Abstract

The Relations between Eonomic Policy and Economic Theory

The discussions in Germany about the revaluation of the DM give reason for examining the relations between economic policy and economic theory. The discussions about a revaluation of the Deutsche Mark are an example that policymakers ignore an almost unanimous advise of economists. This example seems to demonstrate that economic science is welcomed when it renders the foundations of the ruling proposals of policy, but on the other hand economists will be reminded of scientific objectivity and reserve if political consequences from economic theory run against the opinion of politicians. So there is some reason to believe that the weight of economic theory in political reality depends more upon the balance of political pressure groups and ruling opinions in the political sphere than upon scientific objectivity and reserve. The author’s analysis starts with a review of the history of economic theory and its political background. The titles of the works of classical economic theory indicate that economic science means “political economy”. But the further development seems to indicate, too, that there is some tendency to “pure economic theory”. Economic science turns from analysis of economic reality to analysis of an economic system based on personal freedom and international free trade, thus “backing Britain” and its economic interests as the first industrializing country. Against this philosophy Friedrich List developed the “educational customs argument” in order to protect the young German industry against the strong competition of British goods. Modern theory of economic growth is only the second part of the classical equilibrium theory interested in a stable growth path - created by the forces of a free market economy. The single stages of development of modern growth theory also seem to indicate a narrow connection with political questions. They concentrate on the problem, whether or not a high rate of investment and some sort of “new deal policy” is necessary to compete successfully in economic fields with the Soviet Union. The study ends with some critical remarks upon the actual German growth policy based on the concept of “medium term economic policy” (mittelfristige Wirtschaftspolitik).