Anyway, there is a huge literature on all of this, including your points 2 and 3 (your point 4 seems like an editorial comment, not a statement inviting a reply). Rafe’s post above provides some references. I suggest that you try reading some of this literature, which is difficult to summarize in a few sentences. Try to have an open mind.

The point of my post, in any case, was not to demonstrate the superiority of Menger’s approach, but to point out that the conventional categories used to contrast Austrian and neoclassical approaches may be too crude to capture the relevant differences between them. There is an important sense in which Menger’s approach — which, after all, is often termed “causal-realist,” in the Aristotelian sense of realism — is strongly empirical.

Value is a subjective thing–that’s supposed to be the whole point of the Austrian approach. It’s not just subjective because of beliefs, or life situations, but also because of tastes. And tastes are largely psychological things (actually, so are beliefs).

It’s fine to say that we want a theory that is robust to particular psychological theories of preference formation. It’s not fine to pretend that such theories have no psychological underpinnings at all. And it seems odd to dogmatically ignore basic principles of psychophysics such as satiation and contrast effects that are directly relevant to the probable nature of preferences.

I’m not going to defend Mas-Colell’s exposition–the orange-juice/milk example suffers from a lack of specification of the time-period of consumption (i.e. you might want both in your refigerator even if you don’t consume them simultaneously). But the “psychological” aspect is equally present either way you look at it.

And of course, my points 2) to 4) above still stand.

http://oysterium.blogspot.com/2006/07/success-and-failure-of-talcott-parsons.html

Milford and Birner contributed papers to the collection edited by Bruce Caldwell “Carl Menger and his legacy in economics” and this is a gloss on Birner’s paper, undortunately missing the introduction on Menger and proceeding to a modified version of Popper’s situational analysis.

http://oysterium.blogspot.com/2006/05/jack-birner-on-situational-analysis.html

It may help to think in terms of two different kinds of natural laws (each of which are different from the manmade laws , norms and regularities which are subject to conscious and unconscious change). There are the unchanging natural laws of the natural sciences and similarly unchanging laws of the catallaxy. Praxeology is conerned with the second kind of laws.

The laws of each kind are used by historians and everyone else to explain why things happen the way they do (and not some other way). Traditional epistemology has been conferned with the justification of those laws, however they cannot be justified (in the strong logical sense that was desired) however they can be tested and if they stand up then that is about as good as it gets.

There is more to be said about these things, but not until after breakfast.

Menger infers preference orderings from observed choices. It is like revealed preference in that sense (Rothbard uses the term “demonstrated preference” to distinguish his approach from Samuelson’s), though it assumes nothing about stability (i.e., one cannot construct a utility function by assuming constancy of preferences over time). To see the difference between this and a “psychological” approach, compare Menger’s explanation of diminishing marginal utility (a term he doesn’t use) — each additional unit of a homogenous good is assigned to a lower-valued use — with the standard one (‘the second scoop of ice cream doesn’t taste as good as the first”). Indeed, look at the breezy and superficial treatment in Mas-Colell et al., p. 44: “Convexity can . . . be viewed as the formal expression of a basic inclination of economic agents for diversification. . . . A taste for diversification is a realistic trait of economic life.” Menger assumes no such “taste,” only that economic agents employ a (subjective) ranking of ends, to which they allocate scarce means. Mas-Colell et al. continue: “Economic theory would be in serious difficulty if this postulated propsensity for diversification did not have significant descriptive content. But there is no doubt that one can easily think of choice situations where it is violated. For example, you may like milk and orange juice but get less pleasure from a mixture of the two.” Huh? This constitutes a robust, scientific approach to diminishing marginal utility? Puh-lease.

1) What, pray tell, is the non-psychological meaning of “the relative importance for an individual” of an increment of X versus an increment of Y? Maybe this is intended to be a Samuelsonian argument that only revealed preferences are meaningful–it only means that the individual shows a stable propensity to buy so much of X and so much of Y in a given situation–but that kind of operationalism is usually thought to be an anathema to Austrians. In reality, this concept of “relative importance” is just as “psychological” as marginal utility. (Of course, we all know about ordinal versus cardinal utilities, but mathematical theory can cover both, so that can’t be a point of comparison.)

2) Why is Menger’s approach inherently non-mathematical? For example, I often employ the concept of “willingness to pay” for a given product as a buyer characteristic that can be compared across rival products. That characteristic might be psychological, but it could also be based on the derived demand of a business or the consumption technology of an end user. In either case, it can be thought of as a mathematical function mapping product characteristics and other transaction features to dollars per unit. Similarly, willingness to trade off X for Y at various endowment levels is eminently mathematical.

3) What deep empirical research, other than basic introspection, did Menger do to come up with his assumptions? My wild guess–practically none. Both approaches are “armchair economics”–perfectly justified in this case, I might add–and to suggest that “relative importance of X versus Y” is more empirical than “utility of X versus Y” is farcical.

4) Note the anti-formalization sneering at the end of the passage. Gossen, Jevons, and Walras were allegedly trying to puff themselves up and pretend to be “scientific” by applying mathematical techniques, unlike the humbly empirical Austrians. Please. This is just as odious (if possibly less justified) than accusing anti-mathemetizers of not knowing/enjoying math.