Austrian Debates on Utility Measurement from Menger to Hayek

This paper examines how some of the main exponents of the Austrian school of economics addressed the issues related to the measurability of utility. The first part is devoted to the period before World War I. During this period, Menger and Wieser treated de facto utilities as if they were measurable and could be expressed as multiples of a utility unit, Böhm-Bawerk and the young Schumpeter defended explicitly the measurability of utility, while, in contrast to these views, Čuhel and Mises argued that utilities cannot be measured but only ranked. After World War I, the ordinal view became the dominant one among Austrian economists but they admitted that individuals are not only able to rank the utility of goods (as in the ordinal approach), but are also capable of ranking differences of utility. The second part of the paper reconstructs the interwar discussions on the ranking of utility differences, focusing on the contributions of Schönfeld, Rosenstein-Rodan, Morgenstern and Alt. The paper concludes by illustrating Hayek’s ordinal view of utility.