1. Introduction
Frank Albert Fetter (1863–1949) is often described as a leading representative of the Austrian school in the United States. The similarity between Fetter and the Austrians was observed early in his career (Hoxie, Reference Hoxie1905; Whitaker, Reference Whitaker1916), and has since become a trope of works studying his ideas (e.g. Dorfman, Reference Dorfman1949; Coughlan, Reference Coughlan1965; Rothbard, Reference Rothbard1977; O'Driscoll, Reference O'Driscoll1980; Herbener, Reference Herbener and Holcombe1999; McCaffrey, Reference McCaffrey2016). However, despite more than a century of acknowledgment – and apart from a few references to his early writings – none of the research on Fetter actually discusses his personal or professional relationships with the Austrians. Instead, the literature focuses on the doctrinal overlap between their published works. To date, this theoretical common ground has been almost solely responsible for the classification of Fetter's work as a “pecuniary-psychological variant of the Austrian economics” (Dorfman, Reference Dorfman1949: 359). Yet historical accounts to justify this claim are almost completely lacking. As a result, Fetter research is broad and speculative, and leaves the impression that his involvement with the Austrians was incidental, or perhaps that he was a “spiritual” member of the tradition working in isolation from its core members.
This approach and conclusion are understandable, as the published works of Fetter and the Austrians offer scant evidence of any extended influence, or even of contact. There are few citations to Fetter in the principal Austrian works published between the end of the First World War and the “Austrian revival” of the 1970s,Footnote 1 and almost the only thing that is known is that Fetter befriended Böhm-Bawerk. Certainly, no evidence is presented to indicate that Fetter had any direct involvement with the Austrians after about the time of Böhm-Bawerk's death. It might seem then that he played no great role within the Vienna school.
However, a large body of hitherto-unknown evidence tells quite a different story. Fetter's unpublished papers, journals, and correspondence reveal a history of close contact with the Austrians spanning several decades, especially during the interwar period. His personal friends and professional correspondents included many leading Austrians and “fellow-travelers,” including Eugen von Böhm-Bawerk, Gottfried Haberler, Henry Hazlitt, W. H. Hutt, Fritz Machlup, Hans Mayer, Carl Menger, Ludwig von Mises, Oskar Morgenstern, Joseph Schumpeter, and Friedrich von Wieser. The archival records reveal not only that Fetter was actively engaged with the Austrians throughout his career, but also that many of them looked to him for theoretical insight, professional advice, and personal friendship.
This paper draws on an extensive collection of archival materials to tell the story of Fetter's relationships with the Austrians. It relies especially on the Fetter papers housed at the Lilly Library at Indiana University.Footnote 2 These materials have not previously been published or quoted.Footnote 3 Yet they provide numerous insights into Fetter's intellectual debts to the Austrians, and theirs to him, not to mention a wide range of fascinating information about the lives, works, and personal relations of leading Austrians that have not been included in biographies or general histories. Fetter's most “Austrian” work was in value and price theory, but his archives include discussions of many topics, ranging from narrow questions of theory to the broader problems of public policy, to the philosophy of liberalism and the hopes for its future. This last point deeply concerned both Fetter and the Austrians. In fact, the decline of liberalism and the rise of monopolistic state planning is a recurring theme that frames many of their conversations. This is natural, given that many of their exchanges took place during the New Deal era, and ran parallel to the growth of planning in Nazi Germany and Soviet Russia.
It is important to state at the outset what this paper does and does not hope to achieve. First, it is not a comprehensive survey of Fetter's economic or political thought, or a critical exegesis of his or the Austrians’ published works – these can be found in other literature. Instead, the published works cited below play a supporting role by providing context for the unpublished or unknown materials. Second, this paper does not attempt to decide once and for all whether Fetter should be considered a card-carrying member of the Austrian school – as explained below, there is room for debate about his views, which are nuanced. Instead, this article fills a genuine gap in the history of both American and Austrian economics by taking a closer look at Fetter, who provided a bridge between them.
The paper is organized roughly chronologically: Section 2 surveys Fetter's early contact with Vienna, especially with Böhm-Bawerk and Schumpeter; section 3 discusses Fetter's relations with the younger Austrian school during the inter-war period, and the tributes they paid to each other; section 4 outlines Fetter's views on the decline of liberalism and his discussions with the Austrians about reversing it; section 5 examines his account of the Austrian school during his final years, as he reflected on his own place in the development of economic theory; section 6 concludes with suggestions for future research.
2. First communications with Vienna
The period prior to 1914 is usually the only one in which Fetter is thought to have communicated with Vienna, and it therefore serves a useful starting point. Yet even here the historical record is sketchy, and is summed up in the claim that Fetter twice visited Austria and met the leading representatives of the Austrian school (Howard and Kemmerer, Reference Howard and Kemmerer1943). In reality, he formed lasting bonds with several Austrians, and became one of the best-known foreign economists in Vienna.
Fetter's research agenda at the turn of the century involved nothing less than a revision of the entire theory of distribution. In particular, he was interested in rigorously developing the subjectivist, marginalist approach to economic theory and spinning out its various threads to their logical conclusions. As his contemporaries recognized, his approach was fundamentally Mengerian (Hoxie, Reference Hoxie1905; Whitaker, Reference Whitaker1916). Moreover, revising the theories of capital and interest meant that Fetter was obliged to engage Menger's followers as well. This he did, starting with a 1900 article, “Recent Discussion of the Capital Concept,” published in the Quarterly Journal of Economics (Fetter, Reference Fetter1900). This was the start of a long and serious public engagement with Austrian ideas. Over the course of the next 14 years, he published the bulk of his many writings on distribution theory that dealt directly or indirectly with Austrian theories, especially Böhm-Bawerk's (Fetter, Reference Fetter and Rothbard1977).
Given that the Austrians were then flourishing, it is no surprise that Fetter took the time to meet them personally during his visits to Europe in 1910 and 1914. In addition, in 1910 the outlook must have seemed bleak for the German historical tradition in which Fetter had been trained. His personal journal recounts a conversation about the state of German economics with his former doctoral professor, Johannes Conrad (University of Halle). Conrad was pessimistic about the future of German historicism, citing a lack of new research and outstanding young students. In fact, the sentiment in the conversation was generally that the school was on the verge of extinction (Fetter, Reference Fetter1910: 89). Georg BrodnitzFootnote 4 similarly declared that the decline was driven by a lack of large works on German economic history. Brodnitz suggested that the task of writing them should have been undertaken by Gustav Schmoller, but that he lacked the theoretical groundwork and was unable to understand the subject as a whole. In general, Conrad and Brodnitz agreed that both Schmoller and Werner Sombart were brilliant but too radical, and speculated that Eugen von Philippovich would replace Adolph Wagner at the University of Berlin, another hint at the decline of historical work (Fetter, Reference Fetter1910: 89–91).Footnote 5
Fetter's early communications with Austria are thus significant in that they reflect his growing interest in a strand of economic thought that was rapidly outpacing the one in which he (and many other Americans) had been trained. His visits also take on added importance because they were among the first personal engagements between Viennese and American economists. Hayek, for instance, states that for many years there was almost no “personal contact or intellectual exchange” between the Austrians and economists in other countries (Hayek, Reference Hayek and Klein1992: 32). Immediately prior to the First World War, however, this began to change. Hayek gives John Bates Clark as an example of a notable economist who was in cordial communication (Hayek, Reference Hayek and Klein1992: 39).
Eugen von Böhm-Bawerk
Fetter initiated contact with Böhm-Bawerk in 1903 by sending him a copy of a paper on rent and interest (Böhm-Bawerk, Reference Böhm-Bawerk1903). Then during his first visit to Vienna in 1910, Fetter met Menger, Böhm-Bawerk, and Wieser.Footnote 6 He formed a particularly strong bond with Böhm-Bawerk (Howard and Kemmerer, Reference Howard and Kemmerer1943: 230). They spent time traveling together in the Tirol region of Austria, and exchanged family photographs (Böhm-Bawerk, Reference Böhm-Bawerk1910). Beyond their personal fondness, however, their correspondence reveals a deep professional respect as well.
In particular, Böhm-Bawerk was quick to note their theoretical affinities in areas like price theory. For example, in 1912, Fetter published an article that extensively surveyed existing definitions of price, grouping them into various categories according their emphasis on subjective and objective aspects and their monetary or non-monetary character. He classified his views and the Austrians’ together. Böhm-Bawerk praised both his methods and analysis, declaring:
The method that you follow in [the paper], is Daedalian and original, and has led to a good number of insightful and unexpected results. Moreover, I rejoiced in many a fine use of terms that you incorporated into the analysis of your historical-statistical material. They definitely made a good and important step toward the improvement and standardization of that instrument of our scientific inquiries that we refer to as terminology. (Böhm-Bawerk, Reference Böhm-Bawerk1913)
Their mutual admiration even overcame scientific differences. For example, in 1914, Böhm-Bawerk was preparing the third edition of his History and Critique of Interest Theories when Fetter sent him his recently published “Interest Theories Old and New” (Reference Fetter1914). Fetter believed Böhm-Bawerk's time-preference theory of interest was a major advance in economics, but thought he had erred by retaining productivity as one of its foundations. Fetter argued instead for a “pure” time-preference theory based solely on subjective values. Böhm-Bawerk acknowledged the criticism, but could not accept it, though he praised Fetter's integrity as a theorist:
Your work is so penetrated by a truly scientific spirit that I always enjoy reading it even if I cannot fully agree. In this case too, some disagreement will remain. I cannot let go of the opinion that also the “technological” fact of the enhanced productivity of roundabout production is one of the determining forces of interest, and accordingly, that if this technological fact did not exist, interest would still exist as a result of the two other causes that I have acknowledged, albeit with far less intensity; and of course the chain of causation is not as claimed in various “productivity theories,” but is rather brought about by a value increase of present goods. (Böhm-Bawerk, Reference Böhm-Bawerk1914)
Böhm-Bawerk's death prevented any final rapprochement between their views, but he did make last-minute changes to his manuscript in order to publicly acknowledged Fetter's essay, which he described as “very remarkable” (Böhm-Bawerk, Reference Böhm-Bawerk, Huncke and Sennholz1959a, 482) and “exceedingly thorough and instructive,” even though Fetter occupied “the outermost wing of the purely ‘psychological’ interest theorists” and took a “far more extreme” view than himself (Böhm-Bawerk, Reference Böhm-Bawerk, Huncke and Sennholz1959a, 476).Footnote 7
Joseph Schumpeter
Fetter's interest in the ideas germinating in Vienna was not limited to those of the older members of Menger's school, however: he was also fascinated by the work of younger economists. His other significant connection prior to the war was formed in the US when, in 1913, he befriended Joseph Schumpeter while he was an exchange professor at Columbia University. Schumpeter visited Fetter at Princeton and stayed overnight in his home, where his distinctive personality caused a sensation and made a lasting impression on Fetter, his wife Martha, and their young son, Frank Whitson. Schumpeter also lectured to Fetter's students, who no doubt also enjoyed the unique experience (Schumpeter, Reference Schumpeter1913). The two men later traveled cross-country together to Minneapolis for a meeting of the American Economic Association (Fetter, Reference Fetter1974).Footnote 8
Upon leaving the US in 1914, Schumpeter apologized for not being able to visit Fetter again, and remarked that, “I always felt that in the inspiring company of American colleagues I could turn out much better things than I shall be able to over there [in Europe]” (quoted in Fetter, Reference Fetter1974). But they remained on friendly terms until their last years (e.g. Schumpeter, Reference Schumpeter1928; Reference Schumpeterundated). For instance, Fetter accepted Richard A. Lester, one of Schumpeter's University of Bonn pupils, as his graduate student and personal assistant (Lester, Reference Lester1931). In his turn, Schumpeter honored Fetter by describing him as an important and original theorist who “erected a building that was his own,” as opposed to simply following in the tracks of others (Schumpeter, Reference Schumpeter1954: 874).Footnote 9
During Fetter's Vienna trips, he must have made the acquaintance of other young economists in Böhm-Bawerk's seminar, though his personal diaries do not mention specific names. It is certain, however, that his works were already well known in Austria, and that they continued to be studied throughout the 1920s. It is less certain though how Fetter's reputation had first spread to Vienna. Hayek suggests that Schumpeter brought the ideas of the American economists back with him from his 1913–1914 trip (Reference Hayek and Klein1992: 32). However, Fetter's reputation had already been established by this point, as had Schumpeter's in the US. Schumpeter had met Clark in England in 1907 (Schumpeter, Reference Schumpeter1907b), and through him sent Fetter and Irving Fisher copies of his first book, Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (Schumpeter, Reference Schumpeter1908a; Reference Schumpeter1908c). Schumpeter was keen to impress his international colleagues, whose contributions to theoretical economics (as opposed to German historical work) he admired and wanted to emulate (Schumpeter, Reference Schumpeter1907a).
Schumpeter undoubtedly regaled his friends with stories of the Americans, but he was not the basis of their reputation in Vienna.Footnote 10 Fetter's international standing seems more due to Böhm-Bawerk, who encouraged Mises, for example, to study the Americans (Mises, Reference Mises and Greaves2008: 119). As Salerno (Reference Salerno1999) observes, this explanation is the most plausible, as Böhm-Bawerk had already debated Fetter and formed a personal friendship with him several years before Schumpeter's trip abroad. Moreover, Schumpeter read Fetter extensively before meeting him, as he reviewed his first textbook The Principles of Economics (Fetter, Reference Fetter1905a) for the Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung. Schumpeter's appraisal was quite positive, noting that it “surely deserves special attention, not only as a textbook that is rich in content, but also as a scientific achievement.” He went on to explain that Fetter's value theory is “very attractive and clear,” and that it will “strike a chord with those of the proponents of the Austrian school. Indeed, Fetter is much closer to the latter than the other American theorists” (Schumpeter, Reference Schumpeter1908b, Reference Schumpeter and Israel2018). This is consistent with Fetter's own intention for the book, which, as he explained in a letter to Herbert Davenport, was “to give the generally accepted Austrian analysis of marginal utility” (Fetter, Reference Fetter1905b).
3. The early interwar period
Fetter's contact with Europe was severed during the First World War. Despite Austria's political and economic difficulties though, intellectual activity gradually resumed in Vienna following the end of hostilities. In particular, largely due to the efforts of Mises, the Nationalökonomische GesellschaftFootnote 11 was revived after a long hiatus (Craver, Reference Craver1986: 17–18). Communication with America also resumed, including with Fetter and other prominent economists. Böhm-Bawerk's wife Paula had written to Fetter in 1916 to send him copies of her late husband's last published works, but the war interrupted their letters. In 1919 she wrote again, this time to ask for copies of correspondence between Fetter and Böhm-Bawerk that could be included in a planned full-length biography of her husband. “In between,” she wrote, “lies the ghastly war – and now that we have peace again, I turn to those gentlemen whom I can surmise have remained untouched by the madness that has gripped humanity, and, as servants of universal science, are above the strife and hatred of peoples” (Böhm-Bawerk, Reference Böhm-Bawerk1919).Footnote 12
Another significant event in Austrian–American relations at this time involved Carl Menger, who, though long retired from teaching, was still much admired by the younger economists (Hayek, Reference Hayek and Klein1992: 21–22). In 1920, on the occasion of his eightieth birthday, the Nationalökonomische Gesellschaft coined a series of medals in his honor. It entrusted James T. Shotwell of Columbia University with several of these to take home with him (Stearns, Reference Stearns1921a), to be distributed “as a tribute from Austrian economists to American economists” (Stearns, Reference Stearns1921b). Besides Shotwell, the intended recipients were Fetter, John Bates Clark, Frank Taussig, Edwin Seligman, J. Laurence Laughlin, Sigmund Zeisler, and Henry Jewitt Furber. Schumpeter said the medals were given on behalf of Menger, Wieser, and the Society, “in token of our cordial feelings of sympathy and admiration” (Schumpeter, Reference Schumpeter1920).
Fetter thus continued to enjoy the admiration of the Austrians between the wars. In fact, Hayek notes that during his own time as a student, “the work of the American theorists John Bates Clark, Thomas Nixon Carver, Irving Fisher, Frank Fetter, and Herbert Joseph Davenport was more familiar to us in Vienna than that of any foreign economists except perhaps the Swedes” (Hayek, Reference Hayek and Klein1992: 32).Footnote 13 Hayek actually acquired a letter of introduction to Fetter from Schumpeter, although no record of an actual meeting exists (Schumpeter, Reference Schumpeter1923). Nevertheless, throughout the 1920s, Fetter continued to befriend and assist the Austrians in their work. In 1926, Ludwig von Mises, then an acknowledged leader of the younger generation, visited Fetter at Princeton (Fetter, Reference Fetter1938b). As explained further below, they continued to follow each other's work for many years. Fetter's professional and intellectual support was likewise sought by the younger scholars in and around Mises’ circle. Gottfried Haberler also met Fetter in America, and also developed a lasting friendship. He eventually came to rely on Fetter in his teaching at Harvard, writing that he was in constant need of his papers on value theory for his lectures on welfare economics (Haberler, Reference Haberler1932).
The Wieser Festschrift
Fetter's status as a key figure in the development of Austrian economics was recognized in 1927 when he was awarded the Karl Menger Medal by the Austrian Economic Society (Howard and Kemmerer, Reference Howard and Kemmerer1943). His reputation was further enhanced in the late 1920s through his work on a significant but now-neglected project, namely, a festschrift in honor of Wieser to mark his seventy-fifth birthday. Wieser passed away just a few weeks after this celebration, and only lived to see the first volume of the collection in proofs. But the festschrift was nevertheless an important milestone for the Austrian school and for economics generally. It was eventually published in four volumes between 1927 and 1932 under the title Die Wirtschaftstheorie der Gegenwart, or Economic Theory at Present (Mayer et al., Reference Mayer, Fetter and Reisch1927–1932).Footnote 14 The project was spearheaded by Hans Mayer, Wieser's protégé and a chair at the University of Vienna. Mayer shared editorship of the collection with Fetter and Richard Reisch.Footnote 15
Mayer set to work on the collection in 1925. He explained his editorial invitation to Fetter on the grounds that “Professor von Wieser would be honored very much if you would accept this invitation for an editorship because he esteems the American economics school so highly and you being one of the most famous writers of it and so well known especially at Vienna” (Mayer, Reference Mayer1925a). The purpose of the collection went beyond simply honoring Wieser as a scholar and teacher, however. As Mayer further explained, “The edition of this book will be of the greatest importance for the two economic Schools of America and Austria wich [sic] are so closely connected” (Mayer, Reference Mayer1925a).
Fetter accepted Mayer's offer and began soliciting and editing contributions from prominent American economists. His personal and professional connections were invaluable in this task, and he quickly received the cooperation of Thomas Nixon Carver, Irving Fisher, Frank Knight, and Edwin Seligman. John Bates Clark, J. R. Commons, Richard T. Ely, E. W. Kemmerer, Jacob Viner, and several others soon followed. An honorarium of 100 gold marks was promised to each contributor (Mayer, Reference Mayer1925b), but in a touching gesture, Fetter declined his payment and instead made it a gift to Paula Böhm-Bawerk, who was also Wieser's sister (Mayer, Reference Mayer1925c).
With Fetter's assistance, American authors were well-represented. Their contributions were integral to Mayer's project, and were intended to accomplish more than simply showcase the best of Austrian economic thought. As Fetter explained to Edwin Seligman:
It is natural and evident that the Austrian editors hope to show the traces of influence, immediate or remote, that the Austrian school has exerted; but the broader purpose of the work requires the representation of all the clearly articulate trends of thought among us. (Fetter, Reference Fetter1925a)
In other words, it was intended to explain some distinctively Austrian contributions, but also those of other schools.
In late 1925, in connection with the festschrift, Fetter made the acquaintance of another young Austrian, Oskar Morgenstern, who was visiting Columbia University on a Rockefeller Foundation scholarship after having completed his PhD. Morgenstern soon began work as Fetter's editorial assistant on the festschrift and as a go-between with Mayer. His proximity to Fetter, as well as his job assisting Mayer with editing the Zeitschrift für Nationalökonomie (Craver, Reference Craver1986: 17–18), made him a natural choice. He and Fetter worked closely throughout early 1926 to collect, edit, and sometimes translate papers from the American contributors, and Morgenstern himself translated Fetter's chapter on economic thought in America. He stayed as Fetter's guest in Princeton, and a mutual admiration developed. Afterward, Fetter followed the younger man's career closely, and his name was briefly touted as a replacement when Fetter retired from a two-year stint at the University of Illinois (e.g. Bogart, Reference Bogart1936; Fetter, Reference Fetter1936a; Morgenstern, Reference Morgenstern1936). Morgenstern eventually moved to Princeton in 1938, at which point Fetter was fully retired but still intellectually active.
In any case, the final version of the festschrift was an extraordinary example of international cooperation in economics, uniting 81 authors from well over a dozen countries in a series of definitive accounts of the state of the science. The papers examined the major subject areas of economics as well as its development in specific nations (Schulak and Unterköfler, Reference Schulak, Unterköfler and Oost-Zinner2011: 110).Footnote 16 Although the publication of the fourth volume was delayed until 1932,Footnote 17 the complete collection was received positively. For example, in the Economic Journal, H. E. Batson described it as “a sort of ecumenical symposium, a majority report of an academic League of Nations” (Batson, Reference Batson1934: 464). J. R. Commons likewise wrote approvingly of “the editors’ purpose of a world economics with national and personal deviations,” claiming that the contributions were “the augury of a new nationalism, a new internationalism and a real science of economics” (Commons, Reference Commons1933: 100).
Fetter's role in the undertaking went beyond editorship: his own chapter, a study of the development of economic thought in America, was itself a tour de force. In fact, Mayer valued it so highly that he waived his own rule on the size of manuscripts (Fetter, Reference Fetter1926a, Reference Fetter1926b), and declared that “There is no doubt that your contribution will be the focus of the work” (Mayer, Reference Mayer1926). Batson called it “masterly” (Batson, Reference Batson1934: 464), and J. R. Commons likewise referred to it as “a masterful, condensed survey” (Commons, Reference Commons1933: 100). Morgenstern agreed, and wrote enthusiastically to Fetter:
Here [in Vienna] everybody is charmed by your paper on Economics in America which is said to be the best paper in the first volume … I must confess that it gives the best picture of the present situation of American economics I can imagine. (Morgenstern, Reference Morgenstern1927)
He hastened to add, though, that a Hungarian journal had published a negative review: according to Morgenstern, Othmar Spann had arranged the criticism – written by Theo Suranyi-Unger – as a way to discredit the marginal utility theorists.Footnote 18
Morgenstern remarked that Spann “holds that the marginal theory is dead in America (and everywhere!!) and that the Institutionalists have taken its place. Since he hardly can read English he is very little pleased to read the contrary of his opinions in your paper” (Morgenstern, Reference Morgenstern1927). He further mentioned that one of Spann's books was about to appear in English, and asked for Fetter to review it so as to expose its “manysided defects” (Morgenstern, Reference Morgenstern1927). Fetter did not take up the suggestion. He did, however, promote Morgenstern and his research to other economists well after his own retirement (Fetter, Reference Fetter1941), and referred him to colleagues as “brilliant” (Fetter, Reference Fetter1938d).
Analyzing the full significance of the festschrift requires a separate paper, so I conclude by noting that at this vital moment in the history of the Austrian tradition, Fetter was working diligently to recognize its achievements and support its members, and they were doing the same for him.
The London connection
Ironically, at the same time Fetter's reputation among the Austrians was at its peak, his practical influence as a theoretician was beginning to wane (Salerno, Reference Salerno1999). This was due not so much to a lack of interest in his ideas as a lack of resources for studying them; in fact, the younger generation gratefully acknowledged Fetter's achievements. The first edition of Lionel Robbins’ Essay, for instance, included several citations to Fetter alongside references to Menger, Strigl, Hayek, Haberler, and Morgenstern (Robbins, Reference Robbins1932: 15, 61, 63, 102). Robbins also recognized his debt to Fetter's writings on capital and interest (Robbins, Reference Robbins1971: 105), and it is clear he held his contributions in high regard.
A variety of factors contributed to the decay of Fetter's influence as a “pure” theorist. Most importantly, by the late 1920s his earlier works on capital, interest, and rent were in short supply. This was partly due to the limitations of print publishing, which made copying and distributing them difficult, but also to a crowding-out effect created by Fetter's constant work on other topics during the last 25 years of his life. The inaccessibility of his papers was especially noted in the 1930s amongst the circle of young economists at the London School of Economics led by Robbins and Hayek. Fetter may have met the members of this group in the summer of 1931, which he spent touring England with his wife and lecturing at various universities.
The London group was impressed, and they approached Fetter several years later to discuss collecting and republishing his most important papers on capital and interest.Footnote 19 Their agent in the negotiations was Fetter's friend and former master's student at Princeton, Noel Frederick Hall.Footnote 20 In 1935, Hall visited Fetter in the United States with a proposal to publish a collection of his articles in London. The suggestion came from Robbins and others in Britain “who owe a good deal to your work” (Hall, Reference Hall1935a). Fetter agreed, and he and Hall began drawing up the table of contents, which focused on three major strands of research: the general theory of value, the theories of interest and rent, and the theory of population (Fetter, Reference Fetter1935b). Hall returned home with a letter from Fetter to the London economists, about which he was sure “Robbins, Hayek + Co. will be delighted” (Hall, Reference Hall1935b).
A year later, however, Fetter had heard nothing further from Hall, and wrote to inquire about the status of the project (Fetter, Reference Fetter1936b). Hall apologetically explained that he had been overwhelmed with other duties, but that he intended to get back to it immediately. His plan was to give the proposal to another Austrian, Paul Rosenstein-Rodan, who was then advising Allen & Unwin about their publications, and therefore in a good position to assist (Hall, Reference Hall1936). Strangely though, at this point all discussion of the project ends, and the planned book never appeared. The exact reason remains unknown, though one explanation is that it was dropped after a personal feud between Robbins and Hall developed in late 1935 (Howson, Reference Howson2011: 284–287). This is speculative, of course, but it would help to explain why the collection, which had been entrusted to Hall's care, was abandoned, and how it is that he could have found himself in a “stupid, pathological state” about it at the time (Hall, Reference Hall1936).
4. The Great Depression and the New Deal
Fetter's writings from 1900 until the mid-1920s mainly concerned value, price, and distribution theory, and through these topics he enjoyed his greatest influence on the Austrians. However, as a result of his progressive-era training and concern with social welfare, Fetter also developed a fascination with competition and monopoly, especially legal cases of restraint of trade and violations of the Sherman anti-trust laws. In the 1920s, this interest developed into a full-blown research agenda that accounted for most of his academic and public work until his death in 1949.
Monopoly was, for Fetter, the single greatest threat to economic and social harmony in the United States. During the Great Depression especially, Fetter focused on economic policy and the question of whether and how monopoly was to be tolerated (and even encouraged) as part of the national recovery plan. Throughout, he was a relentless critic of monopoly, big business, and any attempt to fix prices or inhibit competition. He was especially ferocious in his attempts to put an end to price discrimination via the basing-point system of delivered prices (Fetter, Reference Fetter1971 [Reference Fetter1931]). This work took him away from theory and into the policy and regulatory sectors, and he often consulted or provided testimony for the Federal Trade Commission (in 1923) and the Temporary National Economic Committee (1939 and 1941).
The fortunes of progressive liberalism
Despite, or perhaps because of Fetter's diminished role as a leader in theory, his work on monopoly and public policy allowed him to engage the Austrians, especially the younger men, in a different way than his earlier writing had. In particular, his later interests offered some common ground between the classical liberalism of many Austrians and Fetter's own progressive liberalism.
Fetter's political views are paradoxical and difficult to classify. On the one hand, he was influenced in his youth by the American progressive economists, especially Richard T. Ely, Edward A. Ross, and John R. Commons. He endorsed, for instance, their general view that economic experts should help guide public administration, thereby limiting the excesses of laissez-faire, as well as some of their specific policy proposals relating to immigration restrictions and eugenics (Fetter, Reference Fetter1913, 1925; Leonard, Reference Leonard2016: 164–165). On the other hand, he was a firm advocate of free trade, free markets, and the power of competition to promote social progress, whose greatest enemies were monopoly and big business. Perhaps unsurprisingly, the labels he used to describe his views shifted frequently, and he referred to himself variously as a progressive, a liberal, and a progressive-liberal, among other things.
Fetter's idiosyncratic politics help to explain why, in the 1930s, his work began to overlap with the interests of the Austrians in a different way. The New Deal, with its large-scale expansion of government regulatory power – especially in relation to price policies – represented a marriage between big business and big government that posed a serious threat to the liberal ideals of free trade and competition. The uncertain future of private enterprise, combined with sweeping reforms intended to protect domestic industry and maintain high prices, provided ample fodder for those liberals who were keen to warn against the dangers of fascist or socialist policies. Fetter and the Austrians were united in this apprehension, and shared their anxieties with each other.
W. H. Hutt
Of all economists associated with the Austrian tradition, the one who was in this period closest to Fetter in his general outlook was W. H. Hutt.Footnote 21 Like his contemporaries, Hutt found that his work was “closely indebted” to Fetter's writings (Hutt, Reference Hutt1937). In particular, Hutt was also a critic of monopoly power, especially in labor markets or when exercised through labor unions. In the mid-1930s, he was also concerned with economists’ roles as policy advisors and molders of public opinion. He outlined his position most fully in his 1936 book Economists and the Public, a copy of which he sent to Fetter.Footnote 22
Fetter proved a kindred spirit, writing to Hutt that, “I wish to express my great enjoyment and cordial agreement at almost every point with your keen and penetrating analysis.” According to Fetter, Hutt's book was “a much needed expression of the spirit and philosophy of the Liberal Economists which is being forgotten in the midst of the clamors from the extremist camps of Communism and Fascism” (Fetter, Reference Fetter1937). They agreed particularly that the maintenance of economic freedom required restricting private monopoly and preventing combinations that endangered consumer sovereignty (Hutt, Reference Hutt1936: 126–127, 190, 271–272). Unfortunately, any efforts in that direction were being hindered by interest groups, usually businesses, but also by economists biased in favor of business (Hutt, Reference Hutt1936: 34, 56–57, 227, 231–232).
Fetter quoted Hutt to this effect in one of his unpublished speeches titled, “Can Capitalism Survive?” (Fetter, Reference Fetter1935a). It is the clearest and most concise statement of Fetter's economic attitudes of this period, and he described it as a “statement of the philosophy of the Progressive Liberal Economists in American [sic] in the best traditional sense of the now much abused term ‘Liberal’” (Fetter, Reference Fetter1937). Its central message was that American capitalism – which had only ever been imperfectly realized – had gradually been transformed into a system of “corporationism.” Supported by special privileges and governmental refusal to enforce the anti-trust laws, large businesses were free to act as monopolists, and wealth and ownership were being concentrated in an increasingly small number of hands. For Fetter this meant a march toward fascism and economic control, and his only solution was a return to the rule of the anti-trust laws, which he held to be consistent with liberalism (Fetter, Reference Fetter1935a).
Hutt argued along similar lines in the passage Fetter quoted, which includes Hutt's usual emphasis on the importance of maintaining competitive institutions (Hutt, Reference Hutt1935). Fetter departed from Hutt mainly in regard to the practical question of how to dismantle existing monopolies: Hutt recommended compensating them for their losses, a policy Fetter emphatically rejected. In his view, monopolies in the US existed largely in blatant violation of anti-trust law, and deserved no compensation for the loss of illegal gains (Fetter, Reference Fetter1937)
Ludwig von Mises
Fetter's unique relationship with the Austrians is also seen through his relationship with Mises. As far as their approaches to economic theory were concerned, the two men were close. Politically, however, there were tensions between Mises’ classical liberalism and Fetter's progressive liberalism. Their most important common ground in economic theory concerned Fetter's development of the pure time-preference theory of interest, which Mises occasionally noted was similar to his own (Mises, Reference Mises and Greaves2008: 124). Mises’ debt to Fetter is stronger than his published work indicates, however. In 1938, while drafting Nationalökonomie, the German-language predecessor to his book Human Action, Mises told Fetter candidly that, “In these last months I have reread your contributions on the theory of interest. It is my firm opinion that they are more important than any other contribution on the subject since Böhm-Bawerk. I am indebted to them” (Mises, Reference Mises1938). Mises’ admiration for Böhm-Bawerk only underscores the importance of his evaluation of Fetter.
For his part, Fetter may have absorbed ideas about business cycles from Mises. O'Driscoll (Reference O'Driscoll1980), for example, shows the similarities between their views, especially as outlined in Fetter's paper “Interest Theory and Price Movements” (Fetter, Reference Fetter1927). Yet O'Driscoll also observes there is no published evidence Fetter was familiar with Mises’ work on cycles. However, unpublished correspondence reveals that Mises visited Fetter in mid-1926, just a few months before Fetter presented his paper to the American Economic Association (Fetter, Reference Fetter1938b). Given Mises’ emphasis at the time on business cycle research, it is unlikely he would have failed to mention the subject.Footnote 23
Political events did more to bring Fetter and Mises into contact than pure theory, however. By the late 1930s they had been out of communication for more than a decade, but Fetter had received updates on events in Vienna through people like Morgenstern, who provided him with an insider's account of Mises and the other liberals’ fight against foreign exchange control in Austria (Fetter, Reference Fetter1938d). Fetter was inspired to make contact once again after reading Mises’ introduction to A. S. J. Baster's The Twilight of American Capitalism: An Economic Interpretation of the New Deal (Mises, Reference Mises and Baster1937). Fetter's interest was further enhanced by Henry Hazlitt's New York Times book review of the English translation of Mises’ Socialism, a copy of which Fetter sent to Mises in Geneva. Mises was delighted, though he showed no sign of being familiar with Hazlitt. Interestingly, Hazlitt was at about the same time also writing to Mises to introduce himself and to share the review (Hazlitt, Reference Hazlitt1984). Given that Hazlitt's article appeared on January 9 and Fetter's letter is dated the fifteenth, Fetter may have been the first person to make Mises aware of Hazlitt, if only by a few days or weeks. In any case, Fetter was happy to find a likeminded economist who shared his skepticism of economic planning, and he confided to Baster that he was looking forward to reading Socialism in full (Fetter, Reference Fetter1938a).
Yet while the growing spirits of nationalism and socialism disturbed both men, they did not agree on all aspects of the best solution to them. Their differences were especially pronounced when it came to the question of immigration. Mises argued repeatedly that economic nationalism led naturally to widespread restrictions in labor markets, particularly on emigration and immigration. These in turn threatened the international economic order and worked against the principles of liberalism. Public policies designed to prevent the free movement of labor were thus for him a non-starter.
Mises made his case forcefully in a 1938 essay, “The Disintegration of the International Division of Labor,” a summary of his thinking on the importance of peace and free trade (Mises, Reference Mises and Ebeling1990). He sent it to Fetter in reply to the “Can Capitalism Survive?” speech. Fetter described Mises’ argument as “admirable,” and even stated that “Nowhere is the case put more clearly” (Fetter, Reference Fetter1938c). But he disagreed on the question of immigration. Fetter had been influenced early on by Malthus,Footnote 24 whose population theory he had criticized but ultimately accepted (Fetter, Reference Fetter1898). And as President of the AEA, he had stated that immigration would cause a resource crisis in the US if left unchecked (Fetter, Reference Fetter1913). He advanced much the same view to Mises:
I am sure that if you would come here and look at the matter from the standpoint of our American civilization you would concede that your implied proposal to admit the Chinese and East Indians as well as all other people with lower standards of living into this country would mean the complete breakdown of our social as well as political and economic conditions. As a student of Malthus I learned what is perhaps his most certain proposition that immigration from an over-populated country never served to raise the standard of wages there but merely to reduce the wages in the countries with higher standards. A policy of unrestricted immigration means letting the countries of the lowest standards anywhere in the world reduce to their own level the standards of all other countries. (Fetter, Reference Fetter1938c)
Mises sharply disagreed: in his view, differences in productivity, and therefore in wage rates, were the primary factors influencing migration, and only the free movement of labor and capital could equalize wages rates and produce higher standards of living in relatively overpopulated countries. Immigration restrictions were largely a tool of trade union policy designed to keep domestic wage rates artificially high at the expense of foreign workers (Mises, Reference Mises and Ebeling1978, Reference Mises and Ebeling1990).
Disagreement did not diminish their mutual respect though. In 1945, Fetter reviewed Mises’ book Bureaucracy in the American Economic Review, likely at the request of Fritz Machlup, who was then acting as managing editor (Fetter, Reference Fetter1945a; Machlup, Reference Machlup1945a).Footnote 25 It was to be the final book review of Fetter's career. Although brief, it offered a broad reflection on the achievements of the older and younger Austrian schools, and of Fetter's admiration for them. He recalled the contrast between the German historicists and the Austrians, observing that “The one pointed the way to the totalitarian state, and the other to a greater and better liberalism in economic and political affairs” (Fetter Reference Fetter1945a, 445). He also drew attention to Mises and Hayek as effective critics of socialism and defenders of free enterprise, and remarked of Bureaucracy that “the case for free enterprise versus socialism has nowhere been more ably and readably stated in brief compass” (Fetter, Reference Fetter1945a, 446). He concluded by stating that “Professor von Mises is a consummate general theorist” (Fetter, Reference Fetter1945a, 446). Such praise is rare in Fetter's writing, and is usually reserved for economists who deeply influenced him, such as John Bates Clark.
Fetter's “unpretentious” book review (Fetter, Reference Fetter1945b) prompted a fan latter from F. A. Harper of Cornell, who praised its range as well as Fetter's refusal to use jargon. Harper became a major figure in the revival of Austrian economics in the US, especially through founding of the Institute for Humane Studies, which encouraged much of the work done by young Austrians in the 1970s (Blundell, Reference Blundell2014). The IHS also played a large part in rehabilitating Fetter's work through the publication of a collection of his papers on capital, interest, and rent (Fetter, Reference Fetter and Rothbard1977).
Machlup shared Harper's enthusiasm, adding that, “I have always been a Fetter fan myself” (Machlup, Reference Machlup1945b). In fact, Fetter's and Machlup's professional interests were remarkably similar; both were fascinated with economic terminology and semantics,Footnote 26 and more important for Fetter, Machlup published extensively on monopoly and also wrote a book devoted to the basing-point system of delivered prices (Machlup, Reference Machlup1949). It cited Fetter heavily and positively, the last major project by an Austrian to do so in his lifetime. Unfortunately, it appeared just one month before his death in March 1949, and he never had the chance to read it (Mund, Reference Mund1949). Several months later, in September, Mises published Human Action, which drew significantly on Fetter's work, particularly his theories of capital and interest (Mises, Reference Mises1998 [1949]). It was Mises’ writing that eventually drew renewed attention to Fetter during the “Austrian revival” of the 1960s and 1970s.
5. Final years
This paper has so far focused on Fetter's direct interactions with the Austrians. Naturally, however, he also expressed opinions about their work in other contexts. These are worth noting for the sake of completeness, but also because they provide a useful way to summarize Fetter's place in relation to their ideas. The later years of his career in particular provided ample opportunity for Fetter to reflect on his place in the history of economics relative to established figures and schools of thought. This he did repeatedly in the 1920s, 1930s, and 1940s. For example, in the early 1920s he produced a series of articles on the history of economic theory that involved much comparative study of ideas, thinkers, and schools. Moreover, these papers positioned him ideally to comment on the importance of different strands of economic thought. They consisted of two two-part articles, the first set dealing with the question of what should be the central theme of economics (Fetter, Reference Fetter1920a, Reference Fetter1920b), and the second with the history of value theory (Fetter, Reference Fetter1923a, Reference Fetter1923b). Throughout these arguments Fetter drew on and praised the Austrians, especially Böhm-Bawerk and Wieser, whom he credited with major roles in defining the proper scope of economics, and with eliminating classical errors.
However, as he made clear in his debates with Böhm-Bawerk, Fetter was also a critic, and he was uncomfortable with being pigeonholed as a member of a school. His own position was one of methodological tolerance. He believed that theoretical, historical, and institutional studies could all serve valuable purposes in economics, so long as they remained grounded in the real world. The true danger was misusing a method by taking it to extremes. Fetter explained his position in a letter to Richard T. Ely:
You know that my training was primarily in the narrow historical field under Jenks and Conrad although I never have been able to get any other economist to think of me in that light, for I became at once tagged in my youthful days because of some early theoretical articles with the brand of abstract Clarkian and Austrian economists. As a matter of fact I am fundamentally interested always in the historical approach and never have had real sympathy with the a priori deductive treatment of economics when it is completely severed from observation and historical studies. However, the extreme of reading the logical or formative method out of economic practice seems to me to be abstract and untenable. (Fetter, Reference Fetter1931; second emphasis added)
In other words, theory should be both logically sound and realistic, and should be wary of the opposing dangers of pure historicism or overly abstract theory. Fetter's comments at first imply that he was critical of Austrian methods on the grounds that they were too abstract, but his position is more nuanced (Herbener, Reference Herbener and Holcombe1999: 128–129). For example, he explicitly defended Menger, Böhm-Bawerk, and the early marginal utility theorists from the claim that they were armchair philosophers lacking practical experience (Fetter, Reference Fetter1923a, 595–596).Footnote 27
Fetter expanded on his opinions in the mid-1940s in one of his last (and unpublished) manuscripts, an extensive survey of the development of economic theory from classical economics to the neoclassical era. Here he complained that labeling economists as members of a school too often served as a convenient excuse to misrepresent their opinions. In his own case, he explained:
[A]ltho my years of economic study were spent entirely under teachers of the historical school, yet I was early tagged as an adherent of “the Austrian school,” because of my recognition of their substantial contributions. Soon afterward, for the same reason, I was generally classified as a disciple of John Bates Clark, and that disposed of the matter for a time. Meanwhile, I was vigorously dissenting from some of the views of both. Later the Austrian label was again more frequently applied to me, alternating with “neo-classical,” after that term had taken on a more confused meaning. I have even been called an “institutionalist” – a title which I would gladly accept if allowed to define it as I think it should be. I have never been consciously an adherent of any “school” or sect of economic theory and have earnestly striven to prevent either pride of personal opinion or a mistaken sense of loyalty to the ideas of any writer or school from dimming my eyes to newly discovered truth. I have continued to believe that sharp differences of opinions among economists on intellectual issues is consistent with mutual respect and halting friendship, and that in such matters the one loyalty, is loyalty to the search for truth, not to some theoretical hero, living or dead, or to some cult, past or present. (Fetter, Reference Fetterunpublished a, 8–9)
In this account Fetter defines membership in a school as unquestioning devotion to orthodoxy, making it impossible to be both a disciple and a constructive critic. By his own narrow view then, he did not belong to any school, but then again, neither did most economists of his time. In fact, in making these comments, Fetter likely had in mind the classical era, especially some of Ricardo's more dedicated followers, whose devotion he criticized in an unpublished essay from the 1940s titled, “The Ricardian Cult” (Fetter, Reference Fetterunpublished b).
Fetter's view of his own work is brought out well by Joseph Dorfman, who categorized it as a “pecuniary-psychological variant of the Austrian economics” (Dorfman, Reference Dorfman1949: 359). By this he meant, respectively, that it focused on practical business affairs and relied on modern psychology as its basis rather than the older hedonistic calculus (Dorfman, Reference Dorfman1949: 360–365). This formulation is largely based on Fetter's letters and conversations with Dorfman, who approached Fetter to ask about his background while drafting The Economic Mind in American Civilization. Fetter was at first skeptical: he complained that his early critics had failed to read his work seriously and therefore to assess it fairly. While he did not doubt the quality of Dorfman's scholarship, he believed that “as a disciple of Veblen you can not do other than condemn a good part of what I have written, the more so to the degree that you fully understand what I was driving at” (Fetter, Reference Fetter1940). Dorfman quipped in return that “disciple of Veblen” was a contradiction in terms (Dorfman, Reference Dorfman1941). Fetter pointed in particular to his Wieser festschrift article as a contribution that Dorfman would likely disagree with, because a good part of it was devoted to Veblen and the institutionalists.
Nevertheless, Fetter explained that his theory of capital – as summarized in the Encyclopedia of the Social Sciences – was “in essential harmony with Sombart's institutional treatment of Capitalism” (Fetter, Reference Fetter1940). His exact meaning is unclear, but he could be referring to the idea that capital embodies important historical and institutional traits. In any case, Fetter clearly thought it important to point out the compatibility of his views and those of other “schools,” rather than their differences. Geoffrey Hodgson likewise observes that Fetter's capital theory bridges several economic traditions by synthesizing elements of German historical, Austrian, and institutionalist views (Hodgson, Reference Hodgson2008).
6. Conclusion
This paper has surveyed the long history of Frank Fetter's involvement with the Austrian economists, filling a gap that has remained open for several decades. Although I do not take sides on the question of whether Fetter should be included in one specific school of thought, it is clear that his life and work were closely intertwined with the Austrians, and with the fortunes of the Mengerian tradition. At the very least, it should be clear, given their connections, that no history of the Austrian school can be complete without an account of Fetter's involvement, as he was a persistent influence among the people and institutions that shaped Austrian economics in the 20th century. Yet most of their history has been preserved only in Fetter's unpublished papers, and has remained unknown.
However, documenting Fetter's relationship with the Austrians is only a first step in a larger research program that revolves around his life and ideas. As Hodgson (Reference Hodgson2008) and McCaffrey (Reference McCaffrey2016) both argue, Fetter's work remains topical. And as indicated throughout, there is still ample room for studying his unique place in the history of economics and for applying his ideas to current controversies. There are many areas that stand out as particularly promising for future work. These include Fetter's:
(1) unique mixture of intellectual influences, including his progressive-era political and policy views, all of which can shed new light on debates about the history of American economics (e.g. Hodgson, Reference Hodgson2008; Leonard, Reference Leonard2016; Magness, Reference Magness2018);
(2) work on the Wieser festschrift, a neglected but highly significant part of the history and legacy of the Austrian school around the world, and its relation to other schools of thought (e.g. Boettke et al., Reference Boettke, Coyne and Newman2016; Salerno, Reference Salerno1999; Wasserman, Reference Wasserman2016);
(3) theoretical and applied work on monopoly, and its overlap and conflict with Austrian theory and laissez-faire economic policy (e.g. Salerno, Reference Salerno2004);
(4) research on capital, interest, rent, entrepreneurship (e.g. Foss and Klein, Reference Foss and Klein2012: 48–50; Hodgson, Reference Hodgson2008; McCaffrey, Reference McCaffrey2016);
(5) distribution theory and its application to research on firms and organizations (e.g. Lewin and Phelan, Reference Lewin and Phelan1999);
(6) distribution theory and its application to research on business cycles and financial crises (e.g. Herbener, Reference Herbener and Holcombe1999: 133–135; O'Driscoll, Reference O'Driscoll1980).
These and many other topics remain open to investigation, and each provides ample reason to reconsider Fetter's work.
Acknowledgements
I would like to thank Sara Goodwin for her tireless efforts with the Fetter archives, material from which appears courtesy of the Lilly Library, Indiana University, Bloomington, Indiana. Karl-Friedrich Israel generously agreed to assist with the translation of the German-language sources. Three anonymous reviewers provided helpful comments on the first draft of the paper.
