Nietzsche and the German Historical School of Economics

4. Nietzsche and the German Economic Tradition.

Nietzsche accepts the standard goal of statecraft as “making life tolerable for the greatest number [of people]” (Nietzsche 1995:236).¹¹ This places Nietzsche in the anthropocentric German tradition of social sciences emanating from Leibniz and Wolff.¹² This tradition emphasizes the need to construct a theory around a core of ‘Man and his needs’. This tradition is holistic, stressing the organic coherence of the social sciences, the Strukturzusammenhänge. This problem-oriented science finds no room for arbitrary distinctions between academic disciplines. The metaphysical instruments of philosophy, economics, and politics are all applied according to their relevance to the task at hand, in sharp contrast to the limited toolbox of neoclassical economics. Whereas modern economists tend to be tool-focused, in that they seek to apply a few axiomatic instruments to all problems they face, the statecrafters were problem-focused, finding or inventing the right tool for the right job. It is therefore impossible, and in fact anachronistic, to divorce the sphere of economics from the whole in Nietzsche’s work; his arguments are synergical, the totality reflecting the State in its all-encompassing form of human coexistence.

In its origins, with Christian Wolff, German economics was based on duty. As already mentioned, Werner Sombart calls this type of economics a richtende Nationalökonomie (Sombart 1930). Symptomatically, in the collected works of Nietsche the word Pflicht – duty – gets 167 hits. The word ‘market’ gets only 8.

Physiocracy marks the point where today’s standard economics diverges from German economics and Other Canon economics. Physiocray, or ‘the rule of Nature’, stands in sharp contrast to the Renaissance tradition where the creative human being is the driving force. Most German economists at the time were ardent anti-physiocrats, and interestingly Friedrich Nietzsche comes out with an unusually strong praise of the greatest anti-physiocratic economist of all, the Neapolitan Abbé Galliani: ‘the profoundest acutest…. man of his century, he was far profounder than Voltaire’. (Nietzsche 2000: 6909).

Corresponding to the German tradition, citizenship, according to Nietzsche, is a reward for dutiful sacrifices on the altar of common good; “We must ourselves, along with other people, have risked what is dearest to us, only this binds us firmly to the state, we must have the happiness of posterity in mind, in order to take the proper, natural interest in institutions and in their alteration” (Nietzsche 1995:245).¹³

This phrase in Nietzsche raises the issue of the many similarities between the Nietzsche and Thorstein Veblen, the founder of the US Institutional School of Economics. Two connecting points come to mind from the last phrase in the former paragraph: first of all, the active attitude towards institution building, and secondly the need to have ‘the happiness of posterity in mind’. In a similar vein Veblen’s term ‘parental bent’ signified Man’s ties to and obligations towards posterity. In Veblen’s system the ‘good’ production-capitalists had this trait as opposed to the ‘bad’ financial capitalists who were, at best, a necessary evil. The creative and constructive people, in Veblen’s case the engineers, are the carriers of salvation for both Nietzsche and Veblen.

In a parallel fashion, Veblen’s contempt for people making their living based on ‘vendibility’ clearly mirrors the perspectives of Nietzsche, and later of Sombart (Sombart 1915). In the Renaissance sprit, Veblen’s basic driving force in the economy is Man’s ‘idle curiosity’ which produces inventions that become innovations when they meet ‘workmanship’ and capital, and the duties and ‘drives’ he establishes for mankind are very similar to those of Benjamin Constant in the quote above. The connections between Nietzsche and Veblen seem to have caused even less academic interest than the connections between Nietzsche and Schumpeter. Of a selection of twelve biographies and works on Veblen, just four (Diggins 1978/1999, Tilman 1992, Eby 1998 and Jorgensen & Jorgensen 1999) seem to make references to Nietzsche, and all of them only peripherally and in passing, not connecting or comparing the analysis of the two authors. Veblen was interested in philosophical matters, his first publication was ‘Kant’s Critique of Judgement’ (Veblen1884/1934)

Going back to Nietzsche’s emphasis on the need to have risked something in order to properly qualify for citizenship, he clearly betrays his Classicist heritage in the sentence quoted above. Arguing here along the lines supported today by Raaflaub (1997), Ober (1996), Rahe (1994), and others, Nietzsche seemingly alludes to the birth of democracy with the ascension of Athenian rowers following the battle of Salamis. Politically alienated due to their material inability to participate in traditional hoplite battle – the martial progenitor of Western warfare characterized by high barriers to entry due to the high cost of bronze armaments (Hanson 2000) – the lower classes utilized their participation in the new naval activities as leverage in political disputes. The essential argument followed Nietzsche’s earlier statement in the empowerment of people actively making sacrifices for the good of the state. Accentuating the need for a higher morality to seriously pursue long-term socio-political goals, Nietzsche clearly belongs to the movement revolting against the hedonistic nature of post-Mandeville economics (see Mandeville 1714/1924).¹⁴ Nietzsche sees the need to sacrifice ‘what is dearest to us’ for the State, and he is conscious of the need to change and shape societies institutions. If we ask ourselves what Nietzsche means by ‘risking what is dearest to us’, risking one’s life comes to mind, but, specifically in Nietzsche’s case, it may be argued that what was dearest to him was ‘individuality’.

In this one crucial phrase, quoted above, Nietzsche thus distances himself from right-wing liberalists on two important points, both of which place him squarely in the German economic tradition against unmitigated economic liberalism. First of all institutions matter and need ‘proper, natural interest’, careful attention and conscious design: the economy does not create a ‘spontaneous order’. Secondly, people like Ayn Rand, who combine characters superficially similar to Nietzsche’s Übermensch with a hatred for the state and for collectivity, have completely missed Nietzsche’s point about the need both for heroic individualism and a solid state structure. As with the Athenian rowers, heroism could almost be seen as a precondition for the honor to participate in the affairs of the state.

In terms of economic policy, this follows in the footsteps of Friedrich List. While not being part of any ‘school’ of economics, List is still a luminary in the German tradition and the history of economic analysis. A precursor to the Historical School and the Verein für Socialpolitik, List’s writings were undoubtedly influential, laying the foundations for the late 19^th Century policies which spread industrialization to continental Europe. List’s emphasis was on organizing forces of production over accumulation of wealth, arguing that the power to produce wealth was infinitely more important than wealth itself (List 1909:109). His anthropocentric system was also quintessentially continental, in that it elevated the mind of Man to a position of primacy: “…all discoveries, inventions, improvements, perfections and exertions of all generations which have lived before us… form the mental capital of the present human race”(List 1909:113 discussed in Bell 1953:310). As we have already seen, this last term is also found in Nietzsche, a point to which we will get back.