Economic Systems and Economic History

Economic History Association
Economic Systems and Economic History

Author(s): Arthur Schweitzer
Source: The Journal of Economic History, Vol. 25, No. 4 (Dec., 1965), pp. 660-679
Published by: Cambridge University Press on behalf of the Economic History Association
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Economic Systems and Economic History
W HAT is the relationshipof economichistory to the study of
comparative economic systems? Perhaps the major contri-
bution to thought on this subject has been made by Walter Eucken,l
whose ideas may be taken as the starting point for our discussion.
Eucken sets forth four propositions on the nature of economic
systems. First, economic actors are always operating within some
specific economic system. All economists, whatever their specialty,
should keep the elements of systems in mind when they tackle their
particular problems. Second, of the three branches of economic his-
tory, economic theory, and the study of systems, each deals with
a different body of materials, but the basic theoretical concepts
should permeate both history and comparative systems. Third, as
a distinct discipline, economic systems consist of two different com-
ponents, one being historical and the other theoretical in nature.
In each case, there are certain elements peculiar to systems that
cannot be treated historically or theoretically but that call for a
special systems' analysis. Fourth, the antinomy between received
theory and history can be overcome only if the study of economic
systems is developed in such a way as to fill the gap between the
two economic fields.
In tentatively accepting these propositions as correct, I shall be
concerned here only with the linkage between economic history
and the study of economic systems. Although Eucken builds his
specific interpretation of theory into the other two economic spe-
cialties, my assignment calls for a critical examination of the linkage
between history and systems.2 I shall seek answers primarily to two
questions. What are the specific roles assigned to history and to
systems in economics? And what are the particular forms of cooper-
ation that could or should prevail between these two economic
disciplines?
I
In the eighteenth and nineteenth centuries, philosophers and
historians developed two distinctly different meanings of history.
1 The Foundation of Economics: History and Theory in the Analysis of Economic
Reality (Chicago: University of Chicago Press, 1951).
2 Within economic systems, emphasis has been placed more upon the relation-
ship between theory and systems. In concentrating here upon the empirical side of
systems, we are able to bring to the fore some neglected issues in contemporary
discussions on systems.
660

Economic Systems and History 661
The thinkers of the Enlightenment tried to derive generalizations
from the great variety of appearances in and between particular
periods. In contrast, leaders of historicism dwelled upon the unique
characteristics of events in time and place, and at the most saw
them united into distinctly different features of various epochs.
The thinkers of the past thus bequeath to us a cleavage within
history which was intensified by the disputes about either the gen-
eralizing or the individualizing methods in historical investigations.
The dilemma of two mutually exclusive meanings of empirical facts,
Eucken suggested, has to be met by recognizing that each school
of thought emphasizes different aspects of the same historical
reality.3 Individual facts and general facts, derived from repetition,
are usually so intertwined in everyday experience that both can be
readily observed and should be given their proper place in the
written history.
Indirectly, Eucken suggests two guides that should be followed
in ascertaining the relevant historical record. There is first the re-
quirement of historical concreteness. The historical record has to
contain the "everyday economic routine" of past and present eco-
nomic life. One has to investigate the actual circumstances of con-
crete situations and present the individual as well as the general
facts in their full context. Equally important is the second require-
ment of universal comprehensiveness. It has to be shown in the
record, for instance, how the everyday economic life "depends upon
the nature of the country, the race, the culture, the beliefs of the
inhabitants, on the political institutions and the structure of the
state, in fact on the entire historical environment." There should
be no purely economic record, isolated from the noneconomic facts
in the historical situation, since the economic events constitute a
part of the process of universal history.
In accepting and applying these two requirements, the economic
historian has two advantages. Immersed in the documents and other
historical sources, historians can give an interpersonal statement of
the relevant facts in a situation and can agree on the existence as
well as the relative significance of the facts. The objectivity of such
historical knowledge makes it possible for the historian to be of
service to other economists who are given an opportunity to utilize
the agreed historical record for the specific purposes of their spe-
3 Cf. Walter Eucken, "Wissenschaft im Stile Schmollers," Weltwirtschaftliches

Archiv, LXIV (1940), pp. 469-506 and idem, "Die Ueberwindung des Historismus,"
Schmollers Jahrbuch, LXII (1938), pp. 63-86.

662 Arthur Schweitzer
cialities. Equally important is the synthesis of the historian in which
he supplies an explanation for the events described in the historical
record. Such a synthesis, for instance, has to tell us "why Germany
today has a particular population of particular abilities and levels
of education, or why a certain kind of social and legal system
exists in Germany." Implicitly, historical explanation proceeds in
terms of the antecedent facts. The origin of the particular facts pro-
vides us with the criterion for explaining not only what but also
why certain events happened. Historical explanation thus differs
significantly from theoretical explanation. The latter seeks to estab-
lish certain laws that then become means of explanation of indi-
vidual facts or of groups of facts. In historical explanation, how-
ever, the antecedent facts constitute the cause for the subsequent
fact. Explanation by origin is effective only if and when the se-
quence of events is clearly visible and explainable by the time
sequence. By the same token, historical explanation and prediction
are not necessarily identical: mass unemployment in the great de-
pression was the major cause for the subsequent social security sys-
tem, while the prediction of recurrent future unemployment was
indispensable for legalizing definite collection and payment sched-
ules for the insured.
In principle, written history supplies us with three different kinds
of knowledge. The biographical narrative and the historical syn-
thesis of nonbiographical events provide knowledge about particu-
lar times and places. There is also the knowledge about the central
characteristics of economic systems which is derived from open-
ended historical records, and which expresses itself in an overall
interdependence of all the facts with each other. How are these
modes of interdependence historically identified and how is general
knowledge about these specific elements of systems established?
To this question we receive two distinctly different answers
from Eucken. In his critique of Schmoller, there is an attempt to
show that the relevant facts of interdependence cannot be derived
from either historical records or from economic stages. Historical
records are limited to particular actions in a given time and place
and can thus not tell us how the various sets of recorded facts are
interrelated. In addition, the complex facts occurring in history can-
not be presented in terms of stages or styles, since these would in-
variably lead to a distortion of the multiplicity of historical events.
It is only when one raises the question of economic orders that one

faces the problemsof interdependenceof the relevant facts within
such an order.
This merely negative answer is accompaniedby the advice that
the historianmust reduce all mass phenomenato individual facts,
so that strictly "societalfacts" cannot be included in a historical
record.4Anyone familiarwith the works of the greatest economic
historians,however,knows that they have tackled the global issues.
They were able to do this because they derivedfrom their historical
records particularframeworksthat permitted them to assess the
significanceof mass phenomena.The most widely used frames of
historicalreferenceare of course the ones of the industry,the city,
the economic region, or the national economy. Others extended
their frameworkto feudalism (Marc Bloch), to capitalism (Werner
Sombart) or to business cycles (Arthur Spiethoff).5Rather than
examining critically how these historians arrived at their frame-
works, Eucken permitted his justified critique of unilinear stages
to fulminateinto a general condemnationof all historicallyderived
frames of reference.
In suggesting a positive answer to the search for the elements
of systems,Eucken advancestwo argumentsfor a procedureof get-
ting at the facts of interdependence.Since various sets of complex
facts are usually so intertwinedthat they do not suggest their par-
ticular pattern of interrelationship,it becomes necessary to distill
from chronologicalhistory the central facts of systems. This is to
be done by transformingthe historicalfacts into ideal types. "These
contain not only the formal elements out of which all actual eco-
nomic systems are built up everywhere and at all times, but the
ideal types represent simple precisely definable sets of conditions,
and the interrelationswithin each set can be graspedand analysed"
(pp. 173-74). It is hoped that the ideal-typicalfacts constitute the
pure featuresof observableeconomicsystems.
By means of the typological method, historical facts are trans-
lated into economic facts. The formermerely happen sequentially
together, while the latter are connected causally.The causal nexus
is thus not onlv employed as the distinguishing criterion of the
-4 For the reasons why this is an untenable position see Maurice Mandelbaum,
"Societal Facts," British Journal of Sociology, VI, (1955), pp. 305-17.
5 Spiethoff's work is of special methodological interest since he succeeded in in-
tegrating the records of individual cycles into one typical pattern of cycles. See
Arthur Schweitzer, "Spiethoff'sTheory of the Business Cycle," University of Wyom-
ing Publications, VIII (Laramie: University of Wyoming, 1940), pp. 1-30.

economic characterof facts but is also the justificationfor the use
of the typological method. The latter has to mold the facts either
into the economic data, embodying the essential conditions of all
economies, or into the pure features of economic systems, called
economic morphology.
The comparativeeconomistis thus urged to study economic his-
tory so as to distill from its record the economic conditionsfor all
economies,and to ascertainthe pure features of economic systems.
It is our task to examine the procedure of distillation and assess
its result for the cooperationbeween economichistoryand systems.
II
There is great emphasisin Eucken upon the notion that only the
economic theorist is qualified to select the data. The implicit as-
sumption is that it is empirically possible to draw a sharp line
between the economic and the noneconomic data. This division
into the two categoriesof data has the unavoidableeffect of sepa-
rating the actual economy from the pure economy of theory, and
of purifyingthe strictly economic data to such an extent that they
fit the requirementsof theory. Since the purified data constitute
the initial conditionsnot only for pure theorybut also for the study
of economic systems, the implicationis that economic systems as
a discipline has to operate within the closed wall of the pure
economy.
Little effortis spent in discoveringthe actual conditionstypically
underlying actual economic systems. In Eucken's treatment, the
noneconomicdata are governed by two rules. One set of noneco-
nomic data performsthe functions of setting boundaryconditions:
adherence to private contracts can be taken for granted because
of the general practice of law enforcement.The total legal order
is taken as a datum that is not in need of an explanationby the
economist.Governmentactions are in general expected to exert no
lasting influence-with the exception of the central authority-
upon the nature of the economic system. The second set of non-
economic data exerts a definite economic impact: an increase in
the populationwill enhance eventuallythe supply of labor services.
Not the cause but only the effect of noneconomicevents upon the
economy is investigated. Such economic impacts are expected to
be primarilyquantitative in nature, so that their relative magni-
tudes can be estimated and incorporatedin the strictly economic
conditions.While the two rules are indispensablefor pure theory,

they produce the side effect of separating the economic system
from its noneconomicsetting.
Quite apart from the fact that this neat distinctionbetween eco-
nomic and noneconomic data is impossible in an empirical situ-
ation, my majorobjectionis that these two categories do not take
into account the meta-economicdata which exert a significantinflu-
ence upon actual systems.6These meta-economicdata originate in
the political, social, psychological,cultural,or technologicalspheres
of life but exert an either temporaryor lasting influenceupon par-
ticular systems. Rather than artificiallyneutralize this influence,
we are obliged to investigate its specific impact upon systems. The
meta-economicdata can either create certain conditions,such as a
tariff, that call for certain adjustmentsin the economic policies of
actors;or these data may act as penetratorsinto the economy,estab-
lish certain quasi-economicgoals or institutions,and thereby be-
come essential characteristicsof actual systems.
Once establishedin the economy, the major penetratorsmingle
with the strictly economic facts and thereby become recognizable
features of actual systems. The result of such interminglingis the
mutual interpenetration(1) of meta-economicwith economic mo-
tives and goals, (2) of meta-economicwith economic components
of particular property structures, (3) of meta-economic with
economic features of organizations,(4) of various meta-economic
incentives with particulareconomic techniques or levels of tech-
nology, (5) of meta-economicwith economic patterns of income
distribution,(6) of meta-economicwith economicfeaturesof power
structures.There can be little doubt that these and other mutual
interpenetrations7 give rise to the most importantcharacteristicsof
economic systems.
Turningto the strictly economic data, Eucken presentsthe usual
ideas of received theory but adds one extensionin the data recog-
nized. He separatesthe data facing the individual firms or house-
holds from the data that refer to the economy as a whole. This dis-
tinction certainly grows out of his recognition that there are
economic systems other than the market economy. Unfortunately,
B For a detailed study of the meta-economic data see Adolf LUwe, Economics
and Sociology (London: Allen and Unwin, 1935).
7 The list of meta-economic features given by Sombart, Spiethoff, and Ritschl
exceeds the one stated here. For a brief summary of their suggestions see Heinz
Haller, Typus und Gesetz in der Nationalikonomie, (Stuttgart: Kohlhammer,1950),
pp. 61-70, 79-88.

the aggregative data do not raise any macroeconomicquestions.
The totals of resources are merely considered as the sum of the
individuallyavailablefactorsof productionor incomes.The various
componentsof GNP are not mentioned separately,nor is any defi-
nite relationshipamong them assumed or investigated. At many
places of the discussion, the overall data imply a given level of
growth and full employmentof the total availableresources.Since
economic systems differ in their attained levels of growth as well
as in their volume of employment at a particular growth level,
this proposedextensionof the economicdata does not clearly indi-
cate how the differentpatternsof economic growth can be identi-
fied as essential characteristicsof specific economic systems.
Somewhat more interestingis the suggested clarificationof the
proceduresby means of which the economic data should be dis-
tilled from the historicalrecord.In "puttingthe questionsin a gen-
eral form" (p. 40), the economistis enabled to separatemere ap-
pearancesfrom the basic featuresin the record.Yet to become ade-
quate for the "idealtype of exchange economy,"for instance, it is
necessary to subject the basic forms of the economic data to two
differentproceduralrefinements.The first one falls under the head-
ing of necessarysimplification.Acceptableeconomic agents are lim-
ited to autonomousfirmsand households;associationsamong such
agents or differentforms of dependenciesamong firmsare deliber-
ately excluded from the universe of the pure economy. The huge
economic differencein size and power between the various firms,
varyingfrom the one-manshop to the billion-dollarcorporation,has
to be neglected in order to apply the principles of the received
theory to all firmsuniformly.
An even greateremphasisis placed upon the need for the proce-
dure of idealization.For instance, the modern household performs
the functions of earning an income, of sharingthis income among
the family members, of providing common shelter, of acting as a
joint purchasingagent in markets,of preparingthe variouskinds of
food obtained, and of consuming jointly the food purchased and
prepared.The procedureof idealizationdeliberatelydisregardsthe
element of jointnessintroducedby the family into the household.In
fact, householdsare treated as if they were single actorshaving no
internal problem of distributionor as if the various actors in the
family treat each other as emotional strangers.The procedure of
idealizationthus picks only one of the functions of the household,

the one of individual consumers of food and services. All other func-
tions performed by the actual household are split off and disre-
garded in the process of selecting the economic data.
It is true that Eucken clearly accepts a limit to simplification and
idealization. Distinctly fictional units, such as perfect foresight, full
divisibility, complete mobility, or any other constructs of perfect
competition are deliberately excluded from the list of selected eco-
nomic data. Mere models of thought are not included in his concept
of economic theory. Yet his rule that all economic data must meet
the criterion of factuality was only partly realized. In splitting off
some of the functions performed by agents, and in idealizing those
selected, the criterion of factuality was replaced by the one of pur-
ity. Instead of distilling the general form of the real economic
agents and factors, the idealization employed led to a definite, al-
though unintended, distortion of the historical phenomena selected
as data from the historical record.
The shift from factuality to purity was largely a result of the
thesis that the economic data have to be manipulated in such a way
as to be equally useful for pure theory and for economic systems.
There can be little doubt, however, that the need for homogeneous
units and single property classes of pure theory called for the proce-
dures of simplification and idealization. The theoretical require-
ments alone determined which data should be selected and how
they should be purified. The particular requirements of economic
systems were hardly taken into account. Not the purity of uniformly
propertied classes but the combination of the various components
or functions performed by particular groups of economic agents has
to provide the criterion for the selection of economic data relevant
for economic systems. The task of the future is thus to reform the
current practice of data selection in two ways. We are in need not
of purified but of full-fledged data; we have to ascertain the par-
ticular patterning of these data for specific systems. Much work
toward such a reform has been undertaken by other specialists in
economic systems and our task is to build upon their accomplish-
ments.
III
How are the data to be organized to permit study of economic
systems? The data are seen as definable sets of conditions that are
unrelated to each other. The linkage among the data can be seen

only if we accept the proposition that every kind of actual economy
is part of a particular economic system. The mutual interdepen-
dence among the data is not derived from the price system as such
but from the central elements of economic systems. Discovery of
these central elements cannot be done merely by studying the his-
tory of any particular system. For Eucken, the facts of the historical
record have to be divided into the basic and the apparent facts of
economic systems, and a certain limited number of basic forms have
to be distilled which must be integrated into one economic mor-
phology or list of typical characteristics for all pure systems. Any
theorizing about systems has thus to be preceded by finding the
"recurrent elemental forms" in all the actual systems, and the re-
sultant morphology performs the same function for systems as do
the eonomic data for pure theory.
What are the main components of this morphology, which is also
spoken of as "the grammar of economics"? In principle, there are
only three fundamental forms, namely the decision-making proc-
esses, the different market forms, and the basic forms of monetary
systems. It is obvious that Eucken has not discovered something
new, but he has split the traditionally defined economic data and
united three of its components into a morphology. What is the pur-
pose for, and the benefits derived from, such a novel regrouping of
facts?
Fundamental in every system is the decision-making process
which takes two different forms: namely, decisions within individ-
ual units and decisions for the system as a whole. Both kinds of de-
cisions are made by means of economic plans. "At all times and
places man's economic life consists of forming and carrying out eco-
nomic plans" (p. 118). This universality of plans is obtained by an
artful manipulation of facts. First, decisions and plans frequently
are regarded as synonyms. Even when neither plans nor deliberate
decisions are present, as in habitual consumption or strictly tradi-
tional production, such actions are treated as if they sprang from
planful decisions. Second, plans are divorced from aims, "which
differ greatly and may be egoistic or altruistic in nature" (p. 345).
The unavoidable necessity of planning is derived from the asserted
universality of economic scarcity; and the direction as well as the
goal of planning is inferred from the law of minimum cost, so that
each particular purpose has to be realized by spending only the
minimum of possible expenditures. Third, there is a one-way rela-

tionship between the planning data and the subsequent plans. In
fact, the particulardata predeterminewhat kind of plan has to be
formulatedand implementedin a given situation. Even the most
powerful central authorityhas no choice among differentplans but
is forced to follow clearly the directive implicit in the data facing
any planner.8Finally, just two differencesare admitted among the
otherwiseuniformplans. The plans of individualsare partial,while
the plans of central authoritiesare total and apply to the whole of
an economy. For each type of plan there can be only one kind of
planner, the single individual and the central authority,while all
other organizationsare systematically excluded from the list of
planners.
This centralbut pure fact of planning,commonto all systems, is
coupled with the interdependenceamong all facts, as the second
and universalcharacteristicof all systems.Planningand interdepen-
dence constitute the "two purely elemental forms of systems."Yet
their relationshipto each other is not the same. Planningand inter-
dependence coincide in the centralizedeconomy, because "the en-
tire everyday economic life of the communityfollows the plans of
a central authority."Centralizationthus builds interdependence
into the plans of such an authority.The opposite is true for the
individual plans, which are in need of specific means of coordina-
tion. This task is performedby the system of markets, in which
prices and quantitiesprovide the main indicatorsas well as correc-
tors for the formulationof individualplans. The differencebetween
centralizedplanning and coordinationof individualplans leads to
a factual assertion of great moment: There can be only the two
basic systems of a centralizedeconomy and of a marketeconomy.
"No other types of economic systems, or even traces of others-
besides these two-are to be found in economic reality past or
present."
We come here to Eucken'smain contributionto the study of eco-
nomic systems.While received theoryfor many decades recognized
only the marketeconomy, Eucken became the discovererand ana-
lyst of the centralized economy as the second economic system.
8 It is this exclusion of choice among different kinds of plans in the same situa-
tion that has induced one of his admirers to charge Eucken with unwarranted de-
terminism, since the plans are "dictated by the facts." (J. W. N. Watkins, "Walter
Eucken, Philosopher-Economist,"Ethics, LXIV [Jan. 1953]). This particular accusa-
tion, however, has to be modified for those cases in which the hidden law of
minimum cost predetermines the plans of man.

How was this discovery possible? It was the search for "the ele-
ments of economic order" that induced him to raise a truly novel
question: Who bore the main responsibility in the system? In seeing
that a central authority can, by coupling planning with interdepen-
dence, establish a different economic order, Eucken was able to
overcome the previous thesis that there can and must always be one
and the same system everywhere.9 The traditional claim of the uni-
versality of markets and of the all-pervasive tendency toward an
equilibrium in these markets was clearly rejected. Markets were not
the only way by which the interdependence could be accomplished;
central planning by authority could in a different way achieve the
same economic task. The result was the theory of two pure systems
that could and did coexist in various places at the same time.
How much or little did history contribute to this discovery? Curi-
ously enough, the original suggestion that authority and responsi-
bility may constitute an organizing principle for a distinct economic
order was derived from the historical school. In his detailed critique
of the role of stages in economic history, Eucken suggested that in-
stead of thinking in terms of long-range phases of development, it
might be better to concentrate upon economic power and responsi-
bility as the central characteristics of an economic system (p. 91).
The original idea thus grew out of a critical assessment of certain
parts of doctrinal history.
A critical examination of decision making in guilds, manors, and
monasteries in the middle ages revealed that a substantial portion
of the decisions were made by men in position of central authority.
The same evidence also indicated that some of the decisions were
taken in response to conditions prevailing in certain markets. The
historical record of the middle ages thus substantiated only in part
the thesis of authoritative decision making, since market-deter-
mined decisions were also typically present in those situations.
Finally, one main reason for selecting central authority as a cru-
cial agent of decision making was suggested by the experience of
the Nazi economy. It was especially after the demise of the Hitler
regime that Eucken elevated the Nazi economy to the leading posi-
tion of a centrally administered economy.10He saw central planning
9 For a spirited defense of the one-system idea see Frank Knight, History and
Methods of Economics (Chicago: University of Chicago Press, 1956), pp. 91-95.
10 See his articles "On the Theory of the Centrally Administered Economy: An
Analysis of the German Experiment,' Economica, XV (May and Aug. 1948).

prevailing in all parts of the economy. The formerly secret docu-
ments reveal, however, that the Four Year Plan of 1936 was limited
to twenty industries and that the total military outlay covered only
about one fifth of total national income." It was not until the two-
front war placed the German army on the defensive that the rulers
shifted to central and comprehensive planning.
Obviously, the historical records examined, whether for certain
economic situations in the middle ages or in one recent dictatorial
economy, supply only a part of the evidence called for by the thesis
of a centrally administered economy. Authoritative decisions were
certainly present, but these were not the only kinds of decisions
made, nor did all the authoritative pronouncements ensue into cen-
tral plans. The centralized authorities had the power to plan or to
merely issue directives or even to refrain from using their power.
The examined historical records do not support the categorical dic-
tum of the universality of planning, whether by central authorities
or by individual firms in market economies.
Faced with this discrepancy between the examined historical rec-
ords and the empirical requirements of his two-system theory,
Eucken introduced the distinction between pure and mixed eco-
nomic systems. The historical records can and do provide directly
only the evidence for the mixed systems, while idealization and
typification are required for obtaining the central characteristics of
the pure systems. It is because of idealization that decisions and
plans are regarded as synonyms, that plans are divorced from the
particular goals of the actors, that scarcity predetermines the nature
of the particular plans, and that central authorities and individual
firms are the only planners active in the pure systems. As in the case
of the selection of economic data, idealization leads to an oversim-
plification of the kind of actions performed and to an understate-
ment of the actual functions undertaken by the actors. Additionally,
idealization of planning overstates the degree of forethought and
deliberation that goes into decisions and also overstates the abso-
luteness and the degree of influence exerted by scarcity upon plan-
ning, if not upon all forms of decision making. Idealization thus
does not merely "represent one single aspect of a group of cases"
(p. 173), but the understatements and overstatements lead defi-
nitely to a distortion of the relevant historical records.
l1ArthurSchweitzer, "Der urspriingliche Vierjahresplan,"JahrbiicherfUr Nation-
alikonomie und Statistik, CLXVIII (Feb. 1957), pp. 348-96.

Why did a man who possessed such a wide range of historical
knowledgeresortto idealizationof the facts? It all goes back to the
basic belief that the multiformityof facts in the historicalrecords
forces the analyst to discover the pure elements of systems. Once
ascertained,the pure formscan be united into a morphologyof eco-
nomic systems. Acting like an "economicalphabet,"the economic
morphologypermits the investigatorto explain the mingled forms
of the actual systems as combinationsof the pure components in
systems. "Justas a huge variety of words of different composition
and differentlength can be formed out of a dozen of letters, simi-
larly an almostunlimitedvariety of actual economicsystemscan be
made out of a limited number of pure economic forms" (p. 109).
Idealizationis thus seen as a necessary procedure,enabling us to
discoverthe core featuresof all systemsand thereby to save a huge
amountof time and energy in the study of the actual systems.
Hardly anyone can questionthe need of reducing the multiform-
ity of historicalfacts into manageableelements of systems,nor can
one object to the great advantagesthat a tenable morphologymay
grantus for the study of actual systems.Unfortunately,the analogy
between language and economics is defective. The words in the
language alphabetare used daily in an undoctoredform, while the
economic alphabet proposed contains factually distorted units.
The proposalof an economicmorphologyof systems is thus accept-
able only if we succeed in effectively eliminatingthe distortionbut
still retain the centralcharacteristicsobservedin actual systems.In
other words, we need an economic morphologythat is not in con-
flict with the historicalrecordsof actual systems.
Extensivereflectionand experimentationwith at least one actual
system convincedme'2 that we can reduce the multiformityof facts
but avoid their distortionif we refrainfrom idealizationand exten-
sively employ the procedure of typification for ascertaining the
common characteristicsof economic systems. Since Eucken is very
much in favor of typification,it is advisableto see how he employs
this procedureand what are the results of his efforts.
Let us accept his suggestionthat patternsof decisionmakingand
kinds of marketsshall be typified accordingto the data-determined
actions and the number of participatingactors. Decisions would
thus have to be arrangedfrom the single firmwith a large number
12 Big Business in the Third Reich (Bloomington: Indiana University Press, 1964),
chs. i and x and Appendix B.

of participantsto the other extremeof a central authoritywhich is
the sole decision maker.Typificationwould thus lead to the group-
ing of decision makersso that we would arrive at alternativepat-
terns of, say, voluntarybut isolated individualactors,voluntaryde-
cisions made by individualsorganizedin loose groups,compulsory
decisionsmade by organizationsin the name of their members,and
finally comprehensivedecisions made by central authority for all
firmsunder its jurisdiction.
Ratherthan giving us some such a list of either coexistingor alter-
native patterns of decision making,'3Eucken accepts only the two
patternsat the extremes.The many modes of arrivingat decisions
in between these poles are neglected. The reasonfor their exclusion
does not lie with the historical record or with the procedure of
typification but springs solely from the idealization employed.
Ratherthan giving single but actual aspects of two readily observ-
able but extreme cases, we are offered mutually exclusive sets of
two polar types. Since in the central economy the central authority
tells everyonethe specificsof individualplans,"the individualecon-
omy and the social economyare one and the same,"so that there is
only central planning and no other form of decision making. Simi-
larly, the individual planners are bound to their planning data,
maketheir decisionsaccordingly,and wait until these are confirmed
or rejectedby the coordinatingmarkets.
Idealizationthus renders the procedureof polar types meaning-
less. Not only are the decision centers at the extreme given an im-
portancethat they do not deserve, but we are also forced to think
of these centers as being mutually exclusive.Either the one or the
other can exist but never both. The mutual exclusion destroys the
main purpose of the polar-typicalprocedure: to supply the pure
elements from both extremes so that we can show their intermin-
gling in the middle ranges in actual systems.
A differentform of typificationis employed in the study of the
structuresof markets in the exchange economy. These structures
"arediscoveredwith their distinguishingcharacteristicsby studying
the planning data of those taking part in the market."Not the in-
tention of the actors but the conditions in the markets determine
what kind of supply or demandprevailsin specific situations.Hav-
13 For a quite different but interesting attempt at typifying patterns of decision
see David Braybrooke and Charles E. Lindblom, A Strategy of Decision (New
York: Free Press [Macmillan], 1963).

ing ascertained"five forms of supply, namely competition, partial
oligopoly, oligopoly, partial monopoly, and monopoly, and five
forms of demands, there are twenty-five forms of markets. If we
take into account whether either side of the market is closed or
open, this numberwill be multipliedby four,"leading to a total of
one hundredpure marketforms.
Startingfrom the actual and not the idealized conditionsin mar-
kets, this form of typification, too, leads to a gap between the pure
and the mixed forms of markets. Rather than showing how the basic
five forms of demand and supply are modified either by the differ-
ent goals of the economic actors or by the policies of noneconomic
agencies, Eucken superimposes a quantification rule upon his typi-
fication procedure. The multiplication shows only statistical possi-
bilities but fails to keep in touch with the actual record of market
structures. The point of transition from the pure to the mixed forms
of markets is not discovered, so that we receive no directive how the
actual systems shall be studied. The central purpose of the analysis
of pure systems gets lost, and intellectual efforts go to waste.
There is a procedural as well as a substantive reason for the fail-
ure to link the pure forms with the actual characteristics of eco-
nomic systems. In regard to typification, Eucken moved in the
wrong direction. All his efforts aimed at intensifying the degree of
idealization, instead of separating idealization from typification and
then developing the concept of the prototype.'4 It seems quite clear
that only if we fully understand the details of the typological
method can we hope to translate the multiformity of facts in his-
tory into distinct and manageable characteristics of economic sys-
tems as a discipline.
It is at this point that we run into the problem of purity. In order
to justify his concentration upon the pure facts of systems, Eucken
compares the comparative economist with the chemist who moves
from the various pure elements to their admixtures. Unfortunately,
this analogy overlooks the distinction between purity analysis and
comparative analysis. In the latter, we cannot assume that the ob-
servable characteristics of actual systems are merely different mix-
tures of the same pure forms. A different composition rule is needed
that distinguishes the common from the special (or divergent) char-
acteristics of economic systems. For instance, possession, ownership,
14 Schweitzer, "Vom Idealtypus zum Prototyp," Zeitschrift fiir die gesamte
Staatswissenschaft,CXX (Jan. 1964), pp. 13-55.

and rights of disposalare the commonfeaturesof all types of prop-
erty, whether owned privately or publicly. The variety of owning
groups, their specific uses of property,as well as the various atti-
tudes toward property,constitute the specificsof a propertystruc-
ture in a particularsystem. The commonfeatures of differentsys-
tems can then be united into distinct patternsof typical facts, such
as the propertyor market structures,while the special features of
particularsystemscan be confrontedwith each other. The common
features provide a basis for a tenable comparisonof different sys-
tems with each other.'5
A shift from the purityto the comparativeanalysispromisesthree
importantadvantagesfor the study of economicsystems.First,there
is no longer any need for separatingthe data from the morphology
of economic systems.As far as the full-fledgeddata are observable
and relevant for actual systems, their common characteristicscan
be united into one list of the typical patternsof all systemsstudied.
Second, dispensing with the search for the pure forms should en-
able us to overcomethe divergencebetween historicalrecordsand
economic morphology,unavoidablypresent in Eucken's work. All
commonand divergent characteristicsof systems have to be in ac-
cord with the respective historicalrecords,while the need for un-
derstandingthe actual economicsystemsopens up a new dimension
for historicalresearchthat goes beyond the traditionalmode of his-
toricalsynthesis.Finally, in integratingthe three components-full-
fledged economicdata, meta-economicdata, and the "pure"facts of
systems-into one economic morphology,we come in a position to
define the empiricalpart of economic systems as a discipline. In
systematizingtheir relevant facts, comparativeeconomistshave at
least to deal with (1) the economic and meta-economicgoals, (2)
the economic and meta-economicpatternsof decision making, (3)
the economic and meta-economicpropertystructures,(4) the eco-
nomic and quasi-economicorganizations, (5) the economic and
and meta-economicfeatures of the relevant technologies, (6) the
economic and meta-economicpatterns of income distribution,(7)
the economic and meta-economicstructuresof power, (8) the eco-
nomic and quasi-economicpatterns of coordinationor direction of
the economic systems.
15 For a sample, see my attempt at ascertaining the common and divergent fea-
tures of the economic ideologies adhered to by Communist and Nazi rulers in
"Ideological Strategy," Western Political Quarterly, XV (Mar. 1962), pp. 46-66.

IV
What can be learned from our critical analysis of Eucken's work?
While I cannot accept his notion of purified history, he has certainly
demonstrated that there are empirical aspects of systems which call
for detailed knowledge of history. What kind of cooperation can or
should thus prevail between economic history and economic sys-
tems?
The first kind of cooperation pertains to the nature of the histor-
ical record. While the historian has a choice between the chronolog-
ically or topically arranged records, the comparative economist has
a definite preference for topical records. If the various characteris-
tics of nationalizing private firms by governments are specified, the
comparative economist can typify the nationalizations according to
their actual goals and incorporate them into the morphology either
of state-directed developing economies, of economic socialism, or of
communism. Although not requiring any conscious effort at cooper-
ation, the topically arranged records of the historian have the side
effect of supplying the comparative economist with the materials
for discovering the features of actual, and the morphology of com-
parative, economic systems.
Much more intricate is the relationship between the historical
syntheses and the morphological patterns of systems. In regard to
historical explanation, it is customary to specify that there must be
a clear time sequence between the cause and the effect of a causal
nexus, but it has been too often overlooked that there are not only
different evaluative standpoints but also different kinds of succes-
sions. In fact, critical analysis of the work of leading historians shows
that they actually deal with different kinds of historical syntheses,
depending upon whether they are concerned with repetitive, evolu-
tionary, comparative, or evaluative history. Most of these distinc-
tions can also be discovered in Eucken's work, although he is hardly
ever fully aware of them.
It is crucial to recognize that the nature of the succession influ-
ences the kind of cooperation possible between our specialities. In
evaluative history, most of the points of view chosen are not pro-
ductive of effective cooperation. A kind of a hindsight history pre-
vails when it is implied that economic imperialism cannot explain
the revolutionary actions of the American colonists because the
British import burden amounted only to a fraction of 1 per cent of

their national income. Such an inference is useless for the study of
economic systems, because no information is furnished that the
populace or at least the leaders knew the precise magnitude of the
burden and calculated it as a percentage of national income. An
ideology-tainted history is present in one theory of totalitarianism
which insists that the one-party rulers dominated all phases of their
respective economies just because their ideology claimed total
power in every phase of life. Most of the evaluative explanations
tell us more about the preoccupations of historians than about the
causes of specified historical successions.
In his distinction of the different market forms, Eucken made use
of a particular notion of repetitive history. He not only distinguished
open and closed forms of demand and supply for specified periods
but assumed that other unexplored periods will exhibit the same
forms of demand and supply. Such an assumption implies the no-
tion that the findings of one period can be regarded as representa-
tive for other uninvestigated periods. Repetition and representation
are thus coupled in such a way as to lead to the type of either open
or closed markets. The task is, of course, to replace the assumption
by tenable syntheses of the as-yet-uncovered periods. Only when
the results of such historical investigations show repetition of the
asserted market forms is the use of the concept of representative
period justified.
In his study of the historical facts of central planning, Eucken
employs a peculiar mode of evolutionary history. In the monasteries
of the middle ages, as well as in the modern dictatorial economies,
the fact of centralization of authority automatically creates central
planning which then prevails undisturbed throughout the evolution
of a centrally administered economy. Rather than assuming prog-
ress and stages as a part of the evolution, as did an earlier philoso-
phy of history,"6Eucken assumes an automatic origin and a constant
succession of central plans. Of course, the actual origins and time
sequences of plans have to be studied in such a way as to reveal
the reasons for the origins and the various phases of the successive
plans. Both can be perceived only if the particular goals leading to
the centralization of the authority and to sequential variations in the
plans are seen as the causes for such centralized systems. Funda-
mental aims and origins as well as particular goals and plans can be
16 Kenneth E. Bock, The Acceptance of Histories (Berkeley: University of Cali-
fornia Press, 1956).

correlatedby means of the concept of a thresholdof action17which
requires of us that we accept only those goals that were actually
held by the plannersduringthe process of preparingand adopting
a central plan. Such a historicallyidentified phased evolution per-
mits the comparativeeconomist to discover the subsystemswithin
a system.
In insistingthat all pure formsmust be pressedinto only two eco-
nomic systems,Eucken makessome drasticand questionableuse of
the mode of comparativehistory.All the featuresof his two systems
must be seen as parallels, regardlessof their particulartime and
place of occurrence.Central authoritiesand their respective plans
differfrom each other only in scope of operation,so that the mere
extent of influencebecomes the sole criterionfor distinguishingthe
directed from the administeredcentralizedsystems. Of course, the
assertedparallels are a result of his purificationof history. If this
procedureis rejected, then quite differentcriteriafor makingvalid
comparisonhave to be discoveredso as to bring out the similarities
and differencesbetween various industries,national economies, or
subsystemswithin a system as well as between systems.
It is one of the majortasksfacing our two specialitiesto develop
empirically suggested and tested methods of comparisonand of
typification.The comparativemethod of the historianwill have to
free itself from the variousassumptionson the nature of economic
change-critically evaluatedby KennethE. Bock-and will have to
ascertainthe valid criteriafor comparingthe similarand different
characteristicsof various industries,markets,or systems. The com-
parative economistwill have to use the comparativemethod if he
studies the characteristicsof an actual system, thereby synthesizing
the results of historicalwork into one overall synthesis.In contrast,
if the task is to engage in a comparisonof varioussystems,then the
historicalevidence has to be typifiedinto the variousmorphological
features which then are presentedin a systematicfashion for each
system. The comparativemethod may be sufficientfor the study of
single characteristicsof an actual system, while additionally the
typological method is requiredfor systematizingthe differentfea-
tures of one actual system.'8The more effectively we develop and
'7 Cf. Big Business in the Third Reich, pp. 44-50.
18 As a sample for using the comparative and typological methods on the same
set of materials, see chs. vi and x of my book, and my article on "Der organisierte
Kapitalismus," Hamburger Jahrbuch fiur Wirtschafts- und Gesellschaftspolitik
(Tfibingen: Mohr, 1962), pp. 32-47.

use the comparative and typological methods, the greater will be
the chances for a successful cooperation between our two special-
ities.
The substantive similarity of the two fields and the complemen-
tarity of the respective methods suggest a sequential but alternat-
ing division of labor between economic history and economic sys-
tems. The mutual assistance can be presented in terms of four dif-
ferent tasks: (1) the evolutionary historian establishes the relevant
historical record and gives the appropriate explanation in the form
of a one-situational synthesis; (2) the comparative economist will
typify the historical evidence into the morphological characteristics
of the same or similar situations; (3) the comparative historian uses
this typology as a frame of reference for his factual comparisons
between different situations or substances; (4) the comparative
economist accepts the results of these comparisons but presents
them systematically as the central characteristics of a system. Ex-
tensive goodwill and mutual assistance are required before these
conditions can be translated into an effective coordination of the
work done in both specialties. Such goodwill and coordination were
absent in the previous generation when many leading historians
condemned, for instance, the work on capitalism by Werner Som-
bart, who was forced to tackle the four mentioned tasks largely by
himself. The fact that both the Economic History Association and
the Association for Comparative Economics have jointly sponsored
this session may be taken as an indication, I hope, that the estrange-
ment between our specialities in the previous generation will be
replaced by a conscious effort at cooperation in our time.
ARTHUR SCHWEITZER,Indiana University


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3 Cf. Walter Eucken, "Wissenschaft im Stile Schmollers," Weltwirtschaftliches

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