CHAPTER 2
We cannot understand ordoliberalism apart from the philosophy of science underlying it. In this respect, Walter Eucken’s contributions are pivotal. Indeed, in his book Die Grundlagen der Nationalökonomie (1940a), which can be literally translated as The Foundations of Political Economy, Eucken proposed a new methodological framework for the German political economy. Recent studies have interpreted Eucken’s research as an attempt to solve the German methodological dispute initiated by Gustav Schmoller and Carl Menger at the very end of the nineteenth century. Although this ambition has been widely recognized, Eucken’s methodology does not end with the Methodenstreit. In fact, this step was not the central objective of Eucken’s work: indeed, the introductory alert in the preface—“this book is not a methodological book” (Eucken 1940a, ix)—would remain sibylline.
InFoundations, Eucken intended to overcome a twofold obstacle—ontological and epistemological—to which economic knowledge would be captive. On the one hand, the ontological obstacle designates the fact that, by the very nature of economic phenomena, the researcher is faced with the “great antinomy” (Große Antinomie) between the historical-individual and the theoretical-general aspects of the systematic understanding of these phenomena. On the other hand, the epistemological obstacle means that Eucken’s approach aimed to rid scientific knowledge of the influence of ideology that is driven by interest groups of power. In a telling metaphor, Eucken (1940b, 264) invited economists to perform the difficult task of drawing back “the curtain interested ideologies used to veil the concentration of, and struggle for, economic power.” In short, for Eucken, power was simultaneously the object of economic analysis and the central obstacle in the way of the pursuit of scientific, economic knowledge. This second obstacle—epistemological—is usually neglected in the current literature. However, it is essential to understanding Eucken’s approach as well as the whole of ordoliberal political economy.1
To overcome this twofold obstacle and thus scientifically (re)found political economy, Eucken relied on the philosophical discourse of his time. The rise of neo-Kantism marked the German intellectual context at the beginning of the twentieth century and, within it, the work of Walter Eucken’s father.2 Although forgotten today, Rudolf Eucken was a prominent philosopher at the time and was awarded the Nobel Prize for literature in 1908, for his development of the philosophy of life (Lebensphilosophie). Equally influential to Walter Eucken’s methodology was Edmund Husserl’s transcendental phenomenology. Husserl was personally and intellectually close to the Eucken family. Walter maintained friendly relations with Husserl from his appointment as professor of political economy in 1927 at the same University of Freiburg im Breisgau (Klump 2003, 149).
By the beginning of the twentieth century, the philosophical and economic literature was not as hermetic to each other as one might think in retrospect. Proof of this was the work by Max Weber, one of Eucken’s predecessors at the Chair of Economics at the University of Fribourg from 1893 to 1896 (Tribe 1995, 82). Eucken maintained a tenuous companionship with Weber’s epistemology, particularly in relation to the concept of ideal type (Idealtypus). This proximity maintained by Eucken contrasted with the intellectual detachment from Weber marked by economists like Joseph A. Schumpeter (although personally close to Weber) or Ludwig Mises in the early interwar period—a withdrawal that “reflects the turning point in political economy in less than a generation and the misunderstanding of the importance of Weber’s work” (Bruhns 1996, 1260). Overall, the plural philosophical references that Eucken mobilized anchored his work within a specific tradition that was alternative to historicism while foreign to positivism.3
2.1 Power as a Central Epistemological Question
2.1.1 Foundations, an Anti-Treatise of Methodology?
The preface to the original German edition of Foundations provides a useful starting point for understanding the nature of Eucken’s epistemological project. This first preface (dated November 1939) is translated and reproduced here in its entirety:
This book is not a methodological book. Its subject of study is the effective economic reality. The overwhelming proliferation of methodological reflections is a sign of disease for any science; although no science has ever been cured by methodology alone. The vital scope of the questions addressed to political economy is characterised by internal insecurity, distance from life itself and fragmentation which—despite many major particular results—prevail within it. Therefore, it is necessary to rethink the concrete problems it has to solve from the beginning. The purpose of this book is to penetrate into the effective economic reality in order to understand it scientifically. (Eucken 1940a, ix)
Eucken’s opening statement against a purely methodological reading of his work can be understood as a desire to mark his originality within the field. In a book review for Economica, Friedrich Lutz (1944, 210), Eucken’s former student, stressed the absence of “endless abstract discussions” on induction and deduction, as well as on whether economics was a social or a natural science. Despite this and “the author’s [Eucken] denial,” the book was, at least, “partly a treatise on methodology” to Lutz’s own admission. However, the issue is not so much the veracity of Eucken’s statement in this incipit as its overall significance in the economy of his discourse. The expression “effective economic reality” (wirtschaftliche Wirklichkeit) was far from anecdotal since Eucken used it abundantly throughout the Foundations.4 Moreover, this term appeared in the first lines of the editors’ foreword in the first issue of the journal Ordo (Eucken and Böhm 1948, vii).
Thus, in this preface, Eucken stressed the opposition between artificial methodology and a study of reality that may seem partially forced. Specifically, he noted the gap between the “constantly metatheoretical” discourse that deals with preconditions and conceptual elaboration rather than actual engagement (Campagnolo 2004, 165). In doing so, Eucken rejected a certain tradition of historicism in favor of Weber’s project (1904), regarding social science as a “science of reality” (Wirklichkeitswissenchaft). Eucken’s theoretical research aimed “to be an instrument of knowledge, not its object” (1940b, 301). Nevertheless, Eucken stressed that “experience and even everyday experience (Alltagserfahrung) is impossible without concepts” (1940b, 24). Thus, any knowledge of reality is mediated by concepts (Begriffe) in the Kantian sense of a priori. The economist must, therefore, investigate facts through concepts, not concepts directly.
Moreover, in Eucken’s view, these concepts that economists necessarily employ (e.g., work, production, prices, etc.) do not need a priori scientific definition. They are borrowed from the understanding derived from ordinary life, however unsatisfactory that immediate understanding may be. It is ultimately the starting point and necessarily provisional. However, it is essential to preserving the link between actual problems rather than rushing “into darkness and inner speculation” (1940b, 25). Hence Eucken (1940b, 28) called for a return to “things” (Sachen)—as opposed to “words” (Worte)—as the source of a proper economic conceptualization.
2.1.2 Everyday Experience and the Five Aspects of the Economic Problem
Eucken (1940b, 17) opened his Foundations with two unexpected references: Hippolyte Taine, on the one hand, and René Descartes, on the other. From Taine, Eucken borrowed his warning from a culture (therefore, science) that no longer looks directly at facts but rather focuses on representations and “meaningless conceptual systems” (i.e., science that no longer asks decisive questions). From Descartes, Eucken borrowed the “universal doubt” and the cogito.5 Moreover, Eucken placed himself in Descartes’ thought experiment: facing a stove that heats a small room, he determined to question reality. Eucken questioned the objective characteristics of the stove (production and use), thereby approaching what has been described as phenomenology of the economic system (see Herrmann-Pillath 1994):6
What is the material out of which the stove is constructed, asks the scientist. This question alone gives rise to a host of others which lead back to atomic physics. Why does this stove produce a certain amount of calories? This leads us on to the theory of heat. Our questions are different. Why was the stove produced at all? Why was it set up in this particular room? Simple questions—seemingly. (Eucken 1940b, 18, emphasis in original)
In Eucken’s view, science emerged from researchers’ will to question reality from a certain viewpoint: the type of question defined the scientific field that emerged. In support of his claim, Eucken explicitly relied on a statement by Weber at the first congress of German sociologists (Deutsche Gesellschaft für Soziologie) in 1909: “ ‘Economy,’ then, is something we select from out of the variety of our experience, a point of view that we adopt when we are faced with particular sorts of problems” (Weber, quoted by Eucken 1940b, 319, n. 1). Eucken (1940b, 18) formulated a series of related questions before setting out the central concern that the economist should address based on experience: “How is this process with its far-reaching division of labour steered (Lenkung) in its entirety so that everyone comes by the goods on which each human existence depends?” In other words, Eucken aimed at addressing the question of the “internal relations of daily economic life” (1940b, 102).
According to Eucken (1940b, 9–22), answering this question concerned five aspects of the economic process: (1) the alternative use of scarce resources to satisfy needs, (2) the distribution of income, (3) the orientation of the production structure by savings or investment (their temporal aspects in particular), (4) the choice among production techniques, and (5) the spatial distribution of production at the national and international levels (see also Kuhnert 2008, 5–7). The term aspect—or “faces” (Seiten)—is important. Eucken emphasized that these five aspects represent five distinct components and ways of examining the same fundamental problem. They are, therefore, interdependent within the single and “overall social process of the economy” (Eucken 1940b, 23).
Eucken conceded that many economists before him had perceived these questions in a similar way, but they would often fail in formulating them. Eucken warned against definitions of economic science based on separate spheres (production, distribution, consumption, and exchange), as propagated by Jean-Baptiste Say following his Cours complet d’économie politique pratique (1828). Such an approach would be incorrect because it would make the economist lose sight of the “unity of economic activities” (Eucken 1940b, 26). Eucken hammered this point: “Since there are no independent spheres in the economy, there should be no separate theories, but only a whole: one problem and one theory” (1940b, 26). In contrast to Say, David Ricardo would have known how to recognize the unity of economic phenomena. However, Eucken stressed that this was at the cost of major impasses, particularly concerning the role of time and space in the economic process. This faulty Ricardian conception of theory would have infused the work of the Lausanne School (Léon Walras and Vilfredo Pareto).
Experience, according to Eucken, must provide the initial impetus for scientific work by isolating the endemic problems of the different sciences in general, especially of economics. To do this, questions could be formulated ex materia from a surmise. Starting from categories and definitions constructed a priori would entail a biased approach to the problems raised by economic analysis. Thus, Eucken (1940b, 304) insisted that “we do not impose our system on the facts, but we find it in the facts.” A scientific definition would then be the “summary,” the result of “the progressive analysis of things,” or the “factual analysis” (Sachanalyse) by science, and not one of its assumptions (1940b, 301). Eventually, one may arrive at a definition that can then be made available for new studies: each concept would undergo a cumulative process rising from ordinary intuition up to a scientifically based proposal.
However, based on an analysis of the facts, Eucken’s return to experience was not a justification for naïve empiricism. Eucken was particularly explicit on this subject, claiming that empiricism weakens science because it condemns it to captivity by the ideological judgments from interest groups, which is precisely what he aimed to overcome.
2.1.3 Science Facing Interests
To approach the effective economic reality, the economist must, therefore, rely on daily experience (Alltagserfahrung). However, in doing so, Eucken warned us that the individual—the worker, the entrepreneur, the politician, or the economist—was inclined to adopt a biased perspective, being himself a part of the economic system. In this respect, we are dealing again with the interpretative key to ordoliberalism proposed in this book (the question of the power exercised by individuals or groups) in the form of an epistemological obstacle:
There is not only the fundamental problem of the economy that emerges from the experience of daily economic life. In the same economic life, there is also a unique tangle of opinions and ideologies on economic issues. This everyday economic experience in which we all share may thus be regarded in two ways. It provides the initial impulse for asking significant questions that call for an urgent response; and at the same time puts a considerable obstacle (Hindernis) in the way of our finding really useful answers. (Eucken 1940b, 28, emphasis in original)
Eucken seeks to ensure a strict separation between the knowing subject, on the one hand, and his object, on the other hand, that invalidates pure empiricism. Accordingly, empiricism would amount to the faulty reproduction of the expression of interests within the scientific discourse. In short, empiricism maintains a double illusion. First, individuals are not always able to properly assess what is really in their interest because they find themselves indistinguishably intertwining “real interest” and “presumed interest” (Eucken 1940b, 28–29). Eucken used the example of the entrepreneurs who, in 1922–1923, urged—successfully—the Reichsbank to pursue a cheap credit policy, which was extremely unfavorable due to hyperinflation. Second, Eucken perceived the individual as subject to what Hayek termed the pretense of (common) knowledge. In other words, their opinions always go beyond their situation so to project themselves onto the economic process but without grasping “the social economy in its overall configuration” (Eucken 1940b, 29).
At the individual level, though, interest opinions are only marginally problematic for Eucken (1940b, 32) since they are still “fragmented” (zersplitterten) among the population. These individual opinions may even be relevant within their field of limited expertise. However, the strongest version of Eucken’s epistemological obstacle comes to the fore with the formation of “closed ideological groups,” which, as “power groups,” were armed for “economic struggle” (Eucken 1940b, 29).7
According to Eucken (1940b, 31), economic theory itself would not be free from ideological usage. First, a theory could be proposed for the benefit of political interests, as was the case with the doctrine of free trade in the nineteenth century. Second, an ideological argument could also be accepted as part of a theory. Eucken (1940b, 321) claimed that this problem, which was perceived by the first economists like François Quesnay and Adam Smith in their charge against mercantilism, would be increasingly less recognized by modern economists (with the notable exception of Karl Marx):
Many economists have not yet recognized the decisive importance of their task for everyday economic life. Even in writings on methodology, the subject is generally overlooked, or only superficially addressed, without its basic importance being made clear. Often, biased ideologies are not seen for what they are, in spite of the ponderous concentrations of power operating behind them. (Eucken 1940b, 32–33)
After such a negative depiction, one might wonder how the economist could overcome this fundamental subjectivism. Could the economist even stand above the expression of interests to scientifically grasp the economic reality? Eucken aimed at providing a positive answer to this question, as opposed to the approach he depicted as negative (inspired by Marx). What Eucken sought with his Foundations was a fundamental criterion for determining the intrinsic value of a proposal on the economic world, knowing that any proposal was the result of interests:
It is not that what we have learned from our everyday experience must be wrong because of the expression of particular interests. It may be either true or false. To decide that, we must find a strict criterion and a scientific method. (Eucken 1940b, 32)
The internal link to the fundamental problem of the economy is made explicit here. Indeed, to adequately understand the five aspects of this problem (described earlier), it is necessary to go through the (phenomenal) experience of the economy, a form of return to things. The researcher is then subject to the contamination of science by vested interests, characteristic for Eucken of an empirical approach.
This first section emphasized the phenomenological (rather than methodological) nature of Eucken’s Foundations, which highlighted the existence of an epistemological problem at the root of any scientific approach and thus the imperative need to detach scientific production from any ideological process. In the conclusion of his Foundations, Eucken (1940b, 305) highlighted that “overcoming (Überwindung) opinions and ideologies is an essential task of political economy” but that this task required “strict adherence to the idea of truth.” Escaping this pitfall would require a specification of the scientific methodology, thereby grasping the dual nature of political economy.
2.2 The Singularity of Political Economy as a Science
2.2.1 “The Great Antinomy” Between Theory and History
According to Eucken, any economic issue must be considered directly from its daily distinctiveness and randomness (i.e., in its “historical-individual” aspect). Eucken emphasized that every economic framework was “in itself History” and thus was “part of the overall process of historical being and becoming” (1940b, 34, 37). Nevertheless, Eucken claimed that the economist’s work was different from the work of the specialized historian. The singularity of the economist would be explained by the general rules that govern the economy (these theoretical rules will be explored in Chapter 3). Accordingly, the economic process is not a historical object of the same nature as “wars” or “diplomatic negotiations” (1940b, 39). Any causal explanation in political economy requires an understanding of the connections and systematic relationships between facts, which are invisible to those who only compile these facts. This situation is what Eucken called the “theoretical-general” aspect of economic science.
Economic activities inevitably appear in a particular and contingent form, but at the same time are ruled by certain general principles that are universally valid. Thus, a simple collection of facts would only confuse the economist in a “chaos of details” (1940b, 41). It would leave the economist unable to perceive the internal relationships expressed. Eucken argued that both the historical and theoretical aspects of the economic problem must be addressed together from the beginning of the scientific inquiry:
The theoretical questions do not come at the end of our science, and the theoretical propositions which we have to seek are not simply a distillation of experience. . . . It is not any doctrinaire spirit or love of philosophical speculation that leads us to study theoretical-general problems, but simply our striving after a truly scientific experience (Erfahrung). . . . If the economist chooses only the theoretical-general approach or only the historical-individual approach, the real world remains foreign to him (wirklichkeitsfremd). (Eucken 1940b, 40–41)
The pursuit of a theoretical analysis requires the use of “conceptual models” (gedankliche Modelle), even allowing the ceteris paribus clause to formulate questions from a general perspective. However, the theoretical method alone would lure economic science into sectarianism and a lack of realism. Paradoxically, Eucken (1940b, 53) called such a procedure “non-historical and non-theoretical” because it would break the link with concrete facts and problems in favor of a logical and metaphysical approach.
At this step, Eucken’s “great antinomy” appears as a major ontological obstacle in the way of fully grasping an economic phenomenon.8 To overcome this, it is necessary to simultaneously reconcile the specific and, therefore, historical particularity of economic phenomena with their relationship to the whole system, as revealed by general and theoretical analysis. “Simultaneously” is the key word because it is neither a sequence from one to the other nor two parallel—separate— approaches. However, Eucken was fully aware of the intrinsic difficulty of the method he was proposing because the historical and theoretical approaches required different and complementary qualities in the scientific investigation:
A superficial compromise between theoretical and historical investigation or merely methodological reflections about their cooperation are pointless. . . . The historical-individual aspect of the problem requires perception, intuition, synthesis, understanding (Verstehen), and empathy (Einfühlung) for living individual experience. The theoretical-general aspect requires rational thinking, analysis, and the elaboration of models. (Eucken 1940b, 43)
In this passage, Eucken gave us the singularity of political economy as a science. It is not strictly historical because it is subject to rules of universal scope. However, it is detached from the natural sciences by the plurality of forms that the economic system can take in a given place and at a given time. We can then understand Eucken’s (1940b, 295) frustration in qualifying political economy as a science: it was all at once a historical (or empirical) science, an experimental (or natural) science, and a social (or moral) science. In short, political economy was “truly a ‘border science,’ ” even if this accurate definition was, in fact, later given by Röpke (1956, 122). In Eucken’s view, the great antinomy was what precisely “determines the place of political economy in the cosmos of science” (1940b, 311). This situation directly implies that political economy cannot import methods from other sciences and vice versa.
However, until Eucken’s time, economists would not have been able to solve this great antinomy.9 Accordingly, Eucken (1950a, 9) claimed that political economy had not yet reached the “full understanding of the modern economic world [which had] new types of social problems, cyclical fluctuations, and contemporary struggles for economic power. The more pressing these current problems become, the more intolerable is the gap between economics and the real world.” The social structure of the economy is increasingly complex, thus making this effort in bringing the two approaches—historical and theoretical—together crucial. Therefore, political economy requires a new method if it is to achieve its fundamental task; namely, the “scientific knowledge of the effective real economy” (Eucken 1940b, 221) or, in other words, knowledge having overcome the great antinomy. In the following paragraphs, I show that Eucken had less resolved to close the Methodenstreit per se than to set the conditions for overcoming it on an entirely different basis.
2.2.2 The Deadlock of the Methodenstreit
In 1883, the publication of the Untersuchungen über die Methode by Carl Menger, followed by a ruthless book review by Gustav Schmoller in his Jahrbuch, inaugurated the famous German dispute over methods. This conflict of methods has often been reduced to a “simplistic and false formula, history without theory versus theory without history” (Bruhns 2004, 4) or to a sterile opposition between data collection, on the one hand, and abstraction, on the other (Campagnolo 2011, 472). The protagonists, especially Schmoller (Louzek 2011, 449), were partly responsible for the caricatural aspect of the debate by polarizing blunt oppositions (such as deduction vs. induction, individualism vs. holism, and theory vs. facts). While these categories are parts of the debate (see Fusfeld 2008), they are not fully relevant since, in the end, both Menger and Schmoller were trying to find the right articulation between each of these pairs. More prominently, the “process of abstraction” of reality and the relationship between political economy and social complexity were at the heart of the dispute (Campagnolo 2011, 475; Labrousse 2009, 147). In short, both sides developed a theoretical approach of inquiry to provide a causal scientific explanation for the required methodology.10
The two authors’ opposition was quite explicit in the use of concepts, particularly that of political economy. Menger’s definition of it was instrumental and formal, centered on individual (rational) behavior. On the contrary, for Schmoller, political economy was substantive and defined a certain geographical and historical field of the social. The concept of the community (Gemeinschaft) was at the heart of his research. Schmoller’s national—people’s—economy (Volkwirtschaft) endorsed an organic outlook, where every kind of economic system forms a coherent group “that can and should be considered as real as the family, the community, or the State” (1902, 329–330). In his case, the very association of individual elements conveys emerging properties that require an analysis of compound products or collective concepts: the whole cannot be reduced to the sum of the parts. The object of historical science was, therefore, to precisely apprehend the particular in what is accidental and singular.
On the contrary, Menger conceptualized a human economy through which he aimed at isolating pure elements—in their individuality—by an essentialist and analytical extraction. By explaining the particular and evacuating accidental factors to grasp the essence, the economist could reconstruct the complexity of the real world. Menger offered a logical definition of abstract concepts without tangible counterpart in the world. Menger (1883) also rejected “collective concepts” (Kollektiv-begriffe) because this category abandons or “neglects the only economic behaviour that can be known for good, individual action” (Campagnolo 2011, 454). Hence, Menger founded two guiding ideas from the different Austrian schools and beyond: subjectivism and methodological individualism.
Although only appearing as an endnote in the Foundations, Eucken’s assessment of the dispute over methods was final: the two positions are inconsistent because they raise methodological questions inappropriately. For Eucken, it was clear that
in the unfortunate quarrel between Menger and Schmoller, both parties were wrong, nor was the truth somewhere in the middle between the two. Neither Menger’s dualism, of which Schmoller perceived the danger, nor Schmoller’s pure empiricism, the failure of which Menger foresaw, does justice to economic reality. A new start is necessary. (Eucken 1940b, 324, n. 11)
Eucken agreed that Menger and Schmoller were both correct in acknowledging some of the weaknesses of each other’s approach. In Eucken’s view, Menger provided theoretically sound answers to questions that have little relevance in reality. However, Schmoller offered theoretically weak answers while asking essential questions. What Eucken (1940b, 55) called Menger’s “dualist” approach distinguishes theoretical analysis from historical analysis under different methods and objectives in two separate types of science (although Menger recognizes the intrinsic value of each). The main weakness of this “cooperative” approach between the sciences lies in its inability to account for actual problems, as each of the two sciences remains sterile in this field: “to the extent that the divide between theoretical and historical political economy is maintained, the real problems remain unresolved” (Eucken 1940b, 56).
It is on the strength of his theory conception that Eucken intended to distinguish himself from the Menger–Schmoller couple:
True theory is not upstream of the examination of the real economy, as conceptualist economists assume, nor downstream, as empiricists believe, nor separately from the examination of facts, as extreme “Dualists” want, but true theory is at the centre of the knowledge process; it is a tool that is created to make scientific experience possible. (Eucken 1940b, 301)
Like Schmoller, Eucken (1940b, 59) stressed the unity of political economy. Nevertheless, the empirical method would remain faulty because it abandons the idea of starting with the formulation of a problem to question reality while striving to compile and assemble exhaustive evidence. It is at this price that a theoretical formulation will then be possible, and yet the essential (or theoretical-general) connections between the facts would remain inaccessible to the historicists.
Clearly, for Eucken, Menger and Schmoller left unsolved the ontological problem of the complex articulation between theory and history. However, Eucken’s dissatisfaction regarding the Methodenstreit was not limited to this aspect. The protagonists of the battle of methods did not even explicitly perceive the epistemological problem emanating from vested interests. Eucken (1940b, 57) illustrated this with the example of cartels, claiming that the “scientific treatment” of actual cartel problems—and the struggle for power that came with it—was highly “unsatisfactory.” On the one hand, theoretical economists like Menger would apply the monopoly theory to cartels and overlook the very specificity of the formation and strategies of cartels in contrast to pure monopolies. On the other hand, historicists like Schmoller would provide hundred-page long descriptive accounts of the formation and running of an individual cartel in Germany, thus missing the decisive explanation of the interdependency of every single economic unit within the whole economic process.
Eucken saw Menger’s a priori conceptual definitions as “scientifically unfounded notions,” divorced from factual analysis and, accordingly, as a path by which “interests-based views and confused ideologies creep into political economy” (Eucken 1940b, 303). As noted in the ordo manifesto of 1936, “all conceptual speculation” would have deleterious effects to “lure us into becoming doctrinaire and unrealistic” (Böhm et al. 1936, 24). Theoretical economists would disregard the “vital problems” of economic life in general and the key issue of power.11 According to Eucken, Schmoller committed the reverse of Menger’s mistake. Historicists did start from the facts and thus identified the crucial question of economic life. However, their lack of appropriate theoretical tools was bound to leave the epistemological obstacle unsolved and political economy under the sway of interest ideologies:
This [empirical] method has no way of advancing beyond a collection of unanalysed facts. Its vision and thinking is pointilliste and unrealistic, for it misses the significance of the interdependence of all economic activities. Because it cannot provide reliable answers to the questions posed, it has to fall back again and again on attempted explanation at the level of everyday experience. The result is the insecurity and inconsistency of many empiricist economists in dealing with interested opinions and ideologies. (Eucken 1940b, 63, emphasis in original)
Eucken provided a clear insight into the articulation behind the resolution of the two identified obstacles. The economists’ failure to overcome the “great antinomy” (i.e., to solve the problem of the ontological obstacle) makes the epistemological obstacle more challenging to address. Thus, the ontological obstacle logically precedes (and in a sense gives momentum to) the epistemological obstacle. Given the sectarianism of conceptual theory and, above all, its permeability to the interests of the Historical School in particular and empiricism in general, the Euckenian project appears as an attempt to place political economy in a methodological approach that must protect science from any bias.
2.2.3 Opposing Schmoller’s Optimist Outlook
Eucken distanced himself from both Menger’s and Schmoller’s views. However, Eucken’s charge against Schmoller was much more documented than that against Menger, for a few reasons. First, the Historical School was the “straw man” to any dissident program of political economy in interwar Germany (Grimmer-Solem and Romani 1998, 275). Although Schmoller died in 1917, he continued to exert a strong influence on German social sciences despite a pluralism that was then greater than at the beginning of the century. Moreover, historicism—though severely in decline in the interwar period—marked a limited but genuine revival under National Socialism (Hagemann 2016, 228; Ptak 2009, 113). These contextual arguments motivated Eucken’s tenacious critique.
A supplementary explanation can be found in Eucken’s formative years as an economist. Indeed, the historicist tradition informed his early works. Eucken completed his doctoral thesis (in 1914) and his habilitation (in 1921) under the supervision of Hermann Schumacher (1868–1952), an economist intellectually close to both Schmoller and Wagner (Hagemann 2004, 408–409). The German Historical School’s inability to satisfactorily explain—and therefore cure—the German hyperinflation of 1923–1924 pushed Eucken to gradually reject it (Klump 2003, 152; Abelshauser 2004, 25). Hence, Eucken embarked on a path from the endorsement of the quantitative theory of money (Eucken 1923) to the construction of an Austrian-like theory of capital (Eucken 1934). He finally called for “the overcoming of historicism” (Die Überwindung der Historismus) in an article published in Schmoller’s Jahrbuch (Eucken 1938a). What has been hitherto neglected in the literature is that Eucken’s rejection of Schmoller’s methodology was comprehensive enough to embrace its ethical-anthropological bases. Schmoller’s postulates on human nature and faith in progress were, according to Eucken, responsible for historicists’ failure to address the epistemological obstacle of political economy.
In the same year Eucken published Foundations (1940b), he also authored a lengthy piece entitled “Science in Schmoller’s Style” (“Wissenschaft im Stile Schmollers”). In this article, Eucken (1940c) leveled his critical fire at the ethical-anthropological postulate on which Schmoller’s work rested. Eucken (1940c, 475) felt at odds with Schmoller’s naïve optimism in the process of continual progress steered by the “inexorable ethicization” (Ethisierung) of “civilised men” (Kulturmenschen), a view broadly infused within the Historical School as a whole (Schefold 1996). According to Eucken, Schmoller’s “ideology of progress” (Fortschrittsideologie) drove him to consider humans today as “more civilised” than before in a process characterized by the progressive disappearance of “selfish motives” from daily economic behavior.
Schmoller’s anthropological postulate, Eucken claimed, was not only contrary to the actual historical trend (he saw the turmoil of the first half of the twentieth century as undeniable evidence of his point of view) but prevented any objective analysis of economic reality. Schmoller had neglected the central issue of rising power groups and their attendant ideologies within modern Germany:
Schmoller was moving away from economic reality; like many other economists. Everyday economic life has always been and still is full of power struggles. And these struggles are not led by people who are infinitely civilized, but by individuals who have developed a sophisticated and brutal art of the struggle for power. (Eucken 1940c, 479)
To Eucken, Schmoller made a fundamental error with his optimistic assessment of the exponential growth of cartels in the newly and suddenly industrialized Germany.12 Eucken (1940b, 264) accounted for this fault by pointing to Schmoller’s lack of “direct and personal experience” of the exercise of economic power in economic life. He not only deprecated Schmoller’s use of second-hand knowledge of cartels acquired through academic studies but also argued more critically that Schmoller’s methodology of “interviews with industrialists and senior officials” (1940b, 264) was what precisely disqualified him from a sound scientific inquiry into power issues.
Eucken (1940b, 105) aspired to “break completely” with historicism. His dissatisfaction was rooted in two main shortcomings. First, historicists were leaving “knowledge about contemporary economic facts to practitioners or business managers.” Second, they were leaving “knowledge about the past to historians.” By contrast, Eucken claimed that these two tasks belonged to the economists’ imperatives. Lacking an adequate method to “penetrate safely into economic reality,” historicist economists were “often dependent on knowledgeable practitioners.” On monetary issues such as devaluations, for instance, historicist economists depended on “the comments of—mostly interested—bank practitioners” (Eucken 1940b, 305).
According to Eucken, scientists alone can provide an objective analysis of the world and thus constitute the only medium for interest-free advice on economic policy debates. Eucken and the ordoliberals supported the scientists’ privileged position with two arguments (Böhm et al. 1936, 15). The first one was linked to ethics regarding the scientist’s “vocation (Beruf) and position, being independent of economic interests.” The second argument concerned Eucken’s perception of economic theory properly understood: scientists could overcome the interested and fragmented viewpoint “on the strength of their intimate knowledge of the intricate interrelationships of economic activity” as a whole (Böhm et al. 1936, 16). Ordoliberals contrasted the scientific expertise of independent academic economists seeking scientific truth with interested experts specialized in the “technical details of their professional field” (Böhm et al. 1936, 16). Thus, these experts would be biased advisers for the conduct of economic policy.
As we show in Chapter 1, the ordoliberals’ act of faith in favor of scientific reasoning was, to them, utterly imperative to remedy the widespread political irrationality of the interwar period, which was inspired by ideologies. For Eucken, these ideologies were deceptive guides to action since “they affirm and promote movements that achieve exactly the opposite of that which ideologists hope from them” (Eucken 1932b, 69; see also Röpke 1935, 94).
Eucken’s rationale against Schmoller’s ideology of progress was a slippery slope. Although Eucken condemned naïve optimism about the human nature, he did not want to fall into pessimism and fatalism embodied, in his view, by authors like Friedrich Nietzsche and, closer to his time, Oswald Spengler. Eucken (1940c, 479) recognized that the pessimistic and fatalistic vision of human nature was to some extent “closer to the effective reality” than Schmoller’s optimism. As Eucken stressed in many passages of Foundations, daily economic life was indeed “full of power struggles.” However, Eucken refused to fully embrace what he termed the “predator-anthropology” (Raubtier-Anthropologie). Even if humans “act frequently as a predator,” Eucken was convinced that men and women were always capable of responsible behavior by following “legal or moral obligations” before their instinctive will to power. In other words, the vast majority of individuals were bounded by “the rules of the game in the struggle for life” (Eucken 1940c, 478).13 In Eucken’s ordoliberal perspective, individuals’ ethics of responsibility enforced by legal norms was essential to reconcile selfish economic interests with the common good (Vanberg 2014; Wörsdörfer 2010).
In the last analysis, Eucken argued that Schmoller (because of his progressive stance), as well as Nietzsche and Spengler (will to power), maintained the same anthropological-ethical confusion. And this flawed point of view would have “penetrated the German intellectual life under various forms” (Eucken 1940c, 478). Specifically, it would be characterized, according to Eucken (1940c, 478), by the equivalence of “the strongest” and “the best” of individuals in the “struggle for life” (Lebenskampf).14 However, the “strong man” in the ordoliberal lexicon is not the person who abandons herself to a nihilist “lust for power” since that person would be “intrinsically weak.” On the contrary, individuals are “strong” because they use their reason to “illuminate the darkness surrounding the acting agent” (Böhm et al. 1936, 23).
Thus, Eucken (1940c, 484, 489) invoked the skepticism of science as a contrary remedy both to Schmoller’s optimism and to the Nietzsche-Spengler fatalism. Eucken, in affinity with Weber’s ambition to consider “what is conventionally evident a problem” (Weber 1904), aimed at questioning conventions or political agreements. Eucken (1940c, 484) endorsed a “sceptical thesis” characterized by the initial condition of the scientist on the path to the “realm of truth” (Reich der Wahrheit), an expression borrowed from Husserl (Eucken 1940b, 304; see Goldschmidt 2013). According to Eucken, political economy as a science suffered from the relativism of truth introduced by romanticism, historicism, pragmatism, and even positivism, which thereby makes it susceptible to the influence of interests. Thus, to become a useful science in guiding political decisions, political economy would have to swerve away from interest opinions to embrace universal values.
Accordingly, in Foundations, Eucken asserted that the scientist must imperatively grasp and rationally explain power relations in the economy. Against the idea that reflecting about power was divorced from genuine scientific investigation, Eucken (1940b, 272) claimed that economic power was “not something irrational or mystical.” On the contrary, it was “comprehensible and accessible by reason.” Schmoller’s optimistic outlook went hand in hand with an inadequate methodology, given the epistemological obstacle highlighted by Eucken. In his views, this was additional to Schmoller’s inability to perceive the fundamentally theoretical nature of the economy, namely the ontological obstacle. This pushed Eucken to develop a competing methodology in its own right.
2.3 Thinking in Economic Orders
2.3.1 The Morphological Analysis to Overcome the “Great Antinomy”
Let us summarize the ontological problem (the “great antinomy”) that Eucken posed. On the one hand, the theoretical approach focused on the object in its general aspect: its criterion is truth, and its method is rationalist. On the other hand, the historical approach seeks to understand the object in its individuality: its criterion is actuality, and it uses empirical methods. However, Eucken stressed that the economic reality was made up of both historical contingencies and valid general principles. Could this great antinomy be overcome? If so, on what conditions?
Eucken claimed that articulating theoretical and historical analysis was possible only thanks to the existence of a certain invariance of the forms that govern the course of the economic activity throughout history. In other words, Eucken suggested that there was “a limited number of pure forms” from which all “economic systems present and past have been, and are, composed” (Eucken 1940b, 109). Furthermore, if economists succeed in isolating these pure elements, then they could “apprehend economic life as a whole” despite “the changing forms of economic reality” (Eucken 1950a, 10–11).
In practice, Eucken provided a historical account of various actual economic systems, starting from the economy of the Inca Empire through the ancient period (Rome, Egypt), the Middle Ages (guilds of Florence or Rotterdam), the European Enlightenment, to the contemporary (interwar) period. On deeper consideration, Eucken saw economic history as a laboratory where a series of experiments had already been conducted on a vast geographical and temporal range—experiments that were awaiting the economist’s systematization. Eucken proceeded by variation and comparison, showing that actual economic systems manifested themselves to our perception (i.e., in effective reality) only as real types or, in fact, as a combination of various ideal types.
Eucken (1940b, 107) used an “isolating abstraction mechanism” in building his ideal types from recurrent and coherent individual facts by isolating and generalizing core features of the phenomenon to the detriment of less significant aspects. Thus, Eucken aimed at obtaining the truth and achieving a universal and exact knowledge of political economy, what he called, following Husserl, “evident truth of reason” (cited and translated by Goldschmidt 2013, 137). Eucken’s method was clearly informed by Husserl’s approach (eidetic reduction).15 Consequently, Eucken’s theory of science cannot be understood as an empirical induction, but instead as an essentializing process from the raw materials of reality. Eucken ended up with a typology of standard ideal types from which the explanatory scheme of an economy can be (re)constructed. He called it a “comprehensive morphological device of economic systems” (1940b, 173), meaning a classification system considered exhaustive and based on the historical analysis conducted.
Thanks to his singular methodology, Eucken was confident of having solved both the ontological and epistemological obstacles. On the one hand, Eucken believed he overcame the great antinomy of political economy because the ideal types obtained would constitute “elements of lasting connection” (1940b, 174) between the historical-individual and theoretical-general aspects of the economic life. On the other hand, this kind of morphological analysis would allow the economists to extract themselves from the biased opinions of a given society. Indeed, they could account for historical events disconnected from their immediate surroundings and revealed by theoretical necessities.
The morphological analysis was an integral—crucial—part of Eucken’s economic analysis. The construction of this morphology of pure forms has, for Eucken (1940b, 240), “two functions in the process of knowledge.” First, its plasticity can account for any economic system, past or present. The result of his morphological work is reflected in an essential duality within economic systems (Wirtschaftssystem); that is, between “administered economy” (Zentralgeleitete Wirtschaft) on the one hand, and “exchange economy” (Verkehrswirtschaft) on the other. At the end of his historical work, Eucken concluded that “traces of other economic systems other than these two cannot be found in the economic reality of the present as well as the past.” As a result, it seemed to him particularly “difficult to imagine” that other (pure) forms exist or may one day exist (Eucken 1940b, 118).
The opposition between the two systems was less binary than it seems. Each ideal type has subcategories that offer nuances. Moreover, an actual economic system was never comparable to either, as it was rather a combination of these elements, which tend toward one of these ideal types. To judge this, Eucken provided five partial economic orders corresponding to the five aspects of the economic problem: (1) the type of direction of the economy (decentralized/centralized), (2) the mechanism of price formation (e.g., competition, oligopoly, monopoly, etc.), (3) the type of ownership, (4) the type of coordination between households or enterprises, and (5) the type of monetary system (see also Weisz 2001, 190). Picturing any real type of an actual economic system would require picturing each of these five aspects as a distinctive combination of ideal types.
Second, each pure form (ideal type) constitutes the basis for proper theoretical work, which is the only one capable of grasping the causal relations of the economy. Eucken’s morphological analysis was, therefore, logically prior to what we might call “standard” or “canonical” economic theory such as monopoly theory, oligopoly theory, and monetary theory (see also Chapter 3). Without morphological analysis, canonical economic theory would be blind. Otherwise, a deductive and theoretical analysis must be selected and applied. Epistemologically speaking, Eucken insisted on the relative validity (time and place) of standard economic theories. In the same manner an ideal type remains “true,” economic theories are still logically correct in general. However, a theory is not always relevant to be mobilized depending on the given historical-individual conditions. Hence in Eucken’s view, an economic theory gains less in truth than in “actuality” (1940b, 234). For example, when a particular market approaches a situation of a monopolistic type, then the monopoly theory can be used.
2.3.2 Eucken’s Theory of Order: Ruptures and Continuities
Eucken’s article, “Science in Schmoller’s Style” (1940c), was part of a series of publications honoring the 100th anniversary of Schmoller’s birth (with important pieces by Carl Brinkmann and Arthur Spiethoff). However, in discussing Schmoller, Eucken was taking a stand regarding his contemporaries: the “youngest” exponents of the German Historical School. Eucken (1940b, 66) highlighted that, before him, some historical studies tried to resolve the “great antinomy.” More precisely, a whole section of German thought starting with Friedrich List followed a similar agenda. However, the attempt at a genuine articulation between history and theory was truly central for the youngest Historical School with the work of Max Weber, Werner Sombart, and Arthur Spiethoff. The growing influence of neo-Kantism on the development of the rational method in social sciences encouraged the process of zoning in on the problematic articulation between history and theory (Hédoin 2013, 44–46). For instance, Sombart (1929, 3) claimed that theory was “the prerequisite for any scientific study of history” in an article timely entitled “Economic Theory and Economic History.”
Sombart and Spiethoff aimed at bridging the gap between theory and history through the study of economic “stages” (Wirtschaftsstufen) and “styles” (Wirtschaftsstile).16 The latest generation of historicists engaged in a return to Marx in the specific theme of the development of capitalism, on the one hand, and the strengthening of analytical tools, on the other (Backhaus 1989, 602; Grimmer-Solem and Romani 1998, 272). Paradoxically, this search for a more theoretical orientation also resulted in the incorporation of a whole range of contemporary economic sciences and their marginalist accents, in particular, by Weber.17
Weber wanted to free his conceptual analysis from any metaphysics, in the sense that he aimed at reaching scientific objectivity without an underlying ethical or political agenda. Thus, Weber embodied the younger generation of the Historical School that explicitly distanced itself from what he called the “logical problems of historicism” (see Weber 1906), as evidenced differently by the works of Roscher, Knies, and by Schmoller himself. In this context, Eucken’s project appeared as an attempt to break with the historicism of Sombart and Spiethoff through a return—and a new use—of the Weberian ideal type.
Shedding light on Eucken’s discussion of Weber’s ideal type will help us grasp the scope of the economic theory models of ordoliberal thought in more depth. Eucken (1940b, 348) claimed that he was “not trying to develop a new concept . . . but simply to define precisely what Weber has treated in an obscure and incomplete way.” Weber’s approach, he pointed out, was not only “fragmentary (Torso), but also contains serious flaws” (1940b). In Eucken’s view, Weber mistook the ideal type for the real type and the different processes of abstraction to which they are subjected. For Eucken, the fundamental contrast between the two types was based on the purely logical nature of the ideal type. For instance, the isolated state (isolierte Staat) of Johann H. von Thünen embodied the ideal type par excellence in Eucken’s view (see Goldschmidt 2013, 133).18
Eucken’s harsh judgment regarding Weber can be partly explained by the latter’s great diversity of uses of the notion of ideal type (see Schweitzer 1970). Weber (1904) himself stressed the need to multiply the creation of concepts that remain historically determined, relating to certain problems or angles of analysis. It can also be explained by the fact that Eucken (1940b, 348, n. 66) considered that “Weber’s views on the construction of types are still influential today” as the remaining seminal reference in German social sciences. Thus, Eucken sometimes magnified the line and marks oppositions more clearly than they really are. For example, for Eucken, the ideal type would have no normative or ethical basis whatsoever. In truth, Weber (1904) knew very well that his ideal type has nothing to do with an ideal image in the sense of perfection to be achieved. Similarly, the construction of “rational utopias,” although it is “only one of the various possible figures of the ‘ideal type’ ” (Weber 1917a, 470), was, in fact, compatible with the use proposed by Eucken.
However, a fundamental opposition remains between Eucken’s and Weber’s perspectives. From Weber’s nominalist view, the ideal type was a pure heuristic principle that makes research advance, although it holds no ontological link with the real world (Goldschmidt 2013, 130). In Weber’s words (1904, 180), the ideal type “is not itself a ‘hypothesis’ but seeks to guide the elaboration of hypotheses.” It “has the character of a utopia arrived at by the conceptual accentuation of particular elements of reality.” For his part, Eucken explicitly rejected Weber’s nominalist approach:
Such utopias are opposed to the concrete reality. These ideal types (Idealtypen) are obtained from concrete reality and serve in turn to understand it. To this end, they are even totally essential. These ideal types constitute, therefore, a firm link between the empirical view of individual historical events and the general theoretical analysis necessary for understanding interrelationships. (Eucken 1940b, 173–174)
The ideal type was a “limit concept” (Grenzbegriff) for Weber (1904, 185). To Eucken, however, the ideal type was the basis of all the logical “conceptual models” (gedanklichen Modelle). Indeed, it worked as a foundational concept that has no heuristic but origin value. It is not utopian, but rather exact in an almost geometric sense. Thus, Eucken firmly linked the actual problem of power and interest within economic facts but arrived at the dispassionate and objective morphology of ideal types.
What role do these methodological refinements play in the relationship between ordoliberals and praxis? The following section shows that this difference in the conception of the ideal type between Weber and Eucken confirmed an antagonistic meaning of the relationship to values.
2.3.3 From a Positive “Economic Order” to the Normative “Order of the Economy”
By the beginning of the twentieth century, Weber, Sombart, and Spiethoff had tried to distance themselves from the normative-orientated works of their predecessors, which were, at first, critically labeled the “socialism of the lectern” (Kathedersozialismus). This new generation insisted on making a clear-cut distinction between scientific studies, on the one hand, and pragmatic-political conclusions and advice, on the other (Gioia 2000, 65; Nau 2000, 519; Schefold 1996, 190). Eucken followed up this trend toward greater scientific neutrality while formulating his own combination between theory and policy. He saw his Foundations as a rational and positive study of the real world. Removing opinions and ideologies within science was, therefore, a fundamental task to satisfy this effort. Nevertheless, Eucken—like other ordoliberals—saw his scientific work as a tool to transform society and embrace explicitly guiding values and normative ends. In short, one could say that Eucken aimed at an “interest-free” rather than a “value-free” economic science, which implied several departures from the Weberian approach.
The 1909 meeting of the Verein für Socialpolitik in Vienna marked the climax of another famous battle in German-speaking countries: the Werturteilsstreit, the battle over value judgment (see Ciaffa 1998; Hagemann 2001). Weber emphasized the need for a social science free from value judgments (Wertfrei). He famously separated the inevitable “relation to values” (Wertbeziehung) from “value judgments” (Werturteil) within scientific works. While the scientist is intrinsically bound to a specific relation to values (science is value-laden), he must avoid taking a stand on the desirability of agents’ goals and ultimate social ends.19 Weber defined this aspect, especially in his famous Munich conference, Science as a Vocation: “There is no science that is absolutely devoid of presuppositions, nor is there any science that can establish its own value once these presuppositions are denied” (Weber 1917b, 20).
Holding to this dichotomy, Weber refused to hierarchize values or seek universal beliefs, which led him to a form of radical relativism (Hédoin 2013, 123). For his part, Eucken (1940b, 264) stated that political economy was to be a “very sober science.” This statement is noteworthy: Eucken could have written “objective” (Objektivität); however, he preferred the term “sober” (nüchterne). In a sense, Eucken played the young Weber off against the older one (the Weber of Science as a Vocation) and especially against Weber’s followers. Before conceptualizing the notion of “objectivity” and “value freedom,” the young Weber spoke of the “pitiless sobriety (Nüchternheit) of judgment” (Hennis 1991). Thus, Weber outlined a scientific ethic rooted in the separation of the function of the scientist and that of the politician rather than a methodological claim regarding scientific objectivity.
In line with Weber, Eucken was convinced that scientific economic analysis had to be free from any political or ideological agenda. In the context of Eucken’s writing, it specifically implied opposing the invasion of the scientific realm by National Socialist dogma (see Nientiedt 2019a, 11–12). However, contrary to Weber, Eucken accepted the idea of universal values and, in particular, truth. Thus, Eucken paved the way for political recommendations based on what he considered permanent scientific knowledge. Much like his friend Röpke and other ordoliberals, Eucken maintained that Weber’s objectivity thesis was essentially beneficial against the old historicists as they often distorted scientific analysis with personal, political, or theological opinions. Taken to its ultimate expression, however, the objectivity thesis would lead to a deleterious cultural subjectivism, standing in the way of any scientifically based policy.20 Röpke provided a clear exposition of this argument:
It was against this indiscriminate use of value judgement that men like Max Weber raised their voice, but then the reaction went much further until it reached the opposite extreme of stigmatizing as “unscientific” to express any definite views on values, ends and “oughts.” (Röpke 1942a, 2–3)
This quotation comes from Röpke’s article “A Value Judgement on Value Judgements” (1942a), published in the Revue de la Faculté des Sciences Économiques d’Istanbul.21 In this text, Röpke (1942a, 10) aimed at shedding light on “what types of judgments are scientifically legitimate and on what basis.” Röpke endorsed Weber’s objectivity thesis as a necessary step in distancing the scientific outlook from the ideology of vested interest.22 Nevertheless, Röpke believed that the Weberian thesis was pushed by its supporters to its opposite extreme, leading to a positivist attitude of bringing the discussion about values and ultimate ends away from the legitimacy of science. Röpke (1942a, 5) denounced a certain confusion. The fact that “monopolistic ideologies” were convoking fundamental Western values such as “common interest,” “justice,” or “patriotism” did not necessarily imply that those values were ideological statements themselves (see also Eucken 1952, 17).
Worse than mere confusion, Röpke considered that anti-axiologism was based on a logical contradiction since the refusal of value judgments and the sacredness of the principle of truth would precisely imply a value judgment. He concluded that “science, on its very foundations, is based on value judgments” (1942a, 8). Röpke argued further that certain value judgments were even necessary to economics. He gave the following example in the medical field to illustrate his argument more clearly: “medicine begins with the value judgment that life is better than death and health better than disease” (1942a, 8). Röpke then took an example from the field of economics regarding the question of the optimum and the interpersonal comparisons of utility or variation in the price index. By doing this, he claimed that “terms like “inflation” or “deflation” can hardly be used without an implicit reference to a value judgment about what should be regarded as “normal” in the monetary sphere” (1942a, 9).
However, medicine is not a science, but an art. Did Röpke purposely used the example of medicine in this sense? Probably not. However, Röpke did embrace a conception of economic science as a form of societal medicine, as discussed in Chapter 4 of this book. For Röpke (1942a, 2), any “attempt at restating the problem of value judgments seems tantamount to struggling with the solution of the spiritual crisis of the Western world.” The reintroduction of value judgments into political economy was decisive from the moment that social and political prescriptions were the final objective of science. Thus, Röpke differed from Weber (1904) in that he sought in the scientific facts certain normative characteristics of universal value.
Röpke outlined a criterion to discern certain statements based on the universality of their acceptance to decide in which of the two subcategories—science or ideology—a statement should be placed. The use of certain values in scientific reflection was legitimate and can be seen as charged with a “degree of objectivity” when they would be “approved by all normal men” (Röpke 1942a, 5).23 The line that Röpke draws may seem loose or even artificial. However, in the last analysis, Röpke’s argument concerned a small group of elementary principles, such as truth, justice, peace, community (Wörsdörfer 2012a, 12). He saw these value as “anthropological constants which, after careful examination, we are bound to accept as facts” (Röpke 1942a, 14, emphasis in original).
Like Röpke, Eucken claimed that (meta-) value judgments were among the core conditions leading to a scientific approach to reality. If universal values like truth were “becoming relative concepts,” they would be “adapted readily to changing facts and opinions” by power groups that “are able to pursue their interests with ever-increasing success” (Böhm et al. 1936, 22). To decide whether any given claim made by interested individuals or groups was right, Eucken (1940b, 32) insisted that political economy needed a “strict criterion” and a “scientific method,” both working hand in hand. Eucken (1940b, 305) argued that a “strict adherence to the idea of truth” (i.e., the “strict criterion”) and the morphological apparatus to reconcile the historical and theoretical character of economic knowledge (i.e., the “scientific method”) were required to overcome the epistemological obstacle raised by opinions and ideologies. Eucken (1940b, 272) claimed that only a combination of both the theoretical and morphological apparatus would equip economists to investigate “the sources and effects of the different positions of economic power.”
In Chapter 3, we will see that the theoretical analysis of power operates at the macro level of the economic order (whether within centrally administrated or exchange economies) and at the micro level of market structures. It has been argued that the ordoliberal theoretical approach—and Eucken’s in particular—maintained an “ambiguous relationship to the normative” (Broyer 2007, 239). Another way of looking at it is as a necessary but complex articulation between the positive and normative levels. Both Eucken and Röpke were not concerned with strictly demarcating the line between positive and normative science. They instead aimed at outlining a source of mutual reinforcement that does not weaken the scientific nature of the economy but is, on the contrary, a necessary step toward policy prescriptions.
Eucken’s reflection on the core concept of “order” (Ordnung) can illustrate this continuum from a positive to a normative analysis. In Foundations, Eucken used two terms to conceptualize the economic system. Eucken spoke of “economic order” (Wirtschaftsordnung) to refer to a study of the pure abstract forms that can be taken by effective and, therefore, positive economic systems. At times, however, Eucken used the expression “order of the economy” (Ordnung der Wirtschaft) in the particular context of an economic order satisfying his normative view.24
For Eucken (1940a, 238), the “economic order” appeared as an “individual fact, positively given” to the scientific approach. Thus, the economic order can be defined as “the totality of the forms through which the running of the daily economic process—here and there, yesterday and today—took place in practice” (Eucken 1940a, 227). Nevertheless, this does not mean that any economic order would satisfactorily achieve economic efficiency and social justice. Indeed, many economic orders “can be inhuman” (1940a, 239), although science must study them as “forms of economic organisation.”25 However, Eucken did not end his reflection at this stage since “order” has yet another meaning: order also corresponds to “the nature of man . . . being based on the notion of moderation and balance” (1940a, 238). Thus, this “order of the economy,” or Ordo, is also Naturordnung—Eucken referred to François Quesnay and spoke of an “ordre de nature”—in the sense that it would be faithful to the nature of man. Ordo was, therefore, an imperative necessity according to which the economic system must be organized:
Today, this idea is being revived again, because of the urgent need to find a functional and humane order, and therefore to find the order of the economy, of society, law and State that are missing in our industrialized world. While versions of this order may change over the course of European history, the intention of the formation of this concept remains constant. (Eucken 1940a, 239)
However, the order of the economy can only be indicated after, and from, an overview of possible economic systems. Therefore, Eucken outlined a historical plurality of the types of organization and a theoretical plurality of possible orders. This multiplicity was embodied by a morphological “alphabet” of standard ideals that can be assembled differently while providing a variety of possible worlds (Eucken 1940b, 109). Thus, Eucken’s approach was not teleological or deterministic but historically—and comparatively—orientated because it envisaged a plurality of feasible systems (or forms). It also envisages a specific completion of the economic order according to institutional conditions in a broad sense—that is, according to the “geographical, intellectual, political, and social environment” (Eucken 1949, 228–229). Hence, ordoliberals envisaged the economic order in general and economic behavior in particular as “embedded in the cultural sphere” (Schefold 1995, 227), reflecting a specific form without altering its fundamental theoretical mechanisms. Although the political feature was still in its infancy in Foundations, the conclusions Eucken (1940b, 314) drew in his book were quite explicit: one must “consciously shape” (Gestaltung) the economic order if one wants to move toward the order of the economy.
2.4 Conclusion: Power, Methodologically Contemplated
One of the specificities of Eucken’s discourse was the way it articulated different traditions of the German philosophy of science. Eucken drew inspiration from Kant, Schopenhauer, and particularly from Husserl and Weber to underpin his thesis of the contamination of scientific knowledge by vested interests (see in particular Eucken 1940b, 321–322, n. 4). In Foundations, Eucken adopted a phenomenological outlook and tried to build a scientific investigation from everyday experience. However, Eucken was aware of the formidable challenge lying in the necessity to detach scientific production from any ideological hold. In addition to this epistemological obstacle, Eucken faced an ontological obstacle, what he termed the “great antinomy” between history and theory. To overcome this twofold—ontological and epistemological—obstacle, Eucken erected a morphological analysis of economic orders based on a typology of multiple ideal types. In doing so, Eucken’s epistemology did not endorse a firm separation between positive analysis and normative recommendations. On the contrary, he saw the progression from theoretical analysis to policy prescription as a continuum: the epistemological conception of competition obliges intervention to achieve it in practice.
Eucken’s epistemology aimed to penetrate effective reality, an objective that can only be achieved through theoretical analysis. However, Eucken rejected both historicism and positivism because they appeared permeable to pressure from interest groups. Based on these observations, Eucken seemed to have lost on both counts. On the one hand, Eucken tried to build typical ideals through a historical study and obtain essences that would lead to theoretical tools, which are themselves out of history. In this respect, Geoffrey Hodgson (2001, 133) claimed that Eucken’s search for perennial truths was undertaken at the expense of “a clear focus on the key problem of historical specificity” and thus contributed to a forgetfulness of history in economics tantamount to that of the neoclassical approach (see also Tribe 1995, chap. 8).
On the other hand, Eucken’s phenomenological approach cannot satisfy the critical rationalism in Karl Popper’s falsificationist version (see also Broyer 2007). Eucken remained rigorously foreign to the scientific conception of the world as formulated by the Vienna Circle, where only directly observable (and testable) facts are objects of science. In trying to transcribe philosophy into the language of science, empiricism and logical positivism were going down a completely opposite path to that of Eucken. Increasingly, neo-positivism became the central philosophical reference for social sciences from its birth in the interwar period to its affirmation in the second half of the twentieth century. Economics followed an analogous path, illustrated by contributions as diverse as those of Lionel Robbins, Milton Friedman, and Paul Samuelson (see Caldwell 1982). Nevertheless, as we will see in Chapter 3, by building on the microeconomic theory of the interwar period, especially Stackelberg’s, the ordoliberals cultivated points of compatibility, if not convergence, with the formal type of economics that would gradually prevail internationally in the aftermath of the Second World War.
1. Eucken did not use this terminology, even if he spoke in terms of “obstacle” (Hindernis). Here I freely draws on Gaston Bachelard’s definition of the “epistemological obstacle” as a difficulty “in the very act of knowing.” In fact, “an epistemological obstacle is embedded in the unquestioned knowledge” of the researcher—it is of the order of “instinct” (Bachelard 1938, 13–15). By contrast, this study terms the “ontological obstacle” as a difficulty “external” to the scientist, one that is based on “the complexity and transience of the phenomena.” On Eucken’s epistemological obstacle, see also Fèvre (2020).
2. The neo-Kantism movement was attempting to revive philosophy of science building on the Kantian intention of reconciling rationalism and empiricism. The term “neo-Kantism” designates not only authors of the Marburg School (such as Hermann Cohen, Paul Natorp, and Ernst Cassirer), but also Heinrich Rickert and Wilhelm Windelband. Eucken cited the last three in his Foundations.
3. The philosophical investigation in this chapter is limited to the comprehensive exposition of Eucken’s epistemology regarding the specific theme of power. Specifically, this is neither a systematic analysis of its sources nor a critical evaluation of its interpretations and uses. The secondary literature already offers significant contributions in this regard. In particular, Nils Goldschmidt (2002, 2013) as well as Rainer Klump and Manuel Wörsdörfer (2011) provided comprehensive accounts of the links between Husserl, Rudolf, and Eucken (see also Campagnolo 2003; Goldschmidt 2003; Herrmann-Pillath 1991, 1994; Miettinen 2016; Oksala 2016; Weisz 2001; Wörsdörfer 2011).
4. Wirklichkeit is consistently translated here as effective reality, to differentiate it from Realität, which means the level of factual experience (specific to historicism). Eucken, instead, aimed at the theoretical structuring principles of reality.
5. Behind the reference to Descartes, however, emerged the shadow of Husserl. Indeed, Husserl built on Descartes to shape his concept of suspension of judgment. Like Husserl’s Epochè, Eucken aimed to adopt a disinterested and impartial view of economic reality (Klump and Wörsdörfer 2011, 556).
6. To what extent Eucken’s methodology was actually satisfying the canons of Husserl’s phenomenology is beyond the scope of this study (see Miettinen 2016). The very possibility and desirability of a phenomenological analysis of the economy is, however, a subject of interest today (Düppe 2011).
7. In some passages, Hutchinson’s English translation of Eucken’s book is questionable. For example, he suppressed several direct quotations from Schopenhauer from the original text in his translation (compare Eucken 1940a, 11, to 1940b, 29). Moreover, he provided approximate and condensed translations, drawing the text toward a contingent interpretation of the passion–interest relationship, which seems more appropriate to the English political economy than to Eucken’s demonstration, for whom the expression of interest is both the source of economic activity and its essential problem (see Chapter 1).
8. Eucken had formulated the expression “Große Antinomie” in a short introductory text published two years before Foundations and titled Political Economy—What For? (Nationalökonomie—wozu?) (Eucken 1938b). The word “antinomy” recalled Kant’s vocabulary: a necessary contradictory statement faced by reason when it aims at grasping the world.
9. Eucken (1940b, 47–63) outlined four types of political economy based on the method used by economists: (1) classical, (2) conceptual or formal (Walras and Pareto), (3) dualist (Menger), and (4) empiricist (Historical Schools). Eucken also talked about modern theorists (such as Marshall, Pigou, and Keynes), admitting having trouble identifying where to put them.
10. Note that there is no real consensus on Schmoller’s program, one characterized by a lack of theoretical unification (Gioia 2000, 63; Peukert 2001, 96).
11. As Pierre Dockès (1999) noted, theoretical economists like Menger (and Walras) pushed power issues into the background of an accessory situation, outside the core of marginalist economic theory. Eucken (1940b, 17) rejected what he called the “senseless conceptual systems” erected by the general equilibrium paradigm. Although Walras and Eucken shared the opinion that state intervention in favor of a competitive order was a central element for a rational economic policy, their respective philosophies of science and history indicated very different ways of seeing the state’s role regarding the market economy (see Baranzini and Fèvre 2019).
12. The historicists’ attention to the institutional changes of capitalist economies led them to focus on the rise of new market structures alternative to pure competition (like cartels and trusts). In the first half of the twentieth century, these new structures were increasingly perceived as adjustment tools necessary for the stability of the economic cycle (Pribram 1986, 239; Schneider 1993, 367).
13. Eucken (1940c, 479) also deplored the fact that so many “efficient actions in history” were also “successful crimes.” Some of the arguments Eucken developed in his 1940 article tend toward a veiled criticism of the Nazi regime, which his unpublished diary further demonstrated (see Klinckowstroem 2000).
14. “Schmoller once said,” stressed Eucken (1940c, 478), “that it is the privilege of the strongest and best individual to win.” Schmoller’s outlook was clearly informed by Wilhelm Dilthey’s descriptive psychology and Herbert Spencer’s evolutionism (Nau 2000, 515). In fact, social Darwinism was widely accepted in Germany (Weikart 1993, 478).
15. Again, Eucken aimed to make political economy a science of essences in its own right, following Husserl’s idea that “apodictic truth and universal validity” (Oksala 2016, 7–8) could be achieved through invariance within the plurality of given historical experiences. However, according to Husserl, the essences of social science necessarily remain inaccurate (he called them morphologies) because it would be impossible to determine exactly all the characteristics of a social object, as in the case of a triangle (Moinat 2005, 44).
16. Eucken’s theory of development provided a critical account of competing German theories (see Goldschmidt 2016; Schefold 1995).
17. Weber endorsed Menger’s marginalist value theory (Campagnolo 2005, 799) and was, for instance, extremely critical of the use of psychological (or biological) factors to explain individuals’ social and economic behavior (Maas 2009, 507).
18. The German economist Thünen (1783–1850) is considered one of the forerunners of marginalist theory, with important contributions to the field of economic geography. For an overview of his work, see Hans Frambach (2012).
19. The objectivity thesis received close examination in the literature and is still presented as a cornerstone of scientific methodology in social sciences, particularly in economics (Hammersley 2017; Mongin 2006; Reiss 2014).
20. As Stefan Kolev (2018b, 13) noted, both Eucken and Röpke misinterpreted Weber’s claim as a restraint from practical engagement, whereas Weber was actively involved in “the shaping of the economic, political, legal, and academic reality” of his time.
21. The birth of this journal in October 1939 was linked to the arrival of German professors (like Röpke and Rüstow) who were forced to leave Nazi Germany and find refuge in Atatürk’s Turkey (see Ege and Hagemann 2012, 96–65; Masala and Kama 2018).
22. Although there was no direct mention of Eucken, Röpke did pick his reference within the same intellectual horizon (Kant, Descartes, Weber, and Rickert in particular). For detailed discussions of Röpke’s article, see Samuel Gregg (2015) and Kevin Christ (2018).
23. In the same years, Gunnar Myrdal came to a similar conclusion, ensuring that the choice of certain values to guide a scientific study did not question its objectivity as long as they “reflected the values shared by a significant part of the society under study, rather than those of the economist” (Cherrier 2009, 34, emphasis in original).
24. The lawyer Franz Böhm used the same kind of dichotomy between positive (Seinordnung) and normative (Sollenordnung), though with a different terminology than Eucken’s (see Mongouachon 2012, 205).
25. Here I follow the English translation by Lutz (1940a, 587).