Joseph A. Schumpeter · 1913
Joseph A. Schumpeter’s review assesses Oppenheimer’s ambitious economic system through a sharp contrast between its methodological and literary merits and its allegedly unsound theory of distribution. Covering the book’s foundations, economic sociology, and economic argument, Schumpeter explicitly leaves aside its fourth book, the critique of classical distribution theory. His central concern is that persuasive exposition gives defective reasoning greater public authority.
The review begins with substantial praise. Oppenheimer distinguishes the sociological study of economic organization from the economic study of the economic process itself, assigning predominantly inductive methods to the former and deductive methods to the latter. Schumpeter also welcomes his conceptual clarification of need satisfaction and his defense of theory against objections based on ethical considerations or the complexity of human motives.
Die methodischen Grundsätze, die da entwickelt werden, sind von jeder Einseitigkeit frei und die Darstellungskunst des Autors zeigt sich da in bestem Licht.
English translation: The methodological principles developed there are free from every one-sidedness, and the author's art of exposition shows itself there in the best light.
This approval extends to discussions of collective needs, differentiation, division of labor, transport, and the development of economic society. Yet Schumpeter finds that Oppenheimer turns observations into pretentious laws and treats sociological evidence as if it permitted only his preferred conclusions. Rejecting the simplistic explanation of property through labor and saving is useful; exaggerating that explanation’s scientific standing is not. The review thus separates the suggestiveness of Oppenheimer’s sociology from the necessity of the economic conclusions drawn from it.
The decisive objection concerns costs. Although Oppenheimer correctly grounds economic theory in needs, he subsequently recognizes only labor expenditure—direct or embodied in produced means of production—as cost. Schumpeter argues that this restrictive definition predetermines what Oppenheimer presents as a fundamental discovery.
Von diesen Definitionen hängt alles weitere ab. Und nur ihre Konsequenz ist, was für den Autor als fundamentale Erkenntnis erscheint. Man kann sein ganzes Gebäude umstürzen durch den Nachweis, daß auch mit anderen Dingen gewirtschaftet wird.
English translation: Everything further depends on these definitions. And what appears to the author as a fundamental insight is merely their consequence. One can overturn his whole edifice by demonstrating that other things too are economized.
The conceptual fault is a confusion between absence of labor cost and unlimited availability. Calling non-costing goods free goods does not establish that their quantities suffice for every need. For Schumpeter, economic treatment cannot be restricted to objects that embody labor: scarcity, rather than labor expenditure alone, matters to the distinction Oppenheimer is trying to draw.
This error becomes consequential in the account of land and property.
Die wichtigste Konsequenz dieser prinzipiellen Stellung ist der Satz, daß der Boden an sich kein wirtschaftliches Gut ist und nur durch die gewaltsame „Bodensperrung“ durch seine Okkupanten zu einem solchen wird.
English translation: The most important consequence of this position of principle is the proposition that land in itself is not an economic good and becomes one only through the forcible "closing off of the land" (Bodensperrung) by its occupants.
Schumpeter reconstructs the resulting chain: exclusion from land creates a propertyless working class; workers must therefore offer themselves to entrepreneurs on terms that leave a profit; abolishing landed property would consequently eliminate capitalist profit. He locates this basic outlook among earlier land reformers and notes previous attempts to explain rent and interest as monopoly gains.
His principal objection is that exclusion from land, even if it produces propertylessness, does not by itself explain how output is distributed between workers and capitalists. Exploitation cannot simply be inferred from workers’ lack of property. Moreover, universal possession of individual plots would raise questions about specialization in other branches of production. Oppenheimer’s denunciation of coercive landed property therefore substitutes an insufficient causal formula for an explanation of the economic process.
The closing judgment returns to the danger posed by the book’s strengths: sincerity, attractive presentation, and illuminating passages may help disseminate errors that economic theory will later have to undo. The review’s broader significance lies in Schumpeter’s insistence on separating institutional histories of dispossession from explanations of distribution, and on testing whether apparently substantive economic conclusions merely repeat assumptions concealed in definitions.
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