Friedrich von Wieser was born 10 July 1851 in Vienna.

His father Leopold von Wieser was a high-ranked civil servant in the Ministry of War. Owing to his merits in the war of 1859 against Italy, Leopold von Wieser was ennobled. Later, he became Vice-President of the Court of Audit.

Friedrich attended the elite Schottengymnasium where Eugen von Bohm-Bawerk (who was to become his friend and brother-in-law) was his classmate. In 1868 Wieser and Bohm enrolled in the Law Faculty of Vienna University. As a part of the curriculum in legal studies, some education in economics was on offer at this academic institution. Both young men entered the civil service and, in 1875, took a two-year leave in order to continue their economic studies with some of the most prominent German professors in the field, Karl Knies, Bruno Hildebrand and Wilhelm Roscher. Wieser passed his habili- tation (with Menger) in economics in 1883 and was appointed associate professor at the University of Prague in 1884 (full professor 1889). He succeeded Menger in the chair of economic theory at Vienna University in 1903. Wieser was the most influential teacher among the first generation of the Austrian School: Schumpeter, Mises and Hayek were his students. He became a member of the Austrian Herrenhaus (House of Lords) and served as Minister of Commerce in the last Austrian government under the Habsburg monarchy (1917-18). He died on 23 July 1926 in St Gilgen, a lakeside resort not far from Salzburg.

Wieser is commonly portrayed as an original thinker with occasionally powerful rhetoric and pre-analytical visions of extraordinarily wide scope, whose originality is not matched by analytical clarity.

Over and above all, in the more specific field of economics his thought is sufficiently multi-faceted to earn him the title of the “odd man out” of the Austrian School. He is sometimes said to have been a follower of Walras rather than of Carl Menger. Indeed, more than the other Austrian economists of the first generation, Wieser was very much interested in general equilibrium interdependences, and in the long-period position (see Kurz and Sturn 1999: 85-7). This implies a certain tension vis-a-vis the causal-genetic approach of the Austrians. Unlike Menger and Mises, Wieser moreover did not cat­egorically reject the use of mathematics in price theory. He was not himself engaging in mathematical modelling and was far from endorsing it as enthusiastically as Schumpeter.

Wieser differs from most other Austrians in one further respect. While all Austrians emphasize the value-neutrality of economic analysis, most of them are staunch defenders of some kind of free market-liberalism. By contrast, Wieser envisaged a mixed economy, eventually including distributive policies.

In an article in the Economic Journal, Wieser (1891) emphasizes parallels between the Austrians, Walras and Jevons. By way of introduction, he offers a crisp account of his views on method, defending the use of suitably idealized models by drawing the paral­lel with a geographical map, which “sharpens our vision in view of the complexities of reality” and is “a means not to deception but to more effective guidance”. But the bulk of Wieser (1891) is devoted to explaining his pioneering (though not entirely successful) attempts to solve the imputation problem by the marginal productivity theory of distri­bution, dealing with the question of whether the marginal product of the contributing factors would exhaust the product.

His habilitation thesis furthermore deals with a couple of other foundational concepts. Inter alia, he defines the essence of costs as foregone utility. No clearer statement of the opportunity cost-concept can be found in the literature before Wieser’s (1884: 101) pertinent passages. Moreover, he coins the term “marginal utility” (“ Grenznutzen”), while Jevons had used the expression “final degree of utility”. After having explained the “law of marginal utility” (“ Gesetz des Grenznutzens”) without production (Wieser 1884: 126-39), he proceeds to the so-called Wieser’s Law of Cost: he is credited for having stated for the first time the equimarginal principle with respect to production.

However, Wieser’s contributions are not limited to terminological innovations and conceptual clarifications. They include more over-arching issues, which are related to subsequent developments in Austrian economics and beyond, most notably the debates on economic planning (another term promoted by Wieser) and their theoretical under­pinning. In the final parts of Wieser (1884) and in Wieser (1889), we find a clear idea of a kind of normative economics conceptualized as an institution-free allocation theory, guided by equimarginal principles of efficient allocation. Wieser emphasizes that those principles hold good for any kind of “economic planning” (capitalist or socialist) and are practically relevant irrespective of the prevailing mode of social and economic organization. Economic planning under socialism (and in the public sector of a capitalist economy) to a certain extent needs to mimic the working of an efficient price system - or it will fail to be rational. In particular, rational socialist planning cannot dispense with (1) marginal valuations, (2) the use of information summarized by prices, and (3) the use of a monetary measuring rod.

However, while Wieser seems to leave open (or even to suggest, see Wieser 1884: 210) the possibility that shadow prices may be used for the purpose of planning, his student Mises twisted the argument, suggesting the impossibility of rational calculation under socialism. In absence of market prices, socialist planners would be “groping in the dark”. Hayek (1945), another student, expanded on the informative nature of prices which is already anticipated by Wieser (1884: 166).

Wieser’s Der naturliche Werth (1889) was edited by William Smart as Natural Value (1893). In this book he shows that the principles of efficient allocation can be analytically separated from issues of distribution: natural value reflects the efficiency conditions of a competitive economy framed by utilitarian principles of distribution: “In natural value goods are estimated simply according to their marginal utility; in exchange value, according to a combination of marginal utility and purchasing power” (Wieser 1893, II.vi). Marginal valuations corresponding to this natural value also could be thought of as ethically defensible criteria with respect to issues such as the allocation of public funds.

Further writings deal with themes in monetary theory (for example, Wieser 1910), in which he remains interested throughout his live. Indeed, one of his last publications is the entry on money in the Handworterbuch der Staatswissenschaften (Wieser 1927a).

Wieser’s third important book in economics, Theorie der gesellschaftlichen Wirtschaft, is a volume commissioned for the monumental collection of contemporary social and economic science Grundriss der Sozialokonomik. This was translated as “Social Economics” and edited by Wesley Mitchell (Wieser 1927b). It is a textbook-like account of Wieserian economics, which is applied to various topics (part III offers the “theory of the public economy”, part IV the “theory of the world economy”). Passages on the different forms of enterprises and entrepreneurs are remarkable for the parallels to Schumpeterian themes and concomitant terminology.

Wieser’s last book Das Gesetz der Macht (The Law of Power, 1926) summarizes his sociological reasoning with specific regard to the role of power in social organizations (see also Wieser 1914, 1927b). Wieser conceptualizes power-driven processes subject to the “law of small numbers” (as opposed to the anonymous forces of the law of large numbers). As the key power he identifies the power over mental models and moods. We find a couple of ideas looming large in contemporary discourses of the first third of the twentieth century, related to mass psychology and leadership. Wieser suggests some power-related “laws”, such as the “law of circulation of power” (dealing with the social conditions for the reproduction of malleable power elites) or the “law of decreasing coer­cion” in the development of civilization.

It is fair to say that Wieser is not an unchanging adherent of what are commonly regarded to be the central tenets of Austrian economics. Nonetheless, many of his ideas have a distinctly Austrian background. Some of those ideas later became relevant in economic theory beyond the Austrian School. Examples are his views related to the informative function of prices and entrepreneurship. Concepts such as opportunity cost, shadow prices, and the general idea of using efficiency conditions in order to derive an institution-free yardstick for economic planning which is relevant irrespective of the institutional framework (be it a perfectly competitive private-ownership economy or some other variety of capitalism, or the public sector of a mixed economy, or socialism, or multi-divisional private firm, or something else) became indispensable ingredients to the welfare-theoretic approach to allocation theory.

Richard Sturn

See also:

Eugen von Bohm-Bawerk (I); German and Austrian schools (II); Friedrich August von Hayek (I); Carl Menger (I); Ludwig Heinrich von Mises (I); Joseph Alois Schumpeter (I).