The Retarded Acceptance of the Marginal Utility Theory: Reply

Author(s): Emil Kauder

Source: The Quarterly Journal of Economics, Vol. 69, No. 3 (Aug., 1955), pp. 474-477
Published by: Oxford University Press
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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 Marginal 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 seventeenth 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 literature 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.

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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 valuein-use theory. Schumpeter, for one, thought very highly of them.6
I cannot agree with Henderson, when he writes that it is generally 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 argument 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 production 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 unsur4. 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.

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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 "classicalsocialist" 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 (isterreichische Kaisertum und das Ende des Heiligen Rimischen Reiches (Berlin, 1927).

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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 objection. New insights have sometimes been gained by deserting wornout 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

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