Gottfried Haberler: Review of Albert von Mühlenfels’s Steuerkraft und Wohlstandsindex (1928)

Gottfried Haberler’s signed journal book review examines Mühlenfels’s attempt to clarify the measurement of prosperity as a basis for criticizing the prosperity index in the Dawes Plan. Its central judgment separates practical feasibility from theoretical possibility: Haberler accepts the negative assessment of what contemporary statistics can accomplish, but finds that Mühlenfels has not adequately established what measurement would mean even if all necessary data were available. The review follows the book’s chapters, using their progression to expose this unresolved conceptual problem.

Haberler presents the book as occasioned by a specific policy controversy but connected to an older “semiological” literature on measuring national wealth, national income, and prosperity. The first chapter asks what an index actually measures. Mühlenfels regards prosperity as too vague for direct measurement; the relevant objects are instead tax capacity, capacity to pay tribute, creditworthiness, or the level of economic provision. For the Dawes experts, the particular concern is internal economic capacity to raise taxes. Yet actual tax-raising possibilities depend on numerous factors, some psychological, that cannot readily be represented by an index. Mühlenfels therefore restricts statistical inquiry to tax capacity under favorable assumptions about collection difficulties and willingness to pay. Haberler finds this account insufficiently clear and comprehensive. The distinction narrows the measurement problem without satisfactorily explaining its object.

The second chapter distinguishes three procedures: a single index based on one symptom, a total index combining several symptoms into one numerical expression, and a constellation method drawing inferences from relationships among symptoms. Mühlenfels considers the first impracticable because no single adequate symptom exists. His objection to the total index is that aggregation obscures the composition of the phenomenon. Haberler challenges the demand underlying that objection:

Dieser Vorwurf scheint unberechtigt, denn es ist doch zu viel verlangt, daß ein Index sowohl die Größe der Gesamterscheinung, als auch ihre Zusammensetzung wiedergeben solle.

English translation: This criticism seems unjustified, for it is surely asking too much that an index should represent both the magnitude of the overall phenomenon and its composition.

An aggregate measure need not simultaneously provide a full account of its constituent parts. Haberler thus distinguishes the task of representing magnitude from that of displaying composition, rather than accepting lost detail as sufficient grounds for rejecting aggregation.

His more fundamental objection concerns the move from incomplete statistical observation to the selection of indicators. Mühlenfels correctly recognizes that statistics cannot capture every manifestation or factor contributing to prosperity or tax capacity. But this practical limitation should not displace the prior theoretical question:

Trotzdem wäre es geboten, zu untersuchen, wie sich unter der Annahme, daß alle Daten gegeben seien, die Messung gestalten würde.

English translation: Nevertheless, it would be necessary to investigate what form measurement would take under the assumption that all the data were given.

This counterfactual inquiry is the review’s decisive conceptual move. Before choosing observable symptoms, one should clarify how the complete phenomenon would be measured. Haberler argues that the omission becomes especially consequential in the third chapter’s discussion of symptom selection. His account of the fourth chapter identifies further technical questions—combining observations, weighting average components, combining positive and negative symptoms, selecting a comparison period, and allowing for changes in money’s value and cyclical fluctuations—but does not offer detailed judgments on their treatment.

The final chapter returns to the applicability of the Dawes index. Haberler finds its observations interesting and accepts its negative practical result: the existing state of statistics does not permit measurement of prosperity, and future feasibility remains doubtful. He nevertheless withholds agreement on the theoretical question:

Ueber die theoretische Möglichkeit einer solchen Messung, d. h. die Möglichkeit unter Annahme, daß alle Daten gegeben seien, ist auf Grund von M.s Ausführungen nicht zu entscheiden.

English translation: The theoretical possibility of such measurement, that is, its possibility under the assumption that all the data were given, cannot be decided on the basis of M.’s discussion.

The review’s significance lies in this qualified conclusion. Haberler does not defend the Dawes index against practical criticism; he insists that inadequate evidence and inadequate conceptual foundations are different problems. A convincing critique of economic measurement must establish what is to be measured before deciding whether available statistical indicators can measure it.