[1104] “The errors of the Classical school are, so to speak, the ordinary diseases of the childhood of every science.” (Böhm-Bawerk, The Austrian Economists, in Annals of the American Academy of Political and Social Science, January 1891.)
[1105] Recherches sur les Principes mathématiques de la Théorie des Richesses.
[1106] Let P = value of product and x, y, z represent wages, interest, and rent respectively, then x + y + z = P, which is insoluble.
Nor does it seem much more hopeful when written out thus:
| x | = | P - (y + z) |
| y | = | P - (x + z) |
| z | = | P - (x + y) |
[1107] “The theory of economic equilibrium is quite distinct from the theory of final utility, although the public are apt to confuse them and to think that they are both the same.” (Vilfredo Pareto, L’Economie pure, 1902.)
[1108] The name varies a little with different authors and in different countries. “The final degree of utility” is the term used by Jevons, “marginal utility” by the Americans, “the intensity of the last satisfied want” by Walras. Walras also speaks of it as “scarcity,” using the term in a purely subjective fashion to denote insufficiency for present need. This very plethora of terms suggests a certain haziness of conception. The term “marginal” seems clearer than the term “final,” although in some cases it may be impossible to oust the latter.
It appears that the first suggestion of final utility in the sense in which it is employed by the Psychological school is due to a French engineer of the name of Dupuit. He threw out the suggestion in two memoirs entitled La Mesure de l’Utilité des Travaux publics (1844) and L’Utilité des Voies de Communication (1849), both of which were published in the Annales des Ponts et Chaussées, although their real importance was not realised until a long time afterwards. Gossen also, whose book is referred to on p. 529, was one of the earliest to discover it.
In its present form it was first expounded by Stanley Jevons in his Theory of Political Economy, and by Karl Menger in his Grundsätze der Volkswirtschaftlehre (1871). Walras’s conception of scarcity, which is just a parallel idea, was made public about the same time (1874). Finally Clark, the American economist, in his Philosophy of Value, which is of a somewhat later date (1881), seems to have arrived at a similar conclusion by an entirely different method—a remarkable example of simultaneous discoveries, which are by no means rare in the history of thought.
Despite its cosmopolitan origin, the school is generally spoken of as the Austrian school, because its most eminent representatives have for the most part been Austrians. Among these we may mention Karl Menger, already referred to, Professor Sax (Das Wesen und die Aufgabe der Nationalökonomie, 1884), Wieser (Der natürliche Werth, 1889), and of course Böhm-Bawerk (author of Grundzüge der Theorie des wirtschaftlichen Güterwerths, in Jahrbücher für Nationalökonomie, 1886, and the well-known book on capital and interest).