The Austrian School begins with Carl Menger (1840–1921), who after beginning his economic study in 1867, published the "Principles of Economics" (1871), which at the time was not widely received. It was only with later works from 1883-4 that he gained attention in a dispute entitled the "methodology struggle" (Methodenstreit), where the "Austrian" School also gained it's namesake. In the same year we get the early works of both Böhm-Bawerk and Wieser, who are its earliest representatives.
We read in James Bonar's "The Austrian Economists and their View of Value" (1888) the direct comparison between Jevons' and Mengers' theory of value. Indeed, Wieser takes Jevons' "final degree of utility" and from it crafts the term "marginal utility" (1884) to mean the same thing. Menger illustrates the same principle but in less eloquent (e.g. formal) terms, and so this stands. In approaching the so-called "Neoclassical" and "Austrian" Schools, what stands between them? Wieser in "The Austrian School and the Theory of Value" (1891) claims that Jevons' view is a "narrower view" of price and value, where value only manifests as price, while to Austrians, value expresses something intrinsic to our experience.
We must start with Menger's "Principles" (1871), which begins with a consideration of causation (Ch. 1, Sct. 1). A thing which is known to have the capacity to satisfy a human need is called a "useful thing" (Nützlichkeiten), which if it may be commanded, is a "good". All goods have a goods-character (Güterqualität). Goods may either be "true" or "imaginary" in their means to satisfy, and thus, goods-character is not arbitrary. The nature of goods can be given in "relationships" (Verhältnisse), as well as individual items. Menger resolves that goods are of two kinds: (i) material goods, and (ii) useful human in/activity; e.g. labour and its product. Causal connections may be seen between goods (Ch. 1, Sct. 2), such that what is directly consumed in bread is a result of goods which indirectly cause our satisfaction (e.g. flour). What is directly consumed is thus a good "of the first order", while what is indirect is of the second/third/fourth, etc. order. The more orders of good, the more indirect causes, and so the greater the process of production, which henceforth corresponds to a greater length of time in production (Ch. 1, Sct. 4). Goods which belong to the same order as each other are "complementary goods", and these are used to create goods of different orders (Ch. 1, Sct. 3A–B). The goods-character of higher and lower orders are thus codependent of each other, toward the end of realising the end of the consumption of goods of first order. If goods fail to serve the ends of consumption, they lose their corresponding goods-character, so are useless. In general, the knowledge of production is uncertain, and relative to the knowledge of society (Ch. 1, Sct. 4); thus, what was previously useless may become useful, given greater a causal conception (e.g. scientific technique). The progress of wealth is seen to be based in the division of labour (Ch. 1, Sct. 5), which thus varies the production of particular goods. The increased variety of goods able to be commanded thus measures wealth, which itself depends upon an increase in goods of higher order. Thus, civilisation and barbarism differ in regard to the scale of ordered goods; by the complexity of production, and of course, human knowledge in general is the basis of all advancement.
Needs are said to arise from our natural drives (Ch. 2, Sct. 0), which concretely correspond to the consumption of a certain quantity of goods. This quantity is seen as a man's "requirements" (Bedarf), or "demand" (Nachfrage). Adequate knowledge of requirement entails planning in advance for the satisfaction of need, and it is this long-term, or provident activity, that also defines civilisation. Goods of first order are "consumption goods", and goods of higher order are termed "means of production" (Ch. 2, Sct. 1A–B). Production is measured from periods of time, designated "Period I, II, III", etc. that corresponds to each sequential good of higher order (Ch. 2, Sct. 1C). Thus, Period I measures the time from a second order good to the production of a first order good; Period II is the period from the third to the second, and so on. The length of provident activity for civilised production is thus given according to these recorded periods of time. All complex forms of production are evidently planned, strengthened by record-keeping, along with government statistics (Ch. 2, Sct. 2). The rational assorting of goods based in the priority of their use is called "economising" (Ch. 2, Sct. 3A), based in the order of consumption, from necessary to luxury goods. Where scarcity reigns, each member of a society will thus compete to economise the available goods for themselves, and it is opposition of self-interest which manifests the institution of law for the protection of property. Economy and property thus have the same origin, in the scarcity of requirement for the satisfaction of (social) need. Abundance thus allows for "non-economic goods" to persist (Ch. 2, Sct. 3B), and so where there is a greater number of available goods than necessary to satisfy people, the status of property also declines. Thus, Menger sees that a propertyless "communism" is the norm where social demand is much lower than the social supply. Oxygen is common to all. The non/economic status of goods is thus dependent upon the requirements given from a certain population (Ch. 2, Sct. 3C). Menger attributes causes for changes in social requirement: (i) change in total population, and (ii) change in human knowledge. There are intermediate goods in economic status also, which largely exist as public services, such as schooling. Menger also adds that abundant goods may become artificially scarce as a result of force - he gives the example of monopolists of land. Since command of these non-economic goods is henceforth restricted, they attain economic character. Quality and quantity is compared, where greater quality attains a smaller quantity for the satisfaction of the same need (Ch. 3, Sct. 2C). Just as the goods-character of a good of lower order determines that of the higher, so too is it the case for their economic character (e.g. scarcity), so to Menger, higher economic goods cannot produce non-economic goods (Ch. 2, Sct. 3D). Just as the entire sum of goods at a person's disposal is his "property", a sum of economic goods is his wealth (Ch. 2, Sct. 4). So then, one's wealth is a result of the lack of requirement from one's property. Wealth may extend to governments in particular, and of social wealth (e.g. "national wealth") in general, Menger advises that this is a sum of individual economising units, and shan't be made legally fictitious.
From these theories of concrete human needs leading to goods, which in quantities of requirement, possess an economic character of wealth, as a type of property, we finally come to the theory of value (Ch. 3, Sct. 1). Value is said to have the same origin as economisation, that it is the importance we impute to goods, and so it is only economic goods which possess "value". All goods have "utility", but not all goods are economic. The measure of value given is twofold (Ch. 3, Sct. 2): (i) degree of importance given to a good (subjective factor), and (ii) the command of each good (objective factor). The first case is simply measured by pleasure, given in quantities of duration and intensity (Ch. 3, Sct. 2A), mapping to a scale of degrees of importance (read: pleasure) given from each good. This is in essence a geometry of the total utility of each good, which thus measures its value, yet as satisfaction is diminished, it reaches "equilibrium" with the marginal utilities of other goods, for which the consumption of one good over another is economically rationalised. This is scaled, like all goods, from what is most necessary to least necessary - the least necessary possessing the lowest total utility, or least importance. Upon this point, Menger writes that from circumstances of quenched thirst, water attains a lesser value than diamonds, since the importance of water becomes less than what may be fulfilled by luxury. Conversely, he says that the need for water may be greater than diamonds only in extreme circumstances of thirst. Ultimately, he insists that it is scarcity which measures the value of these goods (Ch. 3, Sct. 2B). The nature and measure of value are repeated to be subjective (Ch. 3, Sct. 2D), and this dispells any attempt to equalise value with labour or costs necessary for re-production. Examples Menger provides are naturally scarce products which exact a value without consideration of reproduction, and also an incongruity between means of production and a product which may have different total values. He repeats the axiom that the value of goods is determined from an imputation of the importance of goods to satisfying our needs, but is careful to add that this is not just arbitrary. As a reversal of attributing value to costs of production, Menger instead sees that it is the "expected value" of means of production from their final product which is the cause of their requirement (Ch. 3, Sct. 3A). So, just as both the goods-character and economic character of the lower order determines that of the higher order, so too is it the case of the prospective value of the lower for the higher. Present goods, on the other hand, may be different in value than in prospective goods. Goods of higher order are exclusively determined by prospectivity. Upon these means of production, Menger speaks of the "services of capital" (Ch. 3, Sct. 3B), which he claims is not reimbursed by interest upon "abstinence", but upon the simple purchase of a valuable service. Abstinence by itself adds nothing, Menger claims, and from this, he adds that capital is often original of "seizure", where like his earlier example of land monopoly, the services of capital may be commanded by force to meet certain ends. The services of capital are renumerated by the "entrepenurial activity" of the capitalist (Ch. 3, Sct. 3C), or classically, "wages of superintendence", which must then be included within the prospective value of capital. Entrepeneurial activity is given as: (i) information, (ii) economic calculation, (iii) willingness, (iv) supervision. As he adds, the larger the capital, the more entrepeneurs who are required (e.g. managers). Menger also rejects a notion of "risk" management as entrepeneurial activity, although he writes that transport costs are factored into the value of higher order goods, as service. Since the prospective value of capital includes interest, Menger sees that present goods are reduced in value, and so this resolves earlier comments on incongruity. From this, the value of land, if it's to be treated as means of production, is determined in the same way, although Menger declines to affirm "rent" as a service of the land owner, but still rejects Ricardo's theory of ground-rent (Ch. 3, Sct. 3E). Menger also determines the value of the services of labour as prospective of their final product.
The next chapter moves to economic exchange, which as Menger writes, cannot be an end in itself, but only a means to an end; this end being increased satisfaction (Ch. 4, Sct. 1–2). The origin of exchange is the surplus of a good which serves no use to its owner, and a use to another. The mutual transfer of goods adds value to the good which is sold (e.g. W+x). The limits of exchange are then evidently given by a diminishment of gain unto a lack of mutual gain. Where trade cannot offer added value, there is no economic reason in trade. Thus, it is mutual gain (x) which determines economic exchange, by means of bargaining. Moving to prices (e.g. mutually exchanged quantities), Menger considers different forms. Isolated exchange (Ch. 5, Sct. 1) results in a perfect equilibrium of mutual gain (e.g. since there is equal supply and demand). With monopoly (Ch. 5, Sct. 2–3), we see that the less supply and greater demand, the price will increase with the one who offers the most, and so a monopoly of sellers produces a competition of purchasers. With greater supply of the monopoly good, the price tends to diminish, leading to greater purchase. Thus, while mutual gain in bargaining leads to formation of prices, the "laws" of exchange are supply and demand.
Next, economic goods are decoded from their: (i) direct and (ii) indirect value, or between (i) use-value, and (ii) exchange-value (Ch. 6, Sct. 1). As Menger continues, the only value a good can have in an isolated economy is a use-value (Ch. 6, Sct. 2). As use-values diminish in their direct satisfaction as wealth, they may transform into exchange-values for their possessors (Ch. 6, Sct. 3), like the surplus product of trade goods already discussed. Products which expand beyond the household and are ready to be sold (e.g. goods which possess exchange-value) are called "commodities" (Ch. 7, Sct. 1), and so economic goods possessing a "commodity-character" (Waarencharakter). By their nature, commodities are only transitory, and so by conversion into a use-value, they cease to be commodities as such. Money as a commodity thus possesses the same waarencharakter - Menger criticises fiat currency (Ch. 8, Sct. 4), yet in other places, permits the reality of fiat money (e.g. "Lectures to Crown Prince Rudolf of Austria", 1876). He also describes the effectual demand of commodities as a factor of their "marketability" (Ch. 7, Sct. 2A–C), while he prefers the term "saleability" for money. On money, he continues that money is a "natural" creation of custom, and not the state (Ch. 8, Sct. 1), although, he separates "money" from "coin" (e.g. a particular type of money). He adds that the state has perfected money by intervention, but is not its origin - he repeats this in his later article "The Origins of Money" (1892), which is not in any way an historical document. It is the increased "saleability" of certain commodities which grant them the form of money (Ch. 8, Sct. 2), and the form of money thus changes throughout history, with precious metals becoming more important as civilisation expands, yet Menger wants to restate that value is subjective, and so where money serves as means of circulation, it is itself not in any way a representation of "value" (Ch. 8, Sct. 3). Money thus is neither a "measure" nor "store" of value. He rather sees money's imperishability and divisibility as more intrinsic factors of its service (Ch. 8, Sct. 4). This is also the underwhelming conclusion of Menger's book.
So then, to summarise what is written: Originally, man existed in a state of primitive communism where goods were abundant, until some type of disruption which led to scarcity and property, either as an oversupply of the population, or the forceful acquisition of resources, or both at different times. The division of property also led to the division of labour, creating varied resources and so a scale of relative values. As productivity increases, goods are distributed in more variable fashion, but also leading to the creation of luxuries which are valued at a rate beyond the security of necessities. The turn from a household economy to a commercial economy converts goods from use-values to exchange-values, and so the form of commodities, most especially money, and thus the abundance of money signifies a rise in uselessness, since circulation is merely transitory. The rise of social wealth must mean the provision of "true" goods over "imaginary" goods, which are assessed by the rational judgement of economic individuals, which can include governments. All providential production is planned, and all planning entails economic calculation. Therefore, the basis of social production is the soundness of planning. This all has its socialist rhetoric. Engels (1894):
<it is just as easy to build up an at least equally plausible vulgar socialism on the basis of this theory, as that built in England on the foundation of Jevons’s and Menger’s theory of use-value and marginal utility.https://www.marxists.org/archive/marx/works/1894-c3/pref.htmI would also recommend this excellent article on the early Austrians:
https://socialdemocracy21stcentury.blogspot.com/2011/06/why-are-there-no-austrian-socialists.html?m=1