The Philosophical Origins of Austrian Economics

The Austrian School stood diametrically opposed to the German Historical School. 7  In view of the vast divergence of the two schools in economics, one might expect substantial differences in philosophical background. This is indeed what one does find. The leading philosopher who influenced Carl Menger was Franz Brentano. He resolutely rejected the doctrine of internal relations, along with the remainder of the Hegelian system.

Brentano, who was Professor of Philosophy at the University of Vienna during the latter part of the nineteenth century, was a colleague and friend of Menger. Brentano was for most of his adult life a Roman Catholic priest; but after a theological quarrel, he abandoned the Church and was forced to resign his professorship.

His scholastic training contributed to his strong interest in Aristotle. He held Kant and Hegel in contempt, viewing them as retrogressive figures. Most important for our present purpose, he rejected the doctrine of internal relations.

He did not believe that everything was so internally bound up with everything else that nothing could be studied separately. Quite the contrary, the mind was sharply distinct from the external world. Further, Brentano extended his analytical, dissective approach to the mind itself. He distinguished acts of consciousness from their objects.

Brentano’s study of the mind, Psychology from an Empirical Standpoint, was probably his most famous philosophical work and makes a vital contribution to understanding the Austrian theory of value. Brentano in this work and in several smaller works applied his general notion of mind to the concept of value. His approach to mind overthrew the prevailing notion of the mental common to almost all philosophers since René Descartes. The position he was opposed to was especially characteristic of the British Empiricists.

Philosophers such as John Locke and David Hume held, to oversimplify, that ideas are pictures impressed on the mind by external objects. At least when in receipt of impressions, the mind is passive. The empiricists recognized active powers of the mind to some extent. But in order for the active powers to function, the mind first had to have ideas impressed on it. (Innate ideas are a complication that for our purposes can be ignored.)

The working of the mind in perception, according to Locke and Hume, was in essence automatic. If one saw a particular object, an idea would enter one’s mind. The various ideas one accumulated were connected by laws of association. There was little room for the mind to operate in an autonomous fashion. Indeed, Hume denied that a separate idea of the self existed: all that he could locate was a stream of perceptions.

Brentano rejected altogether the position just sketched. The “ideas” of the empiricists did not in fact designate mental activities: rather, to the extent they existed at all, they were the objects of the mind’s activity. If, for example, I think of a chair, my mental action is not a picture of the chair found in my mind. What my mind does is to think of an object. Thinking is an action, a mental “doing,” as it were. Brentano’s term for mental action was intentionality: in his famous slogan it is the “mark of the mental.”

In view of the importance of intentionality, let us risk laboring the point. An intention is a mental going out or grasping an object: it can be diagrammed as an arrow going from mind to object.

In speaking of “object,” I have been guilty of an ambiguity. An object of an intention can be either a mental object, e.g., the ideas of the empiricists, or a physical object. Does the intentional act extend “out of” the mind to make direct contact with the actual world? This is a difficult issue to answer, as Brentano’s system is rather murky on the point. 8

• 7The treatment of the German Historical School given above has been influenced by Ludwig von Mises, The Historical Setting of the Austrian School of Economics (Auburn: Ludwig von Mises Institute, 1984). I have not dealt with differences between the Earlier and Later Historical Schools. My comments apply principally to the latter.
• 8Brentano’s views are very well analyzed in David Bell, Husserl (London: Routledge, 1990)