Emil Kauder, Freedom and Economic Theory: Second Research Report on Menger's Unpublished Paper (1961)

Emil Kauder’s journal article reconstructs Carl Menger’s intellectual development from annotations preserved in his library at Hitotsubashi University. Moving from manuscript evidence and intellectual influences to social philosophy and economic theory, it reveals ambitions and tensions less apparent in Menger’s published writings.

The principal sources are Menger’s annotations in Rau’s economics handbook and the revised copy of his own 1871 theory. Kauder explains the latter’s scope:

Menger's hand copy of his theory of 1871 (abbreviated: fragment) includes an unfinished correction of this work which was planned as an introduction for a four-volume handbook.

The fragment belongs to an expansive project of reconstruction, not merely the correction of individual propositions. Its unfinished arguments allow Kauder to trace alternatives obscured by exclusive attention to published works. Unavailable manuscripts and unexplored books nevertheless limit the reconstruction: the report advances a research program without claiming a definitive intellectual biography.

The annotations also revise the picture of Menger’s intellectual debts. Kauder connects his early thinking with Austrian classicism, especially Joseph Kudler, and emphasizes his engagement with economists less prominent in subsequent histories:

In the fragment Ricardo has been quoted 15 times, while Peshine Smith is mentioned 27 times and Rossi even 55 times.

These disparities redirect attention from a genealogy organized solely around canonical innovators. Conversely, Kauder finds no textual confirmation of Menger’s reported debt to Cournot. Menger’s occasional use of equations also complicates any identification of his economics with an unqualified rejection of mathematical reasoning.

The article’s interpretive center is the relationship between freedom and economic explanation. Kauder distinguishes the unpublished inquiry from Menger’s published methodological defense:

In the fragment Menger investigated mainly the connection between morals and economic action under the condition of personal freedom; in his methodological publication he justifies exact theory.

Freedom carries two connected but potentially conflicting meanings: it characterizes individual decision and names a social condition still to be achieved. Regular economic behavior can express free choice, while poverty and dependence restrict autonomous action. Kauder relates this tension to Menger’s uncertainty between causal explanation and explanation through human purposes. The separation of economic science from political advocacy thus coexists uneasily with a liberal conception of historical progress.

This account qualifies the political implications of Menger’s individualism. Criticism of aristocratic luxury and concern for workers accompany support for saving and private production and opposition to socialism. Analytical individualism does not establish unrestricted competition as an absolute political rule. Menger recognizes conflicts between private profit and public welfare and allows exceptions to laissez-faire. Social reform emerges within his liberalism rather than simply as an external concession.

The theoretical sections reconstruct discovery through successive revisions. Kauder challenges the idea of a single decisive breakthrough in 1869 by tracing value theory through Kudler and the 1867 annotations. Utility, available quantity, individual judgment, and imputation already undermine labor-cost explanations: consumers’ valuations determine the value of productive goods rather than following from their costs. Important elements of marginal analysis nevertheless remain absent, and the documents needed to explain their full emergence before 1871 have not been found.

Subsequent investigations concern isolated exchange, differentiated monopoly pricing, and tentative relations among prices. Monetary notes combine metallism with international adjustment and uneven price responses to paper-money expansion. Other fragments explore diminishing returns beyond agriculture, approaches to value-added accounting, and disturbances involving credit and debt. Kauder distinguishes these suggestive beginnings from completed theoretical systems.

The conclusion attributes Menger’s declining publication to excessive scope, dispersed effort, and increasing preoccupation with classification rather than intellectual exhaustion alone. Unfinished work nevertheless left successors room for independent development. Connections with Böhm-Bawerk, Wieser, Mises, and Spann suggest influence beyond value theory, although transmission through teaching remains difficult to establish precisely. Kauder’s report recovers Austrian economics as an uneven process of conceptual formation shaped by unresolved philosophical questions.