The Retarded Acceptance of the Marginal Utility Theory

The Retarded Acceptance of the Marginal Utility Theory: ReplyAuthor(s): Emil KauderSource: The Quarterly Journal of Economics, Vol. 69, No. 3 (Aug., 1955), pp. 474-477Published by: Oxford University PressStable URL: http://www.jstor.org/stable/1885854 .Accessed: 18/06/2014 19:00

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474 QUARTERLY JOURNAL OF ECONOMICS

REPLY

By EMIL KAUDER

Mr. Henderson raises essentially three objections against the ideas presented in my paper "The Retarded Acceptance of the Margi- nal Utility Theory."' He charges me with: misinterpretation of canonist thinking, abortive attempts at refuting alternative explanations, and the use of a strange method. Let us take up these three points in order.

He asserts that "scholars of the history of economic ideas have consistently associated canonist doctrine with the foundations of labor theory. . . ." Such scholars are very rare. Neither Joseph Schumpeter nor Father Bernard W. Dempsey belong to this group. Schumpeter in his monumental History of Economic Analysis and Father Dempsey in his fine book Interest and Usury claim that neither Aristotle, nor medieval, nor late scholasticism formulated any kind of a labor value theory.2

"Kauder offers no reinterpretation of Calvinist doctrine which substantiates his claim that Calvinist Protestantism nourished seven- teenth and eighteenth century cost theory," says Henderson. I do not need it, because Max Weber in his paper on "Capitalism and Protestant Ethics" has marshalled all the essential facts for his claim that Calvinist theology considered incessant labor necessary for attaining the certainty of salvation.3 I consider it very difficult to dislodge Max Weber's well-documented interpretation. Besides I cannot find that Henderson's quotation from Richard H. Tawney speaks against Calvinist glorification of labor. Tawney, although he

1. This Journal, Nov. 1953. 2. Joseph A. Schumpeter, History of Economic Analysis (New York, 1954),

pp. 62, 93. According to Schumpeter and others, the only schoolman who presented a cost theory but not a labor value theory of the just price was Duns Scotus (Labores et expensae). "The late scholastics, particularly Molina, made it quite clear that cost, though a factor in the determination of exchange value (or price), was not its logical source or 'cause'." Ibid., p. 98. "Still less than a cost theory of value can a labor theory of value be imputed to them [i.e., the late scholastics, particularly Molina] though this has been done." Ibid., p. 98, n. 23.

Bernard W. Dempsey, Interest and Usury (Washington, 1948), pp. 150-54. See also Emil Kauder, "Genesis of the Marginal Utility Theory," Economic Journal, LXIII (Sept. 1953), pp. 639-41. Here ample documentation and litera- ture can be found. See also Raymond de Roover, "Scholastic Economics: Survival and Lasting Influence from the Sixteenth Century to Adam Smith," this Journal, May 1955, pp. 168-69.

3. Max Weber, The Protestant Ethic and the Spirit of Capitalism, trans. Talcott Parsons, pp. 105 seq.


MARGINAL UTILITY THEORY 475

is rather critical of Max Weber, does not attack this part of Weber's theory.4 Tawney even quotes a letter of Calvin in which the great reformer writes: "Whence do the merchant's profit come, except from his own diligence and industry."5

So my interpretation only sums up the results of sound scientific research produced during the last fifty years. I remain still "on the side of the angels," if I emphasize the importance of the earlier Italian economists, who as sound Aristotelians developed the value- in-use theory. Schumpeter, for one, thought very highly of them.6

I cannot agree with Henderson, when he writes that it is gener- ally recognized that "political economy as a discipline grew hand in hand with British economic development" because Great Britain, so he continues, was the first country which emerged from the natural economy. An Italian economist could easily turn Henderson's argu- ment around and write: "Italy was the first country to face the problems of transition from a 'natural' economy to one in which exchange and the division of labor were dominant." Already in the early Middle Ages, Florence and Venice were great trading posts and pro- duction centers with established gold currencies; in Venice for the first time double-entry bookkeeping was described, etc. Therefore, our fictitious Italian author could conclude that Italian economists must have a higher rank than English and American writers. The quality of economists cannot be measured, however, by the nature of the economic life which surrounds them, but only by the originality and truthfulness of their analysis. If one accepts this yardstick of scientific greatness, then Davanzati and Galiani must rank rather high.

My analysis of the reasons for the retarded acceptance of marginal utility theory in the nineteenth century was preceded by a criticism of other explanations, to which my critic takes exception. He does not think that I refuted Stark's theory of the Kantian influence upon Austrian economics. I wonder whether he is aware of the fact that Stark did not give a shred of documentary evidence for his thesis. That I based my statement on the authority of the "obscure" Heinrich Ritter von Srbik is due to the fact that Srbik was during his lifetime the recognized dean of Austrian historians and had an unsur-

4. R. H. Tawney, Religion and the Rise of Capitalism, pp. 316-17. Here Tawney criticizes Max Weber very thoroughly without touching the glorification of labor.

5. Ibid., pp. 105, 109, 114. 6. Op. cit., pp. 292-93, 300-2 and passim.


476 QUARTERLY JOURNAL OF ECONOMICS

passed knowledge of Austrian life, culture, politics, and ideas.7 By the way, I did not write that religious postulates were influencing Austrian economic thinking. Rather I said that there is some reason to believe that Aristotelianism, neopositivism, and Leibnitz had somehow helped to form the Austrian method of economic thinking.

Henderson offers a number of well-chosen quotations to show that Wieser, Jevons, and John Bates Clark were eager to fight Marxism with the weapons of marginalism. He appears to consider these quotations a proof for the correctness of the Marxian economic interpretation of history, but I do not. These authors claimed that marginal utility is better suited to avoid contradictions than "classical- socialist" philosophy, and is a weapon in the fight against socialism. But this has nothing to do with the Marxian exposition of ideological bias. Henderson's quotations would fit into the Marxian pattern, if any one of the writers had glorified the interests and actions of the ruling class and thus drawn up a theory strongly at variance with truth. But nothing like this can be found.

Nicolai Bukharin, the outstanding Marxian critic of the Austrian school, must have been aware of the fact that the glove did not fit the hand; therefore he changed his line of attack. Marginal utility, as a theory of consumption, so he wrote, reflects the goals of decadent capitalists who are fond of cigars, cars, and other things which make life agreeable. Whether this picture of the ruling class is more than a caricature, is not my business to investigate here. That the words quoted by Henderson cannot be fitted into Bukharin's framework, is all that matters. These marginalists may have been eager, perhaps too eager to use their newly forged tools for the criticism of Marxism, yet we have no logical warrant to assume that they were advertising agencies for the consumption habits of the decadent bourgeois class.

It seems to me that marginal utility is ideologically neutral. Furthermore, marginalism has no close connection with any special historical economic situation. The utility concept has been based on general psychological observations which theoretically could be made at any time by any economist. Furthermore, the relationship between labor value theory and the economic life of a special historical period can easily be overrated. The classicists were seeking a yardstick to

7. Heinrich Ritter von Srbik, 1878-1951. Full professor at the University of Vienna 1922-1945, member of many learned societies, e.g., Royal Historical Society, London; Soci6t6 d'Histoire moderne, Paris. Selections from his main works: Metternich, der Staatsmann und der Mensch (Munich, 1925); Das (ister- reichische Kaisertum und das Ende des Heiligen Rimischen Reiches (Berlin, 1927).


MARGINAL UTILITY THEORY 477

measure exchange rates. The search for such a measuring rule is independent of any particular economic situation. I cannot agree with Henderson, who claims that the search for an objective theory of value was a necessary preliminary "to the solution of problems which called for policy recommendations." I do not know any economic problem of classicism which needed for its solution the strict adherence to the labor theory of value. On the contrary, it seems to me that wherever Smith, Ricardo, or Marx used the labor theory, confusion and inconsistency were introduced.

I certainly agree that "political, social, and economic forces" (Henderson) may have some influence on the development of economic thinking. Yet I do not assume, as Henderson apparently does, that a close causal connection exists between these forces and the history of economic thinking. I wonder why, in the enumeration of these forces, no place is left for religion, philosophy, and ethics. It is my thesis, which according to Henderson is "at odds with most hitherto accepted doctrine "that economic thinking like any other form of cultural and scientific activity, is correlated with philosophical, religious, and ethical convictions.

That my method according to Henderson is unusual, is no objec- tion. New insights have sometimes been gained by deserting worn- out trails. Yet I cannot even boast of having used a new method; I am a late-comer. Max Weber, Talcott Parsons, Schumpeter in his fine analysis of Karl Marx, and Gunnar Myrdal, all have worked on similar lines. I agree with Henderson that the application of my method results only in conjectures. But every interpretation in the realm of history is only a conjecture which can be superseded by a better one, and which must be abandoned in the face of valid criticism.

I regret that I find myself so little able to accept Mr. Henderson's criticisms, but am grateful that he gave me the opportunity further to elucidate some points of my thesis.

EMIL KAUDER. ILLINOIS WESLEYAN UNIVERSITY


Article Contentsp. 474p. 475p. 476p. 477

Issue Table of ContentsThe Quarterly Journal of Economics, Vol. 69, No. 3 (Aug., 1955), pp. 321-483Front MatterRecent Open Market Committee Policy and Technique [pp. 321-342]Investment Criteria, Productivity, and Economic Development [pp. 343-370]Differential Rates of Productivity Growth and International Imbalance [pp. 371-401]The Concept of Economic Sectors [pp. 402-420]Federal Credit Agencies and the Structure of Money Markets, Interest Rates and the Availability of Capital [pp. 421-444]A Note on Soviet Capital Controversy [pp. 445-451]Unemployment in Planned and Capitalist Economies: Comment [pp. 452-460]Unemployment in Planned and Capitalist Economies: Reply [pp. 461-464]The Retarded Acceptance of the Marginal Utility Theory: Comment [pp. 465-473]The Retarded Acceptance of the Marginal Utility Theory: Reply [pp. 474-477]The Retarded Acceptance of the Marginal Utility Theory: The Schumpeter Prize Fund [pp. 478-479]Recent Publications [pp. 480-483]Back Matter

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The Retarded Acceptance of the Marginal Utility Theory