For Menger, Value Was a “Bilateral” Relationship Between One Individual and One Economic Good, But for Mises, Value Was a “Trilateral” Relationship Involving One Individual and Two Economic Goods

In the few passages that he devotes to value theory in his money book, Mises decisively elaborates on Menger’s somewhat vague definition of value as “the importance that individual goods or quantities of goods attain for us because we are conscious of being dependent on command of them for the satisfaction of our needs.” In Menger’s definition, value was a bilateral relationship between one individual and one economic good. By contrast, in Mises’s exposition, value was a trilateral relationship involving one individual and two economic goods. Mises in fact discussed the value of one good always in explicit context with the value of another good with which it was compared, and he stressed that this “comparison” was based on choice insofar as it involved “acts of valuation.” In his words:

Every economic transaction presupposes a comparison of values. But the necessity for such a comparison, as well as the possibility of it, is due only to the circumstance that the person concerned has to choose between several commodities.

--Jörg Guido Hülsmann, introduction to the third edition of Epistemological Problems of Economics, by Ludwig von Mises (Auburn, AL: Ludwig von Mises Institute, 2003), xxxvi.

There Was No Such Thing As Value Calculation; There Was Only Price Calculation, Which Could Come into Existence Only Where the Means of Production Were Privately Owned

It is before this background that Mises’s socialist-calculation argument must be appreciated. Mises argued that there were no general principles of value calculation, because there was no such thing as value calculation in the first place. There was in fact only price calculation, and it could come into existence only at those times and places where the means of production were privately owned. It not only followed that the existence of economic calculation was a historically contingent event. It also followed that the specific categories of capitalism—capital, income, profit, loss, savings, etc.—could not be assumed to exist in other types of social organization.

--Jörg Guido Hülsmann, introduction to the third edition of Epistemological Problems of Economics, by Ludwig von Mises (Auburn, AL: Ludwig von Mises Institute, 2003), xxxiv.

The Step Leading from Classical to Modern Economics Is the Realization that Classes of Goods in the Abstract Are Never Exchanged and Valued, But Always Only Concrete Units of a Class of Goods

Only the disintegration of the universalistic mentality brought about by the methodological individualism of the seventeenth and eighteenth centuries cleared the way for the development of a scientific catallactics. It was seen that on the market it is not mankind, the state, or the corporative unit that acts, but individual men and groups of men, and that their valuations and their action are decisive, not those of abstract collectivities. To recognize the relationship between valuation and use value and thus cope with the paradox of value, one had to realize that not classes of goods are involved in exchange, but concrete units of goods. This discovery signalized nothing less than a Copernican revolution in social science. Yet it required more than another hundred years for the step to be taken. This is a short span of time if we view the matter from the standpoint of world history and if we adequately appreciate the difficulties involved. But in the history of our science precisely this period acquired a special importance, inasmuch as it was during this time that the marvelous structure of Ricardo’s system was first elaborated. In spite of the serious misunderstanding on which it was constructed, it became so fruitful that it rightly bears the designation “classical.”

The step that leads from classical to modern economics is the realization that classes of goods in the abstract are never exchanged and valued, but always only concrete units of a class of goods. If I want to buy or sell one loaf of bread, I do not take into consideration what “bread” is worth to mankind, or what all the bread currently available is worth, or what 10,000 loaves of bread are worth, but only the worth of the one loaf in question. This realization is not a deduction from Gossen’s first law. It is attained through reflection on the essence of our action; or, expressed differently, the experience of our action makes any other supposition impossible for our thought.

--Ludwig von Mises, Epistemological Problems of Economics, trans. George Reisman, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2013), 139-140.

What Reply Can Marxian Socialism Make to those Who, Precisely on behalf of the Proletarians, Demand Private Ownership of the Means of Production, and Not Their Socialization?

Even if we were to assume that society is divided into classes with conflicting interests and if we were to agree that everyone is morally obliged to follow his class interests and nothing but his class interests, the question would still remain: What best serves class interests? This is the point where “scientific” socialism and the “sociology of knowledge” show their mysticism. They assume without hesitation that whatever is demanded by one’s class interests is always immediately evident and unequivocal. The comrade who is of a different opinion can only be a traitor to his class.

What reply can Marxian socialism make to those who, precisely on behalf of the proletarians, demand private ownership of the means of production, and not their socialization? If they are proletarians, this demand alone is sufficient to brand them as traitors to their class, or, if they are not proletarians, as class enemies. Or if, finally, the Marxists do choose to engage in a discussion of the problems, they thereby abandon their doctrine; for how can one argue with traitors to one’s class or with class enemies, whose moral inferiority or class situation makes it impossible for them to comprehend the ideology of the proletariat?

--Ludwig von Mises, Epistemological Problems of Economics, 3rd ed., trans. George Reisman (Auburn, AL: Ludwig von Mises Institute, 2003), 201.

What Best Serves Class Interests? This Is the Point Where “Scientific” Socialism and the “Sociology of Knowledge” Show Their Mysticism

But since Marxism and the sociology of knowledge see in the subjective theory of value nothing more than a final ideological attempt to save capitalism, we wish to limit ourselves to an immanent critique of their theses. As Marx himself admits, the proletarian has not only class interests, but other interests that are opposed to them. The Communist Manifesto says: “The organization of the proletarians into a class and thereby into a political party is repeatedly frustrated by the competition among the workers themselves.” Therefore, it is not true that the proletarian has only class interests. He also has other interests that are in conflict with them. Which, then, should he follow? The Marxist will answer: “Of course, his class interests, for they stand above all others.” But this is no longer by any means a matter “of course.” As soon as one admits that action in conformity with other interests is also possible, the question is not one concerning what “is,” but what “ought to be.” Marxism does not say of the proletarians that they cannot follow interests other than those of their class. It says to the proletarians: You are a class and should follow your class interests; become a class by thinking and acting in conformity with your class interests. But then it is incumbent upon Marxism to prove that class interests ought to take precedence over other interests.

Even if we were to assume that society is divided into classes with conflicting interests and if we were to agree that everyone is morally obliged to follow his class interests and nothing but his class interests, the question would still remain: What best serves class interests? This is the point where “scientific” socialism and the “sociology of knowledge” show their mysticism. They assume without hesitation that whatever is demanded by one’s class interests is always immediately evident and unequivocal. The comrade who is of a different opinion can only be a traitor to his class.

What reply can Marxian socialism make to those who, precisely on behalf of the proletarians, demand private ownership of the means of production, and not their socialization? If they are proletarians, this demand alone is sufficient to brand them as traitors to their class, or, if they are not proletarians, as class enemies. Or if, finally, the Marxists do choose to engage in a discussion of the problems, they thereby abandon their doctrine; for how can one argue with traitors to one’s class or with class enemies, whose moral inferiority or class situation makes it impossible for them to comprehend the ideology of the proletariat?

--Ludwig von Mises, Epistemological Problems of Economics, trans. George Reisman, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2013), 170-171.

The "Psychological School" of Modern Subjectivist Economics

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.

--Ludwig von Mises, Epistemological Problems of Economics, trans. George Reisman, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2013), 139.