Carl Menger Was Motivated to Establish a Causal Link Between the Subjective Values Underlying the Choices of Consumers and the Objective Market Prices Used in the Economic Calculations of Businessmen

While there is no dispute regarding Menger's role as creator of the defining principles of Austrian economics, there does exist some confusion regarding the precise nature of his contribution. It is not always fully recognized that Menger's endeavor to radically reconstruct the theory of price on the basis of the law of marginal utility was not inspired by a vague subjectivism in outlook. Rather, Menger was motivated by the specific and overarching aim of establishing a causal link between the subjective values underlying the choices of consumers and the objective market prices used in the economic calculations of businessmen. The classical economists had formulated a theory attempting to explain market prices as the outcome of the operation of the laws of supply and demand, but they were compelled to restrict their analysis to the monetary calculations and choices of businessmen while neglecting consumer choice for the lack of a satisfactory theory of value. Their theory of "calculated action" was correct as far as it went, and was used to telling effect in demolishing the protectionist and interventionist schemes of sixteenth- and seventeenth-century mercantilists and the statist fantasies of nineteenth-century Utopian socialists. Thus, Menger's ultimate goal was not to destroy classical economics, as has sometimes been suggested, but to complete and firm up the classical project by grounding the theory of price determination and monetary calculation in a general theory of human action.

--Joseph T. Salerno, “Carl Menger: The Founding of the Austrian School,” in The Great Austrian Economists, ed. Randall G. Holcombe (Auburn, AL: Ludwig von Mises Institute, 1999), 72-73.