Part 4 of 4 in series "'Good Markets' Book Interviews"

A book interview with postdoctoral researcher Jordan Ballor by Moral Markets content manager Ilse Oosterlaken.

WILHELM RÖPKE. A Humane Economy; The Social Framework of the Free Market. Chicago: Henry Regnery Company. 1960. Download free pdf file of this book.

Jordan, you are a theologian with a long-time interest in economics. The book that you selected for our interview was written by an economist with a theological interest. Why this book and why have I never heard of him?

Wilhelm Röpke (1899 –1966) was not just interested in theology, but also in history and in many other things that economists in the dominant neo-classical economic tradition normally never think about. Because he was knowledgeable of so many areas, he had very interesting things to say at the interface of economics and ethics, things which are still relevant today. But the fact that he did not fit in with mainstream economics might explain why he is not well known.

He was, however, not without influence in his own time. He was exiled from Germany during the Third Reich, but became one of the architects of German’s economic recovery after WWII. And he was not just an academic, but also a public intellectual who wrote for example newspaper editorials to share his ideas and defend the program of postwar economic reform. His book A Humane Economy gives a good and accessible overview of his thinking and what drives him. There is also a freely downloadable pdf of this volume in English translation.”

So what was in a nutshell his view on economics and markets?

“The subtitle of the book in its English edition is ‘the social framework of the free market’, but more informative is perhaps the literal translation of the German title, which is ‘beyond supply and demand.’ Unlike the neo-classical approach to economics, Röpke goes beyond what can be measured.

The main argument that he makes is that for its stability and functioning the free market is dependent on resources from outside the economic sphere. With ‘resources’ he means institutions like the family and culture more generally. These have civilizing effects, instilling certain virtues in people which they also need as market actors.

“The companion remarks that this is an economically inefficient way to produce food. To this Röpke responds by saying that it is perhaps an excellent way to produce happiness.”

Some more recent thinkers, like Deirdre McCloskey, argue that being part of the market place in and of itself leads to the development of certain personal virtues. Röpke does not deny that some such civilizing effects occur within the economic sphere, but holds that the market also has demoralizing effects. The free market may also be destructive of culture and so in the long run it cannot survive without certain external conditions and other institutions.”

Where can we see a theological influence in his work? Do you think this was important to the perspective on the market that he developed?

“Absolutely. Really what he brings in is the integration in economic thinking of the Christian view of the person, which is very different from the narrow view of the individual in neo-classical economics. There people are viewed as atomized individuals trying to satisfy their material needs. They are stripped from their particulars and social relationships, an abstraction rather than real persons.

Röpke sees the person not only as embedded in families and other social institutions, but also as a combination of body and soul. People do not just have bodily and material needs that markets can satisfy, but also spiritual needs. They have an inherent dignity, but also moral responsibility and freedom and an ultimate destiny. He holds that the liberal view of the person is only sustainable within this broader perspective, for him the ultimate source of which is revelation.

There is an anecdote that Röpke refers to at several places in his work, if I recall correctly he is in the Dutch city of Rotterdam with someone he describes as ‘a dogmatic old-time liberal.’ They observe workers who come home and spend free time in the evenings in the allotment gardens which you then apparently had a lot in those neighborhoods. The companion remarks that this is an economically inefficient way to produce food. To this Röpke responds by saying that it is perhaps an excellent way to produce happiness. He thinks that free markets are important, but civil society is where life is lived and happiness is realized and people truly flourish.”

You mentioned the importance that he assigns to family and religion. While preparing this interview I found a number of discussions of his book on sites that self-identify with conservatism as a political movement. Would you say that this adequately labels his work?

“To call Röpke a conservative is not entirely wrong as a characterization, but also not fully adequate. His work is hard to pin down and has appealed to people from different economic and political streams. He is sometimes described as a ‘third way’ thinker, an Austrian School economist [putting methodological individualism central], an ordoliberal [the German variant of social liberalism], as well as someone who has similarities with distributism [an economic ideology based on Catholic social teaching].

A free market is for him not the same as a completely unregulated market; the state has some responsibilities and there is a place for social welfare. The total opposition between radical individualism and socialist collectivism was a false one, in his view. They are in fact closely connected; they feed in to each other. He saw that once all of the natural, moral bonds that define individual persons in their complex relationships – family, church, associations – are eroded away, all that is left is some sort of external coercive power to keep us together.

One main theme that runs through his work is the value of decentralization. He was suspicious of big things – big corporations, big cities, big nations, big anything. Any central collective made him wary. A diverse local ecology, including families and small firms, was his ideal.

With Friedrich Hayek, who is known for his defense of classical liberalism, he had in common that they saw economics as a discipline of humility, one that should be anti-utopian. His policy prescriptions were always very much dependent on the context at hand, rather than on a simplistic ideology.”

Sounds like a book worth reading. What have you learned from Röpke’s work that you intend to apply while working on our research project ‘What Good Markets Are Good For’?

“What is really inspiring is the thorough way in which Röpke thinks through the key concepts in this debate. For example, his discussion of what at the level of principle distinguishes a planned economy from a market economy is very elucidating. In the end he answers this definition question in terms of the locus of decision-making: by a central body or decentralized among market participants.”

Series "'Good Markets' Book Interviews":

Which books – classics or recently published – should you read if you want to acquire a deep understanding of markets and morality? In this series of interviews researchers from the project ‘What Good Markets are Good for’ make their personal recommendation.

Posts in this series:
  1. ‘Measuring America’ – Boekinterview met Floris Heukelom
  2. ‘Measuring America’ – Book Interview with Floris Heukelom
  3. ‘A Humane Economy’ – Book Interview with Jordan Ballor
  4. ‘A Humane Economy’ – Boekinterview met Jordan Ballor

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