Frank Fetter and the Austrians

Although students of Austrian economics are familiar with Mises, Hayek, and the other major figures of the school, there are many economists who worked in and around the Austrian tradition—and made crucial contributions to it—whose writings are today neglected. One of the most significant of these is the American Frank A. Fetter, the “forgotten giant” of the Austrian school.

When I began studying the Austrians, I noticed that Fetter’s name often appeared on standard lists of economists who worked in the tradition. (For example, he receives a chapter in the excellent collection 15 Great Austrian Economists, now available in an abridged audio version here). But as I explored his work, I also noticed that almost every discussion of it focused mainly on drawing parallels between his theories and those of the Austrians, without mentioning any personal or professional relationships he had with them, or what they might have thought of each other.

Unlike Mises, for instance, whose personal manner and life story are preserved through audio recordings and first- and second-hand accounts, there are virtually no published records that describe what Fetter was like, or how he interacted with his fellow economists. And besides some positive remarks scattered throughout his works, there is almost no evidence that he ever met or seriously engaged with the Austrians, especially after the First World War. At first glance then, it seems as if his connection to the Austrians was more “spiritual” than practical.

However, a wealth of unpublished records in the archive of Fetter’s papers and correspondence tell a very different story, and I’m happy to say that after a great deal of research in the collection, I have been able to uncover this history for the first time. You can read the full details in a new paper that will appear shortly in the Journal of Institutional Economics (ungated version here). Below I will mention a few highlights of Fetter’s fifty-year relationship with the Austrian school.

Fetter’s Influence on the Austrians

Fetter’s most Austrian work is in the field of value, price, and distribution theory. Both his criticism and positive theory quickly attracted the attention of the Austrians, whom he met during trips to Vienna in 1910 and 1914, and also during their own visits in the US.

He became particularly close with Böhm-Bawerk, with whom he went climbing in the mountains of Austria. In economics, Böhm-Bawerk bestowed high praise on Fetter’s price theory, writing to him that,

The method that you follow… 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.

Even though they diverged on interest theory (Fetter sharply criticized Böhm-Bawerk’s partial-productivity theory of interest), Böhm-Bawerk was still able to write that “Your work is so penetrated by a truly scientific spirit that I always enjoy reading it even if I cannot fully agree.”

Fetter’s pure time preference theory of interest was more in accord with Mises’s views. But beyond a few scattered references, Mises never publicly indicated that Fetter was a major inspiration for his writings on the subject. Once again though, the unpublished record puts things in a different light. In 1938, while drafting Nationalökonomie, the German-language predecessor to Human Action, Mises wrote to Fetter to express his appreciation, stating 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.” Given Mises’s regard for Böhm-Bawerk and his parsimony with compliments, this is a great tribute.

Fetter remained in contact with the Austrians throughout the inter-war period, during which he befriended many young students of the Mises Circle who looked to him for both professional advice and guidance as an expert theorist. Oskar Morgenstern, for example, worked as Fetter’s editorial assistant on a multi-volume festschrift for Wieser, co-edited with Hans Mayer and Richard Reisch.

In fact, there were scarcely any Austrian economists in the period 1900-1950 who didn’t have some kind of interaction with Fetter. The list of those he influenced is a who’s who of Austrian economics: Eugen von Böhm-Bawerk, Gottfried Haberler, W.H. Hutt, Fritz Machlup, Hans Mayer, Ludwig von Mises, Oskar Morgenstern, Joseph Schumpeter, and Friedrich von Wieser. He was also friends with other US economists of interest to the Austrian school, such as Benjamin Anderson, John Bates Clark, Arthur Marget, and Frank Taussig. And although Fetter was not a liberal in Mises’s sense (Fetter was also influenced by early progressivism), he nevertheless was friends with liberals and libertarians like Henry Hazlitt, Garet Garrett, and John T. Flynn, and shared some of their views.

Fetter’s Place in the History of Economic Thought

Importantly, like Joseph Schumpeter (who quipped that “only fish go in schools”), Fetter was highly suspicious of attempts to conveniently label economists as members of one group or another. Not only do school labels make it easy to misrepresent opponents’ views without actually understanding them, they can also lead to blind devotion and intellectual stagnation. In Fetter’s own case:

[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… [Yet] 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.

These sobering words should challenge contemporary economists of all types. As Joseph Salerno explains in his essay “Economics: Vocation or Profession,” economics is a search for meaningful truths about the world. Yet whether labels are based on an individual or a school, they often take on lives of their own, in some cases even replacing sound arguments as standards of truth. Taking Fetter’s warning seriously is one good way to ensure that we do not fall into this trap.

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