Rationalisierung and Capitalism – Roscher, Menger,
Weber
In his first major work on the methodology of the social
sciences published in 1902, Max Weber addresses “the logical problems of
political economy” intrinsic in the work of his great predecessors of the
German Historical School of Economics, Wilhelm Roscher and Karl Knies, and
joins the controversy over the “methodological debate” [Methodenstreit]
that his two former masters had engaged with another of their pupils, Carl
Menger, over the scientific status or less of Political Economy as against
History as the foundation of the study of the economic activity of human
societies. Ostensibly, the Methodenstreit revolved around the evident
apory that arises whenever we try to extract “laws” or scientific rules from
historical events such as, for instance, the social production of goods and
services – what is broadly known as economics. Like all objects of human
knowledge, our generalisations about them can never exactly reproduce their
objects: as Joan Robinson famously put it, a one-to-one map of reality does not
exist – and if it did, it would be of no use. Weber certainly accepted the
relevance of this Fichtean hiatus irrationalis, that is, of the human
impossibility to reconcile reason and reality. But, against Roscher and Knies,
and in favour of Carl Menger and his Neoclassical theory of marginal utility,
he insisted that the Historical Method could not, as an epistemological
orientation, yield the kind of approximative scientific Resultate needed
for the guidance of social policy, in economics as in many other spheres of
social life.
The difficulty with Weber’s reasoning is that the
prescription or setting of the methods required for the determination of “laws,
rules and regularities” regarding social activity require the dialectical,
discursive consensus of those elements of society affected by the drawing of
those very “laws, rules and regularities”! Differently put, given that the
object of economic science or of political economy aiming to be scientific is
to maximise the welfare of society, it
stands to reason that any and every scientific claim on their behalf
must be scientifically linked to that
welfare as a dependent variable of those scientifically-guided principles. The
difficulty arises from the obvious reality that welfare itself cannot be
determined scientifically or empirically or quantitatively for the unassailable
reason that the definition of welfare
depends entirely on social and political standards and values and needs
amenable only to discursive or consensual decisions on the part of the society
concerned – and most certainly not on scientifically objective methods
and measures. This is why Roscher refers to the “new and distinct science of
Political Economy” as dependent on an “Idealistic Method” – one founded
on axiomatic mathematical calculations incompatible with the empirical
sociological fact-finding of the Historical Method. What is “idealistic”, as
Roscher labels it, about the “scientific method” of economics and of political
economy is precisely the fact that their attempts to make welfare
mathematically and quantitatively “calculable” can only end up distorting the
very notion of welfare – economic and otherwise! The theoretical crux of what
came to be known as the Methodenstreit between the German Historical
School headed by Roscher and the budding science of Neoclassical Economics
based on the theory of marginal utility initiated by his devout student Carl
Menger is all here. Of course, Roscher does not explicitly challenge the
scientificity of “the Idealistic Method” in terms of the untenability of any
claim to the measurability or calculability of welfare. Nor does he offer any
proper critique of political economy and its extravagant claims to be able to
quantify and calculate welfare whether in terms of causality (as Menger
contended initially)or more restrainedly in terms of means and ends (as most
other Neoclassical economists established thereafter).
Nevertheless, it is evident that what for Roscher is
“idealistic” about political economy (Classical or Neoclassical) is precisely
its “formalism”, the incompatibility of the methodical quantitative monetary
calculation of welfare and the intrinsically and ineluctably political
character of welfare itself. One of two things: either welfare, which is
the sole defining object and content (the “Wesen und Inhalt”, as
Schumpeter categorised it in his homonymous first work) of economics, is quantifiable
– and in that case economics turns into engineering, and is therefore no
longer “a distinct science”, losing thus its very raison d’etre; or
else it is not so quantifiable because it depends on social values and
goals – and in that case economics ceases to be a science and turns into a
political activity, it turns into policy. It is signally this formal
“contemplative” – hence “idealistic” – character of political economy that
Roscher attacks quite justifiably. Economics as the study of production of
goods and services for the satisfaction of social needs can be quantified only
on condition that the weights and tools and methods of such quantification
or calculation as well as the “welfare” intended to be their objective are
politically agreed upon by the members of society. Yet this is precisely
what the “new, distinct science of Political Economy” emphatically denies! For
its exponents and promotors, Neoclassical Political Economy, to the extent that
it relates to the maximisation of social welfare, is a science of exchange
(General Equilibrium) based on universal human needs and wants – marginal
utility – and a science of choice based on the optimal allocation of
scarce resources, irrespective of other extraneous considerations such as
cultural and moral values that are wholly irrelevant to their satisfaction.
Both Roscher’s German Historical School and its Neoclassical
counterpart headed by Menger were obliquely aware of the conflicting political
goals and interests upon which their opposing theories were founded. Yet
neither theoretician had sufficient critical insight to recognize the practical
and political origins of their diatribe.
Here is Roscher:
The isolation
of the theory of Political Economy is peculiar to our own day. In more remote
times, we find this study confounded with the other moral sciences, of which it
was an integral part. When the genius of Adam Smith gave it its distinct
character, he did not desire to separate it from those branches of knowledge
without which it could only remain a bleached plant from the absence of the
sunlight of ethics…
We may allow
those who make Political Economy simply a piece of arithmetic to ignore these
retrospective studies and their importance; for mathematics has little to do
with history. But it is otherwise with the life of nations. These would
discover whence they come, in order to learn whither they are tending. (W.
Roscher, “Preliminary Essay on the Historical Method”, PPE, p.25)
For Roscher, political economy cannot theorise the economic
activity of human societies by reducing the complex social relations involved
to “simply a piece of arithmetic”, that is, to abstract, formal mathematical
rules – to formulae - that have no substantive content in terms of the needs
and wants of those societies – needs and wants that cannot be reduced to
quantifiable entities and variables because they contain “the sunlight of
ethics” without which those social relations – yes, even the “social relations
of production” – have and make very little sense. Even the founder of Political
Economy, Adam Smith, Roscher insists, had warned that the market equilibrium
schemata he had theorised in The Wealth of Nations had to be richly
supplemented by his adroit qualifications in The Theory of Moral Sentiments.
Again, what Roscher fails to see here is that, in reality if not in intention, Smith’s
general market equilibrium schemata traced in The Wealth did not so much
describe human society but rather they prescribed the
institutional shape and order that a society had to follow if it wished to
become a capitalist market society. The mathematical or “arithmetic” scheme of
Classical Political Economy was ab initio a “project”, a prescription, a
guide, for the establishment of a capitalist marketplace society capable of
being reduced to measurable entities, not a photograph or portrait of an eternal,
immutable social reality. Regardless of whether or not Political Economy
claimed to describe an invariant human nature, in reality its “laws of
economics” reflected simply the power and violence of the bourgeoisie in
reducing living labour to dead abstract, and therefore measurable, labour.
For his part, and from the opposing viewpoint of Political
Economy, Menger can detect the ideological bases of Roscher’s Historical
Method, in the guise of its predecessor in Savigny’s Historical School of Law;
but he fails to observe the far more ideological refoundation of social
structures by the capitalist bourgeoisie supplanting the old aristocratic
absolutist feudal social order and mode of production. Here is Menger:
It [Savigny’s
Historical School of Law] concluded that the desire for a reform of social and
political conditions aroused in all Europe by the French Revolution really
meant a failure to
INTRODUCTION
[9]
recognize the
nature of law, state and society and their "organic origin." It
concluded that the "subconscious wisdom" which is manifested in the
political institutions which come about organically stands high above
meddlesome human wisdom. It concluded that the pioneers of reform ideas
accordingly would do less well to trust their own insight and energy than to
leave the re-shaping of society to the "historical process of
development." And it espoused other such conservative basic principles highly
useful to the ruling interests 20 (Investigations, p.91)
Menger is right to indict the vested interests of the German
Junker or landed aristocracy behind the promotion of “organic”, autochthonous
economic practices and social values championed by the various German
Historical Schools. At the same time, however, he fails to remove the
ideological veil of his own “science of economics”, the theory of marginal
utility, which only served to hide the project of domination of the bourgeoisie
over all of society.
Of course, by failing to address the epochal implications of
the violent generalisation of commodity production and exchange operated by the
rapid and seemingly unstoppable spread of capitalist industry and enterprise,
Roscher’s objection to the scientific claims of Neoclassical Theory on behalf
of his “Historical Method” were destined to be defeated by the insurgent
“Idealistic Method” espoused and developed by the capitalist bourgeoisie and
its ideologues. The Methodenstreit entirely elides this crucial point:
it deflects the essential political conflict between the two standpoints
into a sterile debate on the correct “scientific method” to be applied to
capitalist industry and enterprise. Roscher and his German Historical School
never perceived that however invalid the claims of Neoclassical Theory were
from a proper historical and anthropological scientific standpoint, it would be
the very violent political imposition of a mode of production and social system
founded on the measurement and “calculability” of human living labour in
monetary terms that would seal the imminent triumph of both capitalist industry
and of its ideological rationalisation in Neoclassical Political Economy
espoused by Carl Menger and the Austrian School that he founded. Tersely put,
it may be said that the rationalisation of capitalism – its scientistic
justification – had to pass through the Rationalisierung of human living
labour by means of the violent imposition of the “labour market” – the
transmutation of living labour into dead abstract labour on which the “exact
calculation”(Weber’s “exakte Kalkulation”) of monetary profit occurs in capitalist
industry.