Frank Fetter: The Fortunes of Subjectivism

Frank Fetter’s central contribution to economics was to develop a consistently subjectivist theoretical system based squarely on the work of the Austrian economists and their American sympathizers. This involved a complete reconstruction of the theories of value, price, and distribution, with a particular focus on the themes of capital, interest, and rent. In this chapter, I explore an area of Fetter’s thought that has yet to receive much attention: his work in the history of economic thought. Specifically, I consider his account of the transformation of economics following the “marginalist revolution,” and of the role of subjectivist Austrian economics in that transformation. This topic increasingly occupied Fetter’s attention in the later decades of his career, as he witnessed the theoretical revolution falter and give way to what eventually became anti-subjectivist currents in economics. In Fetter’s view, the promise of the revolution was never fulfilled, and was eventually undermined because subjectivism was never completely or consistently adopted in economics. This led to both conflicts between classical and subjectivist theories, but also to internal disputes among economists who all nominally embraced the new value theory. These difficulties were often overlooked, leading to a false sense of agreement and unity among economists that masked substantial differences that would eventually undermine the accomplishments and prestige of the subjectivists like the Austrians. It became a widespread belief, even among their own ranks, that their insights had been completely integrated into economics, which had at last achieved the goal of becoming a unified, rigorous social science. Yet as Fetter showed, this view was inaccurate and failed to account for the uniquely valuable and revolutionary character of the work done by Menger and his followers.