Emil Kauder, Genesis of the Marginal Utility Theory: From Aristotle to the End of the Eighteenth Century (1953)

Emil Kauder’s article in The Economic Journal reconstructs the long intellectual prehistory of marginal utility, challenging accounts that begin with Gossen and the nineteenth-century founders Jevons, Menger, and Walras. Its organizing claim is that ancient philosophy, scholastic discussions of just price, early modern monetary theory, and eighteenth-century mathematics supplied much of the conceptual apparatus before economics became a systematic discipline. Kauder advances a counterfactual as well as a historical argument:

French, Italian and Swiss authors of the enlightenment have so perfected this analysis, that it might have been possible during the time of Adam Smith to base a system of political economy entirely on marginal utility calculation.

The article follows two converging lines: the development of subjective valuation from Aristotle through Italian and French economists, and Daniel Bernoulli’s mathematical treatment of diminishing utility. Their conjunction makes the eighteenth century appear as a missed opportunity, although Kauder’s own qualifications show that important elements of a complete marginal theory remained absent.

Aristotle supplies more than the familiar distinction between use and exchange. Drawing on Oskar Kraus, Kauder finds accounts of utility, scarcity, decreasing satisfaction, and valuation through the loss or addition of a good. The Topics anticipates the reasoning later used by Menger and Böhm-Bawerk: a commodity’s importance can be assessed through the difference its removal makes to a collection of goods. Kauder establishes a conceptual resemblance without claiming a demonstrated line of influence upon the Austrian economists. The medieval doctors subsequently preserved Aristotelian valuation while adapting it to increasingly complicated markets and disputes about just price. Their achievement was transmission more than analytical innovation:

Their value theories are a mixture of costs and subjective values, of objective prices and valuations.

This mixture matters because scholastic utility frequently denotes communal welfare rather than an individual’s particular satisfaction. Kauder therefore distinguishes the survival of a vocabulary from the development of a precise explanatory method. Aquinas, Buridanus, Molina, Lessius, Grotius, and Pufendorf sustain the association of value with utility and scarcity, but subordinate it to moral and legal questions.

Gian Francesco Lottini marks a transitional stage. His advice to princes remains governed by Aristotelian distinctions between common welfare and personal goods, and by the ethical demand that reason moderate appetite. Nevertheless, he observes that immediate satisfaction attracts people more powerfully than distant benefits. Kauder reads this as an anticipation of the undervaluation of future wants, while correcting Graziani’s stronger attribution of a fully articulated theory of unlimited needs. Lottini approaches economic analysis without making it an independent undertaking.

With Davanzatti, Montanari, and Galiani, subjective value becomes the basis of a recognizable economic program. Davanzatti and Montanari explain money through the value of the commodities it represents; Galiani extends utility and scarcity to productive factors. Differences in remuneration arise from the usefulness and scarcity of particular talents, including the difficulty of bringing them to maturity. The resulting reversal of causal priority is central:

Generally speaking, according to Galiani, it is not labor costs which determine value, but rather value which determines labor costs.

Kauder also connects Galiani’s distinction between present and future money with the later Austrian explanation of interest. These parallels establish the breadth of subjective analysis before nineteenth-century marginalism, but Galiani leaves price formation insufficiently explained.

Turgot addresses that gap through models of exchange. Two isolated traders possessing maize and wood bargain within limits set by their different valuations. Agreement becomes possible because each prefers what he receives to what he gives up; exchange consequently increases both parties’ satisfaction. Adding competing traders produces a common exchange rate. Kauder sees close affinities with Menger and Wicksell, while presenting Condillac’s subsequent defense of value against cost explanations as the retreating argument of a tradition increasingly displaced by British classical economics.

Yet subjective valuation alone does not yield a theory of the value of interchangeable units. Galiani can explain why gold generally commands more than bread, but not why equal portions of a commodity receive equal valuations:

They cannot grasp it, because they lack the marginal method.

Bernoulli provides the decisive mathematical step in his 1738 work on games of chance. By considering successive small increments of wealth and joining diminishing utility to calculus, he identifies the utility of an additional increment. Kauder nevertheless questions Bernoulli’s comparison of utility across rich and poor individuals, since it assumes a common interpersonal standard. Nor does Bernoulli establish that marginal value determines the individual values of all equivalent units already possessed. Buffon and Laplace do not substantially close this gap.

The concluding synthesis assembles utility and scarcity, concrete satisfaction, diminishing utility, marginal increments, factor valuation, and exchange into the components of an emerging theory. Kauder’s relevance lies in distinguishing these achievements rather than treating marginalism as a single discovery. His final judgment is deliberately polemical: Smith’s contrast between useful water and valuable diamonds eclipsed two millennia of reasoning and postponed a better foundation for economics from 1776 to around 1870. The article thus recovers neglected analytical resources while interpreting their displacement as a historical loss. Its strongest evidence concerns the early availability of separate conceptual elements; the possibility of their eighteenth-century synthesis remains Kauder’s larger, more speculative claim.