Search results

The paper aims to provide an overview of the Austrian School's approaches to the social question before World War I.

The paper takes the form of a comparative study.

In his contributions Friedrich von Wieser supported co‐operative associations as an organizational form of big enterprise to be used as instruments to ameliorate the social condition of workers; and who dealt with issues such as private ownership of the means of production and economic inequality, impact of collective bargaining on wage formation, and public economy, where he discussed the contribution of public sector production to social value. Further reports on Böhm‐Bawerk's essay on disadvantageous consequences of free competition where he came to the conclusion that free competition in reality does not maximize national economic welfare, without, however, drawing concrete policy consequences from his findings. As Austria's finance minister he introduced a modestly progressive income tax early in the twentieth century. Later, in his essay “Control or economic law” he took a more reserved position with respect to the possibilities of correcting ore modifying outcomes of the market process.

The paper illustrates that redistribution can enhance economic welfare.

Calls back to memory that opinions of the first generation of the Austrian School (Wieser, Böhm‐Bawerk) were different from Ludwig Mises' positions expressed in Die Gemeinwirtschaft that all measures of social policy are aimed at the destruction of the free market economy, which later came to be considered as the dominant position of the Austrian School towards the social question.

In his article “Geld” of 1909 Menger introduces a principal distinction between “outer exchange value of money” (purchasing power as measured by index numbers) and “inner exchange value of money,” which is affected solely “by influences originating on the side of money,” not on the side of the other goods. Menger chooses constancy of the inner value as policy goal to be achieved by appropriately regulating the quantity of money. In a growing economy, the general price level would have a declining tendency if the money supply were kept constant – a consequence which Menger does not make explicit, and even appears not to have been aware of. There is a fundamental inconsistency in his writings, since in his essays on the currency reform of the Austro-Hungarian monarchy of 1892 Menger warned against undesired consequences of deflation and inflation. Menger’s extensive discussion on how effects on purchasing power on the side of goods could be separated from those attributable to the side of money is referred in the light of then available monetary and price statistics. The inconsistency remains enigmatic. The last part of the present contribution gives a brief overview on how authors of later generations of the Austrian School (Wieser, Mises, Schumpeter, and Hayek), who coined the term “neutrality of money” for Menger’s constancy postulate followed or deviated from Menger’s concepts of the value of money.