Economic Theory in Germany

Value Theory, Economic Theory in Germany and Austria

From the standpoint of pure economic theory, the dominant note in Germany in the early years of the present century was eclecticism. Take value theory, for example. Here one finds neither the cost nor the utility theory clearly ascendant. On the whole, it may be said that the straight marginal-utility theory had few adherents, among whom the Austrians, Sax, Zuckerkandl, Philippovich, Mises, and Hayek, deserve especial mention aside from the original Austrian leaders. The marginal idea seems to have served merely to develop a neglected point, leaving the refined Classical theory, so modified as to include developments on the utility side, in the ascendant. Wagner's thought was perhaps typical. Two factors, he stated, determine price: one is temporary, being the relation between demand and supply; the other is permanent, being the cost of production where perfect competition exists. Marginal utility functions in demand. And Diehl would have combined the rival theories, holding that the Classical theory gives ample place for the recognition of utility; simply, the Classicists saw in labor the great disposable factor which is both useful and limited in supply. So with the Historical School: Schmoller, while strongly subjective, did not accept marginal utility as the determinant of market value, believing that cost theories afford a simpler solution.

Others, like Dietzel, Gerlach, and Lexis, severely criticized the marginal-utility theory.
R. Kaulla emphasizes institutional limitations on economic value and defends considerable fixing of "just prices."

This situation led some into a sort of doubting opportunism that might almost be classed as scepticism. Thus Gottl, in Der Wertgedanke, ein verhilltes Dogma der Nationalokonomie (1897), Neumann, and Diehl may be placed here. These economists were inclined to believe that there is no simple and single problem of value, but perhaps several, varying with different
classes of goods.