MARGINALISM AND SCOPE IN THE EARLY METHODENSTREIT

Abstract

The early Methodenstreit (1871–1883) between Gustav Schmoller and Carl Menger is one of the defining moments in the development of today’s discipline of economics. However, recent interpretations of the debate no longer identify a substantial point of controversy. I reconstruct the debate to show that the pivotal topic was the scope of economics. Menger claims that his marginalist Principles of Economics more or less captures the entire subject matter of the discipline, which Schmoller denies. I also discuss recent scholarship, which follows Friedrich Hayek to situate Menger at the edges or even outside the marginalist mainstream. I show that support for this reading is weak and in parts based on a misrepresentation of the available sources, putting into question Menger’s status as a forbear of today’s Austrian school.

Definition of Economics in Retrospective: Two Epistemological Tensions That Explain the Change of the Study Object in Economics

“…In the 1970s, Jaffé [45] regretted that Menger, Jevons, and Walras' contributions to economic analysis had been grossly misrepresented by the widely used practice of grouping them under one caption; according to him, differences that characterize their thoughts, especially regarding the understanding of marginal utility, are of interest; "the passage of time has revealed more important [these differences] than anything they [the authors] may have had in common" [45] (p. 511). Even scholars, such as Van't Klooster [46], point out that there are controversies about whether Menger should be considered a marginalist or not. Here, the intention was to focus on how the research project of the forerunners of the MSE was aimed at individuating human behavior laws for explaining individual consumption.…”

“…Following a deductivist perspective, Menger underlined that the economic theory should be axiomatized in the attempt to seek laws. On the contrary, Schmoller was an inductivist and member of the German historical school, and he underlined the analytical need to use historical data to seek recurrent regularities [46]. In contrast with this debate, epistemological pluralism points out that both methods have pros and cons [68].…”