Investigations concerning the money prices of goods and services constituted the historical starting point of the reflections that led to the development of economic theory. What first opened the way to success in these inquiries was the observation that money plays “merely” an intermediary role and that through its interposition goods and services are, in the last analysis, exchanged against goods and services.

All conscious conduct on the part of men involves preferring an A to a B. It is an act of choice between two alternative possibilities that offer themselves. Only these acts of choice, these inner decisions that operate upon the external world, are our data. We comprehend their meaning by constructing the concept of importance. If an individual prefers A to B, we say that, at the moment of the act of choice, A appeared more important to him (more valuable, more desirable) than B.

The most troublesome misunderstandings with which the history of philosophical thought has been plagued concern the terms “pleasure” and “pain.” These misconceptions have been carried over into the literature of sociology and economics and have caused harm there too.

The expression “Psychological School” is frequently employed as a designation of modern subjectivist economics. Occasionally too the difference, in Method that exists between the School of Lausanne and the Austrian School is indicated by attributing to the latter the “psychological” method. It is not surprising that the idea of economics as almost a branch of psychology or applied psychology should have arisen from such a habit of speech.

The system of economic theory is independent of all other sciences as well as of psychology. This is true also of its relationship to technology. By way of illustration we shall demonstrate this in the case of the law of returns.

All action aims at results and takes on meaning only in relation to results. The preferring and setting aside that are involved in action take as their standard the importance of the anticipated result for the well-being of the actor. Whatever directly serves well-being is, without difficulty, given a rank in accordance with its importance, and this provides the rank order in which the goals of action stand at any given moment.

The money prices of goods and services that we are able to ascertain are the ratios in which these goods and services were exchanged against money at a given moment of the relatively recent or remote past. These ratios are always past; they always belong to history. They correspond to a market situation that is not the market situation of today.

The universally valid theory of economic action is necessarily formal. Its material content consists of the data of human circumstances, which evoke action in the individual case: the goals at which men aim and the means by which they seek to attain them.6

Classical economics distinguished three factors of production: land, labor, and capital. Inasmuch as capital can be resolved into land and labor, two factors remain: labor and the “conditions of well-being” made available by nature. If consumption goods are disregarded, these alone, according to the view to be found in the older literature, are the objects of economizing.