by Carl Menger
INTRODUCTION TO THE NEW YORK UNIVERSITY PRESS EDITION
It is a rare book in economics that deserves to be translated into English as much as eighty years after its initial publication. The book that actually receives such attention after so many years almost ipso facto qualifies as a classic. 1 Carl Menger‘s Untersuchungen uber die Methode der Socialwissenschaften und der Politischen Oekonomie Insbesondere of 1883 clearly merited the translation that it finally received in 1963 (under the title Problems of Economics and Sociology 2), for there is no doubt about its preeminence as a treatment of vital ethodological issues in economics. When this translation fell out of print in recent years, the institute for Humane Studies and the New York University Press became naturally eager to reissue it as part of their series of Studies in Economic Theory. This series includes the 1981 edition of Menger’s only other book-length work,
Principles of Economics, which was first published in 1871. Thus the Investigations takes its well-deserved place alongside the Principles as a classic of economic thought enjoying a second century of life in a new language.
The republication of the Investigations today is especially appropriate in light of the interest that economists have recently been taking in this work, in the writings of Carl Menger generally, and (still more generally) in the ideas of the Austrian School of Economics he founded. In his introduction to the 1963 edition of this work Louis Schneider wrote (p. 3): “Neither economists nor sociologists working in the English language have paid any notable attention to the Untersuchungen.
” Since that edition appeared the situation has noticeably changed. The Investigations has been garnering numerous citations each year by authors in major economics journals, at a rate only slightly slower than that of the Principles. Citations to these and to Menger’s other works are by no means found exclusively in articles concerned with the history of economic thought. 3
Much more evidence of Mengerian scholarship appears outside the narrow confines of the journals, in recent books and monographs by members and critics of the modem Austrian School. The direct influence of Menger’s Investigations on F. A. Hayek, noted by Schneider (pp. 12, 16) with particular regard to The Constitution of Liberty, continues to be evident in Hayek’s more recent Law, Legislation, and Liberty, particularly the first volume of this triology.
In criticizing the view that such social institutions as law, language, money, and markets were deliberately designed or rationally constructed, Hayek comments that the Investigations “contains still the best earlier treatment of these problems.” 4
Menger’s insight into the spontaneous character of economic and social orders has also had an unmistakable importance for other “Austrian” economists. Ludwig M. Lachmann, the second prominent elder statesman of the Austrian School, has pointed out the impact of the Investigations on the thought of the great sociologist Max Weber, whose views on institutions Lachmann endeavors to develop in The Legacy of Max Weber. 5 The younger economists Gerald P. o’Driscoll , Jr. and Mario J. Rizzo, in a very recent restatement and extension of Austrian economics, enunciate a research program derived in part explicitly from the Investigations. Menger (p. 146) considered it “perhaps the most noteworthy
. . . problem of the social sciences” to ask: “How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?”
Menger and his heirs have, of course, offered answers that describe ways in which individual self-seeking actions can coalesce. In light of this O’Driscoll and Rizzo rephrase the question a bit more programatically: “More precisely~ our
self-imposed question is: How can individuals acting in the world of everyday life unintentionally produce existing institutions or, more generally, the overall pattern of social interactions?” 6 Thus Menger’s research agenda, put forth in the Investigations, lives on.
The Investigations has clearly had direct and important bearing, and an indirect influence conveyed through the writings of Hayek and Lachmann, on the writings of the Austrian School of today. Yet in many respects the School has outgrown or rejected Menger’s methodological outlook, and it cannot be said that current Austrian methodological views derive predominantly from Carl Menger. Much of Menger’s argument has been filtered out, as it were, particularly by the writings of Ludwig von Mises in the midtwentieth century. It is noteworthy that the early chapters of Mises’s influential treatise Human Action, which discuss methodology, contain not a single reference to Menger’s Investigations. 7 Hayek could say of the Austrian School in 1934 that, with respect to theoretical analysis, “its fundamental ideas belong fully and wholly to Carl Menger.” 8 No one could say the same today with respect to methodology.
The distinctness of the Austrian tradition in economics is correctly attributed to the consistency with which members of the school have employed a common method of analysis, namely one rooted in subjectivism. Yet the defense of this method-the explicit methodology of the school’s members-has rarely been alike from one writer to the next. 9 It should therefore not be surprising that from a modem Austrian standpoint the Investigations receives a somewhat mixed review.
It may seem somewhat unfair to subject a century-old book in economics to criticism from a modem perspective. For works in economic theory it indeed is generally unfair (though it may well be instructive). A methodological work in economics, however, is closer to being an exercise in applied philosophy (in fact it is philosophy of science if properly done) than in economic theory. Philosophers are continually offering exegesis and criticism of important works of the past from present-day standpoints. In that spirit it seems not unfair to comment on the value of various aspects of the Investigations for present-day research in economics.
As Menger indicates in his Preface, the Investigations was originally written for the sake of German economists of the late nineteenth century. It was intended to be a methodological house-cleaning, to clear away in particular the antitheoretical attitudes of the dominant Historical School. 10 For this reason three of four sections (” Books’ ‘) of the work have “Historical” in their titles and focus on the proper role of history in economic studies. Books Two and Four are particularly oriented in such a then-topical way that the modem reader will naturally take greater interest in Menger’s more sweeping statements than in the details of his argument against particular historicist doctrines.
In the present state of economics antitheoretical historicism is an annoyance occasionally encountered rather than a reigning orthodoxy demanding to be overthrown. 11 This state of affairs is of course due to the success of the “neoclassical” tradition in theoretical economics which Menger’s own Principles helped to launch. Nonetheless it is the rare page of the present work that does not have several sentences worth underlining today. It is a measure of Menger’s stature as a social scientist that what might have been solely a tract for his times holds so many passages of enduring importance.
Among the most pertinent themes of the book is the delineation of distinct and complementary roles for theory and history in economics. Here Menger is somewhat more generous in bestowing the title of theory upon certain types of knowledge than seems warranted. In particular he includes within the realm of economic theory the determination of empirical regularities, apparently to be achieved through induction from a large number of cases. Such research is better categorized as a form of economic history. We are today all too aware of the pitfalls of elevating to the level of theory such “empirical laws,” as Menger (p. 105) would presumably call them, as the original Phillips trade-off between inflation and unemployment rates or “Okun’s Law” relating changes in the unemployment rate to the magnitude of real GNP growth. Menger may have unconsciously sought to sell historicists on the value of economic theory by convincing them that some of what they were already doing was a form of theory. No such strategic concern need influence us today.
Fortunately, Menger draws and even emphasizes a suitable distinction between the “realist-empirical orientation of theoretical research” and the “exact” orientation (p. 59). The search for so-called ,’exact laws” alone is more appropriately considered the task of purely theoretical research in economics. We can make sense of “exact laws” as theoretical propositions which (necessarily) take an “if-then” form: if conditions A and B hold, then condition C must also obtain. Menger rightly insists (pp. 70, 215) that realist-empirical generalizations
(e.g., A and B are usually accompanied by C) can by their nature never attain the strictness that necessarily characterizes logical implications.
The two sorts of “laws” are on different epistemological planes. So without too much dissent from Menger’s thought we may divide economic theory from economic history where he divided strict theory from what he considered an empirical sort of theory. What is empirical is really historical, and this accounts for its different status from what is deductive.
Such a redivision yields a methodological outlook on the respective roles of economic theory and history closer to that of Mises, but by no means yet identical. Menger does not claim, as Mises later would, that pure economic theory is axiomatic, deducing theorems from premises a priori to empirical investigation of causal linkages. Indeed he rather plainly rejects such a vision of economic theory (p. 37 n.4). Instead he sees (p. 60) a “partially empirical-realistic analysis” entering into the selection of ideal-type theoretical assumptions, and
empirical observation entering into the ascertainment of causal linkages
between ideal types: “Phenomena A and B must under the same conditions always be followed by the strictly typical phenomenon C in so far as A and B are thought of as strictly typical and the succession of phenomena under discussion here has been observed even in only a single case.” It is not at all clear how Menger thinks even a single sequence of purely ideal (strictly typical) phenomena can ever be observed in the real world, particularly when he is ready (p. 214) to “admit quite unreservedly that real human phenomena are not strictly typical. ”
Menger nonetheless anticipates Mises’s argument that the validity of rigorous theoretical reasoning cannot be tested by historical-empirical methods. Menger puts it wonderfully (p. 70): “To want to test the pure theory of economy by experience in its full reality is a process analogous to that of the mathematician who wants to correct the principles of geometry by measuring real objects. . . .” In order not to misinterpret such a statement it is necessary to keep in mind that
the (logical) validity of a economic theorem is distinct from its (empirical) applicability in any specific case. Neither Menger nor Mises argues that historical-empirical evidence is irrelevant when considering whether a particular pure economic theory actually pertains to a’ specified concrete event. 12
A second theme running through the Investigations, important from a modem perspective, concerns the similarities and contrasts between the social sciences (economics in particular) and the natural sciences.
The decades since Menger wrote have seen the rise to dominance of a positivist methodology, now losing ground but by no means dislodged, that upholds the supposedly “hard” natural sciences as a model for economics to emulate. 13 In one very perceptive passage (p. 142 n. 51) Menger contrasts the subjectivism possible in the social sciences to the objectivism necessary in the natural sciences. The economic theorist has immediate familiarity with the constitutive element of economic phenomena, namely planned human action. Physicists looking for the ultimate building blocks of matter and physical phenomena must deal at the frontier with elementary “particles” (Menger calls them “atoms”) and forces of a hypothetical nature. The natural scientist, then, stands ouside the object of study and knows the complex whole more immediately than the elements, whereas the social scientist has an inside perspective and apprehends the elements more immediately than the patterns or structures they comprise. Both Mises and Hayek have elaborated this Mengerian theme. 14
Menger does not draw from this insight the conclusion reached by Mises and Hayek that a basic distinction exists between the methods of inquiry and validation appropriate to social science and those appropriate to natural science. 15 But this is not because, like some economists, 16 he sees empiricism or positivism or falsificationism as the only proper method for both social science and natural science. Instead he argues (p. 59 n. 18) that both the search for empirical regularities and the formulation of non-empirical, non-falsifiable (“exact”) theories are methods common to both economics and such naturalscience fields as chemistry. In viewing theoretical research in every field as having a non-empirical proposition at its core, Menger’s position bears some resemblance to that of modern philosophers of science. 17
With regard to the specific content of the core proposition of economics, however, Menger’s view is not nearly so modem. In claiming (p. 88) that economic theory is limited to the realm of “the efforts of economic humans aimed at the provision of their material needs, ” Menger seems wedded to a late Classical, or at any rate needlessly narrow, view of the scope and method of economics. IS On a properly broad view of economics as the study of ends-seeking activity of all sorts, it becomes clear that the “Pure Logic of Choice,” as Hayek has called the core of economic theory, does not need to ascribe a “definite volitional orientation,” i. e., a special set of concrete ends, to the agents it studies. Still less does pure economic analysis rest, as Menger believes it does (p. 216), on the assumption that “the ultimate goal of all human economy is . . . to cover our direct material needs” or in other words that economic behavior is physiologically determined. I9 Without this idea Menger’s distinction between “economic” and “other” sources of human action breaks down. Yet we should not too harshly criticize Menger for what amounts to a failure to see all the implications of the subjective approach to economics he himself pioneered. We who intellectually stand on the shoulders of those who stood on his shoulders quite naturally see a wider horizon for economics.
Menger fortunately advances a positive research program which is commendably free of pseudo-natural-scientific approaches to economic subjects. Indeed, his insights into proper and fruitful methods—distinctly social-scientific methods-reward a careful reading today. He enunciates a compelling case for methodological individualism and the compositive method (pp. 93-94, 198-199, 195-196) as necessary means for arriving at any satisfying explanation of complex
economic events. Because “to know is to know through causes,” any satisfying explanation of aggregate-level economic phenomena must begin with individuals as planning units (“singular economies”) and “investigate the laws by which the former are built up from the latter.”
It is widely accepted today (at last) that macro- and monetary economics must have “microfoundations.” So too must the economics of the firm, the state, price adjustment, growth, and any number of other topics which are often treated with ad hoc holistic assumptions.
Menger’s blast against the holism of the classical economists and the German historicists remains pertinent today: “But how foolish to want to simplify the science in contrast to the nature of things by an inadmissible fiction, to want to view a complex of economies as a large individual economy. How foolish to do this, instead of examining the real phenomena of human economy in their actual complication, Le., instead of reducing them to their factors of individual economy and the striving for understanding of them-an understanding which, to be sure, is not easy. ”
We see in this passage just quoted an “essentialist” outlook quite contrary to the “instrumentalist” outlook officially more popular among neoclassical economists today, which says that the falsity of assumptions does not matter. (Significantly, instrumentalism is particularly preferred by those who espouse a hard-natural-science model for economics.)
The ultimate goal of science for the instrumentalist is prediction, 20 which enables control. Menger recognizes prediction-andcontrol as one goal of economic science (p. 36), but not as the exclusive goal: “Theoretical economics has the task of presenting not merely the ‘laws’ of economic phenomena to us, but also their ‘general nature.’ (p. 198) Menger later, in a letter to Leon Walras, defended nonmathematical methods of economic theorizing as the only way to
study “the nature of economic phenomena … (e.g., the nature of value, rent, profit, the division of labor, bimetallism, etc.).” 21 An emphasis on essentialist understanding and explanation through verbal methods has been characteristic of the Austrian School from Menger down to the present. 22 With respect to essentialism Menger’s methodological views are very much alive in modem Austrian economics.
The theme from the Investigations most often celebrated by recent writers, and understandably so, is Menger’s elucidation of the concept of spontaneous order, i. e., his insight into how useful social institutions “come about as the unintended result of individual human efforts (pursuing individual interests) without a common will directed toward their establishment.” (p. 133) Louis Schneider not only embroiders on this theme in his introduction to the 1963 edition of the Investigations, but suggests that it was wholly responsible for his interest, as a sociologist, in making a translation of the work available to an English-language audience. We have already noted the crucial importance of this theme to Hayek, Lachmann, and O’Driscoll and Rizzo.
The concept of spontaneous order was not original with Menger, but he is unquestionably one of its major developers and expositors. The “tradition of spontaneous order” in social thought, as Norman Barry has shown, is both long and rich. 23 Yet if one name from each of the last three centuries could be chosen to exemplify the tradition, the names would be: Adam Smith, Carl Menger, and Friedrich A. Hayek. Before Smith there were noteworthy contributions to nonintentionalist social theory by Bernard Mandeville, David Hume, and Adam Ferguson. Smith is well known today for his simile likening spontaneous social ordering forces to an “invisible hand,” of course, and for his explanation of how the division of labor is promoted by market forces stemming from the pursuit of self-interest. Between Smith and Menger valuable applications or extensions of the spontaneous order concept were made by the French economistes Frederic Bastiat and Gustave de Molinari, by the British free banking advocates Thomas Hodgskin and Samuel Bailey, and by the sociologist Herbert Spencer. 24
Menger expresses an indebtedness to none of these earlier writers, however, not even Smith. On the contrary, he actually accuses Adam Smith “and his closest followers” of holding the opinion “that the institutions of economy are always the intended product of the common will of society as such, results of expressed agreement of members of society or of positive legislation,” and of holding this opinion so closely that “the broad realm of unintentionally created social structures remains closed to their theoretical comprehension.” (p. 172)
Accounting for this unsympathetic interpretation if not monumental misunderstanding of Smith is difficult. Given that Menger goes on to praise the teachings of Edmund Burke as against the “one-sided rationalism and pragmatism of the Anglo-French Age of Enlightenment, ” it would make more sense for Menger’s target to be Jeremy Bentham than Adam Smith. 25 Perhaps the key lies with Menger’s apparent affinity in policy matters for Burkean conservatism rather than the “one-sided rationalistic liberalism, the not infrequently impetuous effort to do away with what exists” that he associates with Smith and his followers (p. 177).
To exemplify the concept of a spontaneously evolved social institution Menger restates his own theory of the origin of money (pp. 152-155). This marvelous theory shows that the use of certain goods as money is not originally invented by the state or adopted by a conscious social agreement, but is arrived at through a natural convergence of self-seeking actions in a market setting. 26 The same approach can be extended to explain the origins of advanced monetary
institutions such as coinage, banknotes, checks, and clearinghouses. 27
Menger identifies several other major institutions as undesigned or ,’organic” in origin: language, law, morals, trade customs, professionalism, cities, and tribes (or primitive “states”). He does not fall into the error of regarding all existing institutions as undesigned, however. He recognizes quite explicitly (p. 157) that “legislative compulsion not infrequently encroaches upon [an institution’s] ‘organic’ developmental process and thus accelerates or modifies the resuIts,” and points to modem monetary, market, legal, and state systems as the results of mixtures of “organic” and “positive” forces. 28
The Mengerian research program, then, calls upon social scientists, and economists in particular, to unravel the “pragmatic” or designed-order strands in current institutions from the “organic” or spontaneous-order strands. The ways in which legislative compulsion modifies institutions require especially sensitive study, as the actual results of intervention are typically not those ostensibly intended.
Piecemeal interventions often fail to achieve their stated aims, and give rise to more encompassing measures. The attempt to legislate an overall design for an institution usually creates unforeseen incentive structures such that the pursuit of individual purposes generates an outcome not attributable purely to the lawmakers’ intention. 29 Modem monetary institutions, particularly central banks, may again serve as a case in point. It would be just as naive to regard the actual functioning of the Federal Reserve System as having been comprehensively designed as it would be to regard the system as the spontaneous outgrowth of free market forces.
Arriving at a satisfactory understanding of such an institution requires that economics first build up, from the essential features of individual human action, theoretical structures adequate to explain the relevant institutional features of both market behavior and political behavior. Then the various forms of interplay between market and state agents and institutions must be studied theoretically. Finally the theory must be sensitively applied to singular historical events. This is
all quite a challenge and requires that some. researchers have a broad field of vision. But then Menger set high standards for economists as social scientists. For this reason too, the Investigations richly deserves a place on the bookshelves of today’s economists.
Lawrence H. White
New York University
1Beside the present work the only examples that come to mind of works translated into English after eighty years are both classics: Richard Cantillon, Essai sur la Nature du Commerce en General (1752) in 1933, and Hennann Heinrich Gossen, Entwickelung der Gesetze des Menschlichen Verkehrs (1845) in 1983.
Menger’s own Grundsatze der Volkswirthschaftlehre (1871) also a classic, went 79 years before an English translation appeared.
2Carl Menger, Problems of Economics and Sociology (Urbana: University of Illinois Press, 1963). The present title attempts to render literally the wording of the original German title.
3For specific evidence consult the Social Science Citation Index for various recent years. A brief selected bibliography of the doctrine-historical literature on Menger up to 1981, compiled by Richard Ebeling, appears in Carl Menger, Principles of Economics (New York: New York University Press, 1981), p. 10.
4Friedrich A. Hayek, Law, Legislation and Liberty, volume 1, Rules and Order (Chicago: University of Chicago Press, 1973), p. 147 n. 5. The index of this volume lists six references to Menger; all of them are to the Investigations.
5L. M. Lachmann, The Legacy of Max Weber (Berkeley: The Glendessary Press, 1971), esp. pp. 55-60. In these pages Lachmann also criticizes the deterministic arguments made by Menger in the Investigations. We return to this below.
6Gerald P. O’Driscoll and Mario 1. Rizzo, The Economics of Time and Ignorance (Oxford: Basil Blackwell, 1985), p. 20.
7Ludwig von Mises, Human Action, 3rd rev. ed. (Chicago: Henry Regnery, 1966), pp. 1-117. Ludwig M. Lachmann, “Ludwig von Mises and the Extension of Subjectivism,” in Israel M. Kirzner, ed., Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises (Lexington, MA: Lexington Books, 1982), p. 32, states that Mises “saw in Menger’s distinction between ‘exact laws’ and empirical regularities the pivot of Austrian methodology,” but unfortunately provides no reference to textual evidence of this. I could not find in Mises’s writings any comment on this aspect of the Investigations.
8F. A. Hayek, “Carl Menger,” reprinted as the introduction to the 1981 edition of
Menger, Principles of Economics, p. 12.
9There is no need to relate here the doctrinal history of Austrian methodology generally. I have tried to do that elsewhere: Lawrence H. White, The Methodology of the Austrian School Economists (Auburn: Ludwig von Mises Institute of Auburn University, 1984).
10A rather detailed account of the debate that ensued-the famed Methodenstreit-is offered by Samuel Bostaph, “The Methodological Debate Between Carl Menger and the German Historicists,” Atlantic Economic Journal 6 (September 1978): 3-16.
II But for an argument against what the author sees as an antitheoretical streak in some recent writers see George A. Selgin, “Praxeology and Understanding,” unpublished ms. (New York University, 1983).
12 For a neo-Austrian statement on the role of modem empirical methods see Mario J. Rizzo, “Praxeology and Econometrics: A Critique of Positivist Economics,” in Louis M. Spadaro, ed., New Directions in Austrian Economics (Kansas City: Sheed Andrews and McMeel, 1978), pp. 51-52.
13 See Bruce Caldwell, Beyond Positivism: Economic Methodology in the Twentieth Century (Boston: Allen & Unwin, 1982).
14Mises, Human Action, p. 355; Hayek, The Counter-Revolution of Science (Glencoe, IL: The Free Press, 1952), pp. 38-39. These passages “are juxtaposed with Menger’s in White, The Methodology of the Austrian School Economists, pp. 19-24.
15 This has been usefully pointed out by T. W. Hutchison, The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians (New York: New York University Press, 1981), pp. 187-189. Hutchison evidently considers methodological monism to Menger’s credit, as he labels “rather pretentious” Menger’s claim that social scientists have an advantage in apprehending ultimate elements. Hutchison devotes a chapter (an earlier version of which appeared in J. R. Hicks and W. Weber, Carl Menger and the Austrian School of Economics (Oxford: Oxford University Press, 1973) to a critical exegesis of the Investigations. He offers evaluations of the book’s strengths and weaknesses opposite in many respects to those offered by the present introduction.
16E.g., Mark Blaug, The Methodology of Economics (Cambridge: Cambridge University Press, 1980), pp. 46-49. Blaug, unlike Menger, clearly distinguishes between techniques of investigation (here natural and social sciences obviously differ, e.g., in the use of laboratory experiments) and standards of theory acceptance (here the methodological monist says they should not differ).
17 In particular, Imre Lakatos has written: “All scientific research programmes may be characterized by their ‘hard core’ . … This ‘core’ is ‘irrefutable’ by the methodological decision of its protagonists: anomalies must lead to changes only in the ‘protective’ belt of auxiliary, ‘observational’ hypothesis and initial conditions.” Lakatos, “Falsification and the Methodology of Scientific Research Programmes,” in Imre Lakatos and Alan Musgrave, eds., Criticism and the Growth of Knowledge (London: Cambridge University Press, 1970), p. 133. Lakatos (ibid, pp. 128-130) gives an example from chemistry that fits neatly Menger’s conception of exact theory prevailing over attempted refutation by observation
of actual (non-pure) elements. For a comparison of Lakatos with Mises see Mario
J. Rizzo, “Mises and Lakatos: A Reformulation of Austrian Methodology,” in Israel M. Kirzner, ed., Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises (Lexington, MA: D.C. Heath, 1982), pp. 53-73. Mises, as noted already, held that the core propositions of economics are not falsifiable.
18 See Ludwig von Mises, Epistemological Problems of Economics (New York: New York University Press, 1981), p. 124 n. 5, for the statement that Menger’s Investigations defends classical rather than modem economics. This is cited and endorsed by Ludwig M. Lachmann, “The Significance of the Austrian School of Economics in the History of Ideas,” in Capital, Expectations, and the Market Process, ed. Walter E. Grinder (Kansas City: Sheed Andrews and McMeel, 1977), p. 48. It was Lionel Robbins’s The Nature and Significance of Economic Science [2nd ed. (London: Macmillan, 1935)] which, borrowing from Mises and other Austrians, decisively broadened modem economists’ conception of their discipline from that of a science of material welfare to that of a science of allocative behavior generally. On this see Israel M. Kirzner, The Economic Point of View, 2nd. ed.
(Kansas City: Sheed and Ward, 1976), ch. 6. Kirzner (ibid., ch. 7) points out that Mises’s conception of economics as a science of human action is broader still.
19Mises has criticized Menger’s views on this in detailed fashion in Epistemological Problems of Economics, pp. 171-174.
20The locus classicus here is Milton Friedman, “The Methodology of Positive Economics,” in Essays in Positive Economics (Chicago: University of Chicago Press, 1953), esp. pp. 7, 41.
21 Quoted in William Jaffe, “Unpublished Papers and Letters of Leon Walras,” Journal of Political Economy 43 (April 1935), p. 200.
22 For a recent reconstruction of the methodological case for this approach see Don Lavoie, “The Interpretative Dimension of Economics: Science, Henneneutics, and Praxeology, ” Center for the Study of Market Processes Working Paper 1985-15.
23 Norman Barry, “The Tradition of Spontaneous Order,” Literature of Liberty 5
(Summer 1982), pp. 7-58.
240n Hodgskin and Bailey see Lawrence H. White, Free Banking in Britain (Cambridge: Cambridge University Press, 1984). On the rest see Norman Barry, op cit.
250n Adam Smith and Edmund Bruke as like-thinking “antirationalist” individualists see F. A. Hayek, “Individualism: True and False,” in Individualism and Economic Order (Chicago: Gateway Edition, 1972), pp. 4-13.
26Philosopher Robert Nozick offers Menger’s theory (as retold by Mises) as a paradigmatic example of what he calls an “invisible-hand explanation”: Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974), p. 18. Nozick points out that such explanations are satisfying because they economize on the knowledge that must be attributed to the mind of any agent in the theory.
27Lawrence H. White, “Competitive Payments Systems and the Unit of Account,”
American Economic Review 74 (September 1984), pp. 703-706. Menger’s theory continues to have the greatest relevance because of the prevalence of “one-sided rationalism and pragmatism” among economists spinning out visions of ideal monetary systems without inquiring into the problem of having the public adopt a new means of payment.
28Menger’s discussion of the primitive state as sometimes organically formed, and of “the modem state” as partly the result of organic factors indicates that he does not use “organic” to mean “free of coercive influences” but rather “not the result of one deliberate overall plan.” Still less does he signal an approval of all organic institutions and a condemnation of all pragmatic ones. The present-day term “spontaneous” is sometimes ambiguous between these two meanings, and often carries a favorable connotation.
29The relevant literature here is vast, but includes Friedrich A. Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944); Ludwig von Mises, Planning for Freedom, 3rd ed. (South Holland, IL: Libertarian Press, 1974), chs. 1-2; and Murray N. Rothbard, Power and Market (Menlo Park, CA: Institute for Humane Studies, 1970), chs. 3-5.