Joseph A. Schumpeter: Joint Review of R. Stolzmann (1912)

Schumpeter’s 1912 review of Die soziale Kategorie in der Volkswirtschaftslehre (1896) and Der Zweck in der Volkswirtschaft (1909) examines Stolzmann’s attempt to ground economics in social organization and ethical purposes. Its central argument distinguishes the social conditions of economic action from the processes that unfold within those conditions. Schumpeter welcomes institutional explanation but disputes Stolzmann’s claim to have established an alternative to prevailing economic theory.

The review combines recognition of Stolzmann’s originality with criticism of his exposition. Schumpeter finds the second book particularly weakened by its struggle to formulate insufficiently precise ideas:

Doch im zweiten ist im Ringen nach dem Ausdruck nicht ausreichend präziser Ideen die Haltung des Gedankengangs stark verloren gegangen.

English translation: But in the second, in the struggle to express ideas that are not sufficiently precise, the poise of the train of thought has been largely lost.

This criticism anticipates the substantive objection: asserting the social character of economic life does not yet identify the mechanisms determining particular values and incomes. Stolzmann’s organizing conception makes the social economic plan responsible for assigning places to individuals and goods:

Das Prinzip alles wirtschaftlichen Handelns ist der soziale Wirtschaftsplan, der jedem Individuum und jedem Gute seine Stelle in der Wirtschaft anweist, damit auch den Wert jedes Gutes fixierend.

English translation: The principle of all economic action is the social economic plan, which assigns to every individual and every good its place in the economy, thereby also fixing the value of every good.

Schumpeter accepts that law, morality, custom, and property shape economic conduct. He also approves Stolzmann’s distinction between pursuing ethical objectives in policy and recognizing ethical forces as facts requiring theoretical explanation:

Treffend führt er weiter, namentlich gegenüber Diezel, aus, daß die Rolle des ethischen Moments nicht auf die Politik beschränkt werden dürfe, sondern daß das ethische Moment als Tatsache auch in der Theorie berücksichtigt werden müsse.

English translation: He further shows aptly, particularly as against Diezel, that the role of the ethical factor must not be confined to policy, but that the ethical factor must, as a matter of fact, be taken into account in theory as well.

Nevertheless, Schumpeter regards an exclusive emphasis on conscious ethical motives as too narrow. Conduct can follow customary or unreasoned rules without actors clearly recognizing their influence. Social explanation therefore extends beyond deliberate collective purposes.

The decisive disagreement concerns how much social organization determines directly. Institutions establish conditions and exclude certain actions, but they leave a historically variable sphere of decision. Pure economics investigates production and distribution within that sphere. Its analytical units need not be isolated persons: a collectively deciding clan or socialist state can occupy the same position. Schumpeter’s card-game analogy expresses the distinction between determining the available possibilities and determining the outcome of play. Social power supplies indispensable economic data without making the analysis of action under those conditions superfluous.

The same reasoning applies to preferences. Their social formation can be acknowledged while already formed dispositions serve as starting points for explaining market processes. Methodological individualism is consequently a limited analytical procedure, not a denial of society’s constitutive role. Institutional inquiry and pure theory address distinguishable explanatory tasks.

Schumpeter develops this objection through Stolzmann’s theory of socially necessary distributive shares. Workers and capitalist employers supposedly receive incomes sufficient to maintain their useful social functions. Yet no central authority assigns these incomes; recipients must obtain them through exchange. Explaining their magnitude therefore requires analysis of valuation, purchasing power, competition, and monopoly. For Schumpeter, completing Stolzmann’s explanation brings it back toward prevailing theory, particularly marginal productivity. Calling wages and interest social facts supplies no independent causal mechanism, while the capitalist’s subsistence requirements cannot alone explain payment.

The discussion of ground rent reaches a similar conclusion. Schumpeter accepts that economic plans, rather than physical possibilities alone, determine the cultivation margin. But recognizing this does not refute Ricardo’s rent analysis or distinguish Stolzmann decisively from contemporary economics. Plans themselves express needs under natural and social constraints.

The review thus preserves a qualified merit for Stolzmann’s enterprise: explicit attention to the social category can clarify economic exposition and guard against misleading abstractions. Its larger methodological claim is that institutional conditioning and economic determination must be distinguished without being separated absolutely. Economic theory can take socially formed premises as given for a particular investigation without denying their importance or their need for explanation elsewhere.