Carl Menger, Politische Oekonomie (1875)

Carl Menger’s review examines Adolf Wagner’s reconstruction of Karl Heinrich Rau’s economics textbook, with Erwin Nasse responsible for a projected treatment of economic policy. Menger distinguishes the scientific value of broadening economics to include ethical and collective activity from the practical merits of redistributive fiscal policy. He recognizes Wagner’s theoretical contribution while questioning whether the proposed reforms would benefit workers without weakening capital accumulation.

Rau’s established authority makes the revision consequential for economic teaching, particularly in Austria:

Rau’s „Politische Oekonomie“ ist in Oesterreich ein seit nahezu einem halben Jahrhundert hochgeschätztes Werk und der vor wenigen Jahren erfolgte Tod seines Verfassers ist auch hierzulande tief empfunden worden.

English translation: Rau's "Political Economy" has for nearly half a century been a highly esteemed work in Austria, and the death of its author a few years ago was deeply felt in this country as well.

Menger connects this reputation with the textbook’s comprehensive scholarship, practical orientation, and repeated revision. Its authority nevertheless does not remove the need for renewal:

Rau hatte in den letzten Jahren seines arbeitsamen Lebens das Werk nicht mehr in gleichem Maße wie ehedem zu fördern vermocht.

English translation: In the last years of his industrious life Rau had no longer been able to advance the work to the same degree as formerly.

Outdated statistical material was only part of the difficulty. Developments in German economics demanded substantive reconsideration of the work’s coverage and foundations:

Dagegen ließ sich nicht verkennen, daß die große, neuere Literaturbewegung auf dem Gebiete der politischen Oekonomie in Deutschland dringend der Berücksichtigung in einem Werke von Rau’s Grundanlage bedurfte.

English translation: On the other hand it could not be mistaken that the great, more recent literary movement in the field of political economy in Germany urgently required consideration in a work of Rau's fundamental design.

Wagner’s appointment therefore raises a question beyond editorial competence. Although Rau himself had wished Wagner to continue the textbook, the successor’s commitment to the Eisenach social-policy movement places him at a distance from Rau’s moderate individualism. Menger considers whether preserving the original text with critical annotations might have better represented the discipline’s competing positions. Wagner instead reconstructs the work systematically, turning an authoritative vehicle of economic liberalism into an exposition of the newer school. Menger acknowledges the undertaking’s importance without endorsing its entire programme.

The central policy discussion concerns taxation. Wagner’s decision to establish theoretical foundations before completing his treatment of taxes reflects a changed conception of fiscal justice. Where liberal public finance emphasized proportional or moderately progressive burdens while protecting capital and accumulation, the Eisenach reformers also seek to reduce inequalities of wealth and income. Menger accepts that this programme requires theoretical justification but presses its advocates to answer practical objections.

Those objections concern the possibility that redistribution could undermine its intended benefits. Inheritance taxation that reduces national capital might provide workers only temporary assistance. Progressive income taxation must operate alongside consumption and yield taxes while confronting evasion and capital mobility. For land, Menger distinguishes future receipts from present asset values: anticipated increases in rent already enter the purchase price, so withdrawing them deprives the owner of part of an existing fortune. He presents this as a practical difficulty rather than a conclusive settlement of the underlying principle.

More generally, Menger questions whether taxation serving collective ends can function within a predominantly individualistic economic order without impairing production or public revenue. If accumulation suffers while the dependent working population grows, reform may narrow workers’ means of subsistence. Recognition of the reformers’ humane purposes thus accompanies a demand for answers to economic constraints. Judgment remains provisional pending Wagner’s further fiscal argument.

The final section assesses the theoretical half-volume’s treatment of fundamental concepts, economic organization, and the state. Wagner expands introductory definitions into an analysis of elementary economic phenomena. His organizational account includes private enterprise and competition, voluntary and compulsory collective arrangements, charity, and combinations of these forms. The state is examined through its purposes, resources, expanding activities, preventive functions, and appropriate sphere.

Menger locates the scientific achievement in correcting the Smithian school’s excessive concentration on self-interested individuals and giving ethical aims and collective economic institutions their due analytical weight. Yet the extended argument establishing this broader framework compromises the work’s compactness as a textbook. The review closes by situating the installment within the projected treatments of theoretical economics, public finance, and economic policy. Its governing distinction remains clear: recognition of collective economic activity does not by itself justify particular redistributive measures.