Felix Kaufmann, On the Subject-Matter and Method of Economic Science (November 1933)

Kaufmann’s essay seeks to resolve economic methodological controversies by clarifying their logical structure. Its movement from the definition of economics to subjective value theory and competing research methods rests on a distinction between conceptual consistency and empirical usefulness.

THE source of the following reflections is my conviction that the sterility of the methodological controversies of the last fifty years is due to a lack of precision in the formulation of the problems involved.

Definitions are conventions, but definitions of established scientific terms must also answer to their actual use. Kaufmann locates confusion both in incidental associations attached to words and in the failure to distinguish successive purposes within an action. Acquisition, consumption, and happiness do not necessarily belong equally to the object investigated. An activity can be examined independently of the further ends it serves.

Looking to economists’ characteristic questions, Kaufmann identifies exchange and the determination of its terms as the discipline’s centre. This requires an account of goods broad enough to encompass services and payments for refraining from action, rather than merely transfers of physical objects.

Clearly, what he acquires are opportunities of utilising the thing in question, and, therefore, a good must be defined as a totality of such opportunities, which can be realised partly together, partly as alternatives to each other.

Exchange involves reciprocal conditional conduct, but it need not involve sacrifice: someone may accept payment for an activity they would otherwise willingly perform. Defining exchange through the economic principle risks a different confusion, whereby conduct stipulated in a definition is treated as an explanation of actual business behaviour.

Kaufmann accordingly separates factual assertions from apodictic certainty. Formal consistency, unity, and simplicity cannot guarantee empirical applicability; deductive laws require observational premises before they yield factual predictions. Empirical laws remain open to refutation, whereas conventions can be insulated against contrary evidence by unspecified disturbing factors. Such factors explain events only when their character and importance can be independently established.

We propose further to show by analysing one of the methods applied in our science, namely the method of the subjective theory of value, how the analysis of the logical structure of a method ought to be carried out.

Subjective value theory supplies Kaufmann’s principal case study. He reconstructs its method as treating action through a plan containing ordered preferences, including preferences among combinations of goods. The economic principle concerns securing a given set of commodities without surrendering more than necessary, rather than maximizing an independently measurable quantity of happiness. Value denotes a position in a preference order.

This reconstruction distinguishes describing a plan from explaining its formation. Given an ordering, surrendering the lowest-ranked use follows from the ordering itself; identifying that use as the least important want does not explain the preference. Marginal utility therefore functions as a heuristic postulate directing inquiry toward plans and their determinants, rather than as an empirical assertion, tautology, or synthetic judgment a priori. Its scientific usefulness must still be assessed. Kaufmann also resists equating preference rankings with intensities of psychological or physiological wants, since desires cannot always be specified independently of the goods satisfying them.

An explanatory instrument must not be confused with the subject it explains. Economics can investigate social exchange through individual plans without embracing every purposive allocation as its subject-matter. Kaufmann thus favours a narrower social definition while endorsing consumer-plan analysis and a theory of value preceding price theory. Appropriateness to a plan entails no ethical endorsement of its ends.

Money provides a further test of conceptual separation: defining its functions does not explain its origins or establish monetary policy. The concluding discussion similarly rejects exclusive methodological claims. The analytical school mistakes empirical laws for irrefutable propositions; the historical school overlooks the theoretical assumptions involved in selecting and interpreting facts. Statistics presupposes selection principles, while mathematics neither guarantees factual certainty nor depends for its usefulness on directly measurable objects. Kaufmann redirects methodological debate toward concrete questions of abstraction, empirical testing, and explanatory fruitfulness.