Economics and Sociology:

The Contributions of Adolph Lowe

by Mathew Forstater
University of Missouri - Kansas City

 

    Adolph Lowe's plea for cooperation in the social sciences in his greatly overlooked and under-examined Economics and Sociology remained an important theme of his lifework for the next sixty years.  Even prior to
its publication, Lowe was immersed in such a tradition. He held the chair in Economic Theory and Sociology at Kiel University in the late twenties and early thirties.  His mentor, Franz Oppenheimer, held the chair in Sociology at Frankfurt, then Germany's sole full professorship in the discipline (Simmonds, 1978, p. 5).  Lowe would still
claim as late as 1965 that Oppenheimer's was the most comprehensive system der soziologie ever written(Lowe, 1965, p. 133).  At a time when the Historical school still dominated the discipline (and especially the academy), Lowe identified Oppenheimer as one of the few scholars in Germany with whom one could study [economic] theory in the classical and neo-classical meaning of the term (Lowe, 1959, p. 60). Oppenheimer and Lowe were later founding members of the editorial board of the American Journal of Economics and Sociology.  The Journal
continues to take Lowe's (1935) call for cooperation and constructive synthesis as its mission.

    Following Oppenheimer's tenure, the same Chair in Sociology at Frankfurt was held by Lowe's close friend and associate, sociologist Karl Mannheim.  Lowe himself had moved from Kiel to Frankfurt in 1931.  It
was, in fact, to Oppenheimer and Mannheim that Economics and Sociology was formally dedicated.  Lowe's reference in the dedication to those years in which the chair was occupied by Oppenheimer and Mannheim,
1919-39, as a period of constructive synthesis in the social sciences (1935, p. 5) recalls the fact that his influences, experiences, and intellectual environment were steeped in such collaboration.  Joint seminars were offered by Lowe and Mannheim, and their collaboration continued in exile after 1933, first in Switzerland, and then in England (Kettler, et al, 1984, 71-72, 81-82; Gansmann, 1998).  Lowe's work did not go unnoticed among sociologists.  No less a figure than Talcott Parsons wrote in his review of Economics and Sociology:

"Lowe successfully transcends the old dilemma which has plagued so much of the methodological discussion of these problems between, on the one hand, the dogmatic 'reification' of a system of individualistic, competitive economic theory on the classical model and, on the other hand, the tendency to repudiate theory altogether, which has been typical of the German historical school" (Parsons, 1937: 477)

    That the influence on Lowe of these collaborative efforts was not limited to this period is evidenced in the Preface to On Economic Knowledge, published in 1965, thirty years after Economics and Sociology.  After stating that his influences are too numerous to mention, Lowe names four individuals to whom he owes an intellectual debt which a lifetime is too short to pay(1977 [1965], p. ix).  In addition to Oppenheimer and Mannheim, a third sociologist is identified in this exclusive list: Lowe's colleague at the Graduate Faculty of Political and Social Science of the New School for Social Research during the forties and fifties, Alfred Schutz, the father of phenomenological sociology (on Lowe and Schutz, see Gurwitsch, 1969; Machlup, 1969; Nagel, 1969; Wagner, 1983; Forstater, 1997, 1999, 2000).  Lowe also had important professional and personal relations with a number of other important figures relevant to Economics and Sociology, including Max Horkheimer, F. A. Hayek, Joseph Schumpeter, and Michael Polanyi (on Lowe and Hayek see Hagemann, 1994; Ruhl, 1994; and Forstater, 1997, 1999, 2000; see the latter for Polanyi and Lowe as well).

    Limitations of time and space do not permit the details of these relations and their implications to be drawn out, nor can we catalogue the numerous prescient insights on a variety of topics from Economics and Sociology and Lowe's other relevant works.  Nor can we put into further historical context the development of Lowe's ideas and their relation to the ideas of others whom Lowe may not have cited, but whose work bears important relation to his own, e.g., C. Wright Mills, Jurgen Habermas, and Anthony Giddens.  These are all important and fascinating details that will have to wait for another time and forum!  Instead, the remainder of this essay will focus on a major theme of Lowe's 1935 book and its implications for the relation of the disciplines, and the relation of history and theory. (While some quotes in what follows are from some of Lowe's other works, the entire argument is contained in his 1935 book.)

    Economics and Sociology begins with Lowe lamenting recent developments in the social sciences and economics in particular: 

"Academic research in the social sciences and the practical application of their results are suffering to-day from a general defect for which even the greatest achievements within the special branches cannot compensate.  An excessive division of labour, a lack of synthetic co-operation between the various sections of social research more and more restrict the truth of any partial knowledge, the efficiency of any concrete action." (1935, p. 19)

"On the surface it looked a natural division of labour between the various social sciences, enforced by the widening range of research.  But in fact one particular branch, economics, usurped a growing preponderance.  This social superiority of economics was accompanied by a growing scientific autonomy.  During the last half century the economists tried to eject just those substantial elements of their doctrines that before linked economic research with political science, law, psychology, and history--striving after pure economics as an independent body of knowledge." (1935, p. 26)

While noting some of the areas in which it appeared economics and sociology are in collaboration, Lowe underlines the fact that in all of these cases, only the outworks of the two sciences are in contact with
one each other (1935, p. 32).  Sociology, Lowe writes, "renders the theoretical generalizations of economics more concrete and appropriate to individual cases.  But these generalizations themselves, the fundament of economic analysis, appear as an entirely independent body of knowledge, not requiring sociological research though certainly concerned with a particular section of society.  In fact, the majority of modern economic theorists deny any relevance of sociological investigations for their essential work; some of them even insist on the
a priori character of their generalizations.  In this they represent the tendency toward purification which has formalized economic theory." (1935, pp. 32-33).

As he put it in another paper written in the same period: The modern theory of choice and valuation claims to have disclosed the essence of economic activity, independently of the forms in which this activity manifests itself in space and time (1936, p. 18).  Thus Lowe embarked on an investigation of the autonomous and independent claims of pure economics (1935, p. 33).

    By the 1930s, Lowe came to reject the orthodox idea that universal economic laws exist.  At that time he began to explore the notion that economic theories are historically relative, their differences deriving primarily from the selection of data depicting structural features representing alternative historical economic systems. Conventional market generalizations described a very specific set of socio-historical circumstances; these generalizations were not applicable to modern industrial capitalism.

    Lowe focused on the laws that traditionally perform the theoretical role of providing stability in a liberal society using markets to organize its economic life: the laws of supply and demand.  In dissecting the laws of supply and demand, Lowe begins by distinguishing between behavior and motivation.  The determinacy and stability of traditional theory, Lowe stressed, depends on how buyers and sellers behave in response to price changes and how they behave in the face of excess demand or supply.

    This simple observation undermines the traditional association of individual free choice with market order under laissez-faire. Individuals are free to choose, yet they must choose to act in accord with the law of supply and demand for markets to function. Truly free choice, however, leaves behavioral outcomes indeterminate.  Lowe
(1935, pp. 51f.; 1951, pp. 405, 413) thus dispenses with the neoclassical idea that utility (or any subjective principle) can be the basis of economic theory.  Assuming free choice, behaviour guided by the utility principle cannot guarantee actions in accord with the laws of supply and demand.

    Behavioural stipulations require some objective principle.  Economic man performs this function for traditional theory.  Citing historical examples and drawing on the work of anthropologists, Lowe (1935, pp. 50f.; 1942, p. 436; 1951, p. 405) questioned whether economic man could provide a universal depiction of human nature.
Individual identity is complicated, contradictory, multifaceted, and socially constructed for Lowe. Individual decisions are the result of fragmentary experience and information, of speculation and hunches, and
... of communication with others (1965, pp. 16f., emphasis added).  Also, both buyers' preferences and sellers' incentives... give way to all sorts of personal, national, racial, and other discriminations (1951, pp.
413).  This contrasts sharply with the traditional view of economic man, which presents the economic subject as natural, universal, and coherent, and identity as fixed and asocial.  Lowe (1951, pp. 424ff.) rejects approaches that take the subjectivity of agents as given; rather, continuously changing social structure shapes and reshapes each participant's interpretation of market events.

    Lowe (1951, p. 409) recognizes that traditional economics treats behavior inconsistent with the economic man construct as a deviation from the normal case.  But he points out that acceptability of the construct depends on demonstrating that the normal case guarantees a determinate outcome.  This, Lowe argues, cannot in fact be demonstrated. Even if the profit motive is assumed, this does not assure conduct in accord with the laws of supply and demand.  It is simply not sufficient to describe motivations:

"Unfortunately, not even in a completely rational world, in the sense of one completely motivated by pecuniary considerations, would actions in accord with our law rise to the level of causal necessity Rather it has to be admitted that calculation of pecuniary gains often suggests behavior that sharply contradicts its propositions.  From all this we have to conclude that neither an understanding of human motives in general, nor the special criterion of the pecuniary motive, entitles us to predict any one course of action as the normal outcome of changes in demand or supply, or of variations in price." (1942, p.437)

    For Lowe, then, the laws of supply and demand have no claim to either causal necessity or statistical probability.  Neither free choice nor rationality guarantee any determinate outcome, much less behavior
consistent with the laws.  Under such circumstances, the laws can only
be understood as prescriptions or stability conditions.  In this sense
they constitute general rules of conduct regarding market behaviour, and
thus their usefulness for explanation or prediction depends on the
concatenation of factors that determine the resilience of the rules and
rule-following behaviour (1942, pp. 433, 446, 451; 1951, pp. 415f).

    The order-bestowing properties of the laws of supply and demand,
how-ever, are not unleashed when individual conduct conforms to the
behavioural stipulations of economic man; rather they arise from the
regular behavioural patterns that result from aggregating the individual
behaviours of all market participants (1935, pp. 60f.; 1951, pp. 41ff.).

    Each and every act of material provisioning entails a sequence of
subactivities requiring a chain of interlocking decisions.  For decisions
to interlock in this manner, market participants must be able to predict
the response of other participants to their own decisions or behaviour
(1942, pp. 439ff.; 1951, p. 412).  Otherwise, there will be no reason to
expect that one's actions will lead to the intended outcome.  There are,
however, no logical or psychological reasons why an individual should be
able to predict the decisions or behavior of all other market
participants (1942, pp. 443f.).   Moreover, while an objective social
rule might play a role in decreasing the instability resulting from
uncertainty, the radical subjectivism of the marginalist school has
deprived modern theory of any criterion by which a pattern of
interlocking choices can be distinguished from a sum of random choices
(1942, p. 445, original emphasis).20

    Behaviour consistent with the laws of supply and demand thus requires
not only that individuals intend to behave in conformity with the law,
but also that they expect others will do so (Lowe, 1969, pp. 180f.).
Paying careful attention to the impact of (historically changing)
socioeconomic structure on behavior and motivation, and the changing
limits upon and consequences of economic action under different
structural and institutional conditions, leads to conclusions quite
different from the neoclassical and the Austrian schools.  Even assuming
both a behavioral code in conformity with economic man and stabilizing
expectations, these can only secure the willingness to respond in a
manner conforming with the necessary conduct; if there is to be system
stability, the laws also require assurance concerning the ability of
market participants to respond as well.  In the first instance,
preconditions for this ability include certain rights (usually identified
with private property) regarding access to, and utilization and disposal
of, resources, the right to engage in contractual relations, and other
political and legal conditions associated with a society of free exchange
(1935, pp. 56f.).  The ability to respond also implies a high degree of
mobility.  This is especially significant on the supply side, where
producers must be able to increase supply when prices rise.

    A technical structure enabling quick response to changing market
conditions will also have a stabilizing effect on expectations, while a
structure that makes response difficult will be destabilizing.  The
faster the required adjustment can be carried out, the nearer to the
present are the relevant future dates, and the smaller the danger that
incalculable events will interfere (1951, p. 429).  This highlights an
essential feature of Lowe's analysis of expectations, and the main
flaw in many Keynesian and Austrian analyses of uncertainty: the
importance of socioeconomic and technological structures in shaping and
determining expectations.

    We can thus begin to comprehend how the same motivating force (the
profit principle) can express itself in diametrically opposed forms of
conduct, or how the same conduct can induce different responses by other
market participants.  The key for Lowe (1942, p. 456; 1951, pp. 420,
429) is the socioeconomic structures and institutional contexts that
prevail in a particular case.

    Dependence of the laws of supply and demand on such factors has
implications for the extent and substance of any changes in economic
structure that are possible without threatening breakdown of the
conditions for its operation.  Thus economic and social evolution not
only must exhibit regularity, it must exhibit regularity of a specific
type: regularity conforming to the requirements for the existence and
stability of the laws (1935, pp. 70-73, 92).

    Lowe (1935, p. 73) uncovers the sociological assumptions of the laws
of supply and demand, thereby defining the institutional setting for its
applicability.  These data are broadly identified as the behavioral code
of economic man and the institutional and technical environment
implicit in the concept of free competition. Thus, the probability of the
laws operation depends on the probability that such structural conditions
actually apply.

    Such a concatenation of structural features is more appropriate for
early capitalism than for modern industrial society (1935, p. 59).  This
does not mean that human nature in that early period is properly depicted
by the economic man construct.  Rather, Lowe (1942, p. 452) identifies
exogenous stabilizers that have historically compensated for whatever
deviations might threaten the stability of the system.  Large portions of
the population living at or near subsistence negate the need to either
assign particular psychological characteristics to human nature or
establish social pressures to behave in conformity with the credo of the
economic man.  In this case, a certain type of maximizing behaviour is
rooted in the pressures for survival (1951, p.414).

    At levels above subsistence greater discretion is possible, although
the profit principle may still be valid by determining upper and lower
levels of extravagance. Interestingly, Lowe (1951, p. 415) points out
that the range of individual deviation permitted under these
circumstances has no necessary relation to the system's ability to
tolerate those deviations, leading him to conclude that while occasional
breaches may be tolerated, the system will collapse before the exception
becomes the rule.

    Lowe places even more emphasis on the different technological
structures in early market society and modern capitalism.  Small-scale,
labor-intensive production, carried out by independent producers with low
fixed costs and operating at low levels of mechanization, makes for
greater mobility.  It therefore results in a high degree of adaptability
to price or quantity variations.  Large-scale, modern industrial
capitalism, with its huge fixed costs, capital-intensive methods and
rapidly changing technologies, is characterized by great immobility, and
thus an inability to make fast adjustments (1935, pp. 57ff., 87f., 109).
These differences in technical structure are at the root of a whole
series of social and institutional transformations: It has
transformed private property into monopoly, money into capital, money
incentive into the acquisitive drive, and the utopian possibility of a
moving equilibrium into the historical reality of the trade cycle (1935,
p. 128).

    Claims for the universal applicability of traditional theory must be
rejected, in so far as determinacy is guaranteed only under one very
definite and exceptional social order (1935, pp. 147f.).  Traditional
economics obtains its exactness and determinacy not by abstracting from
sociological and historical factors, but rather as a result of the narrow
limits of its applicability that follow from its underlying sociological
assumptions.  The laws of traditional economics
are not absent from reality because of their purity, but rather because
of their limited sociological, psychological and technical applicability
(1942, pp. 456f.).

    By his own account, up until Economics and Sociology, Lowe shared the
orthodox opinion that economic theory had to be a self-contained body of
generalizations, independent of socio-political considerations and valid
for all types of economic systems (1977 [1965], p. vii).
With Economics and Sociology, however, he abandoned this latter dogma and
began to realize that classical, neoclassical, and Marxian theories of
the market, not to mention later blueprints for a socialist economy,
depicted different forms of social and technical organization (ibid. n2).

    While the focus here has been on Lowe's deconstruction of the laws of
supply and demand, Economics and Sociology contains much, much more.  It
represents an early and almost completely unknown exposition of the
principle of cumulative causation; an important critique of the
long-period method; a novel interpretation of the history of economic
thought that would inspire Heilbroner's Worldly Philosophers; arguments
for interdisciplinary social science way ahead of its time; prescient
insights on matters that today would fall under the headings of
ecological economics and cultural studies; a theory of the business cycle
rooted in structural and technological change; and more.  As the fields
of Economic Sociology, Sociological Economics, and Economics and
Sociology all attract renewed interest, it will be worthwhile to make
this work, along with Lowe's other contributions, part of the required
reading.


Selected Bibliography of Lowe's works:

Lowe, Adolph, 1935: Economics and Sociology: A Plea for Cooperation in
the Social Sciences, London: George Allen & Unwin.

-----------------, 1936: Economic Analysis and Social Structure, The
Manchester School, 8, pp. 18-37.

-----------------, 1937: The Price of Liberty, London: Hogarth.

-----------------, 1942: A Reconsideration of the Law of Supply and
Demand, Social Research, 9, pp. 431-57.

-----------------, 1951: On the Mechanistic Approach in Economics, Social
Research, 18, 403-34.

-----------------, 1959: "F.A. Burchardt, Part I: Recollections of his
Work in Germany," Bulletin of the Institute of Statistics, 21, pp. 59-65.

-----------------, 1965: "In Memoriam: Franz Oppenheimer," Yearbook of
the Leo Baeck Institute, 10, pp. 137-49.

-----------------, 1977 [1965]: On Economic Knowledge: Toward a Science
of Political Economics, Enlarged Edition, Armonk: M. E. Sharpe.

-----------------, 1969: Economic Means and Social Ends, in R. L.
Heilbroner (ed.): Economic Means and Social Ends: Essays in Political
Economics, Englewood Cliffs: Prentice-Hall.

-----------------, 1976: The Path of Economic Growth, Cambridge:
Cambridge University Press.

-----------------, 1988: Has Freedom a Future? New York: Praeger.


Selected Bibliography of Works on Lowe by the author:

Forstater, Mathew, 1994: The Methodology of Lowe's Political Economics
and the Reconstruction of Classical Political Economy, Economie
Appliquee, Vol. 47.

----------------------, 1997: Adolph Lowe and the Austrians, Advances in
Austrian Economics, Volume 4.

----------------------, 1998: Imagining the Possibilities: The Dissent of
Adolph Lowe, in S. Pressman and R. Holt (eds.): Economics and its
Discontents, Cheltenham, U.K.: Edward Elgar.

----------------------, 1998: Institutionalist Approaches to Full
Employment Policies, Journal of Economic Issues, Vol. 32.

----------------------, 1999a: Lowe's Instrumental Analysis in P. OHara
(ed.):  Encyclopedia of Political Economy, London: Routledge.

----------------------, 1999b: Working Backwards: Instrumental Analysis
as a Policy Discovery Procedure, Review of Political Economy, Vol. 11,
No. 1.

----------------------, 1999: Phenomenological and
Interpretive-Structural Approaches to Economics and Sociology: Schutzian
Themes in Adolph Lowe's Political Economics, paper presented at History
of Economics Society session on Alfred Schutz and the Economists, Allied
Social Science Association Annual Meetings, New York, 1999.

----------------------, 2000: Adolph Lowe on Freedom, Education, and
Socialization, Review of Social Economy, Vol. LVIII, No. 2, June, pp.
199-213.

----------------------, forthcoming: Toward a New Instrumental
Macroeconomics: Adolph Lowe and Abba Lerner on Economic Method, History,
Theory, and Policy, in E. J. Nell (ed.): Functional Finance and Full
Employment, Cheltenham, U. K.: Edward Elgar.


Other works cited:

Gansmann, H., 1998: Economics and Sociology, in H. Hagemann and H. Kurz
(eds.): Political Economics in Retrospect, London: Edward Elgar.

Gurwitsch, Aron, 1969: Social Science and Natural Science: Methodological
Reflections on Lowe's On Economic Knowledge, in R. L. Heilbroner (ed.):
Economic Means and Social Ends, Englewood Cliffs: Prentice-Hall.

Hagemann, Harald, 1994: "Hayek and the Kiel School: Some Reflections on
the German Debate on Business Cycles in the late 1920s and Early 1930s,"
in M. Colonna and H. Hagemann (eds.): Money and Business Cycles: The
Economics of F. A. Hayek Volume I, London: Edward Elgar.

Heilbroner, Robert L.,(ed.), 1969: Economic Means and Social Ends,
Englewood Cliffs: Prentice-Hall.

Kettler, David, Volker Meja, and Nico Stehr, 1984: Karl Mannheim, New
York: Tavistock.

Machlup. Fritz, 1969: Positive and Normative Economics: An Analysis of
the Ideas, in R. L. Heilbroner (ed.): Economic Means and Social Ends,
Englewood Cliffs: Prentice-Hall.

Parsons, Talcott, 1937: "Book Review: Economics and Sociology by Adolf
Lowe," American Journal of Sociology, 43, pp. 477-81.

RFChl, Christof, 1994: The Transformation of Business Cycle Theory:
Hayek, Lucas, and A Change in the Notion of Equilibrium, in M. Colonna
and H. Hagemann (eds.): Money and Business Cycles: The Economics of F. A.
Hayek, Volume I, London: Edward Elgar.

Simmonds, A. P., 1978: Karl Mannheims Sociology of Knowledge, Oxford:
Oxford University Press.

Wagner, Helmut, 1983: Alfred Schutz: An Intellectual Biography, Chicago.

----

It is my pleasure to present the seventh guest editorial of the 1999-2000
school-year.   This editorial is contributed by Mathew Forstater,
Assistant Professor of Economics and Director, Center for Full Employment
and Price Stability, University of Missouri - Kansas City.  He is also a
Research Associate with the Jerome Levy Economics Institute of Bard
College.  His research interests include economic methodology, history of
economic thought, employment policy, macroeconomic policy, social policy,
and economic theory.  He received a B.A. (summa cum laude) in African
American Studies from Temple University and an M.A. (Honors) and Ph.D. in
Economics from the New School for Social Research.

        Jonathon E. Mote                      @
@  Department of Sociology               @
@  University of Pennsylvania           


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