Friedrich von Wieser (; 10 July 1851 – 22 July 1926) was an Austrian early (so-called "first generation") economist of the Austrian School of economics.
Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war ministry, he first trained in sociology and law. In 1872, the year he took his degree, he encountered Austrian-school founder Carl Menger's Grundsätze and switched his interest to economic theory.Joseph A. Schumpeter, Ten Great Economists From Marx to Keynes, 1951, Appendix 2, p. 298, reprinted from The Economic Journal, vol. xxxvii, no. 146, June 1927. Wieser held posts at the universities of Vienna and Prague until succeeding Menger in Vienna in 1903, where along with his brother-in-law Eugen von Böhm-Bawerk he shaped the next generation of Austrian economists including Ludwig von Mises, Friedrich Hayek and Joseph Schumpeter in the late 1890s and early 20th century. He was the Austrian Minister of Commerce from August 30, 1917, to November 11, 1918.
Wieser is renowned for two main works, Natural Value,Der Natürliche Werth, 1889; which carefully details the alternative-cost doctrine and the theory of imputation; and his Social Economics (1914), an ambitious attempt to apply it to the real world. His explanation of marginal utility theory was decisive, at least terminologically. It was his term (building on von Thünen's Grenzkosten) that developed into the standard term "marginal utility", not William Stanley Jevons's "final degree of utility" or Menger's "value". His use of the modifier "natural" indicates that he regarded value as a "natural category" that would pertain to any society, no matter what institutions of property had been established.Mark Blaug, Great Economists Before Keynes, 1986, p. 280.
The economic calculation debate started with his notion of the paramount importance of accurate calculation to economic efficiency. Above all, to him prices represented information about market conditions and are thus necessary for any sort of economic activity. Therefore, a socialist economy would require a price system in order to operate. He also stressed the importance of the entrepreneur to economic change, which he saw as being brought about by "the heroic intervention of individual men who appear as leaders toward new economic shores". This idea of leadership was later taken up by Joseph Schumpeter in his treatment of economic innovation.
Unlike most other Austrian School economists, Wieser rejected classical liberalism, writing that "freedom has to be superseded by a system of order". This vision and his general solution to the role of the individual in history is best expressed in his final book The Law of Power, a sociological examination of political order published in his last year of life.
Biography Born in Vienna on 10 July 1851, Wieser spent his childhood and adolescence in the same city. He was interested since youth in law, history and sociology. He studied law at the University of Vienna beginning in 1868.Der Österreichische Wissenschaftskalender His lifelong passion for political economy was first ignited when he read Herbert Spencer's (Introduction to the Study of Sociology).
After ten years of public service as a government employee, Wieser was awarded in 1875 a scholarship to the Heidelberg University in order to study political economy with Eugen Böhm von Bawerk, a friend from his youth who later became his brother-in-law. Both men were disciples of Carl Menger, Wieser's senior by 11 years. Although neither Wieser nor Böhm-Bawerk studied under Menger directly, they were greatly influenced by reading Menger's (Principles of Economics) (1871), which was the work that had initially inspired the two men to study political economy. The three are considered the first generation of the Austrian School of economics.
After a successful postdoctoral habilitation in 1884, (On the Origin and the Main Laws of the Value of the Factors), a prelude to his value theory, Wieser was named that same year as an associate professor at Charles University in Prague, where he stayed until 1903 when he succeeded Menger at the University of Vienna.
In 1889, Wieser was named ordentlicher Professor (ordinary professor) at the Charles University. That same year, he also published his (Natural Value), with which he initiated the debate on the value of factors of production and from which are derived two of his major contributions: his value theory and the related imputation theory.
Motivated by introducing the innovations of the Austrian School, he published (The Austrian School and the Theory of Value) in 1891 and (The Value Theory) in 1892. Later, he collaborated in other notable works, such as (Resumption of payments species in Austria-Hungary) in 1893 and (Theory of urban land rents) in 1909. He also served as editor for two articles in the Palgrave Dictionary of Economics: "Die österreichische Schule der Wirtschaft" ("The Austrian School of Economics") and "Böhm-Bawerk", both in 1884.
In 1903, Wieser was awarded a chair as a full professor at his alma mater, the University of Vienna, where he taught a new generation of economists, including Ludwig von Mises, Joseph Schumpeter and his most faithful disciple Friedrich Hayek. He developed a monetary theory inspired by the research of Carl Menger and he applied himself during the following years to the problems of the quantity theory of money. In his last 25 years, he dedicated himself to sociology, which he believed must go hand-in-hand with economics for the fullest understanding of human society. By combining these disciplines, he was able to forge a new vision of economic policy.
In 1911, he published (The Nature and Content of Theoretical Economics Major National) which preceded yet another major contribution, alternative cost (or opportunity cost) theory, which was drawn from his study (Theory of Social Economy), published in 1914. It was here that he first coined the term "opportunity cost".
Also attributed to him is the creation of the term "marginal utility" () due largely to the influence of Léon Walras and Vilfredo Pareto, both of the Lausanne School. This has led some scholars to not consider his later works as belonging to the Austrian School. Even his disciple Ludwig von Mises said in his autobiography Memoirs (1978) that Wieser had misunderstood the gist of the subjectivism of the Austrian School and was actually a member of the Lausanne School. However, in both he also presents a clear methodological individualism and a rejection of historicism of the German School, so at first blush it is difficult to justify his exclusion from the Austrian School.
In 1914, Eugen Böhm von Bawerk died, thus marking the end of a lifelong friendship and striking a hard blow to Wieser.
In 1917, Wieser was named a member of the Austrian House of Lords and granted the title of Baron. He was also appointed Minister of Commerce in the Austrian Cabinet, which post he held until the end of World War I in 1918. However, his activity was hindered by Richard Riedl, Energy Minister and clear proponent of economic interventionism, leaving only matters of secondary importance to Wieser's jurisdiction.
His last works were (The History of State Power) in 1923 and a sociological study titled (The Law of Power) in 1926.
Wieser died on 22 July 1926 in Salzburg, where he is buried. Two of his hitherto unpublished works were published posthumously, namely (Money) in 1927, which summarizes his monetary theory; and (Collected Papers) in 1929. This latter book included a tribute resulting from the collaboration of renowned economists like Knut Wicksell, but it was censored during World War II.
Achievements
Wieser's most famous contributions are the imputation theory drawn from his 1889 work (Natural Value) and the Alternative Cost (or Opportunity Cost) Theory drawn from his 1914 work (Social Economics) in which he coined the term "opportunity cost". He is credited with the economic distinction between public goods and private goods subsequently used by Friedrich August von Hayek and eight of his disciples, and with developing the concept of marginal utility ().
Wieser also stressed the importance of the entrepreneur to economic change, which he saw as being caused by "the heroic intervention of individual men who appear as leaders at new economic frontiers". This idea of management was later expounded upon by Joseph Alois Schumpeter in his treatment of economic innovation. Value theory was revolutionary because it opened the debate on the question of economic value, introducing an objective calculation to a subjective theory. It was one of the first mathematical solutions to the problem of determining prices for factors of production. His imputation theory amended possible errors in the theory of his teacher Carl Menger and is still used today in microeconomics in consumer research to calculate the systematic replacement of factors of production.Econlink – La Escuela Austríaca.
Another of Wieser's fundamental contributions to economics is the alternative cost theory (now called the opportunity cost theory), which had been ignored by Alfred Marshall and British economists. Based on the work of Vilfredo Pareto, Wieser created the concepts of marginal utility and opportunity cost, which led economists to the study and analysis of scarcity and the allocation of scarce resources.
Wieser thus perfected the theory of Carl Menger by introducing a definition of cost, the opportunity cost, compatible with the theory of marginal utility. He also used Carl Menger's monetary theory from which he devised his own monetary theory presenting a study of possible influences on monetary value that can change the relationships between natural and monetary economics.
Wieser's most important contributions is that thanks to his familiarity with sociology he combined the Austrian theory of utility with an evolutionary theory of institutions offering solutions to the paradox between private property and the maximization of utility. Wieser said that idealized classical and neoclassical models neglect basic concepts such as the possibility of monopolies and the existence of economies of scale. Wieser claimed that idealized refined and self-contained models may not be useful tools for economic policy, resulting therefore in a suboptimal solution. In his treatise (Theory of Social Economy), he posited the concept of social economy () using the performance of intervention in certain cases as a benchmark to assess policy effectiveness.
Economic theories
From his book (Natural Value), published in Vienna in 1889, are extracted two of Wieser's three relevant theories, his value theory and the imputation theory, although both had had their geneses in previous studies. Adding to his contribution was also the theory originally known as the alternative cost theory (now called the opportunity cost theory), which was published in 1914 in (Theory of Social Economy). Finally, also worth mentioning is his monetary theory.
Value theory Wieser's value theory attempts to establish a method for calculating economic value and states that the factors of production have a value due to the utility they have conferred on the final product, i.e. marginal utility, as opposed to the theory held by his teacher Carl Menger which states that the value factor is the value of the input when contributed to the final product. Wieser's value theory was presented along with his imputation theory in his work (Natural Value), published in Vienna in 1889, although his examination of the subject begins in his 1884 postdoctoral study (On the Origin and the Principal Laws of the Value of Factors).