Marginalist Reasoning

I am progressing from a basis in neoclassical economics toward the Austrian School, but find myself with about a half dozen quite specific questions that I cannot seem to get answered. Perhaps these questions might be usefully argued among this group, or one of you might direct me to a more suitable forum, or offer some one-to-one exchanges. My first question has to do with references to marginalism in the policy arguments of Austrian economists. I presume to see these references everywhere, yet I find them counter-indicated by what I take to be Mises’ deconstruction of the utility idea. I agree with Mises’ reasoning that individual preferences cannot be captured by continuous indifference functions. I also agree with Machlup’s empirical findings that business enterprises do not operate in the vicinity of marginal revenues equaling marginal costs. I find these conclusions well-supported in parallel reasoning by heterodox economists and in the empirical findings of behavioral economists. So: if there are no personal utility functions or industrial production functions, then there should be no basis for arguments proceeding from Menger’s notion of marginalism. Did not Machlup consider that his findings had exiled him from the Austrian School? I wish to know if this disconnect is presently acknowledged by, resolved within, or of concern to Austrian scholars. The best I have been able to do in resolving this question for myself is to abandon the notion of foundational economics altogether. If micro and macro causality need not be continuous with one another, then 1) the economic whole can be sensibly understood as spontaneously directed toward general optimality (per Hayek) even while 2) the smaller, familiar elements of the economy offer us no basis upon which to suppose they are optimizing anything.

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