"There never lived at the same time," wrote Ludwig von Mises, "more than a score of men whose work contributed anything essential to economics." One of those men was Carl Menger (1840–1921), Professor of Political Economy at the University of Vienna and founder of the Austrian school of economics.

Menger's pathbreaking Grundsätze der Volkswirtschaftslehre [Principles of Economics], published in 1871, not only introduced the concept of marginal analysis, it presented a radically new approach to economic analysis, one that still forms the core of the Austrian theory of value and price.

Unlike his contemporaries William Stanley Jevons and Léon Walras, who independently developed concepts of marginal utility during the 1870s, Menger favored an approach that was deductive, teleological, and, in a fundamental sense, humanistic. While Menger shared his contemporaries' preference for abstract reasoning, he was primarily interested in explaining the real-world actions of real people, not in creating artificial, stylized representations of reality.

Economics, for Menger, is the study of purposeful human choice, the relationship between means and ends. "All things are subject to the law of cause and effect," he begins his treatise. "This great principle knows no exception."

Jevons and Walras rejected cause and effect in favor of simultaneous determination, the idea that complex systems can be modeled as systems of simultaneous equations in which no variable can be said to "cause" another. This has become the standard approach in contemporary economics, accepted by nearly all economists but the followers of Carl Menger.

Menger sought to explain prices as the outcome of the purposeful, voluntary interactions of buyers and sellers, each guided by their own, subjective evaluations of the usefulness of various goods and services in satisfying their objectives (what we now call marginal utility, a term later coined by Friedrich von Wieser)....

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