Wagner’s Law, Money and the Theory of Financial Crisis: Adolph Wagner’s Early Viennese Publications

Adolph Wagner’s first engagement as professional economist was with the commercial academy in Vienna where he lived from 1858 to 1863. During this period Wagner published several books and many articles in journals. Wagner’s research interest is devoted to two main subjects: state finances and monetary policy. In the book Die Ordnung des österreichischen Staatshaushaltes (1863) he first formulated the law which carries his name up to the present. He argues that correct classification of the various expenditure categories is conditional for a rational decision about financing alternatives, especially taxes versus credit. Also, Wagner’s book gives a detailed analysis of the debt problems of the Habsburg monarchy. – Wagner’s book Die Geld- und Credittheorie der Peel’schen Bankakte (1862) is perhaps the most important contribution to monetary theory from nineteenth century Germany. Much influenced by the writings of Thomas Tooke, Wagner was a follower of the Banking School, contributing interesting arguments to the debate about endogeneity of money. Wagner’s theory of financial crisis, developed around 1860, is a remarkable anticipation of modern crisis theories. With respect to economic policy, Wagner’s emphasis on the increasing active role of the state for the population’s economic welfare implied a rejection of liberal demands for an economic roll back of the state. In contrast, Wagner pleads for minimum regulation of the banking system.