Subjectivity, Arbitrariness, Austrian Value Theory, and a Reply to Leithner

Abstract

Contrary to the Austrian community’s former perception, we revealed value investing’s incompatibility with Austrian economics (Rapp, Olbrich, and Venitz, 2017). However, Leithner (2017) disagrees with this conclusion. He primarily argues that an analysis of value concepts should be neglected in favor of a discussion of the methods value investors apply to “measure” value to diagnose whether or not they adhere to Austrian value theory. Moreover, he claims that value investors use terms imprecisely and that intrinsic value is actually meant to be subjective, even conceptually. However, we believe Leithner’s remarks suffer from fundamental misunderstandings and error. He is mistaken on Austrian value theory, subjectivity, and the conceptual foundations of value investing. Therefore, we gladly accept the offer to address his misapprehensions and to sharpen the Austrian understanding on investment decisions in general.