Page 68 - The Making of the German Post-war Economy

THE FREIBURG SCHOOL 41

studies of Werner Sombart and Max Weber. Sombart’s Modern Capitalism,
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is an overview of the historical path of European economic life. It deals in
great detail with the phenomena, which created the unique history of
capitalism, its cultural, psychological, religious and technical background.
Furthermore, Weber’s immense sociological and historical studies linked
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the world religions with their economic manifestations. His basic tenet
that in the social sciences understanding of economic relations requires
the understanding of all cultural contents and their meaning was applied to
a vast conspectus of historical facts from which he abstracted his famous
ideal type. These thoughts led Eucken to derive from the various
economic models the two main types: the Centrally Directed Command
Economy and the Free Market Economy. While the members of the
Freiburg School placed themselves firmly in the tradition of classical
liberalism, they distanced themselves from a laissez-faire liberalism that
failed to appreciate the essential positive, or functional, role government
has to play in creating and maintaining an appropriate framework of rules
and institutions which allows market competition to work effectively.
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Equally, they rejected the Controlled or Command Economy as it limited
the freedom of the individual. Thus, they addressed the question of how
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to prevent economic freedom from being destroyed by economic
concentration, such as cartels and monopolies. In contrast to the AGEvB,
the Freiburg School advocated unadulterated competition as prime means
to counter the accumulation of market power, as well as to achieve
freedom and social justice. In their constitutional approach to market
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competition, the ordo-liberals emphasised that the competitive order must
be seen as a public good in the sense that the constitutional framework
induces self-interested individuals while pursuing their own interest to do
what is in the public good. It was in the common interest of all citizens
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that legislature and government act in accordance with their
constitutionally determined mandate to create, preserve and manage the
regulatory framework that guarantees the functioning of the market. As
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the ordo-liberal competitive order depended on a person’s interest both in
enjoying the benefits of a public good and in contributing to its
production, the active individual was at the centre of the economic
concept. This required an informed public and thus their incorporation in
economic policy.
Although the conceptual framework was presented to academia and the
public, the Freiburg School’s economic model remained virtually
nameless, and so it ran the risk of being widely perceived as abstract and
intangible; furthermore, conceptual complexity impaired its
communication. Eucken recognised this deficiency but found fault only in
the absence of a ruling class which understood the competitive order not