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Mises in Defense of Edgeworth

Introduction by Joseph T. Salerno:

Mises’s review of Francis Ysidro Edgeworth’s collected papers was published in German in 1926. It was translated by JoAnn Rothbard and appears here in English for the first time.

Despite its brevity, it is an extremely important document for both Mises scholars and Austrian economists generally. For it is in this review that Mises clearly reveals his attitude toward the third branch of the marginalist revolution, whose two other branches comprised the Austrian school pioneered by Carl Menger and Eugen von Böhm-Bawerk and the Lausanne school founded by Léon Walras and Vilfredo Pareto.

Scattered throughout Mises’s prodigious writings, one encounters numerous references to the Lausanne school, whose mathematical methods he argued were sterile and misleading in theoretical research in economics. In surprising contrast, Mises referred very sparingly to the British branch of marginalism or “neoclassicism” which has been associated most closely with the work of Alfred Marshall.

There is only one reference to Marshall in Human Action, Mises’s 900-page treatise on economic theory, and none in Epistemological Problems of Economics, his pathbreaking collection of essays on economic methodology.

One could, however, infer something of Mises’s view of British neoclassicism in an essay critical of Keynes. There he included among a list of Keynes’s rhetorical “stratagems”: “It is assumed that the evolution of economic science culminated with Alfred Marshall and ended with him. The findings of modern subjective economics are disregarded.”

From this statement one might surmise that Mises, first, considered Alfred Marshall the leading British economist of the late nineteenth and early twentieth centuries and, second, in the hands of the followers of Menger and Böhm-Bawerk economic theory had been advanced well beyond the state where it had been left in Marshall’s work, which still dominated economic thinking in Great Britain in the mid-1920s. The reader would be incorrect in the first surmise and correct in the second. For in the review below Mises declared, “Edgeworth has been the foremost economist in England during the latter part of the 19th century and the beginning of the 20th century.”

Mises’s judgment in this matter is utterly unorthodox and flies in the face of the view accepted as a matter of course by practically all post–World War I economists including the most prominent specialists in the intellectual development of the discipline. It is also just one more indication of Mises’s fierce independence of thought and his impossibly broad and deep acquaintance with the economic literature of all countries and epochs.

Mises unstintingly praised Edgeworth’s contributions in advancing economic science and serving as a stimulus for the research of younger economists in Great Britain. He favorably quoted several statements by Edgeworth—much of whose own work employed mathematical techniques—counseling severe restraint in the use of mathematics in economics and pointing out the limited results yielded by its use. Nevertheless, despite his great respect for Edgeworth’s intellect and scholarship, Mises leaves no doubt that British neoclassicism had reached a dead end long before 1926: “Although Edgeworth in the preface justifies much of the work, he must admit that a sizable portion of it is already obsolete. There is scarcely any value in the essays on money, and also in the part about the work on catallactics.”

Thus, to our great benefit, in this review we at last have a forthright statement of Mises’s attitude toward a major competing school of thought and its neglected master theoretician.

—Joseph T. Salerno, September 21, 2005

Review of F.Y. Edgeworth’s Papers Relating to Political Economy, by Ludwig von Mises. (London, 1925). Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft (Schmollers Jahrbuch) 49:6(1926): 1400–01. (translated by JoAnn B. Rothbard)

F. Edgeworth has been the foremost economist in England during the latter part of the 19th century and the beginning of the 20th century. As a teacher at Oxford he contributed toward the development of the present type of English economics. For many years editor of the Economic Journal, which is still the most important and the oldest journal of economics, he had a lasting influence on the scientific evolution of his country. His personality was impressed on the organ of the Royal Economic Society. In numerous critiques he has taken the position of scientific literature to the newer economists and in many penetrating essays handled the fundamental problems of our science.

Almost all of his scientific activity has been made public through this periodical. Edgeworth had never published an independent book of political economy but his essays and critiques well atone for a number of ponderous books. One must therefore be grateful for the economic fellowship that has now made possible the exhibition of the most important collected works of the venerable scholar.

The first volume of this collection contains Edgeworth’s contribution to catallactics. It is articulated in three parts: value and distribution, monopoly theory, and theory of money. The second volume contains a discussion of the theory of international trade, then a sketch on theory of taxation, and finally a number of essays on mathematical economy. The third volume brings the work to a close.

Edgeworth has made use of mathematical methods in his work. However his notions of the utility and usefulness of the mathematical method in economics are quite restrained. In an abridgement which had been published in a previous collection of his, “On the Application of Mathematics to Political Economy”, he says: “Mathematics is … useful, though not an indispensable adjunct to economic studies; a finish to the training of an economist comparable with a knowledge of the classics as part of a general education” (11, pg. 274). This cautious evaluation of the usefulness of mathematical procedures in economics one agrees with completely without hesitation. However one can better define Edgeworth’s understanding of the value of mathematics with another remark. Again in one of the editions’ prefatory notices to one of the essays he says of the transference of classroom doctrine into the language of mathematics: “Not much is gained by the translation into mathematical language” (11, pg. 4). It is detrimental that Edgeworth devotes too much time and toil to this work for he must finally acknowledge that it cannot bring any great victories to our science.

Naturally, it is not possible, in framing a review of a work of over 1,200 difficult pages, to pass on the individuality of 34 individual essays and more than 70 critiques. Although Edgeworth in the preface justifies much of the work, he must admit that a sizable portion of it is already obsolete. There is scarcely any value in the essays on money, and also in the part about the work on catallactics. It is justified, however, in that the obsolete essays have been used by newer economists.

The historians of theory will have to pay heed to this work. But even those who do not read history of theory, but seek the explanation of difficult problems, will find much here; at any rate, more than one would expect from a cursory perusal. For Edgeworth is initially a critic; he is better able to discover the insufficiencies in others and to formulate problems, than to find the solution himself.

The high point of the collection is a lecture which Edgeworth delivered in 1891 upon assuming his teaching post at Oxford. This essay, titled “The Objects and Methods of Political Economy” is in form and content a small masterpiece. And while one can scarcely imagine that this bulky, not too readable, and by German standards, rather expensive book, will find many readers in Germany, it marks a return to the relation of economic research to economic theory:

“As the producer of wealth will push his investment in the different agents of production up to a certain limit which has been called ‘margin of profitableness’; so, in the manufacture of economic wisdom, each of us should expend his little fund of energy, partly on the fixed capital of the deductive organon and partly on the materials of historical experience. The margin of profitableness in the intellectual as in the external world will differ with the personality of individuals. No general rule is available, except that, like the cultivated Athenian, we should eschew the invidious disparagement of each other’s pursuits.”