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The economists of the Austrian school in the Czech lands in the first half of the 20th century
Section 6. Economic theory
Ilona Bazantovd, Charles University, Prague, Czech Republic, Associate Professor, Ph. D. in Economics, Faculty of Law
E-mail: bazantov@prf.cuni.cz
The economists of the Austrian school in the Czech lands in the first half of the 20th century
Abstract: This article has attention to the less known or completely unknown Austrian economists (or economists partly endorsing this school), who worked in the Czech lands in the first half of the 20th century.
Keywords: Czech economic thought; the Austrian School; teleological approach.
Introduction
Contemporary financial crisis caused that the academic community became interested in the Austrian School again [1]. The academic community is well-known work of the founders of the Austrian School, but any Austrian economists are not known yet.
The aim of this article is to seek attention to the less known or completely unknown Austrian economists (or economists partly endorsing this school), who worked in the Czech lands in the first half of the 20th century.
1. The founders of the Austrian School
The Austrian School is a school of economic thought that is based on methodological individualism. The Austrian subjective and psychological School started its development in the Habsburg monarchy in the final third of the 19th century. The founder of the liberal Austrian School was Carl Menger (1840-1921). He contributed to the development of the theory of marginalism, which rejected the cost-of-production theories of value. Eugen von Böhm-Bawerk (1851-1926) and Friedrich von Wieser (1851-1926) were other representatives of the School. They succeeded in turning Vienna into a new centre of economic sciences during the first two decades of the 20th century. “Eugen von Böhm-Bawerk and Friedrich von Wieser never studied with Menger. They had finished their studies at the University of Vienna before Menger began to
lecture as a Privat-Dozent. What they learned from Menger, they got from studying the Grundsätze. When they returned to Austria after some time spent at German universities, especially in the seminar of Karl Knies in Heidelberg, and published their first books, they were appointed to teach economics at the Universities of Innsbruck and Prague respectively. ...People abroad began to refer to these authors as the »Austrians«. But the designation »Austrian School of Economics« was used only later, when their antagonism to the German Historical School came into the open after the publication, in 1883, of Menger‘s second book, Untersuchungen über die Methode der Sozialwissenschaften und der Politischen Oekonomie insbesondere." [2, 2].
2. The German Prague University
What is less known is the fact that in Bohemia, as part of the Austro-Hungarian Monarchy, Austrian economics was developed and promoted particularly at the German part of the Prague University, the Faculty of Law. The Charles University in Prague (founded in 1348) was institutionally and linguistically divided in 1882: every department and institute at all four faculties was divided into two parts — one with Czech as the language of instruction and research, and the other with German as the language of instruction and research (The German Prague University (and German higher education in Czechoslovakia in general) ceased to exist in May 1945 whilst Czech universities were
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Section 6. Economic theory
closed by the Nazis in 1939 and reopened after the liberation of the country in May 1945). It should be noted that F. von Wieser delivered his lectures at the German part of the University between 1884 and 1902 and he wrote the book Der natürliche Wert (1889) there. Emil Sax (1845-1927) delivered his lectures between 1879 and 1893 at University in Prague, he wrote books Das Wesen und die Aufgaben der Nationalökonomie (1883) and Grundlegung der theoretischen Staatswirtschaft (1887). Also, he was a member of the Austrian Parliament. He tried to develop a theory of public economics based on Austrian ideas. Robert Zuckerkandl (18561926) delivered his lectures between 1894 and 1926. His major book was Zur Theorie des Preises mit besonderer Berücksichtigung der geschichtlichen Entwicklung der Lehre (1889), others books were Das Neue Osterreichische Anerbenrecht (1889) and Die Konsumsteuern im österreichisch-ungarischen Ausgleich (1907).
“Visiting” professor, like many others, was Alfred Amonn (1883-1962). He was not a typical Austrian economist, he was influenced by the Neoclassical School and the Historical School. In Prague he taught from 1920 to 1926 his major books during this period were Ricardo als Begründer der theoretischen Nationalökonomie (1924) and Grundzüge der Volkwohlstandslehre (1926).
The Czechoslovak lawyer and economist of the German origin, a teacher at the German Prague University was Oskar Engländer (1876-1937). His major books were Theorie des Produktivkapitalzinses (1908), Bestimmungsgründe des Preises (1920), Theorie des Verkehrs und der Frachtsätze (1924), two volume book Theorie der Volkswirtschaf (1929, 1930), Preise und Konjunktur: Beiträge zur Krisen- und Preistheorie (1931). His interest in the practical affairs of the Czechoslovak economy was shown in a study Die Gesetze über die Errichtung der Tschechoslowakischen Nationalbank (1924) and a paper Die Devalvation der tschechoslowakischen Krone im Jahre 1934.
3. The Czech University in Prague and Albín Bráf and his students
The Czech lawyer, economist and conservative politician Albín Bráf (1851-1912) was one of the most influential university teachers in Prague. At
the beginning, Bráf recognized learning J. St. Mill in the early 70’s of the 19th century, then in 1876 he became an adherent of the German Historical School and its inductive, descriptive and historical methods. Since the 80’s of the 19th century Bráf, as a theoretical economist, methodologically accepted Carl Menger’s book Untersuchungen über die Methode der Sozialwissenschaften und der Politischen Oekonomie insbesondere [3, 77-82]. Bráf explained the theory of national economy in accordance with the Austrian School, however, he expressed certain reservations regarding its approach as he took quite a critical view on the School’s excessive emphasis upon psychological aspects. He was rather an eclectic in his approach to the theory of economy. Bráf did not use the analysis of “robinsonades” (an example of the solitary figure) and, besides deduction, his methodology included inductive examination of relevant issues [3]. Bráf fully accepted Böhm-Bawerks criticism of Marxism built upon a conflict between Part I and Part III of Marx’s Capital. His university lectures and paper were completely published only after his death under the title Spisy Albina Bráfa (The Writings of Albín Bráf) 1913-1915. Some of his students developed the Austrian School, including Frantisek Cuhel and Karel Englis [2, 19].
Bráf’s student Frantisek Cuhel (1862-1914) strongly supported the ordinal marginal utility theory and criticized cardinalism of Böhm-Bawerk. According to Vencovsky [4, 223-225] Cuhel was more a psychologist than an economist. His fundamental book Zur Lehre von den Bedürfnissen: Theoretische Untersuchungen über das Grenzgebiet der Ökonomik und der Psychologie (1907) has been the most frequently quoted in the following: ordinal concept of utility, the relation between economics and psychology, the use of mathematics in economics, and time preference. Hudík [5] drew attention to some positive reactions to the Cuhel book.
Bráf’s student and significant inter-war Czechoslovak economist and politician Karel Englis (1880-1961) came methodologically from the Austrian School, but he went beyond its limits and began to build his theory upon a teleological method. Between 1899 and 1904 he studied law at the Czech Law Faculty of the University in Prague, where, in addition to law, he focused on the theory
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The economists of the Austrian school in the Czech lands in the first half of the 20th century
of national economy. After his graduation from the Prague Czech Law Faculty in 1904 Englis started his career at the Provincial Statistics Office in Prague; in 1908 he moved to Vienna and began working at the Ministry of Trade.
Englis began his academic and research engagement at the Technical University in Brno in 1910; he was appointed docent (associate professor), and later full professor. Between 1913 and 1918, in the time of the Austro-Habsburg Monarchy, Englis was elected a Deputy to the Assembly of the Province in Brno; after constituting an independent Czechoslovakia he was elected a Deputy for the rightwing National Democratic Party and acted in the Czechoslovak Parliament until 1925. In 1918, in his capacity as a Deputy, Englis substantially contributed to the constituting of Masaryk University, and it’s Law Faculty, in Brno. In there his academic position as a full professor of national economy continued until 1939.
From the middle 1920’s, Englis had a substantial influence upon Czechoslovak fiscal and monetary policy; he was appointed the Minister of Finance six times: between September 1920 and March 1921 and between 1925 and 1931. He acted as the Governor of the central bank (the National Czechoslovak Bank) between 1934 and 1939. In these functions he enforced his theoretical views. In 1939 Englis moved to the Law Faculty of Charles University in Prague as professor of national economy. On 21st April 1947 Englis was elected president (rector) of Charles University in order to head, as a recognized European scholar, the University in 1948 — the year of its 600th anniversary. However, after the Communist coup d’état in February 1948 Englis was compelled to resign and forcibly moved from Prague. He lived in material poverty and was continually persecuted by the police. He died in Hrabyné in 1961 [6, 194-199].
Despite his engagement in high political and economic posts, Englis remained very active in his academic performance. His main books written in Czech are Základy hospodáfského myslení (The Elements of Economic Thought), 1922; Financní veda (Financial Science) 1929; Teleologie jako forma vedeckého poznání (Teleology as a Form of Scientific Knowledge) 1930; Theorie státního
hospodáfství (The Theory of the State Economy) 1932; O fízeném hospodáfství (On the Directed Economy) 1935; Národníhospodáfství (The National Economy) 1940, new edition 1946; Hospodáfské soustavy (The Economic Systems) 1946; Malá logika (Small Logic) 1947.
Englis’s comprehensive economic theory was published in two volumes (1617 pages) entitled Soustava národního hospodáfství. Veda o pofádku, ve kterém jednotlivci a národové pecují o udrzení zlepsení zivota (The System of National Economy. The science ofthe order where individuals and nations care about sustainable improvement of life) 1938, intended also as a course book for university students. Englis’s scholarly activities were extensive and his scholarly books were known outside the Czechoslovak sphere thanks to their German translations: Grundlagen des wirtschaftlichen Denkens (1925), Begründung der Teleologie als Form des empirischen Erkennens (1930), Finanzwissenschaft (1931), Teleologische Theorie der Staatswirtschaft (1933) and Regulierte Wirtschaft (1936). Englis’s first textbook of national economy (1924) was published in German as Handbuch der Nationalökonomie (1927). Only long after his death two books were published in English in New York: the book Hospodáfské soustavy (1946) an English translation as An Essay on Economic Systems. A Teleological Approach (1986) and the book Národní hospodáfství (new edition 1946) an English translation as Economics: A Purpose Oriented Approach (1992).
Karel Englis grew out from the Austrian subj ective psychological school although he later refused its methodological psychological subjectivism and value theory. Englis, for a major part of his scholarly life and career, was critically interested in the Austrian School; during the first three decades of the 20th century his disputations were (in German and Czech languages) with Emil Lederer (1882-1939), with Walter Weddigen (1895-1978), with Aleksander D. Bilimovic (1876-1963), with Hans W. Ritschl (1897-1993) and with Oskar Engländer. The most extensive and well-grounded polemic was with Oskar Morgenstern (1902-1977) in 1931. [6, 230; 7].
Englis supported the conclusions of the Austrian School regarding irreplaceability of economic individualism as the basis for a modern
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Section 6. Economic theory
economic market system. In his concept of economic systems Englis distinguished between two fundamental theoretical systems — individualism and solidarism; he provided three model examples of the economic functioning of a society within their framework. Individualism may assume an individualist-capitalist nature, or a nature of national cooperation (ethocratic). In solidarism only one model — solidaristic — is practicable.
Englis was positively inspired by the Austrian theory of exchange and market price-fixing. The approach of Englis and the Austrian School to defining marginal utility is identical. Similarly to Menger, Englis distinguished exchange value and utility value although he called the latter as economic value. Common logic can be found between Menger’s goods of the first order or higher orders and Englis’s primary and derived purposes. Both the Austrian School and Englis refused inflation as an undesirable phenomenon and blamed the state for it. [7].
Along with his colleagues Václav Chytil (19071980), Milos Horna (1897-1958), Vladimir Vybral (1902-1980), Alois Král (1902-1991) Englis formed, and methodologically developed, a teleological school sometimes denoted as the Brno School of National Economy.
Englis designates his view on the economic science as teleological (teleos = purpose, aim). The teleological theory of economics of Englis was based on the idea that the cognition and understanding of all the economic processes may be satisfactory from the scientific point of view only if it follows the purposiveness, the choice of aims and means and the rationality of making decisions and
methods in the behaviour of all the economic subjects (the state, banks, households, enterprises, etc). “Economic science deals with order within which individuals, as well as whole nations, strive to maintain and enhance their lives. .. .The science of the order where individuals and nations care about sustainable improvement of life.” [8, 3] ... “Order in economy is purposive and results from purposive thinking.” [8, 5].
Conclusion
The Austrian School started its development in the Austro-Hungarian Monarchy in the final third of the 19th century. What is less known is the fact that in Bohemia, as part of the Austro-Hungarian Monarchy, Austrian economics was developed and promoted particularly at the German part of the Prague University and this process continued in Prague and in Brno after constituting a new sovereign state in 1918 — Czechoslovakia. Unfortunately, the Communist regime in Czechoslovakia after WWII barred Englis, as well as other representatives of the so called teleological school, from their academic and scholarly activities and debates over the development of the Austrian economics after the war. The Communist regime forbade reading Englis’s books, which were removed from libraries.
This Brno School was destroyed by the Communist regime: most of its representatives were imprisoned and prosecuted without any chance of resuming their academic or research activities; their books were removed from libraries, too. The scientific debates were forbidden. The main centre of the Brno School — the Law Faculty of Brno University — was closed in 1950.
References:
1. Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles. Auburn: Ludwig von Mises Institute 2006.
2. Ludwig von Mises, The Historical Setting of the Austrian School of Economics. On-line edition. Auburn: Ludwig von Mises Institute 2003, at http://mises.org.
3. Ilona Bazantová, Národohospodár Albin Bráf a jeho vztah k nèmecké historické skole a k rakouské skole. In A. Dolezalová, ed., Albin Bráf: Politik, národohospodár a jeho doba. Praha: Národohospodársky ústav Josefa Hlávky, 2013.
4. Frantisek Vencovsky, Karel Púlpán a kol., Dèjiny mènovych teorii na ceském území. Praha: Oeconomica 2005.
5. Marek Hudík, Frantisek Cuhel (1862-1914). New Perspectives on Political Economy, vol. 3, no. 1, 2007, P. 3-14.
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Government regulation and performance of small saccos in Nairobi City County, Kenya
6. Frantisek Vencovsky, Déjiny ceského ekonomického myslení do roku 1948. Brno: Nadace Universitas Masarykiana, 1997.
7. Ilona Bazantová, Czech economist Karel Englis and his relation to the Austrian School in the first half of the 20th century. Prague Economic Papers (at print).
8. Karel Englis, Soustava národního hospodárství I., II. Praha: Melantrich 1938.
Kevin Biwott KUSCCO Ltd Nairobi E-mail: sirbekev@yahoo.com Irene Asienga, Dr. School of Business and Economics Kabarak University E-mail: ikoech@yahoo.com Firtz Mulumia Gerald Oketch School of Business and Economics Kabarak University E-mail: firtz.mulumia@outlook.com Renny K. Mutai PhD Candidate, University of Nairobi E-mail: rmutai@gmail.com
Government regulation and performance of small saccos in Nairobi City County, Kenya
Abstract: Direct government regulation of Saving and Credit Cooperative societies (Saccos) in Kenya came about through legislation enacted by the Kenyan parliament, the Sacco Act of 2008. The regulations were necessitated by the need to give proper structures and prudential standards to Saccos especially those involved in deposit taking activities referred to as Front Office System Administration (FOSA). The FOSAs carry out banking business with members of the public most ofwhom are not their members. Since the Saccos were not regulated by Central Bank of Kenya or the Banking Act, the government forged direct regulation through Sacco Society Regulation Authority (Sasra). This study therefore sought to investigate the effect of government regulation on performance of small Saccos in Nairobi City County, Kenya. Specifically the study sought to determine the effect of regulation requirements: statutory deposit fund, management qualification, and quality and membership on the performance of small Saccos. The study used survey research design while the target population comprised of all small licensed deposit taking Saccos in Nairobi City County. Data was collected by use of structured questionnaires. The main finding of the study is that implementation of government regulations has improved performance of the Saccos. Statutory deposit regulations positively affect Sacco liquidity while members also showed confidence in qualified managers based on performance but felt that membership regulation is punitive. In conclusion the regulation has positive effects on Saccos and hence the study recommends compliance by Saccos to the regulations.
Key words: Regulation, Saccos performance, Sacco Society regulation Authority (Sasra)
1.0 Introduction where people cooperated in several activities such
The co-operative nature of the Kenyan people as hunting, farming, building houses, taking care of can be traced to the pre-colonial traditional societies animals and in many other important chores. The
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