In his biography of Mises, Hülsmann takes a quick detour to discuss the foundation of the Austrian school and some of its early members which influenced Mises’ development as an economist. I’m having trouble, however, following some of Hülsmann’s distinctions between Carl Menger, W.S. Jevons, and León Walras. Allow me to excerpt from the book at length,
Gossen had indeed anticipated Jevons’s and Walras’s theories. The three men had developed general theories that were analogous to Menger’s general theory of value and prices, but differed from it in their psychological orientation and in the exact type of explanation they offered.
In Menger’s theory, the term “value” does not refer to a psychological feeling, but rather to the relative importance for an individual of the marginal unit of a good X — that is, to the importance of X in comparison to the marginal units of other goods Y and Z. The market price of a good results from the interplay of sellers and buyers, for whom the goods bought and sold have different relative importance. In contrast, in the theories of the other three authors, the price of a good results from the interplay of sellers and buyers whose feelings or well-being are differently affected by control of the good. While Menger explained the pricing process as resulting from the importance of a good relative to the importance of other goods, Gossen, Jevons, and Walras explained the pricing process as the impact of a marginal quantity of a good on the psychology of the actor — an impact they called want-satisfaction (Gossen), utility (Jevons), and satisfied needs (Walras). Jevons’s marginal utility thus played structurally the same role that marginal value played in Menger’s theory — it delivered an explanation of market prices — but where marginal utility explains the price of a good by how the good ranks in importance compared to other goods, according to the needs of the individuals involved in the pricing process.
In the psychological approach of Gossen, Jevons, and Walras, the human psyche was the great common denominator for the economic significance of all goods; in the theory of Menger there was no common denominator. In his approach, “value” cannot be independent of the specific circumstances of time and space; it is inseparable from these circumstances and means different things in different economic settings. According to Gossen, Jevons, and Walras, the amount of “utility” derived from a good could be different in different situations, but according to Menger, the entire basis of value is different as soon as the economic context changes — because the good would then be compared to different other goods.
— Jörg Guido Hülsmann, Mises: The Last Knight of Liberalism (Auburn: Ludwig von Mises Institute, 2007), pp. 131–132.
I don’t have a strong hold on the primary literature; the only relevant book I’ve read is Menger’s Principles of Economics, but I read it some time ago. But, Hülsmann’s argument above is confusing. I don’t remember Menger’s theory of value relying on a concept of “relative importance,” but on a number of prerequisites which boil down to the individual having established a subjective relationship with an object, where the latter can satisfy (or help satisfy) some end the individual has in mind. The “relative importance” of goods, after all, can only be established if each good has an independent value attached to it (and, actually, this idea of “relative importance” seems close to the theory of the marginal rate of substitution). What I thought the major differences between Menger and Walras were was the latter assumed a certain set of prices to exist — thus the introduction of the abstracting proxy of the auctioneer —, whereas the former developed a causal theory of price formation. (I’m not sure as to the differences between Menger and Walras, but if this facet of Mises’ thought has any relation to Menger’s, then another difference would be emphasis on the importance of the psychology that explains human preferences; Mises, and maybe Menger, instead held that we take preferences as given.)
Maybe Hülsmann’s distinctions are too subtle for me; if someone could clarify his argument I’d be much obliged.