWI. Intellectually he moved from economics to sociology, publishing his Social Economics in 1914.

Wieser enriched the Mengerian tradition somewhat, but was more superficially Mengerian. It seems that he did not really understand the fundamental concept of subjectivism. His theory of imputation of factors prices and calculation are more Walrasian than Mengerian. So much so that many do not view him as a causal-realist Austrian in the Mengerian tradition.

Two important works help us to better understand the legacy of Wieser and his impact on the Austrian economic tradition. The first is Samuel Bostaph's, "Wieser on Economic Calculation Under Socialism." Bostaph explains what he does in this article as follows:
The purpose of this present article is to review and critique Wieser’s concepts of “natural value,” “imputation,” and the “simple economy,” and to show their departures from Mengerian thought. One of its main conclusions is that Wieser fails in his attempt to develop the legacy of Carl Menger to provide theoretical support for socialist or communist planning. That is, Wieser fails to show that economic calculation is theoretically possible under socialism.

Specifically, it will be argued that Wieser’s concept of “natural value”—a concept apparently derived from his attempt to understand and extend marginal utility theory beyond Carl Menger’s use of it in his own theories of value, exchange and price—is incoherent. It is also argued that, rather than being an improvement on Menger’s theory of imputation, Wieser’s approach is spurious and confuses imputation with a static theory of distribution. Further, it is shown that Wieser’s theory of the “simple economy” in Social Economics collapses into an attempt to outline a static allocation model of a “Robinson Crusoe” economy that fails because it includes the key errors of Natural Value.

In sum, the nullification of Wieser’s explanations of value, price, and exchange nullify his dependent arguments for the feasibility of economic calculation in a communist or socialist society and for state planning of production. In closing, I argue that Hayek’s acceptance, defense, and use of such obvious and fallacious departures from Mengerian thought may account for Hayek’s emphasis on the knowledge problem, rather than the calculation problem faced by socialism, in contrast to the position taken by Ludwig von Mises.
The second is Joseph Salerno's, "Friedrich von Wieser and Friedrich von Hayek: The General Equilibrium Tradition in Austrian Economics." The abstract of Salerno's article is as follows:
Bruce Caldwell has disputed a number of points in my earlier account of the development of the Austrian school of economics from Carl Menger to Ludwig von Mises and F.A. Hayek. The issues in contention regard Friedrich von Wieser’s intellectual affiliation with Hayek and his influence on the formation of Hayek’s economic thought; Wieser’s status as a general equilibrium theorist; and the reason for Hayek’s early flirtation with general equilibrium theory. In this article I argue that Hayek was a self-conscious adherent of the Wieserian tradition and remained so even after he received the Nobel Prize in 1974 and that he distinguished between this tradition and the Böhm-Bawerkian tradition followed by Ludwig von Mises. I also contend that Wieser used the construction of a general equilibrium economy subject to a single will as both a normative benchmark by which to appraise the performance of the real-world market economy and as an analytical tool to explain the formation of market prices. Finally, I argue that Hayek concerned himself with the problems of the Wieser-type general equilibrium economy beginning with his earliest writings as a professional economist, years before he began to focus on the theoretical problems of money and the business cycle.

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