Carl Menger | Books by the Father of Austrian Economics

Classic Austrian Economics Books by Carl Menger

Carl Menger, a foundational figure in Austrian economics, revolutionized economic theory with his work on marginal utility and the subjective theory of value. His groundbreaking books, including Principles of Economics, laid the foundation for modern economic thought.

On this page, we explore Menger’s key writings, his innovative ideas, and their lasting influence on both classical and contemporary economics. Dive into the mind of one of the great economic thinkers.

Table of contents

Principles of Economics

Principles of Economics by Carl Menger, published in 1871, is a foundational work that established the core principles of the Austrian School of Economics. Menger introduced the revolutionary concept of marginal utility, which explains how the value of goods is determined by their usefulness in satisfying individual needs. This shifted economic thinking from objective theories of value, like the labor theory, to a subjective value theory, where value is based on personal preferences.

Menger argued that economic goods derive their value not from the amount of labor invested but from their ability to meet human wants. This means that the same good can have different values for different people depending on their needs. He also differentiated between higher-order goods (used in production) and lower-order goods (consumer goods), explaining how their value is interconnected.

Another key contribution is Menger’s theory on the origin of money. He explained that money emerged naturally in markets as certain goods became more commonly accepted in exchange, not through government decree but through voluntary trade based on perceived value.

Menger’s clear, logical approach laid the groundwork for later Austrian economists like Ludwig von Mises and Friedrich Hayek. His emphasis on individual decision-making, subjective value, and the spontaneous order of markets remains influential in economic thought today. Principles of Economics is a must-read for anyone interested in understanding the fundamental principles that shape modern economics.

The Origins of Money

explains that it evolved as a solution to the inefficiencies of barter. In a barter system, exchanging goods is difficult because it requires a double coincidence of wants—both parties must want what the other offers.

To solve this, individuals gradually started using highly marketable goods—those widely accepted in trade—as a medium of exchange. Over time, certain commodities, like gold and silver, became preferred because they were durable, divisible, and widely valued. This spontaneous adoption of money allowed trade to expand and economies to develop more efficiently.

Menger’s key insight is that money is not an invention imposed by rulers but an organic outcome of countless individual transactions seeking to improve exchange efficiency. His theory laid the foundation for later Austrian economists like Ludwig von Mises, who further developed the concept of sound money and its role in economic stability.

By tracing the origins of money back to voluntary market interactions, Menger’s work challenges the notion that governments must control currency. His ideas remain highly relevant in discussions about monetary policy, cryptocurrency, and free-market economics. The Origins of Money is essential reading for anyone interested in understanding how money truly functions in an economy.

Investigations into the Method of the Social Sciences

Carl Menger’s Investigations into the Method of Social Sciences (1883) is a critical work that defends theoretical economics against the dominance of historicism in economic thought. Written in response to the German Historical School, Menger argues that economics should focus on discovering universal principles rather than relying solely on historical descriptions of economic events.

A key theme of the book is methodological individualism, the idea that economic phenomena arise from the actions and decisions of individuals rather than abstract collective forces. Menger asserts that social and economic laws exist independently of historical context and can be understood through logical deduction. He criticizes historicism for treating economics as merely an empirical science without recognizing the fundamental laws governing human action.

Menger also explores the role of subjectivity in economics, emphasizing that individual preferences and choices drive economic behavior. He argues that a proper economic methodology must balance theoretical reasoning with empirical observation, rather than relying purely on historical analysis.

This book sparked the Methodenstreit (methodology dispute) between the Austrian School and the German Historical School, shaping the future of economic thought. Menger’s defense of deductive reasoning laid the groundwork for later Austrian economists like Ludwig von Mises and Friedrich Hayek.

Investigations into the Method of Social Sciences remains a foundational text for understanding the philosophical underpinnings of economic theory and the importance of applying rigorous, logical methods to the study of human action.