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Frank A. Fetter Frank A. Fetter (1863-1949)
A Forgotten Giant
by Jeffrey Herbener
Frank A. Fetter (1863-1949)

"Every theory must ultimately meet two tests: one, that of internal consistency, the other that of consistency with reality."

In the period between the founders of the Austrian school (Menger, Böhm-Bawerk, and Wieser) and its next generation (led by Mises and Hayek), Frank Albert Fetter was the standard bearer of the Austrian tradition. [See the Fetter Bibliography] His 1904 treatise, Principles of Economics, constructed a general theory of economics in the Austrian tradition that went unsurpassed until Ludwig von Mises's treatise of 1940, Nationaloekonomie. Yet Fetter, an American Austrian long before the interwar migration from Austria, has not received due recognition for his many contributions to the tradition.

Using the axiomatic-deductive method, he traced economic laws to individual human action, and demonstrated that just as the price of each consumer good is determined solely by subjective value, the rate of interest is determined solely by time preference. The rental price of each producer good is imputed to it by entrepreneurial demand and is equal to its discounted marginal value product. The capital value of each durable good is equal to the discounted value of its future rents. Fetter showed how this uniform, subjective theory of value implies the demise of socialist theories of labor exploitation, Ricardian theories of rent, and productivity theories of interest.

Building on his Austrian theory of capital, money, interest, and entrepreneurship, Fetter even developed a rudimentary theory of the trade cycle, arguing that the boom period is characterized by the artificial swelling of capital values as money and credit expand. The crisis follows when the inflation ceases which causes the mistaken capital values of the boom to suddenly correct downward and, in turn, results in the bankruptcy, unemployment, and retrenchment of the depression.

His work on capital and interest has yet to be surpassed or even fully appreciated, even by Austrians; much more than a correction of Eugen von Böhm-Bawerk's lapse into a productivity theory of interest, it is the foundation for all work on capitalization and the definitive refutation of the claim that productivity has any role in determining the interest rate.

Background

Born on March 8, 1863, in the farming community of Peru in north-central Indiana, Fetter enrolled at Indiana University at the age of sixteen. Although in the class of 1883, he left college after his junior year to operate the family's book store while his father was ill. During these years, he read the books and periodicals provided to him on the job, which included Henry George's Progress and Poverty, the book that influenced his decision to choose economics as a career.

After eight years as a successful entrepreneur, he returned to Indiana University obtaining his bachelor of arts degree in 1891. In this respect too, his self-sacrificing delay in his formal studies proved momentous, for he was able to finish his degree under the influence of Jeremiah W. Jenks. The following year Jenks, who was then at Cornell University, obtained a fellowship for Fetter and he earned the degree of master of philosophy from Cornell that same year. Jenks then encouraged him to study under Johannes Conrad, as he himself had done. After studying under Conrad and attending lectures at the Sorbonne in Paris, Fetter earned a Ph.D. in 1894 from the University of Halle in Heildeberg. He wrote his dissertation on population theory, which he saw as part of a larger theory of welfare, and devoted himself thereafter to the development of a general theory of value and welfare.(1)

Fetter returned from his formal studies to Cornell as instructor for one year and then accepted a position as professor of economics and social sciences at Indiana University until 1898. For the next three years, he taught at Stanford University and, from 1901-1911, he became Jenk's colleague at Cornell as professor of political economy and finance. In 1911 he accepted the chairmanship of the interdisciplinary department incorporating history, politics, and economics at Princeton University and, beginning in 1913, he served as chairman of the newly configured economics department for eleven years. He attained emeritus status in 1931 under Princeton's forced retirement regulations, but his popularity and productivity were so great that he was kept on to teach graduate-level courses until he reached the age of seventy in 1933.

Fetter taught on a visiting or exchange basis at Harvard, Columbia, the Johns Hopkins and Northwestern Universities, the University of Illinois, and the Claremont Colleges. In every post, he was a revered professor and beloved mentor. He was awarded the honorary degree of doctorate of laws from Colgate University in 1909, Occidental College in 1930, and Indiana University in 1934. Intellectually active until his death in 1949, Fetter is the author of eight books, more than a hundred scholarly articles, and more than fifty book reviews. He gave a dozen major addresses and testified before Congress and federal government agencies several times in his long and productive life.

Theory of Subjective Value

Prior to the advent of a mature Ludwig von Mises, Fetter was the world's leading subjective-value theorist. While Mises would bring the theory of money within a subjective-value, general theory of economics in 1912, Fetter had by 1904 already extended the principle of subjective value to bring factor prices and the rate of interest into a unified theory.

The distinctiveness of his contribution was not lost on the profession at large, and it was widely recognized as an Austrian one. A twenty-page article assessing Fetter's book appeared in 1905 in the prominent Quarterly Journal of Economics. The author, Robert F. Hoxie, wrote that Fetter had removed "the lack of harmony...in the eclectic union of the Austrian doctrines with the older classical theory." Hoxie noted that Fetter had rejected the profession's "return towards the objective cost explanation" from the "purely psychic explanation of economic phenomena in terms of utility." Instead, Fetter held, according to Hoxie "that the Austrians were, after all, on the way towards a true and consistent interpretation of economic activity. They failed in this, not because they had departed too far from the classical preconceptions, but because they could not wholly emancipate themselves from the older economic notions." Hoxie claimed that Fetter had taken up again "the initial conceptions of the Austrians" and attempted "to push their characteristic line of thought to its just and ultimate conclusions." Fetter saw "economics as essentially the study of value, and has viewed all economic phenomena as the concrete expression, under varied circumstances, of one uniform theory of value."(2)

Fetter himself was so adamant about the subjective nature of value in economic theory that he disdained referring to the watershed of economic thought in the 1870's as the Marginalist Revolution, preferring the adjectives "subjective" or "psychological" to describe the new theory. He even rejected Leon Walras in the standard trilogy of revolutionaries because he thought Walras, unlike the other mathematical marginalist Stanley Jevons, did not agree that the essence of the revolution was the re-introduction of subjective value into value theory. In Fetter's revisionist account, the correct trilogy is Carl Menger (whose "Unusual vigor, independence, and originality of his mind seem to have been felt and esteemed by all those who came in contact with him..."), Jevons (whose "versatility, originality, and vigor of thought are evident on every page..."), and J.B. Clark (who "is classed by his friendly American critics in the list of the six ablest Anglo-American economists [and] is apparently conceded by all foreign critics the deanship of American theorists)."(3)

Theory of Wages

Fetter also recognized the larger significance of a subjective value theory replacing an objective one in the history of economic thought. He said that, "the labor theory of value had been adopted by Adam Smith after only the most superficial discussion" which led him to "his confusion of ideas regarding labor embodied and labor commanded, labor as the source and as the measure of value, rent and profits now forming a part and now not a part of price." Fetter concluded, that "the resulting confusion was felt by all of the next generation of economists."(4)

In particular, David Ricardo, because he accepted Smith's concept of embodied labor, exerted "a tremendous and evil influence in ways then all unforeseen. Labor is the source of value...; labor is the cause of value; labor produces all wealth. Naturally follows the ethical and political conclusion: if labor produces all wealth then labor should receive all wealth." A conclusion "the Ricardian socialists" were all too eager to embrace and which Karl Marx later used to great effect.(5)

The Ricardo-Mill theory put a potent weapon in the hands of Marxists who, by basing their theory of exploitation on the labor theory of value, paralyzed bourgeois economists whose own cherished theories were founded on the same conception of value. Fetter knew this by personal experience: "Well I remember the confidence and gusto with which this demonstration of the truth of Marxism was still presented by socialist speakers in the nineties, as I listened to it from Berlin to San Francisco, when it was generally though mistakenly assumed that all bourgeois economists were still orthodox Ricardians."

It was not, however, solely Marxism that inspired the marginalists to strike a blow for reason and welfare. "Henry George's semi-communistic doctrine of land confiscation, based on the labor theory, or rent feature of it," argued Fetter, "impelled [economists of the latter sixties] to re-examine the theory of value..." Fetter knew that "the evasive and self-contradictory labor-theory as left by J.S. Mill...was a broken reed against the surplus-value attack upon the system of private industry and private property."(6) The subjective-value rejoinder to the Marxist and Georgist attack was to be found, said Fetter, in the capital value concept of J.B. Clark and "more prominently and explicitly" in Wieser's Natural Value and in Böhm-Bawerk's Karl Marx and the Close of His System.(7) A demonstration of this process of value imputation from products back to labor formed the first part of Fetter's Principles of Economics.

Fetter's method of explaining these principles was Misesian. Fetter writes, "The aim...has been to proceed by gradual steps, as in a series of geometrical propositions, from the simple and familiar acts and experiences of the individual's every-day life, through the more complex relations, to the most complex, practical, economic problems of the day."(8) In addition to employing successive approximation, he was, like Mises, a strict logician in method. As Fetter saw it, "Every theory must ultimately meet two tests: one, that of internal consistency, the other that of consistency with reality." And the latter referred not to empiricism, but the "Rude contact with the world of events [which] is often what tests or betrays theory, and forces thought out of the conventional ruts."(9) Hoxie, writing about Principles, said of Fetter, "he has presented to economic students a system which, for logical consistency, is without precedent; a system which from the first fundamental conception advances without a break to the end....The logical sequence and harmonious symmetry of this work affords, at least, a strong presumption of its essential truth."(10)

Fetter began with the "simple" and "almost self-evident" proposition that "the motive force in economics is found in the feelings of men." It is man's wants that urge him to action, first in primitive pursuits, but eventually "wants develop and transform the world" by propelling man to accumulate wealth, and upon wealth, to build civilization. Moreover, wants are not limited to the narrow "self-interest" of man or of merely "material" attainments, but span the full range of man's "social and spiritual" desires.

When studying the problem of value, Fetter saw that one must "recognize any motive that leads men to attach importance to acts and things," because "value is in the closest relation with wants" and "from the meeting and comparison of the estimates [of value] of individuals, arise market values or prices..."(11) A man's demand for a consumer good is formed from the law of diminishing utility, (a proposition whose truth is found "in the very nature of man") which refers to the "marginal utility" or "gratification afforded by the added portion of the good."(12)

Since the term "marginal utility" expresses "by a single phrase the idea both of demand and supply," prices "are built up on subjective valuations" alone and "correspond closely with the subjective estimates" of the marginal buyer and seller, i.e., "the least eager buyer and the least eager seller."(13)

Fetter divided the value of production goods into two categories: the problem of rent (which explains the value of temporary use) and the problem of capitalization (which explains the value of permanent control and ownership).(14) The rent of a factor of production depends on the universal principle of diminishing returns.(15) Like the law of diminishing marginal utility, "The concept of diminishing returns is one aspect of the great law of proportionality" which is the "fundamental, axiomatic truth, that there is a best or proper adjustment of means and ends" in man's action. "Out of it grow the important economic theories of rent and capitalization."(16)

Since gratification is the basis of all values, what is implied about the prices of consumer goods must be true of factor prices as well. The price of a unit of "a group of consumption goods, all of the same quality" is dictated solely by diminishing marginal utility. It is also dictated by the "quantity of an article capable of ministering to man's wants." Thus a series of consumption goods of different qualities will differ in price. If a good has no marginal utility it will be a "free" good and goods of similar kind but higher quality will have prices "measured from zero upward." The extent to which the "lower grades acquire value" and come into use depends on "scarcity of the higher grades."(17)

Competitive bidding for labor results in the law of wages, that is, that any labor or class of labor is equal to the marginal value of its products. "Each agent in industry, whether it be a horse, a plough, or a man, is valued in connection with other agents," thus, "it is not the total service any one of them performs" that determines its pay but it the value attributed to the last unit of supply. For Fetter, their marginal contribution determines their importance, and thus, their rental prices. This "law of wages is but the general law of value, working itself out amid the special conditions accompanying the gratification of wants by human effort."(18)

Fetter went further than marginal value product theory, arguing that the rental price of a factor would be equal to its discounted marginal value product. Since the application of labor services to different tasks has, "much diversity in their nearness to the gratification for which they are destined," very different intervals of time must elapse before the gratification matures. The expected value of all products but those immediately available is discounted in advance, Fetter argued, since all gratifications disparate in time "are compared at one and the same moment," that is, in the present.

In the market, "labor is distributed according to the prevailing rate of time-value, which...is approximately expressed by the rate of interest." "Hence all wages paid for help on products that are remote," Fetter concluded, "are based on the present worth, or discounted value, of the future gratification to which the labor contributes." While noting the implication of the theory for the socialist doctrine of exploitation, Fetter extended the theory to all factors. Time-value is a different genus of the general value problem: "it must be found in connection with every use that is not immediate....Its application to rent is more frequent and obvious, as only the uses of material agents are capitalized, that is, sold in perpetuity."(19)

Theory of Capitalization

Turning to the theory of capitalization, Fetter defined capital as "economic wealth expressed in terms of the general unit of value." And while capital, at any moment in time, includes all economic goods in existence, Fetter said that most capital is "composed of things durable." For this reason, "when interest is defined as the payment for the use of capital, it is connected with all wealth that is expressed in the capital form."(20)

For Fetter, interest permeated all time-consuming action and the determination of its rate was a prerequisite, not a result of, the calculation of capital value. To make a rational account of the market value of anything, including a durable good, "its importance must be traced back to 'gratification.'" The buyer of durable wealth pays a "definite sum in return for the right to enjoy a series of future rents." It then becomes impossible that capital value could precede income, and therefore, "the mere mention of a capital sum implies the interest problem, and assumes the interest rate."(21)

Interest, no matter how it is manifested, is fundamentally based on time-value, which is omnipresent. Time-value is "the premium rate on present goods," and its manifestation as a rate of interest is "unlike the ordinary market price of goods only in the special nature of the utilities exchanged" which derive from "present and future goods." Capitalization (that is, "the discounting of future rents in goods") is necessary because of scarcity of present gratifications; it implies the emergence of a surplus, or "a net yield, over and above the value of the capital." Because their future uses have been discounted, newly-produced agents will have a price "less than they will be when realized as actual rents." Not only does this rebut the socialist exploitation theory but shows that "to explain the rate of interest as due to the process of 'producing' capital agents out of other materials, is to beg the question" of interest rate determination.(22)

No one has appreciated Fetter's performance on capital, rent, and interest more than Murray N. Rothbard. Fetter, according to Rothbard, filled in the "great many lacunae in the [Austrian] theories of capital, rent, and interest." Rothbard said Fetter "was the first economist to explain interest rates solely by time-preference."(23)

But Fetter's contributions to a subjective-value, general theory of economics did not end with capital and interest.

Theory of Money and Cycles

Based on his view that "the rate of interest" is "a ratio of exchange between present and future" Fetter argued that time-preference affects the accumulation of wealth because of "a close relation between saving and the rate of time-discount." Savers put aside present wants only when the future good has at least the value of the present good. By converting savings into durable indirect agents, man achieves accumulation of wealth, a process that depends on "the successful competition of forethought with present desire." "Savings," according to Fetter, "lifts society from poverty to wealth by the progressive enlargement of the sources of future utilities." In modern industry, saving often takes the form of money, which is then loaned to productive borrowers who are "thus empowered to increase [their] stock of productive agents in the measure that the lender has limited his consumption." A lower rate of interest means a higher capitalization of all incomes which stimulates the production of capital goods. A lower rate also makes it "advantageous to apply newly formed capital to uses which before did not justify the investment," which include expansion of present investments and "putting new links into the chain of technical production." The benefits of saving accrue not only "to the owner of the wealth saved, but are "diffused throughout society" because they raise the efficiency of production.(24)

Although Fetter did not extend the concept of subjective value as completely as Mises did to the topic of money, his views foreshadow the latter's subjective-value analysis. Fetter saw money's value as part of the general problem of value. After distinguishing between "primary money," which was gold and silver coin, and "money substitutes," which were bank notes ("redeemable in gold on demand") and government money or "political money" (founded on "legal tender" laws and "political power"), Fetter argued that under a system of "free coinage" money presents "no special problem of value." "The value of gold as bullion and money is fixed by marginal demand" among "the several uses of gold [that] are constantly competing for it."

The exchange value of a dollar (for Fetter the term dollar is "a convenient name applied to twenty-three and twenty-two hundredths grains of fine gold") will vary in different times and places. Money "is a valuable good kept on hand as the best possible provision against emergency" whose "use is subject to the law of diminishing utility." For this reason, "other things being equal, the value of money falls as its quantity increases, and vice versa." Anytime increasing gold supplies bring about larger stocks of money the optimal proportion between money incomes and money is altered. Individuals respond to the "surplus money" by buying goods to reduce their stock of money; this will bid up prices until the optimal proportion is restored.(25)

Fetter also worked out a rudimentary theory of the business cycle. Noting first that "a crisis is a decisive moment or turning point; hence, in industry, a collapse of prosperity," he divided the trade cycle into three phases: prosperity, crisis, and depression. Every crisis is financial at its root, and "a jolt to prices which shatters the credit of some banks, brokers, merchants, and manufacturers." The phase of prosperity is characterized by increasing money, confidence, and credit which cause "old enterprises [to be] resumed and new ones [to be] undertaken." During prosperity, "profits are apparently great" but "partly illusory" since they "exist only on paper." Greater profits stimulate the purchase of materials in larger quantities which "causes a rise in prices and an increase in costs" and the "surplus labor on the margin of efficiency gets employment, and wages begin to rise." A reversal of monetary and credit expansion caused by a "large and continued exportation of specie" brings on the crisis which reduces "the specie reserves of banks" and "the value of many stocks and securities held by the banks." Banks become cautious and brokers and speculators and are forced to convert resources into cash. The falling prices, the shattered credit, and the financial losses cause bankruptcy, unemployment, and retrenchment.

For Fetter "crises must be explained essentially as the forcible and sudden movement of readjustment in the mistaken capitalization of productive agents." That "capitalization runs through all industry" coupled with the enormous extension of investment in "new machinery and processes" implies a disturbance of "the equilibrium of prices both in time and space." "When the balance between the capitalization of various industries and between the rents of the various periods proves to be false," Fetter concluded, "the inevitable readjustment causes suffering and loss to many, but particularly in the inflated industries."(26)

Entrepreneurship

Fetter recognized the importance of the "enterpriser" as the organizer of the division of labor. The enterpriser's main skill was "judgment", which referred to accurate predictions about future events. Everyone possesses and exhibits this skill to some degree, but "as men differ in judgment" skills the market will establish a division of labor in enterprisers by "the ceaseless working of competition," which ensures that "the higher places are taken by those most capable of filling them, and the efficiency both of the employers and of the workmen is increased."

In like manner, the enterprisers arrange the division of labor and establish "methods of organization" which are "tested by their results." For their services of "foresight" and "judgment" enterprisers earn profit. Profit is not "contract wages, not being paid by agreement....but economic wages or earning of services," which are uncertain. The enterpriser guarantees to the capitalist-lender a fixed return and likewise he gives to workers a definite amount for services applied to distant ends while he "risks his own services and accepts an indefinite chance instead of a definite amount for them." The enterpriser is "the specialized risk-taker, he is the spring or buffer, which takes up and distributes the strain of industry" and his "profits are due not to risks, but to superior skill in taking risks. They are not subtracted from the gains of labor but are earned, in the same sense in which the wages of skilled labor are earned."(27)

The State and Society

Fetter recognized that just as resources differ in their capacity to gratify wants, so do men differ in their powers of labor. Because the "variety and inequality of human talent" is biological, Fetter chided Adam Smith for "discussing wages on the assumption that all men had equal natural ability," and criticized "radical social reformers" who thought that "all the differences in success result from political injustice." He concludes that "to those who ignore the inequality of men, the whole problem of industrial remuneration must remain a mystery. A crude socialism is possible only to those who are blind to the enormous differences in human capacity."(28)

The division of labor itself is made possible because of differences of among individuals.(29)

Fetter thought that the belief in the harmony of economic interests of all men should be qualified. Experience has shown that economic interests in the market are only partly in harmony. From this, Fetter concluded that "society" is "justified in acting" wherever economic interests are not in harmony and it is possible to further the social welfare through intervention. "The state regulates and limits," according to Fetter, with "its aim to preserve the benefits of competition without its evils, to lift the competition to a higher plane, and...to give a higher and truer economic freedom."(30) In the 1920s, he also offered unfortunately kind words for scientific social planning. The role of the scientifically-spirited economists was to supply "wisdom in the art of using wealth toward rational aims," which would "make economics not the slave of industry" but "industry the servitor of mankind."(31)

Twenty years after offering this vision of political economy, he reiterated his admiration for capitalism in a highly favorable review of Mises's Bureaucracy in which he also discussed F.A. Hayek's Road to Serfdom. In contrasting the German historical school led by Gustav Schmoller with the Austrian theoretical school of Carl Menger, Fetter noted that the former "pointed the way to the totalitarian state" while the latter led "to a greater and better liberalism in economic and political affairs." He called Mises and Hayek "two of the most effective contemporary critics of socialism and most valiant defenders of free enterprise" and claimed that their books are "essentially harmonious formulations of the present issue between freedom (political as well as economic) and the trend toward totalitarianism." Of Bureaucracy he wrote, "the case for free enterprise versus socialism has nowhere been more ably and readably stated in brief compass."(32)

Conclusion

Deservedly, Fetter rose to the top of the American economics profession. His work was routinely published in the major journals: American Economic Review, Quarterly Journal of Economics, Journal of Political Economy. He held professorships at several prestigious colleges and universities and was invited to speak at major events held by prominent economic associations and to write commentary for the Encyclopedia of the Social Sciences on the discipline and for European scholars on American economic thought. He was an officer and eventually president of the American Economic Association and a member of the American Philosophical Society. In a rare tribute, he received a note commemorating his 80th birthday in the American Economic Review and a Memorial, in the same publication, upon his death.(33)

At the turn of the century, Frank A. Fetter was elevating the Austrian banner to greater heights than any other scholar. He was one of the brightest stars in the golden era of Austrian economics.

Jefferey Herbener
Grove City College

BIBLIOGRAPHY

Dorfman, Joseph, The Economic Mind in American Civilization, Vol. 3, (New York: Viking Press, 1959), p.360.

Fetter, Frank A., Versuch einer Bevolkerungslehre ausgehend von einer Kritik des Malthus'schen Bevolkerungsprincips [An Essay on Population Doctrine based on a Critique of the Population Principles of Malthus], Jena: Gustav Fischer, 1894.

_____________, "Population and Prosperity," American Economic Review, supplement, Vol.3 (March 1913), pp.5-19

______________,Principles of Economics, (New York: The Century Co., 1904), pp. 184-194.

______________, "Theories of Value in Their Application to the Question of the Standard Deferred Payments," American Economic Association Publications, supplement, Vol.10 (March 1895), pp. 101-103.

______________, " The Exploitation of Theories of Value in the Discussion of the Standard of Deferred Payments," Annals of the American Academy of Political and Social Science, Vol.5 (may 1895), pp. 882-896.

______________, "Value and the Larger Economics I: Rise of the Marginal Doctrine," Journal of Political Economy, Vol 31, Oct.1923., p. 594.

_______________, "Price Economics versus Welfare Economics," American Economic Review, Vol. 10 (September 1920), pp. 483-486.

______________, " Economic Systems; Post-War Planning ," American Economic Review, Vol.35 (June 1945), pp. 445-446.

Hoxie, Robert F., "Fetter's Theory of Value," Quarterly Journal of Economics, Vol. 19 (February 1905, pp. 210-211.

Mises, Ludwig von, Human Action: A Treatise on Economics, 3rd revised edition (Chicago: Henry Regnery, 1966).

Rothbard, Murray N., Capital, Interest, and Rent: Essays in the Theory of Distribution (Kansas City: Sheed Andrews and McMeel, Inc., 1977).

1 His dissertation was published as, Versuch einer Bevolkerungslehre ausgehend von einer Kritik des Malthus'schen Bevolkerungsprincips [An Essay on Population Doctrine based on a Critique of the Population Principles of Malthus] (Jena: Gustav Fischer, 1894). After writing a few articles on population before the end of the century and one in 1907, he made it the topic of his Annual Address of the President of the American Economic Association, see his "Population and Prosperity," American Economic Review, supplement, Vol. 3 (March 1913), pp. 5-19. His thesis was that civilizations are born and mature only by overcoming the Malthusian population problem. This is done by "volitional control" which includes institutional measures, like supplanting communal property with private property, and "psychic" or "social" motives, like caring for offspring and attaining a higher standard of living and a higher social class. See Fetter, Principles of Economics (New York: The Century Co., 1904), pp. 184-194. His first writings on value theory were "Theories of Value in Their Application to the Question of the Standard of Deferred Payments," American Economic Association Publications, supplement, Vol. 10 (March 1895), pp. 101-103 and "The Exploitation of Theories of Value in the Discussion of the Standard of Deferred Payments," Annals of the American Academy of Political and Social Science, Vol. 5 (May 1895), pp. 882-896.

2 Robert F. Hoxie, "Fetter's Theory of Value," Quarterly Journal of Economics, Vol. 19 (February 1905), pp. 210-211.

3 About the marginalists, Fetter wrote, "The names of Jevons, Menger, and J.B. Clark are most fully representative of the three creative sources of the marginal theory, though Böhm-Bawerk and Wieser have outstanding importance in some respects fully as great." See Fetter, "Value and the Larger Economics I: Rise of the Marginal Doctrine," Journal of Political Economy, Vol 31, Oct. 1923., p. 594. It was the combination of adherence to logic and concern for mankind that Fetter claimed led to the Marginalist revolution. "When both intellectual power and humanitarian interest are united in one person as in Jevons, or Menger, or J.B. Clark," said Fetter, "it is not surprising that something noteworthy happens in the history of economic thought," Ibid., p. 600. Fetter strove to emulate these men both in rigor of thought and depth of concern.

4 Ibid., p. 596.

5 Ibid., pp. 596-597. See also, Fetter, "Price Economics versus Welfare Economics," American Economic Review, Vol. 10 (September 1920), pp. 483-486.

6 Ibid., p. 601. Though "deeply moved" Henry George's Progress and Poverty, Fetter was a stern critic of George's theories and policies. See, Joseph Dorfman, The Economic Mind in American Civilization, Vol. 3 (New York: Viking Press, 1959), p. 360.

7 Ibid., p. 604.

8 In another place, Fetter said his method, "begins with introspection and pursues the analysis of man's nature and wants by observing and comparing the impressions, the hopes, and the motives that determine acts in relation to gratification." Cited in Dorfman, The Economic Mind, Vol. 3, p. 361. These statements are akin to Mises's on method. See Mises, Human Action: A Treatise on Economics, third revised edition (Chicago: Henry Regnery, 1966).

9 Fetter, "Value and the Larger Economics," pp. 601-602. "Each of these is impersonal, logical, non-partisan, and not simply an adjustment of beliefs to preconceived ends. And it will hardly be disputed even by its severest critics that the subjective school in much of its work reached the highest level yet attained in economics in critical methods and impersonal reasoning." Ibid., p. 602. About his own, more strictly praxeological, view of the relationship between experience and logic Mises said, "The end of science is to know reality....Therefore praxeology restricts its inquires to the study of acting under those conditions and presuppositions which are given in reality....However, this reference to experience does not impair the aprioristic character of praxeology and economics. Experience merely directs our curiosity toward certain problems and diverts it from other problems. It tells us what we should explore, but it does not tell us how we could proceed in our search for knowledge." Mises, Human Action, p. 65. For Fetter, experience was an ex post "reality check" for a poorly thought out theory that would force the economist back to the drawing board of logical construction. For Mises, experience established assumptions which constrained logical construction so that the resulting theory conformed to reality.

10 Hoxie, "Fetter's Theory of Value," p. 230.

11 Fetter, Principles, pp. 17-20.

12 Ibid., pp. 22-23. The similarity with Rothbard's view on "ordinal marginal utility" is striking. See Murray N. Rothbard, "Toward a Reconstruction of Utility and Welfare Economics," in Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (Princeton: D. Van Nostrand, 1956). Also Fetter makes the same distinction as Rothbard between consumption or "immediate" goods "those things which are immediately at the point of gratifying man's desires," and production or "intermediate" goods, "those things which are not yet ready to gratify desires." Fetter, Principles, p. 20 and Rothbard, Man, Economy, and State, 2 Vols. (Los Angeles: Nash Publishing Corp., 1962), I, pp. 6-7.

13 Fetter, Principles, pp. 32-35.

14 Ibid., pp. 53-60.

15 Ibid., pp. 62-64.

16 Ibid., pp. 71-72.

17 Ibid., pp. 73-75.

18 Ibid., p. 213-214.

19 Ibid., pp. 219-222. As with ordinal marginal utility, it is Rothbard who accepts and develops Fetter's concept of discounted marginal value product. See Rothbard, Man, Economy, and State, pp. 387-409.

20 Ibid., p. 115.

21 Ibid., pp. 122-124.

22 Ibid., pp. 141-151.

23 So impressed was Rothbard with Fetter's contributions to capital and interest that he collected Fetter's scattered articles on the subjects and edited the resulting book, Capital, Interest, and Rent: Essays in the Theory of Distribution (Kansas City: Sheed Andrews and McMeel, Inc., 1977). Rothbard's claims, quoted above, are in his introduction to the collection, pp. 2-4.

24 Fetter, Principles, pp. 160-169.

25 Ibid., pp. 431-442.

26 Ibid., pp. 345-355.

27 Ibid., pp., 282-291.

28 Ibid., pp. 177-182.

29 Ibid., pp. 202-204.

30 Ibid., pp. 426-430.

31 Fetter, "The Economists and the Public," pp. 24-26. Fetter's concrete contribution to this effort was in anti-monopoly theory. He played a prominent role, with John R. Commons of the University of Wisconsin and William Z. Ripley of Harvard University, in the "Pittsburgh-plus" or base-point, pricing-system antitrust case. His two major theoretical works on this issue are: "The Economic Law of Market Areas," Quarterly Journal of Economics, Vol. 38 (May 1924), pp. 520-529 and "Exit Basing Point Pricing," American Economic Review, Vol. 38 (December 1948), pp. 815-827. The role he suggested for the state in curbing monopoly was strictly limited. "The remedies at hand" for the ills of monopoly are laws requiring "a posted price" to prevent "discriminatory" pricing and uneconomical "dumping" of goods across regional territories and enforcement of antitrust statutes to prevent mergers that "stifle competition." The goal of these measures "is the fostering and creating of open markets where traders in each line of products could and would meet to buy and sell goods fairly in free competition." He likened this role for the state to "the well-grounded public purpose of the medieval fairs and markets with their 'merchant law.'" See Fetter, The Masquerade of Monopoly (New York: Harcourt, Brace and Co., 1931), pp. 410-425.

32 Frank A. Fetter, "Economic Systems; Post-War Planning," American Economic Review, Vol. 35 (June 1945), pp. 445-446 (emphasis original). In this review, Fetter also wrote of John M. Keynes that it was no "mystery or chance that [he]...found it necessary when he became an advocate of national planning, to abandon the 'classical' doctrines, and to make the state the arbiter of prices."

33 Howard and Kemmerer, "Frank Albert Fetter, A Birthday Note," and Brown, "Memorial: Frank Albert Fetter, 1863-1949."