3

Schumpeter and Weber:

Unternehmer-geist and leitender Geist between Freedom and Necessity

The Law of Value as reformulated in the new marginal utility theory of the Neoclassical Revolution represents the scientific specification by political economy of the market price mechanism as the optimal system for allocating existing scarce resources according to individual choices. The machinery of production, the technologies adopted in the process of production, is determined independently of the system of needs and wants that demands its rational and systematic utilization through bureaucratic rule so that its technically-determined output or supply can be maximized to satisfy the individual choices as fixed by the capitalist market price mechanism aimed at profit.

The nature of the matter (das Wesen der Sache) for the Economics is that it needs to determine precisely from the standpoint of the individuals self-interest the individual contribution to the production of goods for final consumption (in Schumpeters words quoted below, the community has occasion to become conscious of the economic value of its members to itself), which is what interests the individual ultimately, and what determines the value and distribution or allocation of privately-owned social resources between individuals in society:

Another application of this theory [marginal utility] is the next step to

a height from which a wide view into the innermost working of an economy

is gained. Means of production are also complementary goods. But

[171] their values are not directly determined: we value them only because

they somehow or other lead to consumers' goods, and their value can thus,

from the point of view of the subjective theory of value, be derived only from

the value of these consumers' goods. But many factors of production are always

involved in the production of a single consumers' good, and their productive

contributions are seemingly indistinguishably intermixed. In fact, before Menger,

one economist after another thought it impossible to speak of distinguishable

shares of the means of production in the value of the final product, with the

result that further progress seemed impossible along this route, and the idea of

subjective value appeared to be unusable. The theory of the value of complementary

commodities solves this seemingly hopeless problem. It enables us to speak of a

determinate 'productive contribution' (Wieser) of such means of

production and to find for each of them a uniquely determined

marginal utility, derived from its possibilities of productive applica-

tion that marginal utility which has become the basic concept of the modern

theory of distribution and the fundamental principle of our explanation of the

nature and magnitude of the incomes of economic groups.

(J. Schumpeter, Ten Great Economists, ch. on Bohm-Bawerk.)

As former professor of Political Economy, Weber was well aware of and versed in the new theories of the marginalist revolution propagated by the Austrian School against the Historismus of the old and new German Historical School. He had already published in 1904 a major critical review of the old School, when it was led by Roscher and Knies, criticizing heavily the logischen Probleme of its philo-Hegelian emanationism in which the economy was interpreted in the holistic and teleological perspective of the Volksgeist that denied the possibility of a scientific study of economic facts in isolation from other political and social phenomena. Weber would also have been perfectly aware that the central message of all bourgeois intellectual forces - most stridently advanced by the emerging Neoclassical Theory - was incessantly to denounce the futility or the impossibility of Socialism at this critical time of global conflict and in the face of the Bolshevik challenge and the spread of revolutionary worker movements in Europe.

Rational socialism cannot escape this beautifully closed chain of logic! Socialism can only amount to or end up in the identical system of production as capitalism, with only a lot more bureaucracy and a lot less free choice. At the very best, rational socialism could minimize the frictions of the market mechanism, its transaction costs and the negative effects of disturbances or exogenous shocks. At the worst, it would distort the free individual choices made by free labor by removing the ability of labor to determine freely the individual choices of workers, in such a way that bureaucracy would rule alone and would no longer be kept in check by private capitalism with its free market and free labour, through those conflictual and ir-reconcilable self-interests! Alternatively, were there to be no state bureaucracy, then free market capitalism would not be able to maintain the laws of free market competition that determine scientifically its optimal level of production for the satisfaction of individual needs and wants understood as self-interest.

(185) We now approach the last step of the stairway that takes us to

the top of Bohm-Bawerk's edifice . He was the first to realize fully

the significance of the length of the period of production in its two-fold aspect -

the aspect of productivity and that of the lapse of time.

He gave both aspects their exact content and their places in the

foundation of the system of marginal utility analysis.

Our proof shows further that, because only an agio on present

goods puts the relative demands of present and future into proper

(183) balance with one another, the values of present and future goods can-

not stand at par even in a socialist community, that the value phenom-

enon which is the basis of the rate of interest cannot be absent even

there, and hence demands the attention of a central planning board.

From this it follows that even in a socialist society workers cannot

simply receive their product, since workers producing present goods

produce less than those who are employed on the production of

future goods. Thus, whatever the community decides to do with

the quantity of goods corresponding to that value agio, it would

never accrue to the workers as a wage (but only as a profit) even

though it were divided equally among them. This could very well

have practical consequences whenever, for example, the community

had occasion to become conscious of the economic value of its mem-

bers to itself; in such a case it could assess the value of a worker

only at the discounted value of his productivity, and since all work-

ers equally able to work must obviously be evaluated equally, a

'surplus value' must even here emerge which would appear as an

income sui generis. (183)

Two corrections of the idea of exploita-

tion are now also in order: first, one can speak of 'exploitation' as a

cause of profit only in the sense in which such exploitation would

occur also in a socialist state; second, there is exploitation not only

of labor, but also of land. For moral and political judgment this is

of course irrelevant, since the socialist state would use its 'exploita-

tive gains' in a different way; but it is all the more important for

our insight into the nature of the matter.(183)

Socialism may well be able to remove some of the anarchical features of capitalism - which preserve in large part the individual choices of free labor. But it would do so at the cost of removing in large part that very free consumer choice and free labor that capitalism makes possible! In no way whatsoever could the Sozialismus prevent or abolish the separation, the Trennung, of the worker from the means of production the source of the Marxian alienation, of the ante litteram Lukacsian and Heideggerian loss of totality, reification and facticity , or still less remove profit, because these are technically necessary aspects of the efficient utilization of resources for the satisfaction of the system of conflicting and irreconcilable individual wants and needs!

There is not and there cannot be a capitalist economy and a socialist economy: these are only formal differences in ownership of the means of production that must give rise in any case to the separation of all workers, individually and collectively, from control over their work in favour of a technocratic bureaucracy for the sake of the paramount technical and rational efficiency of production and the paramount satisfaction of the system of needs and wants, of the iron cage! There can only be one Economics, one economic science: the time for Political Economy is past because politics cannot determine the rationally calculable technical efficiency of industrial production and its utilization of resources.

Theoretically more important, however, is the result - to use a terminology

that has become accepted in treatments of this topic that the rate of interest

is a purely economic and not a historical or legal concept.(ibid., p.183)

This is the task and the supreme achievement of capitalism as a mode of production based on free labor: - that it organizes rationally the factors of production, chief among them labor, for the maximization of individual utilities. Its ultimate aim is the efficient production of consumption goods, not just for the present but also for the future, in accordance with the conflicting subjective valuations (needs and wants) of self-interested individuals!

In applying this 'theory of imputation' (Wieser), which owes

to Bohm-Bawerk one of its most perfect formulations, we arrive at

the law of costs as a special case of the law of marginal utility. As a

consequence of the theory of imputation, the phenomenon of cost

becomes a reflex of subjective value, and the law of the equality of

the cost and the value of a product is derived from the theory of

value never in our science has there been a more beautifully closed

chain of logic.

But all this so far still refers only to the world of values. That

all of its forms express themselves also in the mechanism of the ex-

change economy can be shown only by a corresponding theory of

price. Bohm-Bawerk therefore turns to price theory, developing the

implications of the law of value for the behavior of buyers and

sellers, and his investigation culminates in that celebrated proposi-

[172] tion (for the case of bilateral competition) which has since become

'historic'.

All this is developed first for the situation with given quantities of

exchangeable commodities with the conclusion that, since the forces operating on the supply side of the market are the same as

those operating on the demand side, the old 'law of demand and

supply' turns out to be simply a corollary of the law of marginal

utility. This is then extended to the case of the formation of the

prices of commodities whose available quantities can be varied by

production.

In reviewing the theoretical masterpiece of his Viennese mentor, Die Positive Theorie des Kapitals, Schumpeter remarks first on the beautifully closed chain of logic of Bohm-Bawerks elaboration and extension of marginalist theory forgetting in the process that it was precisely the attempt by Karl Marx to close his system by trans-forming values into prices that had led Bohm-Bawerk to accuse the German theoretician of indulging in metaphysics in the appropriately named article The Close [Abschluss] of Karl Marxs System! Schumpeter is unable to see that the metaphysics of the socialist and Marxian labor theory of value have now become the metaphysics of neoclassical marginal utility! It is precisely Bohm-Bawerks attempt to identify and define a Law of Value that would allow him to close the subjective estimation of value with the objective manifestation of prices that lands him inexorably into the metaphysical trap that nullified Marxs own efforts in Volume Three of Das Kapital: for it is impossible, outside of meta-physics, to quantify mathematically what are inextricably social relations of production!

The Law of Value whether in its socialist or Marxian or Neoclassical form seeks to reconcile the respective inputs of the factors of production with their respective shares of income to homologate values and prices. But what distinguishes economics from engineering is precisely the element of individual, subjective choice in the specification of needs and wants! It is therefore im-possible to certify the scientific status of the capitalist market economy and, at the same time, to preserve its freedom, its Freiheit precisely the con-fusion, the closing of the system that Nietzsche had so devastatingly demolished with his critique of German Idealism, and Bohm-Bawerk in his Machian critique of Marxs Ab-schluss echoed by Weber in his polemic against the emanationism of Roscher and Knies.

Already in 1911, Schumpeter had celebrated at the very beginning of chapter two of the Theorie the advent of the Weberian Rationalisierung as the overcoming (Uberwindung) of metaphysics and the triumph of empirical science totally mis-comprehending yet again the Nietzschean connotations of the word as applied by Weber. What Schumpeter overlooks in his Machian exultance is the evident and dramatic conflict that Bohm-Bawerks theory contains and exudes! For behind Bohm-Bawerks scientistic and lucid exposition lies all the explosive conflict of capitalist society even at the level of market pricing according to consumer choice according to marginal utility or supply and demand! However much the different subjective valuations of goods on the market may be based on fair and equal exchange, the terrifying fact remains that the self-interests of the individual market agents are determined by the sheer violence of imposition of their subjective, egoistic choices and preferences!

The level of price is determined and limited by the level

of the subjective valuations of the two marginal pairs' - i.e .on the

one hand by the valuations of the 'last' buyer admitted to purchase [!]

and of the seller who is the 'most capable of exchanging' among the

ones already excluded from the exchange, and on the other hand by

the valuations of the seller 'least capable of exchanging' [!] among those

still admitted to the exchange and of the 'first' excluded buyer.

The full conflict and sheer violence of the market mechanism is made evident here in all its stark nakedness! It is futile to seek recourse to the beautifully closed logic of the Neoclassical theory reformulated by Bohm-Bawerk: the inescapable fact remains that even behind the most beautiful and elegant equations there is all the ineluctable conflict of what Weber will soon call with astonishing (Marxian!) insight the capitalist rational organisation of free labor under the regular discipline of the factory!

[F]or value to emerge, relative scarcity has to be added to utility. With the

aid of a distinction between want categories (or want directions)

and want intensities, and under careful consideration of the factor

of substitutability, Bohm-Bawerk arrives(in Menger's sense, and in

a way similar to Wieser's) at the law of decreasing marginal utility

with increasing 'coverage' of wants within each category - i.e. with

increasing quantities of the commodity in the possession [!] of an indi-

vidual. (169)

As Schumpeter quite uncritically reveals and concedes with this summation, this scientific-rational economic mechanism is still self-consciously dependent on the conflicting self-interests of individuals and on their historical or legal acquisition of possessions which determine both the relative scarcity of commodities as well as the increasing or decreasing quantities of commodities in their possession! It follows inexorably, by definition, that this conflict can never result in equilibrium and that contrary to what Schumpeter claims above it can never be a purely economic and not a historical or legal concept! Quite to the contrary, this economic concept and process must be guided and governed politically instead!

(The horrifying spiral of bourgeois possessive individualism descending from Hobbes to the scientific administration of terror in the Third Reich is traced masterfully by Hannah Arendt in The Origins of Totalitarianism [1949]. With unequalled perspicacity, Arendt then goes on to trace the historical process whereby the parallel transformation of the capillary bureaucratic administration of the most basic needs of social life (Webers phrase) arising out of the capitalist socialization turned into the Nazi and Stalinist nightmares of totalitarian control and terror in both the more advanced bourgeois civil society of Germany and the desolate peasant steppes of Russia. In her later study, On Revolution [1962], Arendt seeks to distinguish Hobbess commonwealth from Rousseaus volonte generale, for which the Frenchman was even tagged with the charge of plagiarizing the Englishman, in the sense that the latter is an introspective concept the bellum civium becomes the bellum psychologicum in which the external threat is the common enemy of selfishness that stands in the way of compassion or le salut public and therefore more akin to totalitarian ideologies. We have canvassed these matters thoroughly in our Civil Society and shall return to them in Part Four, but it may suffice here to observe that Arendt over-psychologises the nature of totalitarian movements at least in the initial stages of their seizure of political power. After all, however much Robespierres Terror may have leaned on Rousseaus political philosophy, this was certainly not the case with the Nazi dictatorship which, if anything, found its geistesgeschitlich avatar in Carl Schmitts unquestionably Hobbesian early jurisprudence of the totalitarian state. This palpable change in her attitude to Anglophone political theory as against its continental counterparts [though she rescues Montesquieu and properly chastises, in chapter 6, the charlatanry of twentieth century French philosophes] rhymes with Arendts anointment of the Founding Fathers of the American Constitution. Equally, Arendt absurdly oversimplifies as compassion with the poor and downtrodden and a prelude to Stalinism, Marxs entire analytical effort to develop a complex theory of social development in antithesis to the capitalist wage relation, especially in the Grundrisse.)

***************We intimated above that Weber will soon call this conflict the capitalist rational organisation of free labor, - but not yet! We have jumped too far ahead. This revealing re-formulation of the Problematik of rational Socialism indistinguishable from that of rational capitalism will not come out until Webers Vorbemerkungen to the Aufsatzen zur Religionssoziologie published in 1920, a Weberian terminus ad quem that we are tracing here. We need to retrace our steps and continue with our linear analysis of Webers political formulation of the Problematik of bureaucratic rule in 1917, when Parlament und Regierung is first published and then re-worked and extended in 1918 after the Bolshevik Revolution!

For the moment, after the publication of Schumpeters Theorie, Weber has discovered the one element in it that will help him reformulate his entire theory of bureaucratic rule most closely related to the rise of modern capitalism by seeking to integrate into it the Schumpeterian notions of the trans-formation mechanism (Ver-anderungs-mechanismus) that characterises capitalist development (Entwicklung): development understood as crisis, - not simply as evolution but as meta-morphosis, not simply as growth but as trans-crescence, as growth-through-crisis, as Nietzschean creative destruction (the concept appeared in Nietzsches Zarathustra long before Schumpeter made it popular). In this re-working and extending of his previous formulations dating back to the Ethik in 1904, Weber gives proof yet again of having grasped much more thoroughly than Schumpeter the powerful and unprecedented Nietzschean critique of Western thought and society, of its Kultur and Zivilisation, of its Politics and a fortiori of its political economy (see our Nietzscebuch, end of Part One, on his ontogeny of economic relations and categories in Western societies).

By the time Weber returns to the theorization of this transition, however, it is clear that it is no longer the inexorable powerof external goods that interests him, but rather the rational organization of modern industrial work under the pervasive aegis and control of machine-like bureaucratic rule, rational and systematic. What troubles Weber above all is the decisive leap forward of the Bolshevik Revolution and the possibility of its upsetting his seemingly inescapable fate of bureaucracy. The iron cage has now meta-morphosed from the simple secularization of the ascetic spirit of capitalism its glorification of labor to the dependence of the provision of the most basic needs of society on the rational organization of that labor. The Bolshevik Revolution of October 1917 has forced Weber to re-work and extend for publication in 1918 the original series of five articles that had appeared in the Frankfurter Zeitung between April and June 1917. If bureaucratization is the fate of human social development, if capitalism represents its closest relation and possibly its foundation, then the Bolshevik experiment needs to be understood and re-configured within Webers overall interpretative and methodological Entwurf (framework) so that its political impact can be anticipated and even neutralized. The Russian Revolution and its Leninist variant represent a quantum leap in the linear, scientific, rational and systematic Ordnung of bourgeois society. Specifically, precisely this vital element of conflict needs to be re-articulated and re-inserted organically within an overall theory of crisis and trans-formation of capitalist society and industry.

Weber understands that conflict is the very nature of the matter of Economics and that he needs to theorize and devise an institutional framework capable of capturing this conflict, to encapsulate it and turn the energy of its antagonism into the motor of development, the source of real dynamism of bourgeois society and of the modern nation-state. Of course, the political realities that need to be considered are the incipient and seemingly unstoppable democratization of governmental rule due to the irrepressible push on the part of the urban industrial proletariat for representation of their interests that are no longer mere individual interests but take on instead an organized form as class interests in the urgent instance with the formation of imponent and (sit venia verbo!) bureaucratic social democratic parties that reflect and even replicate the very rational organization of labor that characterizes the modern industrial work of the factory in modern capitalism.Whereas the static equilibrium scientific analysis of Neoclassical Theory describes wishfully the equivalence of these conflicting self-interests in the marketplace as indicated by prices, it fails to com-prehend, to grasp practically the process whereby this conflict can be mustered and governed! There may well be no exploitation in the marginalist view of economics: certainly, there is no inter esse or teleological reconciliation of economic antagonism. But just as certainly there is conflict because there is self-interest; there are wants that cannot be satisfied due to lack of provision, due to scarcity a scarcity induced and provoked by the very conflict of want and provision of the quantity of possessions, as Schumpeter put it earlier. And it is simply unscientific and irrational to believe that these conflicts, these self-interests can be in equilibrium! That they can be balanced without evolution, without development without crisis.

The static and trans-historical analysis of the ascetic origins of capitalism carried out in the Ethik , the scientific, value-neutral framework of Wirtschaft und Gesellschaft are no longer applicable to the highly specific reality of capitalist industry and the trans-formation it has effected through the Sozialisierung of the most basic needs of social life. This antiquated analytical framework has been superseded and dissolved just as completely as the old Protestant work ethic. (As the editor of Economy and Society, Gunther Roth, put it, with all its seemingly static typologies, the [p.XXXVI] work is a sociologist's world history, his way of reconstructing the paths of major civilizations. This is the principal reason why we are ignoring completely Webers sociological lexicon in this work.) To prove the point, if proof is needed, one need not do more than point to the profound upheavals of the Great War and the revolutionary workers movements spreading rapidly throughout Europe at this time! The question is: what ideal type of institutional structure can both reflect the conflictual and antagonistic reality of capitalist industry and its economy and muster the energy of this conflict to transform its existing static structures into the dynamic motor of capitalist and national development? In short, what institutional structures can capture and govern the class antagonism of modern capitalism and turn it into the dynamo of its development? The problem is one that invests not merely the reality, the experience of modern capitalism, but also the conceptual categories that can be used to com-prehend it: how can science, which involves a system of determinate concepts, com-prehend, under-stand (verstehen) dynamic, vital social processes that are by definition indeterminate and free? Can there be a dynamic science of capitalist development, or is this just an oxymoron, a contradictio in adjecto?

The central problem here for Weber as for Schumpeter will be to analyze and theorize the interplay of a science of Economics in determining an optimal process of production that is managed rationally and systematically with the Political resolution of the conflict over wants and provision that the process of production the machine is meant to serve! If indeed there is conflict between want and provision, then the process of production cannot stand still! It will have to be driven by this conflict and by the crises to which it will unquestionably give rise. This antithesis between static science and dynamic transformation, between objective factors that can be weighed, quantified, and subjective forces impossible to rationalize and calculate, had already occupied Weber in his Roscher und Knies and again in the Ethik both written and published between 1896 and 1904. It also became the central problematic for Schumpeter in a work first published seven years later in 1911 of which Weber must have been aware even because it cites him at the very beginning of chapter two!

Having only recently succeeded Karl Knies in the Chair of Political Economy at Heidelberg, Weber was quick and keen to tackle the methodological diatribe that had seen the emerging Austrian School of Economics riding high on the early acceptance of its marginal utility theory in Central European industrial capitalist circles pitted against the more established German Historical School of Roscher, Knies and Hildebrand and now led by Gustav Schmoller, also close to German industrial circles. In his review of the by then notoriously heated Methodenstreit, Weber cuts to the quick and singles out the central bone of contention between the two Schools around the issue of whether it is possible to reconcile idiosyncratic [or ideographic] freedom and rational calculation, nomothetic necessity and irrational individuality in social science, - whether it is possible to build such a social science methodically on the individual idiosyncratic inquiry in a manner that is consistent with sociological nomothetic measurement.

Intriguingly, Weber openly sides with the methodological individualism of the Austrian School, denying that any sociological categories can legitimately or logically abstract from the role of the individual in society against the emanationism of the Historical School that starts from broad idealistic concepts such as people or nation. Yet, as we are about to see, Webers apparent championing of individual freedom very soon veers in the direction of social necessity in such a way that, whilst he recognizes the ultimately irrational forces that motivate human action, that make it peculiar and subjective, as he does in the Ethik, he ultimately asserts the logical rationality of Neoclassical Theory basing himself on the historically specific characteristics of modern capitalist society and therefore also on the full legitimacy, and indeed the theoretical necessity, of the kind of scientific-logical approach to the Economics propounded by Menger and the Austrian School that would seem to contradict the very methodological individualism that was ostensibly its theoretical point of departure! We shall see soon enough that despite Webers truly astounding and profound insight into the differentia specifica of capitalism, that is, its ability to transform apparently irrational social relations into apparently rationally calculable ones which is the formal significance of the rationalisation this trans-formation is indeed only apparent once the ultimate significance of the Rationalisierung, its effectuality, is fully com-prehended. But Weber lacked the theoretical tools and his theorization was historically too precocious to enable him to formulate it adequately. With the consequence that his own articulation of his theoretical Entwurf led him to oscillate and vacillate between the poles of decisionist voluntarism and Neo-Kantin formalism.

***********

We open Schumpeters Theorie at the very start of chapter two:

The social process which rationalizes our life and thought has led us away

from the metaphysical treatment of social development and taught us to see

the possibility of an empirical treatment; but it has done its work so

imperfectly that we must be careful in dealing with the phenomenon itself,

still more with the concept with which we comprehend it, and most of all with

the word by which we designate the concept and whose associations may lead

us astray in all manner of directions. Closely connected with the metaphysical

preconception. is every search for a meaning of history. The same is true

of the postulate that a nation, a civilization, or even the whole of mankind must

show some kind of uniform unilinear development, as even such a matter-of-fact

mind as Roscher assumed (Schumpeter, Theorie, p.57)The footnote at rationalizes was expanded for the English translation and reads as follows:This is used in Max Webers sense. As the reader will see, rational and

empirical here mean, if not identical, yet cognate, things. They are equally

different from, and opposed to, metaphysical, which implies going beyond

the reach of both reason and facts, beyond the realm, that is, of science.

With some it has become a habit to use the word rational in much the same

sense as we do metaphysical. Hence some warning against misunderstanding

may not be out of place.Evident here is the maladroit manner and dis-comfort (not aided, and perhaps exacerbated, by the disjoint prose) with which Schumpeter approaches the question of the meaning of history. The Rationalisierung, which Schumpeter adopts from Weber, has made possible a scientific empirical treatment of social development (Entwicklung), but has done so only imperfectly, not to such a degree that we are able to free ourselves entirely of metaphysical concepts which is why we must be careful in dealing with the phenomenon [of Entwicklung] itself. Nevertheless, Schumpeter believes that it is possible to leave metaphysics behind and to focus on both reason and facts, and therefore on the realm of science. In true Machian empiricist fashion, Schumpeter completely fails to see the point that Weber was making in adopting the ante litteram Nietzschean concept of Rationalisierung to which he gave the name. The social process which rationalizes is an exquisitely Weberian expression: far from indicating that there is a rational science founded on reason and facts that can be opposed epistemologically and uncritically to a non-scientifc idealistic and metaphysical rationalism, Weber is saying what Nietzsche intended by the ex-ertion of the Will to Power as an ontological dimension of life and the world that imposes the rationalization of social processes and development in such a manner that they can be subjected to mathesis, to scientific control! What Weber posits as a practice, one that has clear Nietzschean onto-logical (philosophical) and onto-genetic (biological) origins, Schumpeter mistakes for an empirical and objective process that is rational and factual at once forgetting thus the very basis of Nietzsches and Webers critique of Roscher and the Historismus - certainly not that they are founded on metaphysics (!), but rather that they fail to question critically the necessarily meta-physical foundations of their value-systems, of their historical truth or meaning, of their scientificity!Far from positing a scientific-rational, ob-jective and empirical methodology from which Roscher and the German Historical School have diverged with their philo-Hegelian rationalist teleology, Nietzsche and Weber attack the foundations of any scientific study of the social process or social development that does not see it for what it is Rationalisierung, that is, rationalization of life and the world, the ex-pression and mani-festation of the Wille zur Macht! By contrast, Schumpeter believes that the mere abandonment of any linearity in the interpretation of history, of any progressus (as Nietzsche calls it), is sufficient to free his rational science from the pitfalls of metaphysics! But he would certainly have been enticed into this misapprehension by Webers own equivocal notion of ideal type (a Simmelian Form), which was intended to preserve the historicity of sociological inquiry by confining the reach of its categories to a specific situation (Simmels content) requiring the selection of specific means to achieve specific ends whence the distinction between Zweck-rationalitat and Wert-rationalitat (purpose and goal, Sein and Sollen, soul and forms, content and form, form and norm) - whilst simultaneously insisting within this limited historical domain on the scientificity or rational basis of the sociological procedure and methodology utilized for such selection.

Webers central failure was not that he mistook scientificity for science, for its corresponding practical conduct which mostly he did not! Webers failure was rather that his insistence on categorizing his scientific pursuit with the introduction of the ideal types distracted him from the fundamental question of how the Rationalisierung is possible! This failure led him to reify, to hypostatize the historical object of his studies into the scientific categories or forms that he presumed to adopt for that study ignoring thereby Nietzsches famous warning against systematizers! Essentially, Weber mis-interpreted (!) Nietzsches Umwertung (trans-valuation of all values) to mean that all values are interpretations of reality, and that therefore it is possible for the scientific observer of a given historical reality to select a hermeneutic code of interpretation (the ideal types) linking rationally the means available to its actors with the pro-jected ends that they may envisage. Yet, as Nietzsche would have promptly reminded Weber, this framework of analysis (Entwurf), this phenomenalism and relativism starts from the pre-supposition that such a rational code of interpretation is both possible and applicable which Nietzsche would vehemently deny on the ground that it is the very possibility and applicability of this rational code itself to a given historical reality its effectuality - that needs to be interpreted and explained as the mathesis universalis (Leibniz), as the rationalization of the world that is based on human needs, on the system of needs and wants! In Nietzsches own words,

It is our needs that interpret the world; our instincts and their impulses for and against, (Aphorism 481, Wille zur Macht).

Webers Neo-Kantian hypostatization not only of his sociology but above all of the scientific fields of knowledge to which he sought to apply it from economics, to law, to music is induced fatefully from this inability to com-prehend Nietzsches Umwertung, his thoroughgoing De-struktion (Heidegger) of Western metaphysics and science and the related critique of Western Kultur and Zivilisation. It should come as no surprise, then, that it remains suspended, as we noted earlier, between the Dezisionismus of charisma derived from the individualist relativism and the Neo-Kantian formalism of the ideal types necessitated by Webers need to ground this hermeneutic relativism on logico-mathematical hence, rational and systematic, scientific - bases. What Weber fails to com-prehend above all else is precisely the historical character of the metaphysical foundations of logico-mathematical rationality whose political origins Nietzsche had made all but evident.

A brilliant illustration of these points is provided by Norberto Bobbio who, in reviewing Kelsens attack on Webers theory of the State and sociology of law in Max Weber e Hans Kelsen (p.72), concedes that Webers Neo-Kantian or Simmelian formalism enticed him to his detriment into the Kelsenian Norms, but that at the same time Webers positivism was premised on the fact that capitalism represents a historically specific intensification of this positivization of the juridical norm, in line with its exasperation of the Rationalisierung (p.77) which would be theoretically a far more consistent and Nietzschean position for Weber to take. Commenting on Kelsens requirement that co-action be added to the definition of legal norm (the famous Grundnorm) so as to equiparate the concepts of Right with Law and therefore also with that of State, Bobbio goes on to reason (at p.71) that Webers notion of apparatus (bureaucracy) must be added to Kelsens co-action for this equiparation of Right, Law and State to have any historical effectuality! Bobbio then comes uncannily close (at p.76) to the central thesis of this study on the meaning of Rationalisierung, which we have enucleated in our Nietzschebuch and will illustrate more incisively in Parts Two and Three of this study on Weber. In a nutshell, Bobbio perceives without actually comprehending that the notion of Right or Law or the State requires the existence of appropriate "institutions" that "en-force" these abstract concepts and that indeed both enforcement and its requisite State apparatus are part and parcel of the conceptual content of the categories of Right, Law and State! The question that needs to be answered is how political enforcement can "crystallize" or "congeal" into abstract concepts and how abstract concepts "dis-solve" themselves into political institutions. This is what Nietzsche attempted by challenging the scientificity of Western science from the dawn of the bourgeois era, by exposing the immanent materiality of its scientific categories and laws whilst all others, including Marx, did not.Separately, by discussing Kelsens claim that his jurisprudence is intended to apply both to capitalist and to socialist States, Bobbio helps us highlight the link that we are about to trace in the following sections, dealing with the claim on the part of Neoclassical Theory to apply equally to both capitalist and socialist economies, between Neo-Kantism and Neoclassical Economics!

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Schumpeter is a contemporary of Weber, but he is also the heir of Mach. Through Weber he is linked to Nietzsche, but he is already too much under the spell of Machism fully to comprehend the significance of Nietzsche's radical critique of bourgeois society through the tracing of the completion (Heideggers Vollendung) of Western metaphysics into science. Schumpeter looks at capitalism through the "scientific" prism of Machian empiricism. The task of the "scientist" is not to look "beyond" or "behind" mere phenomena, it is not to discover substances or values behind events (Geschehen), but rather to find the simplest mathematical "con-nection" between them; it is to describe reality, not to explain it: indeed, description that is mathematically regular is or amounts to explanation. The task of science is to describe phenomena in the simplest and most "predictable" manner: simplex sigillum veri (simplicity is the seal of truth). (A discussion of Nietzsches vehement critique of the ontological assumptions behind Machian and Newtonian science is in our Nietzschebuch.) Just as Mengers theory of marginal utility does not inquire about the value of utility, its substance, its quidditas, relegating these matters to the realm of metaphysics, but relies instead on the observable behavior of individuals to formalize mathematically an Aristotelian logic of human economic action, so Machs philosophy of science does not question the empirical validity of Newtonian physics, its ability to predict real events by con-necting them by means of mathematical equations: what it questions is instead the cosmology of the Newtonian system, its reliance on absolute frames of reference to explain the cosmos, the uni-verse or reality (the res, the thing-iness of the Kantian thing-in-itself, the noumenon that pro-duces the empirical phenomena) that are dis-covered as the laws of nature. That is why Schumpeter never goes beyond the simple "observation" and "analysis" (literally, retrospective dissection) of the empirical behaviour of capitalist institutions and adopts uncritically the Machian presuppositions of his Viennese academic training:

According to this conception the purely economic plays only a passive role

in development. Pure economic laws describe a particular behavior of

economic agents, whose goal is to reach a static equilibrium and to re-establish

such a state after each disturbance. Pure economic laws are similar to the

laws of mechanics which tell us how bodies with mass behave under the

influence of any external "forces", but which do not describe the nature of

those "forces".

It shows [471] how the economy responds to changes in those conditions

coming from the outside. Therefore, in such a conception, pure economics almost

by definition excludes the phenomenon of a "development of the economy from

within".

It is the conception that there is an independent element in technical and

organizational progress, which carries its law of development in itself and

mainly rests on the progress of our knowledge. (Schumpeter, ch.7, Theorie)

In the Theorie der wirtschaftlichen Entwicklung, Schumpeter seeks to enucleate scientifically the mechanism of transformation that can account for the phenomenon of a development of the economy from within, that can elevate the capitalist economy from one level or Gravitationszentrum (centre of gravity) to another from one equi-librium to another. Granted that there is a system of forces that at any given time allow the economic system to operate and function, it may then be possible to define for that given moment in time an equilibrium state that does not explain why the economic system is in equilibrium but that may yet allow us to identify those forces that, when altered, caeteris paribus, determine a corresponding alteration in other forces affecting the system. An equi-librium is therefore a balance of forces whose nature we do not know but around which the economic system tends to gravitate. Equi-librium is literally a Gleich-gewicht, an equal weight, a balance of forces around which the economy gravitates: hence, for Schumpeter, economic equilibrium is not an eternally fixed mathematical identity, as it is for Walras, but rather a Gravitations-zentrum, a centre of gravity around which an economic system revolves but one from which this system may well move or diverge, in a direction that completely upsets and trans-forms the balance of forces and even the nature of the forces that determined the previous state of equilibrium, the previous centre of gravity!Unlike the waves of the ocean, the waves of the economy do not return

to the same level. They always tend to swing like a pendulum around a certain

level, but the level itself is not always the same. It is not just the observable facts

that change. The explanatory pattern, i.e. the ideal type, changes as well. Let us

grant that the first problem of economics was: how, based on its entire circumstances

of life, does a population reach a particular level of the economy? Then [466] the

second problem is the following: how does an economy make the transition from one

level-which itself was viewed as the final point and point of equilibrium-to another

level? This question takes us to the very essence of economic development

[wirtschaftliche Entwicklung]. (Schumpeter, TwE, ch.7, pp465-6)

But by insisting on the existence of a scientifically ascertainable centre of gravity for the capitalist economy and of its equally scientific mechanism of transformation, Schumpeter ends up oscillating between two untenable antinomic positions: - on one hand, the scientific hypothesis of the tendency of the economic system toward equilibrium (hence the notion of centre of gravity) or circular flow (Kreislauf); and on the other hand the historical experience of the proneness of the economy to grow and develop, to change from one ideal type to another an experience that is both empirical as well as necessary for the simple reason that an economy is and must be subject to historical transformation, but a transformation that is nevertheless impossible to formalize as a mechanism!

Equilibrium is either static or it is not an equi-librium at all! For the system to change, it must be subject to forces that are not the mathematical or mechanical ones of equilibrium. In short, dynamic equilibrium is a contradiction in terms! Schumpeter himself rightfully contends as much:

It follows from the entire outline of our line of reasoning that there is no such

thing as a dynamic equilibrium. Development, in its deepest character,

constitutes a disturbance of the existing static equilibrium and shows no

tendency at all to strive again for that or any other state of equilibrium.

Development has a tendency to move out of equilibrium. This is quite

different from what we could call organic development; it leads to quite

different pathways that lead somewhere else. If the economy does reach a new

state of equilibrium then this is achieved not by the motive forces of development,

but rather by a reaction against it. Other forces bring development to an end, and

by so doing create the first precondition for regaining a new equilibrium.

Actually, what happens first is that when a new development begins, there is again a new

disturbance in the equilibrium of the economy. Thus, development and

equilibrium in the sense that we have given these terms are therefore opposites,

the one excludes the other. Neither is the static economy being characterized by a

static equilibrium, nor is the dynamic economy characterized by a dynamic

equilibrium; an equilibrium can only exist at all in the one sense mentioned before.

The equilibrium of the economy is essentially a static one.`19And not only is the equilibrium of the economy essentially a static one, but it is also above all a stagnant one! Yet we know that one of the vital features of capitalist industry is precisely its ability to grow, to develop. It follows therefore that there must be some internal feature of capitalism that forces it to trans-cresce and that therefore constitutes its differentia specifica. Orthodox economic theory, both Classical and Neoclassical, treats the forces of development as essentially exogenous to the capitalist system of production:

It is the conception that there is an independent element in technical

and organizational progress, which carries its law of development in

itself and mainly rests on the progress of our knowledge, (Schumpeter, ibid.)Here Schumpeter seizes on the realization that in point of fact there can be no such independent element in technical and organizational progress and that both of these must be treated as part and parcel of the social relations of production, and not be attributed to an independent element, a purely mechanical and adventitious factor independent of what Weber styles capitalist economic action. It comes as no surprise, then, that because Schumpeter takes the economy and economics as objects or phenomena of scientific analysis that are separate and distinct from the rest of social reality, including those technical and organizational forces (!), he must then necessarily isolate them from the trans-formation mechanism of the capitalist economy! When Schumpeter looks for a "trans-formation mechanism" (Veranderungsmechanismus) to explain the "meta-morphosis" of capitalist industry - its "development, evolution and growth" (Entwicklung) he can find it only in a subjective, voluntary factor, something that closely resembles Webers own thesis of the spirit of capitalism (der Geist des Kapitalismus) expounded in the Ethik published in 1904, that is, only seven years before the publication of Schumpeters path-breaking Theorie!

Following Webers lead, Schumpeter finds the carrier (Trager) of the transformation mechanism, the driver of capitalist Entwicklung, (the expressions have a curious Hegelian-Marxist ring) in the "entrepreneurial spirit" (Unternehmer-geist) without noticing the contra-diction between "mechanism" and "spirit"! His search immediately contra-dicts itself because the factors of development, the forces that trans-form the economy, that buffet it from crisis to crisis and therefore elevate or lower it from level to level can quite evidently not themselves constitute a trans-formation mechanism! A mechanism will always be static because whatever factors cause it to develop must be endogenous and therefore, by definition, re-conducible to the existing definition of the system! An endogenous or internal mechanism of trans-formation would always be re-definable in terms of those equi-librium conditions that Schumpeters theory was supposed to confute and discard! There can be no freedom in a system of economic analysis or science. There can be no trans-formation in a mechanism- no internally-generated scientifically measurable development or growth from one equilibrium to another. And that is the exact reason why Schumpeter is unable to com-prehend in his theory the real subsumption of the technical and organizational processes, which he erroneously relegates to the Statik or exogenous components of the mechanism, within the social relations of capitalism itself, within the Dynamik of the system of needs and wants (Webers iron cage) that drives or pro-pels the modern industrial work or the lifeless machine of capitalist industry (the Simmelian Form) which in turn is guided by the capitalistic rational conduct of business the living machine (Simmels Soul).

One can almost feel the agony of Schumpeters theoretical contortions as he grapples and fumbles with these complex conceptual matters:

[490] Economic development is not an organic entity that forms a whole;

it rather consists of relatively separate partial developments that follow

one upon the other. Here we build on what has been said in the chapter on

crises. Accordingly, development of the economy occurs in a wavelike

fashion. Each of these waves has a life of its own.

With this we really get closer to reality. In particular, we win a clearer

insight into that peculiar jumble of conditioning and freedom, which

economic life shows us. The static circular flow and the static

phenomena of adaptation are dominated by a logic of things, while it is

completely irrelevant for the general problem of freedom of will,

nevertheless in practice - with fixed given social relationships - it leaves

as good as no maneuvering room for individual freedom of will. This can

be demonstrated and yet it was always a point of criticism, since the creative

work of the individual was so obviously visible. We know now that the

latter observation is correct. Yet, this observation does not contradict the

theorems of statics. We can precisely describe the place and function of this

work. Of course, in development the logic of things is not missing; and just as

one cannot demonstrate with the static conception the case for philosophical

determinism, one cannot maintain the case against it with the dynamic conception. But despite this we have shown that an element is present in the

economy, which cannot be explained by objective conditions and we have put

it in a precise relationship to those objective conditions.23 (Theorie, ch.7)

By identifying a subjective factor as the historical carrier (Trager) of the meta-morphosis of the capitalist economic system, of the trans-crescence of capitalist industry the entrepreneurial spirit and the process of innovation (Innovationsprozess) that it unleashes subjectively (!) on the scientifically and mathematically definable static equilibrium of the capitalist economy to move it from one centre of gravity to another, to transport it like a wave from one ocean level to another -, Schumpeter is also validating and sharpening Webers original thesis in the Ethik of the religious ascetic origins of capitalism in the entrepreneurial spirit.

But the reason for Schumpeters agonising ambi-valence and ambiguity over the dualism of freedom and necessity and his acquiescence in his own theoretical answer to it can be found once again in Ernst Mach's philosophy of science. The "empirical observation" of entrepreneurs in capitalist industry and their empirical connection to the provision of "finance" by "capitalists" is all that counts: both factors can be reconciled as parts of one mechanism" for the trans-formation of capitalist industry through "innovation" and "creative destruction". Just as in marginalist theory the axiomatic assumption of utility (a metaphysical notion at best, by Mengers own admission, an inscrutable Aristotelian entelechy) does not and cannot explain the determination of market prices, and yet the mere proof of a simple mathematical connection between individual prices and the axiomatically assumed marginal utilities of individuals is sufficient to prove the mathematical existence of an economic equilibrium and to found the new science of Neoclassical Economics, so now Schumpeter concludes that the empirical derivation by the "entrepreneur" of a "profit" from his "innovative leadership", from his "enterprise", combined with the existence of a pool of financial capital made available by capitalists is sufficient to establish the existence of a Mechanismus that trans-forms the capitalist economy. Indeed, the Unternehmer-Gewinn (the entrepreneurial profit) is the only "profit" that is worthy of the name for him. All other "profits", as the subtitle to the Theorie loudly suggests, are simply "interest" or rents charged by "capitalists" for advancing their "working capital" to the entrepreneur.

In other words, Schumpeter never even attempts to locate the source of "profits" beyond the mere "innovation process" of the entrepreneur, beyond the "reward" for his "enterprise". Schumpeter does not look at the "motive" behind the activity of the entrepreneur except to allude to a vague Nietzschean "will to conquer", to the simple "pleasure of success". Again, this failure is largely due to the fact that, unlike Weber, Schumpeter does not see the Rationalisierung as a political process but simply as a "scientific development", as the supersession of the Enlightenment notion of "progress", understood in a teleological or moral sense, and its replacement with the strictly empirical scientific principles of the Economics applicable to human organisation and industry.

Put differently, Schumpeter interprets "profits" as a function of and reward for the "entrepreneurial spirit". Yet he does not even suspect that it may be "profitability" that makes the "entrepreneurial spirit" a matter of life or death for every "capitalist", whether an entrepreneur or not!

*********The timeless mathematical scientific description of the capitalist economy clashes irremediably here with the living experience of its existence! This is a leitmotiv of the period that will preoccupy Wilhelmine culture from Nietzsche to Husserl, Lukacs and Heidegger that is to say, the Neo-Kantian dualism of knowledge and experience, of living spirit and objective process or machine, between Soul and Forms, and between Forms and content. Weber himself will mock the evident contra-diction between the scientific proof of capitalist collapse proffered in The Communist Manifesto with its prophecy of the inevitable advent of human socialist freedom applying thus the Nietzschean demolition of Western metaphysical transcendentalism and subjectivity, of the Freiheit that Webers initial formulation of the Rationalisierung in the Ethik and in Roscher und Knies had failed fully to comprehend but that what is one of our central theses in this piece he will begin to tackle seriously with the articulation of the interaction between the Political and the Economics in the triptych of 1917 to 1919 formed by Parlament und Regierung and the two Munich lectures, in the lecture on Der Sozialismus delivered in June 1918, and then finally with the Vorbermerkungen written in 1920.

The profound, almost absurd in-comprehension of this vital reality the overwhelming, conditioning necessity of the system of wants and needs and the social antagonism of the capitalist wage relation - on the part of Schumpeter, he himself exhibits in this blunt statement in the Theorie:

The leader personality never happens as a response to present or revealed needs.

The issue is always to obtrude the new, which until recently had been mocked or

rejected or had just remained unnoticed. Its acceptance is always a case of

compulsion being exercised on a reluctant mass, which is not really interested in

the new, and often does not even know [545] what it is all about.What we want to show now becomes obvious. The development of wants, which we

observe in reality, is a consequential creation of the economic development that

has already been present. It is not its motor. The fact that the human economy

has remained constant over centuries heavily weighs in favor of our argument. .

The amplification of needs is a consequence and symptom of development. Insofar as

truly new needs and desires exist they will not have a practical effect on the economy,

new needs and desires as such mean nothing. But even then, if there were an

original cause in the development of needs and desires, this would still require

creativity and energetic activity in order to create anything new of importance

It is at this fateful juncture that Weber takes his distance from Schumpeter, even as he obviously stands on the shoulders of the Austrians evolutionary problematic. For whilst he accepts that the economy can never be in equilibrium, Weber correctly rejects the proposition that in any case science could ever explain rationally the trans-crescence of the economic system, its Entwicklung. Weber rejects dismissively Schumpeters thesis that it is the entrepreneur with his creativity and energetic activity who is solely or even chiefly responsible for the meta-morphosis of the system and that new needs and desires as such mean nothing! To the Nietzschean Weber, this proposition would smack unacceptably of the jejune subjectivism and emanationism of the German Historical Schools Historismus of the Hegelian Providence (Weis-heit) and of the idolatry of Freiheit, the freedom of the will whose dialectical reconciliation in German Idealism leads to the freedom from the will of the Demokratisierung and its Socialist utopia, that triumph of the Individualitat against which Nietzsche had devoted much of his critical genius with devastating effect! It is this Individualitat, the personality of the entrepreneur that Weber could never entertain approvingly.

(The concept of freedom in German Idealism is canvassed with supreme mastery from the viewpoint of the negatives Denken by Heidegger in his Schellings Essence of Human Freedom. It is interesting to advert here to the incomprehension of Webers entire theoretical orientation on the part of those critics of all persuasions who wave his concept of charisma as conclusive evidence of a voluntaristic streak or subjectivism in Webers methodology, and the even greater incomprehension of those epigones who make charisma the central concept in Webers entire sociology! However much these quite erroneous views may be justified on the basis of the static typology contained in the Ethik and in Webers later classificatory efforts, it is very wide of the mark when it comes to his incisive reformulation of the Problematik of capitalism in his later writings. There is no charismatic voluntarism in this methodological stance, no Caesarism! There is only a coherent application of Nietzschean immanentist ontology of thought to the phenomenology of the social world. Nor is there any irrationalism in the post-Nietzschean De-struktion [Heideggers term] of the philosophia perennis and scientism of the Aufklarung and its German Idealist apotheosis.)

Not only does Weber realize with unmatchable acuity that the creative entrepreneur is not responsible for the phenomenon of capitalist development and the concomitant crises that it ineluctably inflicts on the economic system; but also and above all else he sees that the entrepreneur is responsible instead in a Nietzschean sense diametrically opposed to the one suggested by Schumpeter! For the entrepreneur can be merely the carrier of a trans-formation of the economy that must originate endogenously from its very foundations, from its ground that is to say, from its Wants and Provisions, from its system of needs and wants. But not as a mechanism of transformation such as Schumpeter had sought on the mistaken assumption that wants are static! On the contrary, it is the conflict inherent and intrinsic to the very notion of want and of self-interest that creates the objective con-ditions and circum-stances that allow the emergence of the entrepreneurial spirit, of his Will to Power at the very crest of this surging wave of conflict that transports with itself the entrepreneur and the rest of the capitalist economy and society! The nature of the matter, the essence of capitalism and of the Economics, must consist then in the historically novel and specific manner in which capitalism organizes this conflict! This signifies the end of Political Economy not only as the market-based mirage entertained by Neoclassical Theory of a rigorous science of Economics devoid of political conflict, but also as the utopia embraced by liberalism and socialism of a free public sphere of Politics devoid of economic antagonism.The personality that truly counts, the Individualitat that drives the system, the machine the motor of the mechanism of transformation that Schumpeter was so desperately seeking - is emphatically not the entrepreneur with his creative individuality causing the inertia of the system of needs and wants - the rentier capitalist, finance capital, trustified capitalism, the passive consumer - to change through the Innovationsprozess facilitated by the mechanism of capitalist financial institutions. A million times No! The real motor, the true spirit of capitalism (however soul-less it may have become now) is exactly and precisely that conflict inherent to the system of needs and wants, to the iron cage, that capitalism has freed, has unleashed, has vented and released by institutionalizing bureaucratically the rational organization of free labor! The most effective way to organize a society is to utilize its labor, intended as labor force or labor power, in a manner that responds rationally to the politically free specification of their conflicting needs and wants by the workers through the market mechanism (filter, osmosis, synthesis) so that these may be provided for most efficiently.

In regard to this point, Weber can detect now another major fallacy or oversight in Schumpeters limited and flawed analysis in the fact that the entrepreneur may well be the material functional carrier of trans-formations to the structure and orientation of enterprise, but that these trans-formations occasion profound shocks and crises that cannot be limited or confined to the economy alone, and that therefore require a form of mediation and governance of political responsibility! - that is absolutely inaccessible to the entrepreneur or indeed even to the bureaucracy! In fact, it is not merely the entrepreneurial function that loses its autonomy, its individuality under the iron law of socialization, but it is also that scientific research that becomes increasingly subsumed to the political needs and wants of the system rather than be dictated by the narrow needs of industry or the exogeneity of pure research. In other words, there may well be no scientifically ascertainable mechanism of development for the simple reason that scientific activity itself (!) has lost its autonomy from that rational organization of free labor that is capitalist enterprise.This is the more so, the freer that free labor becomes precisely by reason of its Demokratisierung and the constitution of the proletariat as a class (!) with its own socialist democratic political parties that defies and prongs the state bureaucracy out of its inertia, out of its myopic search for scientific equilibrium! It is no accident that the sub-title to Parlament und Regierung refers specifically to the binary interplay, the antithetical dualism between Parteienwesen (the nature of parties or party system) and Beamtentum (bureaucracy)! To be sure, Schumpeter himself had foreshadowed this problem during his discussion of his problematic in the quotations we selected above:

In other words, there is no true economic development, no development

emanating from the economy itself, but only development that conforms

to one pattern of imagination or does not conform to it. Yet, in any event

economic development brings about extraeconomic effects in the social

realm that have further repercussions within the economy. This kind of

development expresses itself everywhere in national life. (Schumpeter, ibidem)But in pointing to the personality and leadership of the entrepreneur, even within the confines of the Innovations-prozess, as the differentia specifica of capitalism, Schumpeter neglected these essential extraeconomic effects of modern capitalist industry and society that Weber is already theorizing from the standpoint of political sociology and that Keynes will start to dress up in economic garb after the Paris Conference of 1919: (a) the ineluctable presence of conflict in the relationship between market effective demand (or wants) and its provision through development and growth; (b) the problematic of bureaucratic-technical and scientific-technological capitalist organization of this irreducible and irrepressible conflict; and then (c) the articulation of the forms of political organization able to mediate the inevitable dis-equilibria and crises that development inevitably engenders so as to govern these effectively. This is the gigantic task that Weber would now tackle with his overall program or Entwurf of Parlamentarisierung for the effective Regierung of a re-constructed Germany (neu-geordneten Deutschland).

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