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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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―order‖ instead of Sombart‘s system, because an economic system is a special case of orders that rely on contrasting principles and serve the purpose of selecting the appropriate set of theoretical doctrines as opposed to a comparative analysis of historical epochs in Sombart‘s sense.623 In contrast, ‗Capitalism‘ as a form of economic system provides in Eucken‘s view no unambiguous definition of an economy‘s structure and thus fails to describe its order. Describing an economy with this term is for Eucken hypostatizing and replaces the need to scrutinize the variations of real economic systems.624 To the contrary, ―‘Capitalism‘ slurs over this variety‖.625 For Eucken, to analyze the essence of an economy, that is, to reflect Capitalism and its spheres of production, distribution and consumption, means speculation and distracts from the unity of the real economy which is not separated into different spheres.626 He also dismisses the notion of ‚stages‗ of development as an idea of the 19th century on the ground that it implies that every country passes through the same sequence of phases and that connects higher level of development with every stage.627 Also, the further development in this line of research, the economic style, is criticized by him (in the course of his work he uses both terms synonymously). Although it describes less a sequence of different stages of a system but rather a parallel existence of different systems, it is for him still concerned with development and also merely with what he calls cross-sections of economic history, which neglects the fundamental structure of (economic) orders.628 Instead, ‗the great antinomy‘ of economic analysis, namely the necessity to combine general-theoretical models that need a rational, analytical approach with the historical aspects of economics that require intuition and empathy, has to be overcome.629 He denies that economic styles with their notion of finding time-dependent theories, valid only for certain epochs and cultures, and thus, an ‗intuitive theory‘ in the sense of Salin, enables to fully understand economic processes and hence, economic reality. He demands that to explain real economic processes, it is not enough only to understand an economy but that it has to be possible to construct a more general theory out of the findings (see below).

He prefers to use the term ‗order‘ instead of ‗style‘, because an economic order is an universal prerequisite for economic activity and provides the framework for economic Kloten, 1971, p. 449.

Eucken, 1947, p. 92, 101ff.

Eucken, 1947, quote taken from translation: Eucken, 1992, p. 98.

Eucken, 1947, p. 14f.

Eucken, 1947, p. 64. For a description of the theory of stages, please refer to chapter 4.1.

Eucken, 1947, p. 65f., 95.

Eucken, 1947, p. 36f.

processes. Eucken goes even as far as claiming that without order economic transactions are impossible. As described above, an order for Eucken can take on two forms: it is either centrally planned or it is a market economy, based on a competitive order (differentiated from a laissez-faire state) (‗Verkehrswirtschaft‘).630 Eucken proclaims the universality of economic principles and thus the general applicability of the neoclassical theory, combined with the denial of the significance of a specific mind set for the economic activity of an epoch or a culture. For him, a theory is always right, but not always timely. He also rejects the idea of the differentiation between the ―satisfaction of needs‖ and the ―principle of acquisition‖ which is central to Sombart‘s work.631 Even though the economic order concept claims that the economy is embedded in culture, both are still treated as separate spheres. It states that cultural factors have a defining influence on specific economic systems, but as preferences are said to be given exogenously, embeddedness has no further meaning for the analysis and is not examined in greater depth.632 Consequently, only abstract theorems are able to describe the individuality of economic reality. More than that, Eucken even questions the existence of ―competing theories for alternative forms of economy; [he] believed the general equilibrium theory was ‗always valid‘‖.633 In identifying the economic order first, it is then possible to apply the right set of theories that has been constructed for each economic order (therefore theories in Eucken‘s sense are not time-bound, but order-bound).634 Economic orders represent a sober and prosaic classification of historical economic structures, which is used as the basis of not a historical but current comparison of systems.635 In Eucken‘s view, the economic style-approach neglects the details of reality due to its ‗macro‘ perspective that is only able to construct ‗types‘. Instead, the economic orderapproach for him emphasizes small elements from a more ‗micro‘, individual perspective and thus represents the real economy, thereby identifying (in the sense of recognizing and understanding, instead of merely ‗constructing‘) ideal types, thereby eliminating the ‗antinomy‘.636 In an earlier chapter, he dismisses the creation of ideal types by the economic styles (and stages) approach as merely defining arbitrary real types. He justifies his own construction of ideal types in differently defining them as a ‗pure‘ morphological system, which is more than just representing cross-sections of economic reality. Also, his ideal Eucken, 1947, p. 82, 127.

Spiethoff, 1948, p. 588, Schefold, 1995, p. 226f., Schefold, 1994a, p. 94.

Schefold, 1995, p. 227.

Schefold, 1995, p. 247.

Eucken, 1947, p. 64ff., 104f., 269, 275, Gottschalk and Broyer, 2004, p. 48.

Schefold, 1994a, p. 93f.

Eucken, 1947, p. 253f., 262f., 364f.

types are the result of a different form of abstracting process, namely the ―isolating abstraction [or] abstraction of specially significant characteristics‖. 637 They are constructed from a ―delimited class of configurations for describing the ideal and typical basic elements of the economic order‖, which represent the aggregation of real phenomena abstracted from reality, which are used as a model to characterize real economies. Ideal-types do not embody perfection, and they only exist in reality, understood as real types, as amalgamated forms. They function as connection between historical narrative and deductive analysis of economic processes.638 In contrast, generalizing abstraction, as used by the economic style-approach, constructs cross-sections and in Eucken‘s view therefore distances itself from reality and details.639 Real types of economies, hence ―spatially and temporally localized economic system[s]‖, consist thus always of layers of different ideal types earlier defined.640 Economic orders are thus ideal- not real-types for Eucken, although he emphasizes only to perpetuate the definition of the term by Max Weber in characterizing it more exactly and exhaustive.641 However, Eucken‘s concept is a static concept, not a dynamic theory and it fails to describe the change of economic systems. He defines stabile and unstable states of economic systems which induce the institutional constellation of an order to change towards a stable variant, but omits an explanation for this process.642 Eucken‘s dichotomic concept of economic orders has been expanded and refined by authors like Norbert Kloten and Michael Kröll, who categorize ideal types in Eucken‘s sense and in a second step describe various real types of existing economies, but also these more recent approaches fail to describe institutional change and hence, transformation.643 Eucken and the theory of orders paved the way for the modern comparative analysis of economic systems.644 In so far it is not far away from the Varieties of Capitalism-approach, except that these types are defined according to a different set of characteristics.

Eucken, 1947,p. 68f., 366. Quote taken from Eucken, 1992, p. 326 Schefold, 1995, p. 227, Gottschalk and Broyer, 2004, p. 48.

Eucken, 1947, p. 253f., 366.

Schefold, 1995, p. 227, Gottschalk and Broyer, 2004, p. 48.

Eucken, 1947, Note 66, p. 418ff.

Eucken, 1947, p. 288f., Gottschalk and Broyer, 2004, p. 54.

Gottschalk and Broyer, 2004, p. 60, for details on the concepts of Norbert Kloten and Michael Kröll please see Schachtschabel, 1971a.

Gottschalk and Broyer, 2004, p. 51.

4.5.3. The economic style approach In contrast to the more functional notion of the economic system (or economic order in Eucken‘s terms) with its two antipodes of plan and market, the concept of the economic style is able to distinguish economies in a more differentiated way, including its institutions and value systems.645 The term has been coined at the end of the 19th century and stems from the notion of style in art history, referring to works of the same period. 646 It assumes that in every epoch a certain spirit prevails and complements the existing economic organization, thus culture is endogenized into this theoretical approach. It has therefore a fundamentally different approach as system analysis in the sense that ―system analysis involves the reconstruction of functional connections by drawing on formal models – in the context of a given order; the style concept on the other hand aims to give the research a complementary structure based on understanding and interpretation (hermeneutics)‖.647 The latter concept, namely the intuitive theory [anschauliche Theorie, sometimes also translated as ‗concrete theory‘] has been introduced by Edgar Salin in his festschrift for Werner Sombart in contrast to ―rational theory‖. Both concepts are theories in the sense that isolation and abstraction are the fundamental guideline of both methods. Therefore, they are not antipodes, but rather intuitive theory has also to include rational theory, it is hence ―also-rational‖ instead of ―only-rational‖. Rational theory only concentrates on the functional causal relations of a subsection of the economy, namely the exchange economy, and is associated with the notion of an economic system.648 In contrast to this ‗pure‘ theory, which simplifies phenomena and uses deduction to reach conclusions, intuitive theory seeks to understand an economic as a whole and deconstructs the various layers of the real economy to reveal the ideal type within, using inductive logic. Intuitive theory provides mainly ―sense cognition, cognition of totality, unity, for and essence‖.649 Its goal is to draw an image of reality650, but it abstracts from historical singularities. It is a phenomenological description that aims towards greater insight and a revelation of the changing of economic structures, trying to understand the embeddedness of economic institutions in the cultural background, not to forecast future developments. Intuitive theory means ethical economics and is associated with the concept of economic styles.651 Meyer-Abich and Schefold, 1981, p. 112.

Müller-Armack, 1944, p. 7.

Schefold, 1995, p. 228.

Salin, 1967, p. 181f., my translation.

Harada, 1997, p. 379.

Harada, 1997 calls this „a theoretical transcribed picture of reality‖ [Abbild der Wirklichkeit], p. 384.

Spiethoff, 1948p. 570f., 594, 643ff., Schefold, 1994a, p. 78, Schefold, 1995, p. 236ff., Gottschalk and Broyer, 2004, p. 36f.

In connection to this theory, Arthur Spiethoff characterized an economic style with the following five attributes: economic spirit, natural endowment and technology, economic and social constitution, economic dynamism. Economic spirit comprises the moral attitudes, in particular towards economic activity, innovation and technology; natural endowment and technology includes population growth and density, the degree of the division of labor as well as available technology, hence material factors; social constitution means the solidarity and coherence of a society, be it blood, enforcement or contract as well as the degree of social division of labor, whereas the economic constitution incorporates property rights (free, state, collective), economic institutions (enterprises, state price formation, work relations, principle of acquisition versus satisfaction of needs) and the distribution mechanism. With this concept, Spiethoff followed the intentions of Sombart but worked out the concept in greater detail, although his structure is partly congruent with Sombart‘s notion of economic system, in for example using the term ―economic spirit‖ instead of Sombart‘s ―economic mentality‖. He goes beyond Sombart in describing as the fifth characteristic the dynamics of an economy with the subcategories ‗constant‘ and ‗progressive‘ economy (and creates his theory of crises out of that thought).652 In contrast to the concept of economic stages – and also contrasting Eucken‘s assessment – the notion of economic style uses more than one characteristic to describe a style.

Here it also goes beyond Sombart in claiming that the catalogue of characteristics has to be open and able to expand. The stages theory follows the development of a single attribute over time and therefore creates longitudinal sections in observing the economy. It implies that every stage is connected to a higher state of material and moral development. In contrast, the style concept is going beyond this notion and builds a cross-section of economic life, thereby using a theoretical framework and defining the characteristics by the inductive logic of description, observation of specific phenomena, resulting in a construction of conceptions and extraction of regularities. This means a considerable progress in comparison to the stage theory. In a next step, the reality is scrutinized and the attributes defined before are structured to reveal a concrete style, which represents an image of reality. The idealtype is always the starting point of this process, the image of reality its end. Economic phenomena within the style are thus explained deductively.653 Spiethoff claims, that the attention is not turned towards the sequence of stages but towards their interrelation and context as well as the development from one stage to the other and thus includes a dynamic Spiethoff, 1971, p. 146ff., Gottschalk and Broyer, 2004, p. 41.

Gottschalk and Broyer, 2004, p. 43f. and Spiethoff, 1948, p. 577, 641ff.

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