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Adam Smith Triumphs in Germany

Mises Daily: Tuesday, March 20, 2012 by

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In this atmosphere deeply permeated with cameralism it is no wonder that Smith's Wealth of Nations made little headway at first in Germany. However, Britain had an important foothold in Germany, for the electorate of Hanover was a continental possession of the British dynasty in the heart of Prussia, and therefore this land was under strong British cultural influence. Hence the first German review of the Wealth of Nations appeared in the official journal of the University of Gottingen, in Hanover. The University of Gottingen had developed the most respected department of philosophy, history, and social science in Germany, and by the 1790s it had become a flourishing nucleus of Smithianism in the otherwise hostile German climate.[1]

Taking the lead in introducing Adam Smith into German thought was Friedrich Georg Sartorius, Freiherr von Waltershausen (1765–1828). Sartorius was born in Kassel and studied theology and history at the University of Gottingen. Soon Sartorius taught history at Gottingen, by the 1790s expanding his repertoire to courses in political science and economics. Sartorius published selections of Adam Smith's works, and his Handbuch der Staatswirthschaft (Berlin, 1796), was explicitly an economic textbook summarizing the views of Adam Smith. An expanded summary of Smith's work appeared a decade later as the Von den Elementen des National-Reichthums, und von der Staatswirthschaft, nach Adam Smith (Concerning the Elements of National Wealth and State Economy according to Adam Smith) (1806).

In the same year, however, there appeared another volume which set forth Sartorius's own views, as well as where they differed from the master: Abhandlungen, die Elemente des Nationalreichthums und die Staatswirthschaft (Essays on National Wealth and State Economy) (1806). Sartorius differs from Smith's odd value theory, and affirms that the main source of value is its use in consumption. The value of labor, too, is determined by its usefulness, and therefore it cannot serve as an invariable measure of value, and neither can money, since money prices are also subject to the changing interplay of supply and demand. Sartorius therefore finds Smith's labor theory of value "a strange and deceptive conclusion." Unfortunately, Sartorius's other main deviation from Smith is a great weakening of Smith's already shaky devotion to laissez-faire. Sartorius advised frequent interventions by the state.

Sartorius was one of a great quartet of professors who propagated Smithian doctrine in Germany. Another was Christian Jakob Kraus (1753–1807), a distinguished philosopher who was born in East Prussia and studied under Immanuel Kant at the University of Konigsberg, later becoming a close friend of Kant. Kraus took his doctorate at the University of Halle, but spent a formative year at Gottingen, where he imbibed a lasting interest in economics. After gaining his doctorate in 1780, Kraus became professor of practical philosophy and cameralia at the University of Konigsberg, where he taught not only philosophy, but also the Greek classics, history, English literature, and mathematics. By the early 1790s, however, Kraus's interests became entirely devoted to economics. Indeed, Kraus was one of the first persons in Germany to acclaim the Wealth of Nations, which he hailed as "the only true, great, beautiful, just, and beneficial system." Kraus greeted Adam Smith with none of the deviations or hesitations that had beset Sartorius; in fact, he trumpeted the Wealth of Nations as "certainly one of the most important and beneficial books that have ever been written." Kraus even dared to liken Smith's book to the New Testament: "certainly since the times of the New Testament no writing has had more beneficial results than this will have.…"

Curiously enough, for a German academic Kraus published very little during his lifetime. He was, however, a highly influential teacher; his lectures at Konigsberg were always crowded and he was considered the most important professor there with the exception of Kant. After his death, Kraus's friends published all his manuscript writings, the most important of which was Die Staatswirthschaft (5 vols, Konigsberg, 1808–11). The first four volumes of this work were essentially a paraphrase of Smith's Wealth of Nations, substituting Prussian for British examples.

The fifth volume of Die Staatswirthschaft was by far the most important, for there Kraus presented his own contribution to Smithian economics. Kraus addressed himself to Prussian economic policy, in lecture form. The volume was an incisive call for individualism, free markets, free trade, and a drastic reduction of government intervention. Kraus began with the fundamental insight that every individual wants to improve his lot. ("The desire and effort of each individual to improve his lot is the basis of all state economy, like the force of gravity in the universe.") But if men wish to improve their own lot, then government coercion, requiring certain actions or forbidding others, must necessarily cripple and distort such effort at improvement. For otherwise, why don't individuals do what government wants of their own accord, and without coercion? And since they don't wish to do so, they will seek means of evading the government mandates and prohibitions. In all these cases, and in stark contrast to the cameralists, Kraus puts himself in the point of view of the individuals in society subject to government edicts, and not in the point of view of the officials issuing the decrees.[2]

A charming memorial to Christian Kraus was set forth to a friend by the great statesman of reform, Baron Karl vom Stein (1757–1831). Stein said of his friend and adviser:

The whole province [Prussia] has gained in light and culture through him, his views forced their way into all parts of life, into the government and legislation. If he has set up no brilliant new ideas, he has at least been no glory-seeking sophist; to have presented the plain truth clearly and purely and correctly expressed, and to have communicated to thousands of auditors successfully, is a greater service than to arouse attention through chatter and paradoxes.… Kraus had an unassuming but genial personality, which laid strong hold on its environment, he had flashes of new insight, and great applications, and often astonished us by his unexpected conclusions.… Reading his writings, everything there is clear and simple, and at present you need nothing more.[3]

A third member of the Smithian professorial quadrumvirate in Germany was August Ferdinand Lueder (1760–1819). Lueder was also a product of the University of Gottingen, studying there, and becoming professor of philosophy. He was also a history professor and court councillor in Brunswick. Lueder had done a great deal of work in historical and geographical statistics, publishing the statistical compendia, Historische Portefeuille (Historical Portfolio) (1787–88), and Repositorium für Geschichte, Staatskunde und Politik (Repository for History, Statistics and Policy) (1802–5). But in the meantime, Lueder read Adam Smith and became an enthusiast, publishing a Smithian work in 1800–2 (Über Nationalindustrie und Staatswirthschaft) (On National Industry and State Economy). In addition to a compendium of Smith's views, Lueder provides an impassioned defense of freedom in all its social and political aspects, as well as in the strictly economic sphere. As Lueder wrote in another work, "I hazarded everything for freedom, truth and justice; for freedom of industry as well as of opinions, of hand as of spirit, of person as well as of property."

A fascinating aspect of August Lueder is that he was driven both by Smithian methodology and by his devotion to freedom to repudiate his beloved life work, the investigation into national statistics. For not only would statistics mislead government policy makers, but government planners could scarcely hope to plan at all without a raft of statistics at their command. Statistics is not only misleading, therefore; it becomes a necessary condition for the very government intervention which must be repudiated. Lueder leveled his criticisms in two volumes on statistics, Kritik der Statistik und Politik (Criticism of Statistics and State Policy) (1812) and Kritische Geschichte der Statistik (Critical History of Statistics). In the preface to his Kritik, Lueder wrote movingly:

On the strongest pillars and the firmest foundation the structure of statistics and policy seemed to me to rest. I had devoted the happiest hours of my life and the greatest part of my time to statistics and policy;… everything in me could not but revolt at the convictions which pressed upon me. But the current of the times flowed too swiftly. Ideas, which had entered my very marrow, had to be reviewed and exchanged for others; one prejudice after another had to be recognized as prejudice; more and more indefensible appeared one rotten prop after another, one rent and tear after the other; finally, to my no small terror, the whole structure of statistics collapsed and with it policy, which can accomplish nothing without statistics. As my insight grew and my viewpoint cleared, the fruits of statistics and policy appeared more and more frightful; all those hindrances which both threw in the path of industry, whereby not only welfare but culture and humanity were hindered; all those hindrances to the natural course of things; all those sacrifices brought to an unknown idol, called the welfare of the state or the commonweal, and bought with ridicule of all principles of philosophy, religion and sound common sense, at the cost of morality and virtue.[4]

With such perceptive insight into the evils of statistics and "policy," one shudders to think of Lueder's reaction to the current world, where statistics and policy, both then in their infancy, have spread and virtually conquered the earth.

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The fourth influential German Smithian academic was Ludwig Heinrich von Jakob (1759–1827). Jakob studied at Halle, and then taught at the University of Kharkov in the Ukraine. As a result, Jakob became a consultant to several commissions at St Petersburg, and helped spread Smithian economics to Russia. But for most of his life Jakob taught political economy and philosophy at the University of Halle, where like Christian Kraus, he combined Kant and Smith's individualism into an economic and philosophical whole. Like Kraus also, Jakob played an important advisory role in the liberal Stein–Hardenberg reforms in Prussia. His most important work was his Grundsätze der Nationalökonomie (Principles of Economics) (1805).

At any rate, under the influence of the quadrumvirate of Sartorius, Kraus, Lueder and Jakob, the Smithians rather rapidly took over one economics department after another from the older cameralists, who were pushed back where they more properly belonged, into the departments of law and administration. Smithian views also penetrated the civil service, and were responsible for the important failed liberal reforms, in the early 19th century, of Stein and Hardenberg in Prussia. Stein and Hardenberg, it should be added, had both studied at the University of Gottingen. In a little over a decade, Smithianism had triumphed over cameralism in Germany.

Notes

[1] The three most influential German universities of the day were those of Gottingen, Halle in nearby Prussia, and Leipzig.

[2] Thus, Christian Kraus writes,

Whenever it is a question of a law or an arrangement, by which men are to be brought either to do something which they previously did not do, or not to do something which they previously did, then, in the second case, the first question is why people did not cease of their own accord?… Then follows the second question: What will men attempt to do in order to evade the law which conflicts with their interests? Then the third question: How far will that which they undertake in order to evade the law succeed? In the case of the second and third questions many striking views will be gained, which would otherwise have quite escaped us, as soon as we put ourselves entirely in the position of these men and make their situation our own. What has here been said of ceasing to do is of even greater validity when it is a question of doing; that is, when men are to be brought (enticed or forced) by laws or arrangements to do something which they previously did not want to do.

Quoted in Carl William Hasek, The Introduction of Adam Smith's Doctrines Into Germany (New York: Columbia University, 1925), p. 89n.

[3] Quoted in ibid., p. 93.

[4] Cited in ibid., p. 83.