Background on the Economist
Friedrich von Wieser was born in July 1851 in Vienna. He was an Austrian sociologist and economist, and a member of the Austrian trio, which contributed to the Austrian School (Hayek, 2014). Wieser studied law at the University of Vienna. His early interest in history, inspired by Herbert Spencer, Leo Tolstoy and T. B. Macaulay directed his consideration for the general laws of social evolution. Nevertheless, the Menger’s Grundsätze publication in 1871, prompted Wieser‘s shift in the focus of his interests. He perceived this shift as a representation of his departure from sociology work and began focusing on economic theory, though he persisted with his comprehensive treatment to social theory. He later on became a Professor of Political Economy between 1903 and 1922 in the same institution he studied law.
School of Thought and Contributions
Wieser acknowledged that value is imputed to the diverse factors of production that are subjected under diverse conditions of quality, supply and demand. According to him, that value of production goods depended on the marginal law, which is the nominal contribution imputed to each distinct quantity. Marginal utility is regarded the basis of value and the value of goods indicates the economic rank in accordance with their prices. Consequently, a phase of value is practically equivalent with the “power in exchange.” Wieser affirmed the essence of personal valuations expressed in monetary terms, however much the value of the monetary may differ from one individual to another (Bochenek, 2015). The price is not fixated by the marginal want which can be sufficiently supplied, but rather by the marginal capital comparable to subjective wants. The theory also focuses on distribution because it explains how different factors of production are recompensed. In essence, the value of production factors reflects the value of outputs.
In the theory of social economy, Wieser identifies three types of commodities including those used by everyone, intermediate goods and luxury goods. Commodities used by everyone determine the marginal utility of the low-income individuals, intermediate goods determine the marginal utility of the middle class, while the luxury goods are for the affluent. Wieser asserts that rapid urbanization; the harmful consequences of inequalities in wealth and increasing oppressiveness trigger social degeneration. He believed that trade unions’ efforts can enhance the economic conditions of various work personnel. Wieser therefore proposed that trade unions should avoid conflicts and instead resolve collective bargaining and wages issues. Wieser endorsed centralized control systems .He believed that the State should aim for the development of social production. The economist was against the idea of progressive taxation and instead championed for economic nationalism.
Wieser introduced the opportunity cost concept that asserts that relative prices reflect foregone opportunities. For example, in the case whereby a consumer has a fixed income, the opportunity cost of purchasing a new heater might be worth several suits of clothes that were not purchased. He claims that cost goods constitute the indispensable sources of production while monopoly goods comprise particular elements of production. Wieser affirms that cost principle of valuation should be applied only to cost goods to capitulate maximum utility (Yurlov, 2019). This concept allows economists to review the relative monetary values of a variety of commodities and services.
Conclusively, Friedrich von Wieser served a vital role in the Austrian school and contributed to its dissemination. He also made contributions to economic thought that have been significant in shaping the discipline.
Bochenek, Mirosław. (2015). the issue of value in economic thought — part 2: the evolution of views from 1871 until the second half of the 20th century. Ekonomia i Prawo. 14. 315. 10.12775/EiP.2015.020.
Hayek, F. A. V. (2014). Friedrich von Wieser (1851–1926). In The Fortunes of Liberalism (pp. 120-137). Routledge.
Yurlov, V. (2019). Working Paper No. 26, Basic Tenets of the Austrian School of Ec