Joseph A. Schumpeter: Review of Achille Loria’s La synthèse économique (1913)

Schumpeter’s German review examines Loria’s attempt to construct a theory of distribution valid across historical economic systems. Moving from its foundational concepts through its chapter sequence to a final assessment, the review argues that the system stands or falls with its exploitation theory. Schumpeter denies that historical universality distinguishes Loria’s project from other distribution theories, and regards its conceptual substance as remote from contemporary scientific development. His abbreviated treatment also reflects a methodological frustration:

Solange auf unserem Gebiet über jedes Problem so gut wie jede Ansicht möglich ist und Beifall finden kann, ist mangels eines Fonds an allgemein anerkannten Theoremen und Methoden eine gründliche Kritik innerhalb einer kurzen Rezension unmöglich und auch unfruchtbar.

English translation: So long as in our field practically every view on every problem is possible and can find applause, a thorough critique within a short review is, for want of a fund of generally acknowledged theorems and methods, impossible and also unfruitful.

The review thus connects criticism of Loria with the absence of shared standards in economics. Instead of attempting an exhaustive refutation, Schumpeter isolates the propositions that carry the system.

Loria divides output into subsistence, the return attainable by isolated labor, and revenu, the additional return attributable to organized labor. The latter can accrue partly to workers and partly as rent, interest, and monopoly profit. Schumpeter treats the derivation of surplus from combined labor as an old idea. What distinguishes Loria’s formulation is the claim that productive association requires coercion, and that this coercion restricts competition sufficiently to prevent costs from exhausting the surplus. Yet the crucial proposition receives strikingly little justification:

Der Begründung dieses letzteren, für ihn fundamentalen Satzes, widmet Loria nur einige Zeilen (p. 31).

English translation: To the establishment of this latter proposition, which is fundamental for him, Loria devotes only a few lines (p. 31).

After defending his income concept in the second chapter, Loria explains coercion across economic forms in the third. In slavery it is direct; in the market economy it operates through exclusion from land and the means of accessing it. Land prices rise, or workers’ subsistence falls, so that the propertyless cannot acquire independent productive resources. Loria consequently treats monopoly, rather than free competition, as the governing principle of distribution. Schumpeter finds this reasoning insufficiently examined, though he notes affinities with Oppenheimer and O. Conrad. His objection concerns not simply the conclusion but Loria’s failure to confront readily available counterarguments.

The subsequent chapter survey distinguishes occasional useful discussion from the system’s central claims. Loria explains income differences through successive appropriation of less favorable productive opportunities; Schumpeter credits parts of the accompanying tax discussion while emphasizing their independence from the underlying theory. Chapter V considers labor quantity and productivity, presenting coercion as a source of unproductive expenditure and capitalism as destructive of natural resources. Schumpeter’s increasingly ironic account challenges the movement from alleged tendencies and intentions to asserted economic results.

Chapter VI depicts distribution as a struggle shaped by force, fraud, monopoly, and existing wealth. A following chapter attempts verification and rebuttal, while the final chapters anticipate the replacement of coercion and conflict by free association. Schumpeter treats this promised resolution as an extension of the initial premises rather than an independently established result. His closing formulation identifies the precise explanatory structure at issue:

Der Grundstock dieses Systems ist also eine Ausbeutungstheorie, die das Vorhandensein eines Ueberschusses über den Unterhalt des Arbeitenden durch die Assoziation der Arbeit und eine Zuweisung an »Nichtarbeitende« durch ein »Monopol« erklärt.

English translation: The foundation of this system is thus a theory of exploitation which explains the existence of a surplus over the worker's subsistence by the association of labour, and its allocation to "non-workers" by a "monopoly".

Association explains the production of surplus; monopoly explains its appropriation by nonworkers. For Schumpeter, the validity of that two-part explanation determines the book’s value, while its wider historical and social claims do not always follow from it. The review’s significance lies in this demand to separate an expansive social vision from the economic mechanisms and argumentative warrants needed to sustain it.