WEBVTT NOTE 14. The Austrian School’s Critique of Marxism 1 00:00:00.000 --> 00:00:06.800 Chapter 14 The Austrian School's Critique of Marxism 2 00:00:06.800 --> 00:00:11.560 Council republics were established in Hungary and Bavaria, according to the Russian-Soviet 3 00:00:11.560 --> 00:00:17.600 model shortly after the First World War. Violent revolts erupted in many places in Germany. 4 00:00:17.600 --> 00:00:24.140 Vienna, too, was dominated by this revolutionary atmosphere, which middle-class circles embraced 5 00:00:24.140 --> 00:00:27.020 with Calculated Opportunism. 6 00:00:27.020 --> 00:00:31.740 Ludwig von Mises, who at the time was a civil servant in the Chamber of Commerce of Lower 7 00:00:31.740 --> 00:00:38.620 Austria, recalled the following, People were so convinced of the inevitability of Bolshevism 8 00:00:38.620 --> 00:00:43.660 that their main concern was securing a favourable place for themselves in the new order. Bank 9 00:00:43.660 --> 00:00:50.580 directors and industrialists hoped to make good livings as managers under the Bolshevists. 10 00:00:50.580 --> 00:00:56.220 Otto Bauer was State Secretary in the Foreign Department at this time, the leading Austro-Marxist 11 00:00:56.220 --> 00:01:01.300 and later Chairman of the Nationalisation Commission. Mises knew him very well. They 12 00:01:01.300 --> 00:01:06.340 had attended Boehm-Bawerk's economic seminar together. At the time, Mises wrote of the 13 00:01:06.340 --> 00:01:12.020 winter of 1918-1919 in his memoirs, I was successful in convincing the Bauer's that 14 00:01:12.020 --> 00:01:16.740 the collapse of a Bolshevist experiment in Austria would be inevitable in a very short 15 00:01:16.740 --> 00:01:22.900 time perhaps within days. I knew what was at stake. Bolshevism would lead Vienna to 16 00:01:22.900 --> 00:01:28.420 starvation and terror within a few days, plundering hordes would take to the streets, and a second 17 00:01:28.420 --> 00:01:33.580 bloodbath would destroy what was left of Viennese culture. After discussing these problems with 18 00:01:33.580 --> 00:01:38.220 the Bauers over the course of many evenings, I was finally able to persuade them of my 19 00:01:38.220 --> 00:01:44.060 view. In January of 1919 Bauer finally made the announcement in the Arbeit at Saitung 20 00:01:44.060 --> 00:01:49.860 that he wanted to carry out expropriations with reimbursements in heavy industry and large-scale 21 00:01:49.860 --> 00:01:55.780 landholding. The Arbeitszeitung, or workers' newspaper, was started in 1889 and functioned 22 00:01:55.780 --> 00:02:02.660 as the main organ of the Austrian Socialist Party until 1989. It was banned from 1934 23 00:02:02.660 --> 00:02:09.180 to 1945. It ceased publication as an independent newspaper in 1991. 24 00:02:09.180 --> 00:02:13.340 Organisational measures were to be taken in preparation for nationalisation in other industries 25 00:02:13.340 --> 00:02:15.340 as well. 26 00:02:15.340 --> 00:02:20.380 The convincing Mises did in those memorable nighttime discussions was directed towards 27 00:02:20.380 --> 00:02:25.900 socialist political intentions that had the potential of endangering the short and unstable 28 00:02:25.900 --> 00:02:30.140 store of supplies available to the Viennese population even further. 29 00:02:30.140 --> 00:02:35.620 Of all the voluminous literature circulated during the subsequent debate on socialisation, 30 00:02:35.620 --> 00:02:41.200 Schumpeter noted that even the most able were writing the most banal things. Mises was one 31 00:02:41.200 --> 00:02:46.740 One of the few who kept his focus on the possible consequences of state intervention with sobriety 32 00:02:46.740 --> 00:02:52.700 and a sense of reality. The government-run war and transitional economy had provided numerous 33 00:02:52.700 --> 00:02:58.260 examples of the inevitable failure of central economic planning and had also proven the 34 00:02:58.260 --> 00:03:05.500 lesser economic productivity of public enterprises. Moreover, Mises realised early on that the 35 00:03:05.500 --> 00:03:11.460 The interests of the Viennese Sozialisierungskommission, Commission for Nationalisation, were by no 36 00:03:11.460 --> 00:03:16.460 means identical to the interests of the Federal States, in any case. 37 00:03:16.460 --> 00:03:20.900 These nightly talks put such a strain on his relationship with Bauer that Mises tended 38 00:03:20.900 --> 00:03:25.220 to believe Bauer had tried to have him removed from the teaching staff at the University 39 00:03:25.220 --> 00:03:26.220 of Vienna. 40 00:03:26.220 --> 00:03:30.460 Mises was indeed no longer considered for the position of tenured professor in Vienna 41 00:03:30.460 --> 00:03:33.080 when it became vacant in 1919. 42 00:03:33.080 --> 00:03:40.080 It was given instead to Ottmar Spann, 1878-1950, a former colleague of Bauer in the Wissenschaftliche 43 00:03:40.080 --> 00:03:46.680 Komitee für Kriegswirtschaft, Academic Committee for War Economy in the Royal Imperial Ministry 44 00:03:46.680 --> 00:03:48.760 of War. 45 00:03:48.760 --> 00:03:54.160 During the course of the nationalisation debate of 1919, Mises defended private property and 46 00:03:54.160 --> 00:03:59.120 the market economy with the argument of economic efficiency of supply, but he had to argue 47 00:03:59.120 --> 00:04:04.080 the position almost single-handedly, as many members of the Austrian School had been appointed 48 00:04:04.080 --> 00:04:09.220 to senior positions in the Central War and Transition Economy offices, thereby joining 49 00:04:09.220 --> 00:04:11.680 this statist camp. 50 00:04:11.680 --> 00:04:16.920 It almost seemed as if they had, over the course of their careers, completely forgotten 51 00:04:16.920 --> 00:04:22.740 that the academic dispute with Marxism had at no university been so profound and productive 52 00:04:22.740 --> 00:04:25.400 as it had been in Vienna. 53 00:04:25.400 --> 00:04:30.240 When the subjective theory of value had begun to take hold in the 1880s, other theories 54 00:04:30.240 --> 00:04:36.240 that competed with those of the Austrian School had also come to the fore, for example the 55 00:04:36.240 --> 00:04:43.000 labor theory of value. In Capital and Interest, a Critical History of Economical Theory, 1884, 56 00:04:43.000 --> 00:04:49.440 Eugen von Boehm-Bawerk devoted a complete section to socialist notions, the exploitation theory, 57 00:04:49.440 --> 00:04:53.120 and subjected them to fastidious and detailed criticism. 58 00:04:53.120 --> 00:04:59.400 In 1885, Gustav Gross authored one of the first biographical sketches on Karl Marx. 59 00:04:59.400 --> 00:05:04.920 In the very same year, he produced a separate biography, Karl Marx, eine Studie, Karl Marx's 60 00:05:04.920 --> 00:05:05.920 study. 61 00:05:05.920 --> 00:05:10.520 Shortly thereafter, he reviewed the second volume of Das Kapital, Capital. 62 00:05:10.520 --> 00:05:15.320 Hermann von Schulen zu Schottenhofen, first scholarly publication was Die Lehre von den 63 00:05:15.320 --> 00:05:22.280 Produktionsfaktoren in den sozialistischen Theorien, 1885, Study of the Factors of Production 64 00:05:22.280 --> 00:05:24.420 in Socialist Theories. 65 00:05:24.420 --> 00:05:28.760 The dispute with the Socialists was soon to become a permanent fixture of the Austrian 66 00:05:28.760 --> 00:05:29.760 School. 67 00:05:29.760 --> 00:05:34.480 It is an irony of history that it was this school of thought that first introduced academic 68 00:05:34.480 --> 00:05:40.080 discourse about socialism into the seminar rooms and libraries of established economics 69 00:05:40.080 --> 00:05:42.120 departments. 70 00:05:42.120 --> 00:05:46.980 Criticism was aimed primarily at the labor theory of value, whose contradictions and shortcomings 71 00:05:46.980 --> 00:05:53.260 were thought to have been overcome once and for all with the subjective theory of value. 72 00:05:53.260 --> 00:05:58.500 The socialist theory did not represent progress but rather regression. 73 00:05:58.500 --> 00:06:03.220 Fierce controversy between Boehm-Bawerk, Dietzel and even Zocacandl, among others, brought 74 00:06:03.220 --> 00:06:06.340 competition between the two doctrines to a head. 75 00:06:06.340 --> 00:06:11.340 Dietzel held to the labor theory of value and held fast to the view that the principle 76 00:06:11.340 --> 00:06:18.860 All of marginal utility was, in the end, nothing more than the good old law of supply and demand. 77 00:06:18.860 --> 00:06:23.660 Disputes with socialism soon went beyond the labor theory of value and brought the socialist 78 00:06:23.660 --> 00:06:26.380 state into question in many respects. 79 00:06:26.380 --> 00:06:31.540 Boehm-Bawerk, for example, regarded interest as an economic category wholly independent 80 00:06:31.540 --> 00:06:33.580 of the social system. 81 00:06:33.580 --> 00:06:37.340 Interest would exist even in the socialist state. 82 00:06:37.340 --> 00:06:42.780 Mises criticized socialist writers for their inadequate teaching of values' role in the 83 00:06:42.780 --> 00:06:48.340 socialist state. He came to the conclusion that not for one day could the socialist economic 84 00:06:48.340 --> 00:06:54.780 state of the future be administered according to any such reading of value, for Mises, in 85 00:06:54.780 --> 00:06:58.700 the socialist theory of value, pretty nearly everything is wrong. 86 00:06:58.700 --> 00:07:03.580 Johann von Komorzinski extended the analysis to political science. He distinguished between 87 00:07:03.580 --> 00:07:11.380 and a true philanthropic socialism and a delusory socialism aimed purely at class interests. 88 00:07:11.380 --> 00:07:17.260 After the posthumous edition of the third volume of Das Kapital 1895, two in-depth contributions 89 00:07:17.260 --> 00:07:21.860 of the Austrian School marked the temporary cessation of its critique of Marxism. 90 00:07:21.860 --> 00:07:27.300 In one perceptive essay, Komorczynski tried to prove that Marxist theories were at the 91 00:07:27.300 --> 00:07:31.420 greatest possible odds with the real economic processes. 92 00:07:31.420 --> 00:07:36.660 The contradiction stemmed from the basic principle, not from the utopian thinking. 93 00:07:36.660 --> 00:07:42.340 In his famous Zum Abschluss des Marxischen Systemes, 1896, Karl Marx and the close of 94 00:07:42.340 --> 00:07:47.160 his system, Boehm-Bawerk summarized his previous critique and came to the conclusion, based 95 00:07:47.160 --> 00:07:52.460 on the well-known contradictions between the first two and the third volumes of Das Kapital, 96 00:07:52.460 --> 00:07:57.900 that the final Marxist theory contains as many cardinal errors as there are points in 97 00:07:57.900 --> 00:08:09.900 They bear evident traces of having been a subtle and artificial afterthought contrived to make a preconceived opinion seem the natural outcome of a prolonged investigation. 98 00:08:09.900 --> 00:08:16.900 The Marxian system, according to Boehm-Bawerk, has a past and a present but no abiding future. 99 00:08:16.900 --> 00:08:23.260 A clever dialectic may make a temporary impression on the human mind, but cannot make a lasting 100 00:08:23.260 --> 00:08:24.260 one. 101 00:08:24.260 --> 00:08:29.340 In the long run, facts and the secure linking causes, in effect, win the day. 102 00:08:29.340 --> 00:08:34.100 Boehm-Bawerk foresaw that the belief in an authority, which has been rooted for thirty 103 00:08:34.100 --> 00:08:40.100 years in Marxist apologetics, forms a bulwark against the incursion of critical knowledge 104 00:08:40.100 --> 00:08:43.460 that will slowly but surely be broken down. 105 00:08:43.460 --> 00:08:48.980 And even then, socialism will certainly not be overthrown with the Marxian system, neither 106 00:08:48.980 --> 00:08:52.740 practical nor theoretical socialism. 107 00:08:52.740 --> 00:08:57.180 By the end of the 1880s, the law faculty of the University of Vienna became a centre of 108 00:08:57.180 --> 00:08:59.200 research into socialism. 109 00:08:59.200 --> 00:09:04.540 In his sensational work, Das Recht auf den vollen Arbeitsertrag in geschichtlicher Darstellung, 110 00:09:04.540 --> 00:09:11.840 1886, The Historical View of the Right to Full Labour Revenue, Anton Menger, 1841-1906, 111 00:09:11.840 --> 00:09:16.240 One of Carl Menger's brothers, professor of civil litigation law and the first socialist 112 00:09:16.240 --> 00:09:20.540 of the monarchy with a tenured professorship, made a case for the nationalisation of the 113 00:09:20.540 --> 00:09:28.340 means of production. Carl Grünberg, 1861-1940, a scientific Marxist, taught economics there 114 00:09:28.340 --> 00:09:35.580 starting in 1892 and was one among many of Mises's teachers. In 1924 he was appointed 115 00:09:35.580 --> 00:09:40.700 of Frankfurt, where he founded the Institut für Sozialforschung, Institute for Social 116 00:09:40.700 --> 00:09:44.300 Research, and edited the works of Marx. 117 00:09:44.300 --> 00:09:49.820 Anton Menger, Carl Grünberg and later even Boehm-Bawerk came to attract the young socialist 118 00:09:49.820 --> 00:09:56.700 elite – Marx and Friedrich Adler, Otto Bauer, Carl Renner, Julius Tantler, Emil Lederer, 119 00:09:56.700 --> 00:10:00.660 Robert Dannenberg, Julius Deutsch and Rudolf Hilferding. 120 00:10:00.660 --> 00:10:05.860 From Hilferding's pen came the first Marxist anti-critique directed at Boehm-Bawerk, and 121 00:10:05.860 --> 00:10:11.380 his Das Finanzkapital 1910, Finance Capital, was a remarkable outcome of the culture of 122 00:10:11.380 --> 00:10:17.180 the seminar. In it, he comments on the role of banks and their symbiosis with the state, 123 00:10:17.180 --> 00:10:21.700 seemingly anticipating the monetary and business cycle theory of the Austrian School, which 124 00:10:21.700 --> 00:10:26.860 was sceptical of both. On the eve of the First World War, the continuing 125 00:10:26.860 --> 00:10:31.020 The prevailing exchange of ideas between these talented young people nurtured in Boehm-Bawerk 126 00:10:31.020 --> 00:10:36.180 the belief that the labor theory of value had lost ground in theoretical circles in all 127 00:10:36.180 --> 00:10:40.140 countries in recent times. 128 00:10:40.140 --> 00:10:45.100 Theoretical arguments that had evolved over the years did not play much of a role in the 129 00:10:45.100 --> 00:10:47.960 post-war debate on nationalization at first. 130 00:10:47.960 --> 00:10:52.880 In fact, ideas about the organization of the economy and economic policy were prevalent, 131 00:10:52.880 --> 00:10:59.200 It soon appeared that the ideas of nationalisation functionaries had been openly inadequate. 132 00:10:59.200 --> 00:11:03.760 Many nationalised business establishments fell upon economic hard times. Entrepreneurs 133 00:11:03.760 --> 00:11:09.160 proved reluctant to invest when expropriations were announced, and amazingly enough Otto 134 00:11:09.160 --> 00:11:14.440 Bauer seemed surprised at this reaction. In the federal states, state claims made the 135 00:11:14.440 --> 00:11:20.440 process of nationalisation stall or fail altogether, but most notable was the threat of starvation 136 00:11:20.440 --> 00:11:29.100 in Vienna. In 1919, 150,000 of the 186,000 school children were undernourished or severely 137 00:11:29.100 --> 00:11:35.000 undernourished. This was an indirect consequence of a controlled war economy that had led to 138 00:11:35.000 --> 00:11:41.460 a quadrupling of fallow land. Schumpeter, who in 1919 had had to resign as finance minister 139 00:11:41.460 --> 00:11:46.200 over the question of nationalisation, took stock two years later. 140 00:11:46.200 --> 00:11:52.160 Though it has political appeal, nationalisation accompanied by a comfortable lifestyle and 141 00:11:52.160 --> 00:11:57.400 a simultaneously abundant provision of goods, and the childish idea of bedding oneself in 142 00:11:57.400 --> 00:12:04.280 existing affluence is just nonsense. Nationalisation, which is not nonsense, is politically possible 143 00:12:04.280 --> 00:12:09.120 today, but only so long as no one attempts it in earnest. 144 00:12:09.120 --> 00:12:13.200 Just when the politics of nationalisation were beginning to lose momentum, Mises gained 145 00:12:13.200 --> 00:12:20.740 recognition for his spectacular essay Die Wirtschaftsrechnung im sozialistischen Gemeinwesen, Economic Calculation 146 00:12:20.740 --> 00:12:25.940 in the Socialist Commonwealth. It was expanded substantially two years later and published 147 00:12:25.940 --> 00:12:32.500 as the book Die Gemeinwirtschaft Untersuchungen über den Sozialismus, 1922, Socialism and 148 00:12:32.500 --> 00:12:38.520 Economic and Sociological Analysis. Mises made the point that rational economic management, 149 00:12:38.520 --> 00:12:43.160 that is resource conserving production and distribution of goods, which takes consumer 150 00:12:43.160 --> 00:12:49.040 preferences into account, can only be guaranteed with a free price system, the free exchange 151 00:12:49.040 --> 00:12:54.280 of goods and freedom to implement all possible uses of the goods, and that with central planning 152 00:12:54.280 --> 00:12:56.920 these goals can never be achieved. 153 00:12:56.920 --> 00:13:01.200 If the means of production are not privately owned, then efficient business leadership 154 00:13:01.200 --> 00:13:05.720 and the consequent satisfying of consumer interests cannot be ensured. 155 00:13:05.720 --> 00:13:11.200 The core problem according to Mises is that in the socialistic community economic calculation 156 00:13:11.200 --> 00:13:17.920 would be impossible. In any large undertaking the individual works or departments are partly 157 00:13:17.920 --> 00:13:23.880 independent in their accounts. They can reckon the cost of materials and labour and it is 158 00:13:23.880 --> 00:13:29.020 possible at any time to sum up the results of their activities in figures. In this way 159 00:13:29.020 --> 00:13:34.320 it is possible to ascertain with what success each separate branch has been operated and 160 00:13:34.320 --> 00:13:39.540 and thereby to make decisions concerning the reorganisation, limitations or extension of 161 00:13:39.540 --> 00:13:43.180 existing branches or the establishment of new ones. 162 00:13:43.180 --> 00:13:48.500 It seems natural then to ask why a socialistic community should not make separate accounts 163 00:13:48.500 --> 00:13:52.580 in the same manner, but this is impossible. 164 00:13:52.580 --> 00:13:57.340 Separate accounts for a single branch of one and the same undertaking are possible only 165 00:13:57.340 --> 00:14:03.040 when prices for all kinds of goods and services are established in the market and furnish 166 00:14:03.040 --> 00:14:19.440 Socialism, therefore, is not able to calculate. This is the main assertion of Mises' argument, 167 00:14:19.440 --> 00:14:25.000 otherwise known as the calculation problem. There would be neither discernible profits 168 00:14:25.000 --> 00:14:31.920 nor discernible losses. Success and failure remain unrecognized in the dark. A socialist 169 00:14:31.920 --> 00:14:37.760 Management would be like a man forced to spend his life blindfolded. 170 00:14:37.760 --> 00:14:43.040 Mises did not allow for the argument made by many bourgeois economists that socialism 171 00:14:43.040 --> 00:14:48.840 could not be realized because humans were still too underdeveloped in a moral sense. 172 00:14:48.840 --> 00:14:54.320 According to Mises, socialism would be bound to fail not because of morality, but because 173 00:14:54.320 --> 00:14:59.800 the problems that a socialist order would have to solve present insuperable intellectual 174 00:14:59.800 --> 00:15:01.040 difficulties. 175 00:15:01.040 --> 00:15:08.320 The impracticability of socialism is the result of intellectual, not moral, incapability. 176 00:15:08.320 --> 00:15:12.640 Mises's brilliant and overpoweringly logical analysis was not new. 177 00:15:12.640 --> 00:15:16.520 Its main features were already part of an inventory belonging to the early marginal 178 00:15:16.520 --> 00:15:20.040 utility theoreticians, but this was little acknowledged. 179 00:15:20.040 --> 00:15:25.940 Hermann Heinrich Gossen, 1810-1858, had already established that only in a society based on 180 00:15:25.940 --> 00:15:31.140 on Private Property could the economy be adequately and most expediently managed. 181 00:15:31.140 --> 00:15:36.220 The central agency assigned by the communists to allocate various jobs, Gossen said, would 182 00:15:36.220 --> 00:15:42.860 learn very soon it had set itself a task whose solution was beyond the ability of human individuals. 183 00:15:42.860 --> 00:15:47.660 In terms of the early Austrian School, Friedrich von Mises had already placed clear emphasis 184 00:15:47.660 --> 00:15:50.540 on the necessity of economic calculation. 185 00:15:50.540 --> 00:15:55.260 He was one of the first economists to recognize the relevance of the informational nature 186 00:15:55.260 --> 00:16:01.160 of Value in an Economy, Value, Wieser stated, is the form in which utility is calculated 187 00:16:01.160 --> 00:16:06.680 and thus value comes to be the controlling power in economic life. 188 00:16:06.680 --> 00:16:11.240 Apart from a few sporadic contributions in the foreign literature, the problem of economic 189 00:16:11.240 --> 00:16:17.740 calculation in socialism was scarcely considered until 1919, not even by socialist economists. 190 00:16:17.740 --> 00:16:24.020 Erwin Wiesel, 1930-2005, the Viennese economist and historiographer of the Austro-Marxist 191 00:16:24.020 --> 00:16:29.460 This debate on socialization even claimed that one wanted to ignore the problem. 192 00:16:29.460 --> 00:16:34.280 At the height of the socialization debate in spring 1919, Menger's student and business 193 00:16:34.280 --> 00:16:40.260 attorney Markus Ettinger warned that only market price could be a reliable regulator of demand 194 00:16:40.260 --> 00:16:46.780 and for the in and outflow of capital and labor from one area of production to another. 195 00:16:46.780 --> 00:16:52.980 It is interesting that Max Weber, 1864-1920, who was in close contact with Mises during 196 00:16:52.980 --> 00:17:11.820 Mises' fundamental critique received international recognition into the 1920s. The notion that 197 00:17:11.820 --> 00:17:17.940 central planning without a price system would automatically be inefficient was seldom denied. 198 00:17:17.940 --> 00:17:22.060 But in the early 1930s, economists in the English-speaking world began responding with 199 00:17:22.060 --> 00:17:28.580 models for a socialist calculation in answer to Mises that included the idea of competition 200 00:17:28.580 --> 00:17:35.500 socialism. It prevailed and survived in socialist circles until the 1980s. The idea was that 201 00:17:35.500 --> 00:17:40.220 planners could adequately stimulate market development with trial and error loops in 202 00:17:40.220 --> 00:17:46.300 between individual planning periods. Subsequent calculations could then be made. Both Mises 203 00:17:46.300 --> 00:17:51.220 and Hayek responded in detail and Hayek presented a concise summary of the complete debate in 204 00:17:51.220 --> 00:17:57.380 in 1935. He first and foremost centred in on the hubristic notion of being able to plan 205 00:17:57.380 --> 00:18:03.280 economic and social systems comprehensively. Socialism in all its right and left wing varieties 206 00:18:03.280 --> 00:18:09.580 was an ideology born out of the desire to achieve complete control over the social order 207 00:18:09.580 --> 00:18:14.640 and the belief that it is in our power to determine deliberately in any manner we like 208 00:18:14.640 --> 00:18:20.800 every aspect of this social order. In contrast to Mises, Hayek emphasized the indispensable 209 00:18:20.800 --> 00:18:25.840 Information Function of Market-Induced Prices. That a market system has greater knowledge 210 00:18:25.840 --> 00:18:31.520 of facts than any single individual or even any organization is the decisive reason why 211 00:18:31.520 --> 00:18:37.100 the market economy outperforms any other economic system. Amid heated debate, the Austrians 212 00:18:37.100 --> 00:18:41.680 were hardly aware of the fact that Hayek and Mises were pursuing two ultimately different 213 00:18:41.680 --> 00:18:47.720 paradigms. Mises' massive attack on the utopia of an economically efficient socialism did 214 00:18:47.720 --> 00:18:51.920 not evoke much in the way of a direct counter-reaction. 215 00:18:51.920 --> 00:18:56.920 Because the instigators of nationalisation were aiming only at partial socialisation, 216 00:18:56.920 --> 00:19:01.360 they were able to get out of a tight spot by pointing to organisational issues. 217 00:19:01.360 --> 00:19:07.960 The counter-attack came only after two years, when Helene Bauer, 1871-1942, diagnosed the 218 00:19:07.960 --> 00:19:12.680 bankruptcy of the marginal theory of value in the party organ of the Socialist Party 219 00:19:12.680 --> 00:19:20.080 Bankrott, der Grenzwertheorie, 1924. Using revolutionary rhetoric and warlike language, 220 00:19:20.080 --> 00:19:25.800 she insinuated that the marginal utility theory served a frightened bourgeoisie as a bulwark 221 00:19:25.800 --> 00:19:30.480 and was used as the predominant theory to agitate against Marxism at the university 222 00:19:30.480 --> 00:19:36.300 level. But Bauer touched the achilles heel of the marginal utility theories on one point. 223 00:19:36.300 --> 00:19:41.460 She called their imputation theory inadequate. The denunciatory intention of depicting the 224 00:19:41.460 --> 00:19:47.220 The Marginal Utility Theory as an Ideology of the Bourgeois Owner Class was particularly 225 00:19:47.220 --> 00:19:52.740 obvious in Russian Theoretical Economist and Philosopher Nikolai Ivanovich Bukharin's 226 00:19:52.740 --> 00:20:00.420 1888-1938 Economic Theory of the Leisure Class, 1919. Bukharin's personal attacks on Boehm-Bawerk 227 00:20:00.420 --> 00:20:06.520 occasioned an unemotional counter-criticism. Ludwig von Mises was a specially easy target 228 00:20:06.520 --> 00:20:11.020 for this kind of appraisal on the part of socialist authors. Mises held the conviction 229 00:20:11.020 --> 00:20:16.020 and that liberalism was the only idea that could effectively oppose socialism. 230 00:20:16.020 --> 00:20:21.020 Liberalism, said Mises, is applied economics in another work from the previous year. 231 00:20:21.020 --> 00:20:27.020 He had even stated that classical liberalism was victorious with economics and through it. 232 00:20:27.020 --> 00:20:33.020 The theory of marginal utility nevertheless found some support in Germany in the 1920s 233 00:20:33.020 --> 00:20:37.020 even from socialist writers or others with socialist leanings. 234 00:20:37.020 --> 00:20:43.020 While preparing for the Dresden Convention of the Verein für Sozialpolitik in 1932, 235 00:20:43.020 --> 00:20:47.780 Mises repeated his junction of modern economics and liberalism and was promptly criticized 236 00:20:47.780 --> 00:20:51.060 even by advocates of the subjective theory of value. 237 00:20:51.060 --> 00:20:55.820 Despite the polarization, a young participant of the Dresden Convention, the post-doctored 238 00:20:55.820 --> 00:21:01.900 graduate, attorney and political scientist Hans Zeisel, 1905-1992, in the United States 239 00:21:01.900 --> 00:21:20.900 Hans Zeissel, Sports Correspondent of the Socialist Arbeiter-Zeitung and, until 1938, contributor to the now classical Marienthal-Studie, attempted the first sentences in Marxismus und Subjektive Theorie 1931, Marxism and the Subjective Theory of Value. 240 00:21:20.900 --> 00:21:27.300 According to Zeissler, the notion of value had developed into a concept of human elective action. 241 00:21:27.300 --> 00:21:32.500 The goods concept had given way to the relational concept of possible uses. 242 00:21:32.500 --> 00:21:38.500 The so-called laws of the subjective theory of value were of a statistical nature and received 243 00:21:38.500 --> 00:21:43.460 their cognitive value when they are applied to empirically discerned demand systems. 244 00:21:44.180 --> 00:21:48.580 If one were to replace demand systems with demand with purchasing power, 245 00:21:48.580 --> 00:21:53.460 One would immediately recognize that demand is allocated according to class. 246 00:21:53.460 --> 00:21:58.580 The crucial Marxist line of thought that the level of wages and interest rates, etc., 247 00:21:58.580 --> 00:22:04.340 are dependent on class structure could be precisely articulated in the subjectivist theory of value. 248 00:22:05.060 --> 00:22:10.100 Subsequent changes in the political arena rendered any continued development of this 249 00:22:10.100 --> 00:22:15.860 interesting synthesis of praxeological thinking and the Marxist theory of distribution impossible.