CHAPTER 9 Emil Sax: The Recluse from Voloska

Within the ranks of the Austrian School, Emil Sax occupied an original but now largely forgotten position.¹ Just a few years younger than Carl Menger, he was, at the start of his economic research, more of a competitor of Menger than a fellow campaigner, and only began supporting and further developing methodological individualism and the subjective theory of value after becoming a professor in Prague. He distanced himself from the Austrian School yet again a few years thereafter. Disappointed, he retired from university life. But after a quiet period lasting almost twenty years he resumed his research and in the last decade of his life became an unusually prolific author.

Emil Sax was born in 1845 into a family of cloth manufacturers and civil servants from Javorník-Jánský vrch (previously Jauernig-Johannesberg in East Silesia, today the Czech Republic). His father died a few months after his birth. The young Emil studied in Vienna, gained a doctorate of law, and worked initially as secretary of the “Austrian commission at the world exhibition in Paris,” and as trainee legal officer at the Viennese chamber of commerce. In 1870, Sax began teaching economics at the Polytechnisches Institut in Vienna, the precursor of the Technische Hochschule (“Institute of Technology”). An abridged version of his very first lecture, a theoretical foundation of railroad economics, was published in 1871 (Sax 1871).

The renowned railway expert subsequently took over the post of secretary to the director of the Kaiser-Ferdinand-Nordbahn railroad, and in 1874 received his Habilitation in “economics and finance” from Lorenz von Stein. In 1879 the academic staff of the University of Vienna had unanimously voted upon a tenured professorship for Menger and a non-tenured professorship for Sax. The Ministry for Education complied with the proposal in Menger’s case; but Sax, who had just published his two-volume work Verkehrsmittel in der Volks- und Staatswirthschaft (1878–1879) (“Means of Transport in Economics and State Economy”), accepted his non-tenured professorship in distant Prague, where he became fully tenured one year later (cf. Schraut 1966, p. 15). At the end of the 1880s he was elected dean, and later president, of the German University of Prague. At the beginning of his university career, Sax, also a member of the Deutsch-Liberale Partei,² became an elected representative in the House of Deputies of the Imperial Council for the constituency of Troppau (present day Opava, Czech Republic), a mandate he carried out until 1885. In his role as politician he warned of the dangerous consequences of national strife (cf. Schraut 1966, p. 17) and of the “great political dangers” it posed for the Austrian monarchy (cf. Sax 1881, p. 15).

Sax joined Menger’s circle early on and was one of the first to support him in the Methodenstreit (Sax 1884). Yet from the start he developed a clearly autonomous position, which he presented in one of his main works, the Grundlegung der Theoretischen Staatswirtschaft (1887) (“Foundation of Theoretical State Economy”). In Sax’s opinion, the subjectivist theory of value embodies a kind of natural law: “As an apple falls from a tree and the stars move according to the laws of gravity, one Robinson Crusoe and an empire of one hundred million obey the same law of value when it comes to economic activity” (cf. Sax 1887, p. 308). According to Sax’s claim, the driving forces of humanity were egoism, mutualism, and altruism. Human needs were the “most important basic concept of economics” (ibid., p. 172). Sax drew a distinction between “collective needs” and “individual needs,” and correspondingly between a “state economy” and a “private economy” (ibid., p. 179). Both were entwined, however, on account of the law of value: “Value controls and guides human relations toward the multifariousness of goods at large. It therefore also guides relations between people who are dependent on the rapports between goods” (ibid., p. 249). Value would thus result not only from the relationship of humans to the world of goods, but would also be a “fruit of social coexistence” (cf. Beckerath 1930, p. 353).

While the theory of value was developed within the Austrian School into a “logic of values” (Schumpeter 1954, p. 1058), Sax pursued mainly psychological considerations, talked about “valuation” or “feeling of value,” and regarded value theory as “applied psychology” (cf. Sax 1889, p. 9). This resulted therefore in significant differences within the mainstream of the Austrian School: unlike Böhm-Bawerk, Sax did not consider labor to be an economic good; he rejected Wieser’s imputation theory, and saw interest as being a result of the barter economy and not as an economic category. For Sax, Böhm-Bawerk’s theory of interest was weak and irreconcilable with the imputation theory (cf. Sax 1916, esp. pp. 19–24, 228–249). Finally, he also disagreed with the tax theory of the renowned and acknowledged expert of the school, Robert Meyer (1855–1914), whom he accused of a lack of “precision in scientific thinking” (cf. Sax 1892, p. 53). When the second professorship in Vienna (next to Menger’s) became vacant once again and Eugen von Philippovich was appointed, Sax had to acknowledge that his aspiration of returning to the University of Vienna would long be postponed (cf. Schraut 1966, p. 17). It was obvious that his work was not getting the recognition he had expected. Bitterly disappointed, he went into early retirement (cf. Beckerath 1930, p. 348).

Until the time of his death, he lived with his wife in a remote house with a view of the sea in Voloska, a small fishing village in Istria.³ With a “resigned distance” toward life, he looked for solitude as if “contemplation [were] his greatest need” (ibid., pp. 354–355). After a work hiatus of more than twenty years, during which there were only few and insignificant interruptions, Sax began to publish a new series of books—something almost sublime in light of events of the time, like war and its miserable aftermath: Der Kapitalzins (1916) (“Capital Interest”), the second edition of his monumental, three-volume Verkehrsmittel in Volks- und Staatswirtschaft (1918–1922), and a lengthier contribution to Wertungstheorie der Steuer (1924) (“The Valuation Theory of Taxes”).

Emil Sax lived to see his tax theory and his theory of public economy come to bear fruit, particularly in Sweden and Italy (cf. Blumenthal 2007, pp. 217–233). Already an Italian citizen, he received an honorary doctorate from the University of Cologne in 1926. He was soon forgotten in the countries that emerged after the collapse of the Austrian monarchy—an event that affected him greatly. But on account of its originality, astuteness and profundity, his complex, comprehensive, and sophisticated work, though difficult to cope with linguistically, still fascinates today.

¹On the biography of Sax see Beckerath 1930, Schraut 1966, Prisching 2005, and Blumenthal 2007.

²Literally, “German-liberal party.” It favored classical liberal economic policies, advocated the unification of the German-speaking countries into one nation-state, and demanded a strict separation of church and state.

³Peninsula at the head of the Adriatic. Today shared by Croatia, Slovenia, and Italy.