Adam Smith as New Founder of The Austrian School of Economics: Reinterpreting Menger’s Critique of Smith as An Immanent Critique

Abstract

Although Carl Menger is regarded as the founder of the Austrian School of Economics, I argue that the founding of the Austrian School can be traced directly back to Adam Smith. Rather than transcend Smith’s theoretical framework, Menger developed an immanent critique of the Smithian propostion that increasing specialization under the division of labor is the main cause of economic development. I argue that Menger’s nascent theory of capital extends, rather than transcends, this Smithian proposition. From this perspective, accumulations of capital are a by-product of more fine-grained specialization under the division of labor.