Author's Preface

AUT H 0 R 'S PRE F AC E The Theory of the Social Economy, .which I published shortly before the outbreak of the World War, brings together the results of the studies with which I have been concerned since the beginning of my economic thought. Like other writers of the Austrian school, I began with the theory of value. Grad.ually, I passed through the entire circle of phenomena in social economy, state economy and world economy. To all of these I attempted to apply the same method which the Austrian school developed for the theory of value and price. My aim was to show that the entire social economy is built up with a view to management and value. To be sure, only a part of, the organization may be explained in purely social terms. Another part·· must be explained in terms of those who possess power in the nation and in the world. But the meaning of power also has a social basis. No power has ever been sufficiently great to proceed entirely without consideration of the general meaning of management and value. Powerful persons are merely in a position, in building up the economic organization, to carry through their personal interests rather than the general interest. Thus they are able, at those points which they regard as critical, to replace the social mind by their own. By this means the social consciousness is falsified and made to appear contradictory. It seemed to me that the highest task of theory was to show in what relations this con sciousness and power were in harmony and in opposition in the creation of the social, state and world economy. A theory which succeeded in showing this would enable one to see clearly the direc tion in which the 'interference of counter-force and, above all, of en lightened statesmanship was needed, in order that the economic or~ ganization might become truly social. Such a theory will also indicate for the modern 'state the theoretical groundwork for a suitable inter nal and external political economy. In particular, it will point the way to needed reforms. Reaching forward, it will also serve a more purely social state 'of the future, which the proletarian thinkers in terpret as socialistic, but the final form of which we cannot yet see accurately. It will 'serve this state in that it will establish those most general elements of management and value which have always existed and will always exist and which, therefore, cannot be absent xvii xviii AUTHOR'S. PREFACE in any economic order. Thus this theory may clearly indicate to the state of the future what it must take over from the present order.

Even when I published The Theory of the Social Econom,y, I was aware that I was in a position only incompletely to reach my far distant goal. In the ten years which have since passed, the de ficiencies of my work have become even more apparent to me. But owing to the pressure of other events, 1 have been unable to find lei sure to express my thoughts more pertinently. As the publisher ad vised me that anew edition of the book had become necessary, I was forced to explain to him that I was not in a position to undertake re vision. We therefore agreed to publish the second edition as an un changed reprint of the first. I have merely increased the references to the literature. In the, text itself few corrections were made. The reader is therefore not to be surprised if he finds references, for exam ple, to pre-war monetary conditions or the economic condition of Austria-Hungary as it existed before the war. It may also be re marked that I believe such mention of pre-war conditions has greater illustrative value than mention of the opaque and transitory condition in which the world finds itself today. But all this is incidental, for in the main I think I, can establish that the same goal of theory that I set up in the first edition exists for any theory of the social economy after the World War and revolution.

Never has there been as deep and pressing a need of economic theory as in the present. At the time when the representatives of the classi cal school were thinking, out their principles of economy, practical interest was confined to the question of the degree of freedom which the state should give to private economy as such. The socialistic thinkers fought the laissez-faire attitude, of private management. One who gave no great weight to their objections set himself scientifically apart from them. One did not dream that the day would come, was indeed near, when the proletariat should be strong enough to give pertinence to its demands by force. In the wake of the vVorid War this day suddenly arrived. In Russia the experiment in social ism was carried through in the most extreme form "of ,bolshevism. Almost everywhere in Europe the proletariat has come forward with such strength that it must be considered and, a counter-reform of the economic order proposed. It will not be long before the same thing will come to pass in the United States. The flourishing America of today can better satisfy its workers than aging Europe. In the rapid progress of its development it may allow greater benefits to the entrepreneurs who lead the way. But as soon as the movement beAUTHOR'S PREFACE xix gins to ebb the workers will be as eager to undermine the power of the entrepreneur as they are today in Europe.

The final distinction between· possessors and proletariat will not be successful without the aid of theory. Both class6s have sought scientifically to strengthen that position which their own interests have led them to take, and both have thus made errors with seriousconse quences. The proletarian thinkers have fastened on untenably im practical dogmas. The bourgeois thinkers on the one hand have de veloped their own case, but on the other they have left too many loop holes in the explanation. Endless sacrifices would be required were there no other means than that of trial and .error to clear up the order. Of course, it is necessary that there be such attempts. Power will also make its influence felt. In time, however, theory will be called upon. This time will come so soon as one begins seriously to suffer from the errors of practice and so soon as it is realized that raw power can work evil but cannot heal it. But when this happens, theory must have unified its thought sufficiently so that men may find the necessary help in it when once their thoughts advance to a point at which they may subject their wishes to the insistent commands of reality.

The classical theory and the socialistic theory deduced from it have not come to an agreement. The classical theory pushed into the rela tions of the social economy only so far as seemed necessary to give grounds to the demand that labor be freed from governmental con straint. The socialistic theory eagerly took over the unfinished clas sical theory, as the strongest support for the demands of the workers seemed to be here. The openly unsatisfactory nature of the classical socialist theory that comes into insoluble conflicts with actual condi tions led many economic scholars, particularly in Germany, to discard it entirely. The scholars devoted themselves to the great practical task that was constantly and forcefully raised hy the stormy modern development, and remained satisfied to raise the scientific foundation which is required from the historical development of the national economy. Just as the last scientific generation in Germany turned in this manner from the theory to the problems of socio-economic politics, this appears now to be happening in the United States. In England, the home of classical theory and the country in which this theory best fitted the conditions of life,. the connection between theory and practical politics was best maintained. But even here the mer chant class lacked the strongest support of a convincing theoretical foundation. The· proletarian class alone··found this support which xx AUTHOR'S PR'EF'ACE might be ded.ucedwithforcefullogic so soon as one had passed over the unreal fictions of the classical labor-theory. There is no doubt that the increased-scientific self-confidence of the proletarian thinkers, which the masses shared, has been a powerful aid in increasing the feeling of power by the ,masses. They thought that they' had infal libIe evidence that they were in the right at all points.

Xn the meantime, in all countries that led in scientific thought, serious, thinkers had begun to attack the fundamental economic prob lems from a new' point of view without immediately considering the practical application of their ideas. Men writing in German, English and French, who were later followed 'by Hollanders and Italians, found themselves together on a new path, in that they derived the meaning of economy and of the closely connected value from the care for the utility of goods, and in that they clearly laid down the law by which men measure utility in the economy~ Just as the discoveries of physics, which were the result of purely scientific inquiry, opened the way to numerous technical applications, so the new truths of economic theory, because they are pure truths, may be called upon to give a firm foundation to the',ends and means of the social order. The experience of management and value, extending over many thousa,nd, years, cannot be meaningless; it cannot be 'a single great error. It is a necessary result of the nature of man and the economic environment. Modern theory has succeeded in pointing out these experiences. The contradictions which the classical-socialistic theory could not solve, have been removed by the theory of marginal utility. This theory gives us the key to the understanding of eco nomic computation as it is applied in practice. But' at the same time that it enables us to understand, the sense of the economy may be perverted from a social point of view when the mighty utilize their superiority for themselves. The powerful person may extend his margin of the use of goods to include the superfluous and vain uses, while he presses the weak down to the bare needs of existence or even below this level. One sees that it is foreign to modern theory to defend the degenerations of power. On the contrary, it is quite apparent that the modern theory in its fundamentals 'is nothing less than a theory of possession, and that it gives the most effective weap ons to the socialistic critic. To be sure, it takes from socialism the theoretical foundation on which it has stood until now, but in so doing it does not weaken the position of socialism but rather increases its critical power. In the place of a doctrine that appears logically forceful but is actually foreign' to experience, is given a ioundation AUTHOR' SPREF ACE xxi of laws that are rooted in the experience of thousands of years and that will hold in all future time. These laws will become invalid only if the most unlikely condition arises and the want which calls forth anxiety for the utility of goods disappears .before a free super fluity of goods.

Revolution has brought forth no new fundamental economic thought. The bolshevistic experiment seeks to give reality to social istic doctrines whose thought had stiffened to dogma. Whether the experiment has succeeded or not is still in dispute. Therefore the experiment at least at present does not have conclusive force. He who would form a judgment of its significance must first see clearly the sense and absurdities of the practical economy. The highest duty of theory could not be performed by the classical theory and even the more deeply penetrating theory of today has not completed its work. To complete this work is the task or the present. The firmness with which I oppose the classical theory must not be interpreted to mean that I lightly appraise its significance. On the contrary, I recognize it as one of the most brilliant and practically significant efforts of the scientific mind. In spite of all attacks it has not yet lost its influence on theory and practice. B1eing complete in itself, it has withstood every attack that does not rest on a similarly closed system. Every new economic theory must first be measured by the classical theory. No matter how great an advance may be made, it will only deserve to be considered as a continuation of the work begun by the great classical masters. In this case, however, the continuation entails at many important points also a retracing of steps. At certain difficult cross-roads we must follow a different direction from that taken by the classicists. But in spite of this, their fame remains undisturbed as the first to have been on the ground and even to have showed, by their mistakes, the way to those who followed.

Because of the dominating significance which attaches to the clas sicists, it has seemed required of me to compare the modern theory with their propositions at all decisive points in orde~ to place the opposition in the clearest light. I have, however, satisfied myself to refer to the classical doctrine in its most general thoughts without entering into details and following the changes which the fundamental ideas received at the hands of each author. I have not had space to concern myself with the literature of derived ideas. The sum of the expositions which I have to present to the reader is of itself so heavy, that I had to avoid increasing it by an arrangement of the literature. I could do this all the more easxxii AUTHOR'S PREFACE ily because in the Fundamentals of Social Economics, of which The Theory of the Social Economy is a part, a specific section by Schum peter has already been seen on Epochs of the History of Dogma and Method. I commend this excellent presentation to the reader.

F. VON WIESER INTRODUCTION § 1. THE ME'THOD OF THE FOLLOWING STUDY The "Psyohological Bchool"-'1'he instruments of the isolating wnd, ic£eaZizing hypothesis and of decreasingabstraction-LQIYI,guage atnd its concepts---The tas'lv of modern eoonomio theory. The remarks on method which follow do not aspire to the dignity of a methodology. All I desire is sufficiently to acquaint the reader with the method of my investigation so that without distrust or misunderstanding he may accept my starting point seemingly so remote from actuality_ From this point the enquiry may proceed to its completion in the economy of society, of the state and of the. world at large. For. further enlightenment I refer to my ear lier works: Ueber Ursprung and Hauptgesetze des Wirtscha,ftlichen Wertes, 1884, (I. Die wissen8chaftliche Bedeutung der Sprachbegriffeand, Wesen 'Under Haupt inhalt der theoretischen Nationalokonomie (Zeitschr. F'.G.V~ 1911).