Ludwig von Mises · 1928
Originally published in 1928, this essay appears here in its German republication of 1933. Across four sections, Mises clarifies subjective value theory by challenging objectivist remnants in Menger’s and Böhm-Bawerk’s formulations. His criticism is reconstructive: their explanations of prices remain sound, but some methodological statements obscure the implications of their achievement.
Die nachstehenden Ausführungen erheben keinen Anspruch auf Originalität.
English translation: The following remarks make no claim to originality.
Mises presents his argument as a consistent development of established insights. Misunderstanding arose not only among critics but also from ambiguities in the founders’ presentations. His governing distinction separates explaining exchange from judging the purposes or beliefs that motivate it.
Section I identifies agents’ choices between definite quantities of goods as the foundation of price explanation. Psychology, physiology, and cultural history may investigate why people desire particular objects; catallactics takes their valuations as its starting point.
Das Handeln dieser Subjekte, daß sie eine bestimmte Menge des Gutes A einer bestimmten Menge des Gutes B im Tausche vorziehen und so fort, ist die letzte für die Katalaktik relevante Ursache der Austauschverhältnisse des Marktes.
English translation: The action of these subjects, the fact that they prefer a definite quantity of good A to a definite quantity of good B in exchange, and so forth, is the ultimate cause, relevant for catallactics, of the exchange ratios of the market.
The qualification “for catallactics” is decisive. Mises does not deny that preferences have causes; he distinguishes those causes from the choices through which market exchange becomes intelligible. Modern economics resolves the paradox of value by examining particular quantities rather than entire classes of goods. Attention to diminishing marginal utility can obscure this more fundamental shift in the unit of analysis.
Section II applies that principle to disputes over rationality and genuine needs. Value scales are expressed in action, not established by an observer’s standard of reasonable conduct. Fashion, vanity, and mistaken belief therefore matter to price formation as fully as informed or socially approved purposes.
KANTs Werke mag der eine aus Wissensdurst, der andere aus Snobismus kaufen; für den Markt ist der Beweggrund des Handelns der Käufer gleichgültig; allein das, daß sie einen bestimmten Betrag aufzuwenden bereit sind, entscheidet.
English translation: One man may buy Kant's works out of thirst for knowledge, another out of snobbery; for the market the motive of the buyers' action is a matter of indifference; the decisive thing is solely that they are prepared to expend a definite sum.
The example isolates willingness to exchange from the cultural worth of the buyer’s motive. Against Menger’s distinction between genuine and imagined needs, Mises maintains that an actor’s belief in an object’s usefulness suffices for the relevant economic relationship. Religious implements or cosmetics cannot be excluded from price theory because an observer disputes their efficacy. A general explanation must account for their exchange rather than classify it away.
Section III extends the criticism to Böhm-Bawerk’s separation of immediate exchange advantage from modifications attributed to custom, generosity, convenience, or nationalism. Mises traces this distinction to classical economics’ merchant-centred perspective. Monetary accounting made maximum financial gain appear the defining economic objective, leaving other ends to be treated as departures from economic conduct.
His examples expose the weakness of that boundary. Buying pencils from a disabled veteran combines acquiring goods with supporting the seller; shopping nearby obtains convenience as well as merchandise. A nationalist’s willingness to pay more to a compatriot likewise expresses a preference, not a suspension of economic explanation. These transactions pursue multiple ends within the same process of valuation. Competition makes merchants responsive to customers’ wishes, including politically motivated preferences when customers accept the additional cost.
Mises nevertheless retains a limited distinction between monetarily calculable advantage and other ends. Honour or fidelity may be costly in business terms. The mistake is to turn that accounting distinction into a boundary separating conduct explained by catallactics from conduct requiring different principles.
Section IV revisits homo oeconomicus as an embodiment of commercial principles, insufficient as a foundation for explaining all exchange. Classical theory sought general laws but could not adequately encompass consumption through its merchant-centred schema. Subjectivism supplies the missing generality by accepting agents’ purposes without prescribing them.
Sie ist von allen psychologischen und ethischen Erwägungen unabhängig.
English translation: It is independent of all psychological and ethical considerations.
This independence is methodological, not a denial of motives or moral concerns. Different purposes change the data of market activity without requiring different principles of price formation. Mises preserves Menger’s and Böhm-Bawerk’s substantive achievements while correcting their inconsistent formulations. The essay articulates a unified theory of exchange in which error, altruism, prejudice, and convenience enter as agents’ valuations, not exceptions to economic law.
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