Political Economy Seminar

GA 341 — 31 July 1922, Dornach

First Seminar Discussion

Question: The Key Points appear to be logically self-contained, but the criterion of whether something is realistic or not cannot be found in them.

Rudolf Steiner: It would be particularly good if the friends would speak out more clearly on this point. You must bear in mind that political economy as such is actually a very young form of thinking, hardly a few centuries old, and that in the realm of economic life, everything up to the great utopians has actually taken place more or less instinctively. Nevertheless, these instinctive impulses that people had were something that became reality.

To gain a more precise understanding, consider the following. Today, people often say: What we can think about the economy actually arises from economic class antagonisms, but also from the economic mode of operation, and so on. I don't even want to look at the most extreme view, as Marx and his followers advocate. Even economics teachers who lean more towards the middle-class view speak of the fact that everything actually arises from the economic fundamentals as if by automatic necessity. Nevertheless, when people discuss the individual concrete things, it is the case that the concrete institutions that have come into being to produce today's economic life are nothing other than the results of medieval thinking itself, certainly in connection with the various realities. But just consider what form was given to the Roman concept of property, which was a purely legal category, and what was created economically through this concept. It can be seen that these things were not treated scientifically, but that the legal categories, which were already conceived economically as legal, had a formative effect. Now the mercantilists and so on have come, who were not creative people, who were theoretical people. For example, it may be said that the advisers of Emperor Justinian, who created the Code of the Corpus Juris, were much more creative people than the later teachers of political economy. These people actually created not only a Justinian Code in our present sense, but in the further course of medieval development we see the opposing impulses developing precisely on the basis of what was laid down in this Justinian legislation.

And so we have come to the new era, to people whose thinking is no longer creative in an economic sense, but only contemplative. This contemplation really begins with Ricardo. Take, for example, the law of diminishing returns. This is a law that is just right, but absolutely not in line with reality. For practice will continually show that, if all the factors that Ricardo took into account are taken into account, what he called the law of diminishing returns will indeed follow, but the moment more intensive cultivation techniques are introduced, this law is thwarted. It does not hold true in reality.

Take something else, something more trivial. Take Lassalle's “iron wage law”. I must confess that I feel it is a certain scientific carelessness that one still finds stated that this law has been “overcome”, because things do not prove true. The fact of the matter is this: from Lassalle's way of thinking and from the view that labor can be paid for, nothing more correct can follow than this iron wage law. It is so logically strict that one can say: If one thinks as Lassalle had to think, it is absolutely correct that no one has an interest in giving the worker more wages than are just necessary to enable him to make a living. He will not give him more, of course. But if he gives him less, the worker will wither away, and the one who pays the wages must atone for this. It is basically impossible to get by without theoretically admitting the iron wage law. Even within the proletariat itself, people say: the iron wage law is wrong, because it is not right that in recent decades wages have been maintained at a certain minimum, which would also be their maximum. Yes, but why is Lassalle's iron wage law wrong? If the conditions under which he formulated it had continued – I mean the conditions from 1860 to 1870 – if the economy had continued to be run under the purely liberalistic view, the iron wage law would have become reality with absolute correctness. This did not happen. A reversal of the liberalist economy took place and today the iron wage law is constantly being amended by making state laws that effect a correction of reality that would have emerged from the law.

So you see, a law can be right and yet not in line with reality. I don't know of anyone who was a greater thinker than Lassalle. He was just very one-sided. He was a very consistent thinker.

When you are confronted with a law of nature, you can see it. When you are confronted with a social law, you can also see it, but it is only valid as a certain current, and you can correct it. Insofar as our economy is based purely on free competition – and there is still a lot that is based only on free competition – the iron wage law is valid. But because it would be valid under these conditions, there must be corrections with social legislation, with a certain working hours and so on. If you give entrepreneurs a completely free hand, the iron wage law applies. Therefore, there can be no purely deductive method in economics. The inductive method is of no help at all. It has followed Zyjo Brentano. We can only observe the economic facts – she says – and then gradually ascend to the law. – Yes, we don't come to any creative thinking at all. This is the so-called newer political economy, which calls itself scientific. It actually just wants to be inductive. But you won't get anywhere with it.

In economics, you absolutely need a characterizing method that seeks to gain the concepts by starting from different points, holding them together, and allowing them to culminate in concepts. This gives you a specific concept. Since you can never see the full range of facts, but only have a certain amount of experience, it will probably be one-sided in a sense. Now go through the phenomena again with the concept and try to verify it. You will see that this is actually a modification. In this way, by characterizing, you arrive at a concept that you modify by verifying, and you then arrive at an economic view. You must work towards views.

I would now like to work out such a conception in the lectures of the National Economy Course by showing you what always intervenes in the formation of prices. The method in economics is a highly uncomfortable method because in reality it amounts to the fact that one must compose the concepts out of an infinite number of factors. They must work towards economic imaginations! Only with these can you make progress. When you have them and they come into contact with something, they modify themselves, whereas it is not easy to modify a fixed concept.

You know what is known as Gresham's Law: good money is chased away by bad. If bad, under-value money, money minted at below its face value, is in circulation somewhere, it drives out money with good fineness, and that then migrates to other countries. This law is also an inductive law, it is purely an empirical law. But this law is such that one must also say: It is valid only as long as one is unable to secure the significance of money. The moment you are able, through entrepreneurial spirit, to secure the right of money, it would be modified. It would not die out completely. There is no economic law that is not valid up to a certain point; but they are all modified. That is why we need the characterizing method. In natural science, we have the inductive method, which at most comes up to deductions. But in general, deductions are much less important in natural science than one might think. Only induction is of real significance here.

Then you have pure deductions, which are found in jurisprudence, for example. If you want to proceed inductively, you introduce something into jurisprudence that destroys it. If you introduce the psychological method into jurisprudence, you dissolve jurisprudence. In that case, every human being must be declared innocent. Perhaps these methods can be introduced into reality, but then they will lead to the undermining of the legal concept that exists. So it may well be justified, but it is no longer jurisprudence.

In economics, you cannot get by with deduction and induction. You could only get by with deduction if it were possible to give general rules to which reality itself would yield the cases. I will mention only those who want to proceed purely deductively, albeit with a main induction at the beginning. Oppenheimer, for example, puts a main induction of history at the top with his settlement cooperatives and deduces an entire social order from it. Well, many years ago, Oppenheimer was already the settlement man and said: Now that I have got the capital, we will establish the modern cultural colony! – I replied: Doctor, we will talk about it when it has been destroyed. It had to fail because it is impossible, within the general economy, to establish a small area that would enjoy its advantages through something else, so that it would be a parasite within the whole economic body. Such enterprises are always parasites. Until they have eaten enough from the others, they remain - but then they perish.

Thus, in economics, you can only characterize by thinking your way into the phenomena. This also arises from the cause, because in economics, one must continually work into the future on the basis of the past. And as one works into the future, human individualities with their abilities come into play, so that basically, in economics, one can do nothing but stand on the quivive. If one intervenes in practice, then one must be prepared to continually modify one's concepts. One is not dealing with substance that can be plastically formed, but with living human beings. And that is what makes political economy a special kind of science, because it must be imbued with reality.

Theoretically, you will easily be able to see this. You will say: It is then extremely inconvenient to work in economics. But I do not even want to accept that. Under certain circumstances, as long as you still stand on the point of view that you want to write dissertations, for example, you can gain a great deal by following the relevant literature of recent times on some subject and by comparing the individual views. Particularly in economics, there are the most incredible definitions. So just try to compile the definitions of capital from the various economics textbooks or even larger treatises! Try to put them in a row, eight or ten of them! One comes to mind right now: “Capital is the sum of the produced means of production.” I have to say, I don't understand why the adjective is there. The opposite: unproduced means of production – you could also think of something under that, for example, nature, so the soil, and that is what the person in question will mean. But then, of course, he is unable to somehow justify how the soil can be capitalized after all. It is capitalized after all. So there is actually no way out, and that is based on the fact that one has such concepts, one must seek them out and must try to somehow enrich them. The concepts are all too narrow.

If you think that the realistic will be difficult for you in these considerations, I would like to say: the realistic could actually be easy! You say that the “key points” are logically self-contained. They are not, neither the “key points” nor the other things! I must emphasize that I did not want to be purely economic, but social and economic. This, of course, conditions the whole style and attitude of these writings, so that they cannot be judged purely economically. At the most, only individual essays in the three-folding writings can be judged in this way. But I certainly do not find them logically self-contained, because I was careful enough to give only guidelines and examples or, in fact, only illustrations. I wanted to create an awareness of what can be achieved by someone managing a means of production only for as long as they can be present; then it must be handed over to someone who can manage it themselves. I can well imagine that what is to be achieved in this way could be achieved in a different way. I just wanted to give guidelines. I wanted to show that a way out can be found if this threefold structure is properly implemented, if spiritual life as such is actually liberated, if the legal system is placed on a democratic basis, and if economic life is based on the factual and technical, which can be represented in the associations. And I am convinced that in the economic sphere, the right thing will happen.

I say that the people who are in the association will find the right thing. I want to count on people, and that is the realistic thing to do. A treatise on the “concept of work” would have to be written in such a way that you really find the concept of work in the economic sense. This concept must be freed of everything about work that does not create value, and not just economic value. So that must be eliminated first. Of course, this only leads to one characteristic. And it is this characterizing method that is important. Of course, this must be said methodologically.

Question: To what extent is inspiration necessary for economic knowledge?

Rudolf Steiner: What is meant is that this inspiration, if one takes the matter seriously, is actually not that extraordinarily difficult. It is not a matter of finding supersensible facts, but of making inspiration effective in the economic field, so that it cannot be particularly difficult.

The way in which labor is limited would require me to show that a person can perform work without it having economic value. That is a truism. A person can exert himself terribly with talking, and yet no real economic value comes of it. Then I would show how labor, even when it begins to have an economic significance, is modified in its value. Let us assume that someone is a woodchopper and performs a labor that actually creates value, and someone is a cotton agent, has nothing to do with woodchopping, but gets nervous just from his work, so that every summer he spends a fortnight chopping wood in the mountains. Here the matter becomes more complicated, because the agent will certainly be able to utilize the chopped wood, and he will receive something for it. But you must not evaluate what he receives in the same way as you evaluate the woodcutter's work. You must assume that if he does not chop wood for 14 days in summer, he can work far less as an agent in winter. In this case, you have to consider the support he receives from this work. The economic value of the wood chopped by the cotton agent is the same as the value of the wood chopped by the woodchopper; but the economic effect of his work, which falls back on his activity, is now essentially different.

If the value of the agent's chopping wood lies in the fact that it has an effect on his agency, then I have to investigate whether it is also true where someone stands on a treadwheel and climbs from one step to another, thereby making himself thinner. This is an effort for him, but there is no effect on the national economy. It is true, but I have to distinguish here whether the person in question is a rentier or an entrepreneur. The latter becomes more efficient as an economic value creator.

You have to gradually work out the matter in a characterizing way and then, if you go on and on and on, you get a direct value of the work and an indirect, reflective value of the work. In this way you arrive at a characteristic of the concept of labor. With this you can go back again to the ordinary woodchopper and compare what the woodchopping of the cotton agent means in the economic process with that of the professional woodchopper. In this way you can go from one level to another and you have to look everywhere to see how the concept works. That is what I call realistic. They have to show how the work is realized in the most diverse areas of life. Like Goethe with the concept of the primal plant: he of course drew a diagram, but meant a continually changing one. Economic concepts must be subjected to constant metamorphoses in life. That is what I mean.

Of course, you won't have much luck with such concepts. Teachers today do not accept this; they want a definition. But I have not found that the concept of work has been clearly defined in economics. One should characterize it, not constantly speak negatively about it. In economic debates, for example, I have found that work cannot be decisive for the price because it varies among individuals according to their personal strength. Negative instances can be found. But the positive is missing, that one advances to characterizing work in such a way that it actually loses its original substantial character and gets its value from other positions in which it is placed. When one begins to characterize in this way, then the substance is lost; in the end one gets something that plays entirely within the economic structure.

Labor is the economic element that originally arises from real human effort, but which flows into the economic process and thereby acquires the most diverse economic value in the most diverse directions. One should speak of the processes that lead to the evaluation of labor in the most diverse directions.

Inspiration is based on the fact that one comes up with how to progress from one to the other. It depends a little on the spirit that one finds just the right examples.

Question: Isn't a generic term necessary after all? Even with the characterizing method, isn't there a need to place emphasis on the causes by which the observed effects came about?

Rudolf Steiner: As far as the matter of effects is concerned, I agree that one must return to the causes. But just as in certain fields of nature it is the case that one finds the causes only by starting from the effects, so it is even more the case in the field of economics that knowledge of the causes is of no help if it is not gained from the effects. For example, the tremendous effects of a war economy are there. If one did not know them as effects, one would not evaluate the cause at all. It is therefore important to acquire a certain sense of the quality of the effects in order to be able to ascend to the causes. Certainly, in practice one will have to ascend to the causes. But that is what economics is based on for the practical. You learn to evaluate the effects, and by seeing the aberrations of the effects, you come to know the causes and then improve the causes. It is of little use to just get to know the causes. You have to get to the causes in such a way that you can say: I know them by starting from the effects. - An insight of such tremendous significance as the language center in the left hemisphere is, is only recognized from the effects: lost language - left hemisphere paralyzed. You first recognize the effect. Then you are led to examine the matter at all. So this recursive method is necessary.

Question: I cannot look at everything from an economic point of view that has to do with art and religion or even sport. Some of it can be viewed from an economic point of view, but not the whole?

Rudolf Steiner: I drive through an area and find extraordinarily artistic buildings in this area - I am, of course, describing an utopia. This is not just an artistic view. These artistic buildings are only possible on the basis of a very specific economic situation. If I drive through an area where there are a great many art buildings, I will immediately get an idea of how it is managed. If, on the other hand, I drive through an area where even so-called beautiful buildings are tasteless, I will get an idea of the economic situation of the area in question. And if I find only utilitarian buildings, I will get an idea of the economic situation of the area in question. Where I find artistic buildings, I can conclude that higher wages are paid there than where I find no artistic buildings. I cannot imagine that anything could be considered uneconomical. Everything, even the most exalted things, must be considered economically. If an angel were to descend to earth today, he would either have to appear in a dream, in which case he would change nothing; but as soon as he appears to people while they are awake, he would intervene in economic life. He cannot do otherwise.

Objection: I admit that it can be viewed from an economic point of view – but only if you want to! But it can also be viewed from other points of view.

Rudolf Steiner: You are entering a circle. All that can be said is that it is necessary to base the consideration on the economic point of view for the time being. This has only a heuristic value, a value of research and investigation. But if you want to find an exhaustive, realistic political economy, you will not be able to avoid characterizing the economic effects from all sides. You have to characterize what influence it has on the economic life of an area, whether it has a hundred excellent painters or only ten. Otherwise it is hard to imagine that economic life can be encompassed. Otherwise I would not have insisted so strongly on this emphasis. Precisely by emphasizing it, you always end up with definitions that basically do not apply in some area, or that have to be stretched to breaking point. It is actually impossible to define the income that a person should have by pointing out, for example, that he is entitled to “what he produces himself”. There is even this definition: someone is entitled to what he produces himself. It seems quite nice to make such a definition. In a certain field it is correct. But the sewer cleaner could not do much with it. The point is that in economics one should not single out one phenomenon from the sum total of phenomena, but should go through the whole sum. One must be aware: I start thinking economically because I can help those who cannot do so. But one must also be aware that economic thinking must claim to be quite total, to be a very comprehensive kind of thinking. It is much easier to think in legal terms. Most economists think in very legal terms.

Question: Opinions on what is “normal” in economics are so divergent that it is impossible to know what is normal?

Rudolf Steiner: I have no desire to compete with these notions of “normal” and “abnormal”. There is a saying: there is only one health and countless illnesses. - I do not recognize that. Every person is healthy in their own way. People come and say: There is a heart patient who has this and that little defect, which should be cured. - I have often said: Leave the little defect to the person. — A doctor brought me a patient who had injured his nasal bone so badly that he now has a narrowed nasal passage and gets so little air. The doctor said, “That needs an operation, it's a terribly simple operation.” I said, “Don't do the operation!” He has a lung that is so constructed that he is not allowed to get more air; it is fortunate for him that he has a narrowed nasal passage. So he can live another ten years. If he had a normal nose, he would certainly be dead in three years. So I don't attach much importance to 'normal' and 'abnormal'. I only understand the most trivial things by them. I very often say: a normal citizen. Then people will understand what I mean.

The question is asked about the value of statistics.

Rudolf Steiner: It is true that statistics can be of great help. But the statistical method is applied externally today. Someone compiles a statistic about the increase in house values in a certain area and then about those in another area, and puts them side by side. But that is not good. It only becomes reliable when the processes themselves are examined. Then we shall know how to evaluate such a figure. For there may come a time when a series of figures is special simply because an extraordinary event has occurred in the series. ...

Question: Does inspiration also occur when collecting numbers?

Rudolf Steiner: Inspiration also occurs in that when you have a series, a second series, a third, then you find out - now again through the spirit - which facts, if you look at them qualitatively, are modified in the first series by corresponding facts, say in the third series. As a result, certain numerical values may cancel each other out. In the historical method, I call this the symptomatological consideration. One must have the possibility to evaluate the facts and, if necessary, to weigh the contradictory facts correctly against each other.

Economics in particular is sometimes practiced in an extremely unobjective way. One has the feeling that statistics are handled in such a way that, for example, the balance sheets of the finance ministers of the various countries are drawn up from a party-political point of view. Where one wants to prove a certain party line, the numerical data is actually used, which can just as easily prove another. There is no use other than to be impartial in one's soul. Something elementary and original comes into consideration. In all the science that deals with the human being - yes, even if you want to list a science that leads you to learn how to treat animals, to tame them - your concepts must prove to be modifiable. And this is even more true in economics. That is where inspiration comes in. You have to have that. Don't hold it against me if I say it dryly.

I am convinced that many more of today's students would have this inspiration – for it is not something that floats terribly in nebulous mystical heights – if it were not actually expelled from them at school, even at grammar school and secondary school. We have the task today, when we are at university, to remember what was driven out of us at grammar school in order to enter into a living practice of science. Today it is practiced terribly dead. It happened to me in a foreign country that I spoke with a number of economics lecturers. They said: When we want to visit our colleagues in Germany, they say: Yes, come, but not to my lecture, visit me at home! - Today one really needs an unbiased insight into these things. ... This economics has particularly declined recently. It is really all connected with the fact that people have lost this creativity of the spiritual. Today, people really have to be pushed in the face if they are to believe a fact.

Now you can read articles in the newspapers about the spiritual blockade in Germany. Of course, it has been there for a long time. If we want to deliver the magazine 'Das Goetheanum' to Germany today, we have to deliver it at a cost price of eighteen marks per copy! Think of the technical and medical journals! They are impossible to obtain. Think of the consequences for culture! This is also an economic issue. Germany is under an intellectual blockade. ... The withdrawal of these journals is directly what should lead to the dumbing down in Germany. ... In Germany it has an economic character, in Russia it has already taken on a state character, you can no longer read anything that is not sold by the Soviet government itself. People become a pure copy of the Soviet system. At best, you can smuggle a book here or there.

Question: Is it not useful when observing the economic effects not to start primarily from the statistics, but from the observation of the facts that are available?

Rudolf Steiner: This approach is needed even when consulting statistics. Statistics only enable us to prove things in figures. It is clear that if you come to Vienna now, you only need to walk the streets and gain experience. You only need to look at the apartments your acquaintances lived in ten years ago and those they live in now. And so on, piece by piece. You can make such observations of the most terrible kind. You can see for yourself that an entire middle class has been wiped out, which basically only lives – yes, because it has not yet died. It does not live economically, because if you see what it lives on, it is terrible. You will start from there, but the number can still be extremely important to you as proof.

You have to have a certain “nose” for it; because if you can prove things in figures, the numbers will in turn take you a little further. For example, the devaluation of the crown in Austria: it is indeed laughable how little the crown means today, but not any old value can be reduced without something being taken away from others. If you now look at the victims of the currency, they can be found among those whose pensions and similar income have been devalued. Here you can follow the calculation, and the strange thing is that the calculation could no longer be right for Austria today, let alone for Russia. Austria should have the right to devalue the crown even further, since everything has already been exhausted, and yet it does not explain the state bank default. Of course, this can only be achieved by the blockade that has been brought about in some way. The moment you lift this blockade, people will have to take very different measures. ...

Question: Can the state, as long as there is wealth, seize this wealth by increasing the money supply?

Rudolf Steiner: The state can certainly survive by increasing the money supply, but when the point is reached that the rent has been used up, if it is not artificially maintained, it could actually no longer survive economically, even if it continues to produce banknotes, because the further production of banknotes would lead to a doubling of the rent, which would lead to an increase into infinity. The state must increasingly shut itself off.

Question: Does the state not live off the economic capital itself, which is invested in the enterprises?

Rudolf Steiner: Yes, but off what is a pension in it.

Question: Yes, I mean, it sucks out the capital. The capital decreases?

Rudolf Steiner: To the extent that capital takes on the character of a pension. Because when the state absorbs it, it takes on that character. The state can certainly live, but it can no longer do economic work. That is no longer economics. It can only live off what has already been earned; it only draws on the old. It lives dead off the pension. In Austria, the point should have been reached long ago where the pension is dead. In Germany, it is still a long way off. It certainly could not go on in Austria if certain laws of compulsion did not exist, for example with regard to rent. They actually pay nothing – I think about twenty-five cents for a three-room apartment. The only way things can be maintained is by having certain things for free. In Germany, it is also the case that you may only pay a tenth for your apartment. It is only because of such things that things can be maintained in a certain social class that can afford to pay up to that point. In Austria, a certain social class has deteriorated to such an extent that it can no longer even pay the twenty-five cents. People who had an income, let's say, of three thousand crowns could live on it under certain circumstances; today that is a little over an English shilling. No, you can't live on that!

Today, economic phenomena are so terrible that people might start to take notice and realize that we should actually study the economic laws in such a way that it would help in a practical way. This attempt failed in 1919; but at that time the amount of foreign currency was not as high as it is today.

We could address the question: What does economic thinking mean? - Then: How do you arrive at a concept of work in an economic sense? - And then it would be good if someone were to continue to discuss the terms that I have already used in their own sense, quite freely. It would also be good if someone tried to work out the concept of entrepreneurial capital: what pure entrepreneurial capital is. If you want to characterize entrepreneurial capital in terms of its concept, you have to contrast it precisely with mere bond capital.