Isaac Marmolejo, who runs the always interesting Radical Subjectivist blog, shared some links on the last thread about Carl Menger's views on the state (here and here). The first is one Menger and the state generally, with some well deserved swipes at Hoppe, and the second is about the role of the state in the development of money specifically. Isaac quotes a passage on roads and schools, but let me quote something (from his lectures to Crown Prince Rudolf of Austria) just before that I think provides Menger's basic framework. It's actually potentially more expansive than most classical liberals of the liberal/moderate persuasion on the American political spectrum (at least in this passage - perhaps he more specifically defines it elsewhere):
"Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations.
These are not paternalistic measures to restrain the citizens' activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured."
He then goes on to talk about roads and their importance for the "general welfare".
So we have a general welfare justification. We have what could be called a "necessary and proper" justification, because Menger sees activities as being acceptable if they support the larger purpose of the state. There's something like Sen and Nussbaum's capabilities approach when he talks about furnishing citizens with the means for their activities. But most notably, the whole first paragraph justifies state action simply as a matter of scale economies.
There was a little bit of a scuffle over whether these passages could really be taken as Menger's views. I'll let Isaac handle that one here. As for whether he's a socialist or not (Joseph Fetz's contention), I don't think there's anything contradictory if the founder of the Austrian school was a socialist, but I doubt that's the case. Certainly Fetz hasn't exerte any effort to convince any of us that Menger thought the state should own or substantially control the means of production of society. Let's not dumb down socialism, people.