Money, Time, and Rationality in Max Weber: Austrian Connections (review)

This book endeavors to persuade us that the work of Max Weber provides some substantive economic and methodological lessons for economists. To date there is no consensus on the subject of Weber's relationship to economics. In Stephen Parsons's account, however, Weber was not only a renowned economic sociologist, but he had intellectual links to Austrian economics, particularly to the first-generation Austrian school and its unique "marginal" analysis—as distinct from the marginalist economics of the Walrasians and Marshallians. Weber later used these early Austrian links to develop a critique of economic planning along Austrian (though not von Misesian) lines.

The first key issue for Parsons is to reconcile Weber and the Austrians on marginal utility theory. The author contends "that many of the confusions surrounding Weber's relationship to economic theory have been generated because the uniqueness of the Austrian school's marginal analysis has not been appreciated" (2). Between 1905 and 1908, Weber offered some important remarks, first on the content of the principle of marginal utility in a hypothetical Robinson Crusoe economy and second on the content of the principle in a social context. Like Friedrich Wieser, Weber tried to fashion the concept of marginal utility into a tool for investigating sociological problems rather than for elaborating on its so-called psychological aspects. Parsons presents compelling evidence in favor of Weber's intellectual indebtedness to the Mengerian approach to economic "action" or economizing behavior in which serial process analysis, time, uncertainty, and indivisibility are crucial differentiating factors. These elements distinguish the economics of Menger and Weber from that of Walras, Jevons, and Edgeworth; the last three used the concept of the margin in a different way. Weber rejected the use of mathematics in the sense of calculus (as opposed to arithmetic illustrations), which was used by many of these other writers to establish functional relations between key variables in the market. This methodological attitude explains Weber's attachment to the distinctive early Austrian analysis of price-formation processes in which bargaining and uncertainty were pivotal.

Weber did not slavishly accept Mengerian foundations for "economic action"; he posited differences of a methodological nature that he later exploited to help develop a full sociological investigation. Nevertheless, the concept of the margin in economic action was useful to both the sociological and economic analyses that Weber carried out. This book explains convincingly how his economic analysis was essentially prosecuted in the Austrian tradition.

As far as it goes, Parsons's comparison between the works of the early Austrians and Weber is welcome, and his conclusions supportable. For the historian of economic thought there is still a nagging question: Where does Max Weber belong in the history of economics? Weber did not integrate the concept of marginal utility into a unique theory of value and distribution, as might be expected by economists, and that is why he has been regarded as an economic sociologist. His contributions in that realm, so it was thought, had little import for major debates on economic theory and policy. Not so fast, argues Parsons, who demonstrates in the centerpiece of the book (chapter 3, "Weber and the Sociology of Economic Action: The Critique of Economic Planning") that Weber had much to say about the difficulties of socialist calculation. In fact Weber was highly skeptical of the theory of socialist planning, and Parsons contends that skepticism should have led to more extensive acknowledgment of Weber's ideas in the debates that took place in the 1930s and 1940s, as well as in discussions of the subject ever since. Weber was right to emphasize the point that monetary calculation of any kind, indeed the very existence of a monetary economy, implies that uncertainty and liquidity are important and cannot be ignored by the planners. Weber's prognosis for socialism was not favorable, and Parsons summarizes Weber's contribution to the debate: "In the absence of monetary calculation, a socialist economy could not attain the same level of rationality...