Carl Menger

 

Carl Menger is known for his pioneering work in the late 19th century, which laid the foundation for neoclassical economic thought, particularly in the areas of marginal utility theory and subjective value. He underlined how crucial it is to comprehend economics from the standpoint of unique human behaviors and preferences. Here are some key aspects of Carl Menger's economic views.

v  Subjective Theory of Value

Menger challenged the classical labor theory of value, which suggested that the value of a good was determined by the amount of labor required to produce it. Instead, he proposed the subjective theory of value. According to this theory, the value of a good is not inherent in the good itself but is rather determined by the subjective preferences and desires of individuals. In other words, something is valuable because people want it.

Menger's subjective value theory led him to conclude that prices are determined by the interaction of supply and demand, where both supply and demand are driven by individual preferences and choices. This perspective provided a more realistic and flexible understanding of price formation than the classical theories of his time.

v  Marginal Utility

Menger introduced the concept of marginal utility, which is the additional satisfaction or utility that an individual derives from consuming one more unit of a good. He argued that people make decisions about allocating their resources based on the marginal utility of goods rather than their total utility. This idea revolutionized the way economists thought about consumer behavior and resource allocation.

v  Methodological Individualism

Menger emphasized the importance of studying economic phenomena from the perspective of individual human action. He believed that economics should focus on understanding how individuals make choices and allocate resources to satisfy their subjective preferences. This methodological individualism has remained a core principle of the Austrian School.

The work of Carl Menger had a significant impact on the growth of contemporary economics, particularly within the Austrian School. His emphasis on personal preferences, relative worth, and the market as a spontaneous order helped to build economic theory and is still significant in today's economic discussions.

Written by

Dushan Rathnayake

References

History of Economic Thought. (2002).

https://www.britannica.com/biography/Carl-Menger