Weber’s ‘Economic Sociology’

THE whole of the present volume in a sense constitutes the elaboration—although far from complete—of a system of ideal type theory. What may be called the key outline is, however, given in Chapter I. In Chapters II and III Weber turns to the elaboration of his analysis in two primary sectors of social life, what would ordinarily be called the economic and the political respectively. What he is essentially concerned with in both cases is a typological analysis of the institutional structuring of economic interests and activity, on the one hand, of political authority and its modes of exercise on the other.¹

As compared with the first chapter these two are much closer to specific empirical problems. Since some of the principal methodological issues raised by Weber’s procedure have already been discussed, attention may now be turned to the more empirical aspects of his work.

Undoubtedly by far the most systematic and comprehensive empirical investigation which Weber undertook was that of the relations of religious ideas and attitudes to economic activities and organization, the incomplete results of which are published in his three volumes on the Sociology of Religion. These studies, although of enormous comparative scope, were, however, specifically oriented to the problems of understanding certain of the crucial aspects of the social and economic order of the modern Western World.

In the course of these studies Weber had occasion to go very fully into the economic and political organization of the societies he was studying at their various stages of historical development. Moreover, he did not entirely confine himself to the aspects most immediately relevant to the problems of the role of religion. From this and other sources he had accumulated a vast store of factual knowledge and interpretations bearing on the economic and political development of the Western World which in his later years became ripe for systematization.

It should be remembered that the empirical material presented by Weber in these chapters was meant to be illustrative of the conceptual development, not a connected empirical analysis as such. This was reserved for the later part of the total work and was realized only in fragmentary fashion. There is, nevertheless, sufficient empirical discussion here to give a better conception of Weber’s approach to and treatment of comparative institutions and the understanding of modern Western society than any other of his works available in English, perhaps than any other of his works at all except Wirtschaft und Gesellschaft taken as a whole.

Weber begins the chapter by stating emphatically that what he is about to present is not in any sense ‘economic theory.’² In this he is undoubtedly correct—at no point does he attempt to develop an analysis of the process of price determination nor of the distribution of income through the play of market forces. What he presents is rather an account of the social, or perhaps better the institutional, structure of systems of economic activity and above all the ranges of variation to which this structure is subject. Economic theory as such is notably lacking in interest in the variability of institutional structure. It is, however, a fact of considerable importance that Weber, unlike many historical and institutional economists, shows a high level of comprehension of the nature of economic theory. His scheme is not, like that, for instance, of Veblen, meant to replace what has ordinarily been called economic theory, but to supplement it, to provide an account of certain ranges of the institutional data essential to it.

Weber’s whole treatment is dominated, as is all his work, by two deep underlying convictions which need to be brought out explicitly as they have much to do with the empirical fruitfulness of his analysis. Both contrast with the dominant tone of much of ‘economic’ thought.

The first is the conviction of the fundamental variability of social institutions. To him the institutional system of the modern Western World is not a ‘natural order’ which has come about by the mere process of removal of obstacles. It represents, in every fundamental respect, only one of several possible lines of social development. Other radically different structures, such as those found in the great oriental civilizations, are not ‘arrested stages’ in a development leading in the same direction, but are simply different. It follows that, at least in many of its principal aspects, our own situation is not to be explained by the operation of the most general factors common to the situation of all men, but by quite specific combinations of circumstances.

The second closely related conviction is that of the inherent instability of social structures. For Weber human society, and underlying that, the situation of human action and the character of humanly possible responses to that situation, are shot through with deep-seated tensions which make the maintenance of any given state of affairs precarious. This is particularly true of what for Weber would undoubtedly be among the ‘higher’ structures, those displaying a high level of rationalization. ‘Traditionalism’ represented for him by far the most stable social situation, but one which was undoubtedly thought of as ‘primitive’ or backward.³ This emphasis of Weber’s thought also contributes to lending his work a very different character from that most prominent in the work of the more orthodox traditions of economic thought.

In the present discussion it is out of the question to attempt to comment on the many detailed questions of particular concepts and empirical interpretation raised in this chapter, fascinating though many of these are—attention must rather be confined to the broadest lines.

Seen in these terms the chapter may, in addition to its directly theoretical character, be considered an analysis of the modern Western economic order seen in comparative perspective. The comparative perspective is used in the first place descriptively and structurally to bring out the distinctive features of our economy more sharply and to show its structural relations to others through various lines of continuity of variation. But Weber does not stop at the structural level. He goes on to analyse certain specific points of instability and strain and the corresponding tendencies to change in the structure—tendencies to transform it in the direction of quite different structural types—with the possibility of extremely far-reaching social and cultural consequences.

In dealing with the modern economy in this way Weber takes certain conditions, which are much more fully analysed in other parts of his work, for granted, or discusses them only incidentally. The first is that, to a high degree, it is a ‘rationalized’ economy in which its bearers orient their decisions to the rational weighing of utilities and costs in a context of relatively wide scope. Closely related to this is the assumption of a ‘mentality,’ a set of attitudes to economic activity relatively favourable to the functioning of such an economy. This consists, in a very broad sense, in the ‘spirit of capitalism’ which is so prominent in his sociology of religion. In part this involves a particularly favourable attitude toward, and ethical sanction of, acquisitive activity. But it must be strongly emphasized that this is only part of the picture. Besides that, and in fields of activity other than the acquisitive, it involves above all rationality—a receptive attitude toward new solutions of problems by contrast with traditionalism—the devotion to a task for its own sake without ulterior motives—what Weber calls the attitude of a ‘calling’—and readiness to fit into functionally specialized roles and be governed by universalistic standards.

Thirdly, there is the existence of a political organization and legal order of a particular type, namely the modern rational-legal state and a universalistic impartial legal system. These Weber discusses explicitly here more than the other factors. They will be mentioned here, but more fully discussed in relation to Weber’s ‘political sociology’ in the next section. Finally, there is a vaguer factor, which Weber does not discuss specifically very fully anywhere in his works. It is partly implied in his treatment of rationality and of the spirit of capitalism. This consists in the relative weakness, in the modern Western World, of such social ties as would seriously interfere with the mobility of resources (above all, human) which is essential to our economy. This is above all true of the more extended kinship ties found in so many societies, and of the solidarity of local communities and of various kinds of social status groups. These do not admit either of personally following out openings for occupational or economic opportunity, or of being treated, under pressure of circumstances or of authority, as an ‘instrument’ of such goals by others.

With these assumed conditions Weber centres his explicit analysis primarily upon two interdependent strategic sectors of the social structure of the modern economy, those impinging on the use of money and the structure of markets and relation of economic units to them on the one hand, those connected with the relations of ‘appropriation,’ that is of property, on the other.

Weber attributes enormous significance to the role of money. There are, in his treatment, three primary aspects of this importance. In the first place it obviously makes possible an enormous extension of the range of possible exchange relationships in that any particular transaction need involve only purchase of a good, service, or other economic advantage with money or its sale for money. ‘Indirect exchange’ is the basic phenomenon. The kind of economic system Weber is interested in can develop only in direct proportion to the extension of the area of possible money transactions. Exchange in kind, because of the necessity of finding a direct user for or supplier of the specific utility offered or desired is inherently extremely limited in scope.

Secondly, however, money not only facilitates exchange generally, but it in proportion even more strongly facilitates the ‘acquisitive’ orientation of economic activity. For without it acquisitive orientation is limited either to the things the actor desires for his own consumption, or for which he can secure a taker through barter exchange. Above all, orientation to the increase of money resources as an immediate goal of acquisitive activity introduces, as perhaps Aristotle was the first clearly to formulate, a qualitatively different factor into the situation. It is further important that money can become a measure of the success of acquisitive activity and a symbol of prestige.

Third, finally, the use of money has the extremely important consequence of introducing, into the qualitative heterogeneity of concrete, economically significant goods, services, and other advantages, a common denominator which makes it possible to compare them systematically and measure their economic significance. Above all it is a numerically quantitative common denominator, so that economic activity can become in general oriented to arithmetical calculation. This possibility enormously broadens the scope of rational planning in economic connexions. A ‘budget’ need no longer consist alone in the allocation of concrete resources, but can be based on a single money income. The varied activities and interests of a profit-making enterprise can be oriented to the single criterion of successful operation, the money balance of profit and loss during accounting periods. Perhaps this possibility of money accounting is the most decisive of the three consequences of the use of money for Weber’s particular interests.⁴

Closely related to the use of money, though not logically dependent on it, is Weber’s distinction of two fundamentally different modes of orientation of rational economic action.⁵ One is to the rational allocation of available resources as between the various uses to which they may be put by an individual or any sort of collectivity. This he calls ‘budgetary management’ (Haushalten). The other is the exploitation of opportunities for profit, that is of the increase of available resources, directly in exchange or through production for exchange. Though inherent in the structure of economic activity as such, this distinction becomes of great empirical importance only with the widespread use of money. To be sure, money makes a far higher degree of rationality in budgetary activity possible. But without it the difficulties in the way of ‘profit-making’ activity are so formidable that this can scarcely be said to be of important structural significance except in economies with widespread use of money and markets. Not only, however, is the development of profit-making dependent on the use of money, but one may say that a highly developed market system, along with the other institutional conditions that favour it, will almost inevitably give rise to a considerable development of profit-making enterprise.

This, it should be noted, Weber does not in the least attribute to any inherent propensity of human nature such as the ‘self-interest’ of many of the orthodox economists. Whatever the relevant elements of motivation on a psychological level, the factors Weber is interested in are on a different level, they are ‘structural.’ Throughout his work he continually emphasizes that the modern business man is not in the least exceptionally ‘acquisitively minded,’ that profit-making appears wherever the objective opportunity for it is given. What is characteristic of the modern economy is not in this particular connexion the attitudes, but the extent and peculiar character, of the opportunity. Furthermore, the people involved in many specifically non-capitalistic structures, such as the Indian village economy, are not a whit less ‘acquisitive’ than Western business men.

It is at this point that Weber introduces one of the fundamental elements of tension in the modern economy, what he calls the tension between the ‘formal’ and ‘substantive’ (materiel) rationality of the economy.⁶ By the unfamiliar term formal rationality he means the extent to which it is possible to carry through accurate rational calculation of the quantities involved in economic orientation of either of the above types, and hence to act upon the results of such calculation. By substantive rationality, on the other hand, he means the extent to which it is possible to secure what, according to a given system of values, is an adequate provision of a population with goods and services, and in the process remain in accord with the ethical requirements of the system of norms.

The tension arises from the fact that a high level of formal rationality can be attained only under certain specific substantive conditions, which are always in some important ways in conflict with the interests and moral sentiments implied in a high level of substantive rationality. Of these conditions Weber mentions three principal ones. In the first place, high formal rationality is dependent on a wide extension of market competition between autonomous economic units. The prices which are an essential basis of rational accounting are, as he says, not so much ‘claims to unspecified utilities’ without relation to the conflict relations of human beings, as they are ‘estimates of the chances of success’ in a situation of the conflict of interest with other competitors. The outcome of such a competitive conflict can never be guaranteed to be strictly in accord with the standards of substantive rationality.

Secondly, because of its enormous simplification of the goals and standards of success of economic activity, the highest degree of formal rationality takes the form of capital accounting. The thing Weber emphasizes immediately is the dependence of this in turn on the highest possible degree of ‘market freedom,’ that is of the absence of impingement on the market of economically irrational interests or influences, or of economically rational ones, which, like monopolies, by restricting market freedom interfere with the access of others to the conditions of high calculability. In addition, capital accounting implies, Weber notes, a high level and stability of discipline in the functioning of the enterprise, and stable relations of appropriation of all the important elements in the situation, materials, premises, equipment, labour, legal rights, and privileges, etc.⁷

Finally, third, it is not ‘need’ or ‘desire’ as such which influences the production and marketing of goods, but ‘effective demand.’ There is in the first place no guarantee that any given distribution of purchasing power is in accord with the standards of substantive rationality. This is true not only as between individuals but also between impersonally organized interests. For instance, so far as higher education and research are dependent on private support through gifts and endowment there would seem to be no reason to suppose that the relative funds available to institutions for this purpose at all accurately reflected the valuation of the goals in the society at large. Too many fortuitous circumstances influence their income. Furthermore there is reason to believe that the processes of a competitive market economy themselves influence the distribution of income in ways contrary to any given set of substantive standards, notably through the cumulative tendency to increasing inequality which operates unless control of it is more stringent than there seems any realistic possibility of attainment.

The tension operates reciprocally. The process of extension of formal rationality, and of the conditions underlying it, creates situations and stimulates types of action which in various ways come into conflict with whatever substantive norms there are in the society and the sentiments and symbols associated with them. As a result of this conflict there are at various points tendencies to ‘interference’ with the operation of the free market economy. Under relatively stable conditions these forces may be held in a state of relative balance, even though it be precarious, but under other conditions it is quite possible for the interfering tendencies to enter upon a cumulative development such as to lead to a far-reaching process of change, undermining many of the essential conditions of the market economy.

The specific tendency of this character, with which Weber seemed to be most preoccupied, was that of restriction of the area of autonomous market relations, with the corresponding system of competitively determined prices. Though it by no means stood alone in his thinking Weber tended to concentrate, in this connexion, on the implications of socialism in the technical economic connexion of proposals for a complete rationally planned economy. In this connexion it is important to distinguish between two levels of analysis which enter into Weber’s argument. He raises, on the most abstract economic level, the question of the theoretical possibility of fully rational allocation of the resources of a complex community by centralized planning, and comes to the conclusion that this is intrinsically impossible⁸ for two reasons. On the one hand, it could not be based on money calculations because a system of ‘assigned’ prices could not, for theoretical reasons, take the place of prices determined by actual market competition. They would have to be too highly arbitrary to base rational calculation upon. On the other hand, without an extensive system of money prices, calculation would have to be ‘in kind’ and there is no possibility of rational results in a complex economy because it involves reducing qualitatively heterogeneous elements to a common denominator, which could only be done by making arbitrary assumptions.

Weber wrote on this subject when analysis of this technical problem was in its beginnings, and the weight of the best contemporary opinion seems to be against him. But even if it were granted that he was wrong on this level, the theoretical possibility of rational allocation is far from being an empirical probability. It could become such only if certain very specific conditions were fulfilled, and Weber adduces much evidence to show that this is extremely unlikely.

It should be remembered that Weber held that the relatively high development of a market economy was precarious anyway. Hence even apart from the theoretical possibility of rational centralized allocation, it is quite reasonable to suppose that the absence of spontaneously determined (not necessarily ‘perfectly competitive’ in the technical sense) prices might well be enough to shift the balance of forces sufficiently to lead to quite other forms of economic organization. Weber felt this to be particularly true since the pressure of other tensions in the economy and the social system at large tend to work in the same direction.

These more ‘empirical’ difficulties in a rational planned economy may be summed up as follows: Perhaps the least important is the question of adequacy of knowledge in the hands of the planning authority. Undoubtedly in the ‘capitalistic’ economy many decisions have to be made on the basis of nothing more than shrewd guesses as to the state of affairs and probable consequences of projected action. But the provision of adequate information for such an authority is an enormous task. A more serious question concerns the adherence of the planning authority to fidelity to the standards of substantive rationality which are supposed to guide their decisions. Weber says it would have to be a standard of ultimate values. But in a complex society, which is necessarily also a changing society, there is never available, except for an extreme authoritarian form of crystallization which would have repercussions of its own, a completely consistent unambiguous formulation of these values which would be agreed to by everyone in the society. There are many different nuances and emphases which, moreover, always tend to get caught up in the many tensions and conflicts inherent in a complex society, which only a Utopian would expect to be eliminated entirely under socialism. Hence the planning authority would be under important pressure in two respects: Their own personal sentiments, through the operation of the conflicting currents upon them, could very well deviate importantly from those of other groups, or of the main trend, and they would be subject to pressures which, in despite of their personal sentiments, they were politically compelled to take account of. Furthermore any failure of important groups to be fully satisfied with their actions would lead to repercussions intensifying the conflict, and perhaps the deviation.

A third important field of limitation lies in the question of adequate enforceability of decisions once made. Under modern conditions this involves command over a highly complex administrative machinery, notably a bureaucratic organization. Bureaucratic organization, a subject to which Weber devoted much attention,⁹ is just as much a peculiar feature of modern Western society as is an extensive system of market prices, and depends on as unstable conditions, many of which are probably closely linked with those underlying the latter. But even with the highest standards of bureaucratic efficiency known, the question of its adequacy cannot be lightly dismissed. And the indirect repercussions of a great, and especially a relatively sudden, extension of its scale and scope may be of great importance.

Finally, the requisite calculability of human behaviour, all the way from the supreme authority down through the social structure, depends on many complex conditions, among them above all the relations of appropriation, and a relatively stable equilibrium in the important tensions of the society. The maintenance of property relations and of labour discipline cannot be taken for granted.

The main reason both for Weber’s and for the present editor’s raising the problem of socialistic economic planning is not to deliver a critique of socialism. It is rather a way of illuminating the fact that in Weber’s analysis a system of spontaneously determined prices has an important functional significance to the economy, and is in a certain sense, so long as it functions fairly well, a stabilizing factor. This is because competitive prices form a relatively fixed point of orientation for a wide variety of activities. They narrow the scope necessary for certain rational decisions all through the society while at the same time allowing a high degree of flexibility and freedom from traditionalistic fixation. This narrowing of the scope which it is necessary to include in rational calculations eases the pressure on rational action of the many ‘irrational’ forces which necessarily impinge upon it. But the structure which has this functional significance is itself relatively unstable. It is both subject to a great many relatively precarious conditions and itself a factor, in its relatively autonomous development, in intensifying certain of the tensions of the social situation. Weber on the whole accepts the views of the functions of a competitive price system current in ‘orthodox’ economic theory. But on this side of the problem he extends the perspective into considerations of considerably broader scope. The price system is one of the important foci of orientation for one of the prime characteristics of the modern Western social system as a whole, its ‘rationality.’ A serious disturbance of the conditions facilitating rational orientation in this area would have repercussions all through the complex system of rational activity in our society, in science, technology, law, and administration.

At the same time that Weber goes beyond the orthodox economists in analysing the functional significance of a price system, he also goes much farther in the analysis of the conditions on which it depends and in the exposure of points of instability inherent in those conditions.¹⁰, ¹¹

The second primary focus of Weber’s empirical attention in this chapter is on what he calls the conditions of ‘appropriation’ or in more usual terms the ‘property’ system. This constitutes a sociological rather than a legal analysis of property which, so far as the editor’s knowledge goes, is unique in the literature, both for its analytical penetration and its empirical significance.

In Chapter I¹² Weber defined the basic concept of ‘appropriation.’ Appropriation he treats as an aspect of the ‘closure’ of a social relationship, that is the exclusion of individuals from it, or their admission only upon specific conditions. A relationship is, on the other hand, ‘open’ when it is accessible to any individual who wishes to participate and who is factually in a position to do so.

One primary aspect of the closure of relationships in turn is the monopolization’ of ‘advantages’ (Chancen), that is of anything which is valued. Monopolization, however, is meaningless unless the advantages in question are in some sense and to some degree transferable, that is can constitute ‘possessions,’ the enjoyment of which might be given over to or appropriated by another. Such monopolized advantages may be freely accessible to the participants in the closed relationship, they may be made accessible subject to various forms of regulation or rationing and, finally they may be ‘appropriated’ by the participants, as individuals or as members of a participating unit.

As Weber treats it, a social relationship is closed only by virtue of the content of an ‘order’ to which the corresponding action is held subject, in the most important cases a legitimate order. The specific feature of appropriation as opposed to the other modes of access to advantages is that, according to the binding order, the individual (or other unit) has ‘rights’ of access which other members and the governing authority of the closed group must respect, so that rights thus recognized cannot be interfered with except under definite conditions.

Weber reserves the term ‘property’ for a particular class of appropriated rights, namely those which survive the individual lifetime, and are inheritable by a particular individual heir or other social unit, whether by testament, or by an automatic rule of succession. If alienable they constitute ‘free property.’

It should be noted that Weber does not approach the subject in terms of a classification of objects or things. The concrete content of appropriated rights may be anything, tangible or intangible, for which the individual or unit has one or more ‘uses,’ which has ‘utility.’ Moreover, it is not the concrete object, the ‘thing’ as such, tangible or intangible, which is the basis of the interest in appropriation, but the ‘use’ to which it can be put. Correspondingly it is not the ‘things’ which are appropriated, but rights in them. It is by no means impossible for a number of different individuals or units to have appropriated rights in the same concrete thing, such as a certain tract of land, at the same time.

A functional classification of the content of appropriated rights is, however, essential to Weber’s analysis. Economic utilities are, he says, of three classes, goods, services, and a residual category of objects of rights not fitting either of the other classes. This includes such intangibles as ‘good will’ and the advantages of participating in all manner of social relationships so far as these can be the object of economic orientation. Goods are physical objects of economic significance, and services the actions of human beings in the same context. Corresponding to this is a classification of objects of appropriated rights. The most important distinction Weber makes is that between the non-human and the human ‘means of production’ or, more broadly, sources of economic utility. Human means are sub-classified into two types, labour services and managerial functions. The concept of labour turns on the fulfilment of the specifications of others, that of managerial function on the co-ordination of the activities of others. Non-human means are classified roughly as natural resources, raw materials, premises, implements, saleable or consumable products, money funds, and a residual category of valuable rights and privileges. In all this there is nothing original, as Weber would be the first to admit.

With respect to all these classes, however, there is a range of possible variation in degree of appropriation relative to freedom of access and in the specific forms of appropriation found. Certain of these variations are of critical significance in terms of relative favourableness or unfavourableness to the functional needs of a free-market economy such as that of the modern Western World. The optimum combination from this point of view is given by Weber in the formula, the maximum full appropriation of rights over the non-human means of production by owners, and the complete lack of appropriation of rights over the human agents of production, that is ‘formally free’ labour.¹³ In so far as production is carried on in complex organizations, and not by isolated individuals, this implies the ‘expropriation’ of the workers from control of the means of production. It is interesting that Weber here points out that the ‘corporate’ system of recent times carries this out more fully than the classical individualistic capitalism of the nineteenth century in that it has gone far to abolish the appropriation of managerial functions by individual owners of the enterprise. Management tends to be appointed to a considerable extent on grounds of ability and competence.

This is, according to Weber, the essence of the modern property system, and a close approach to it is essential to a high degree of formal rationality of economic activity. Even to-day, however, there are a good many restrictions on it, and it is in a high degree of approach a very exceptional rather than a common combination. There are, to be sure, certain formal respects in which a system of unrestricted slave labour could be considered more favourable to high economic rationality and hence productivity than the present system. On empirical grounds, however, Weber argues that under almost all conditions this is not actually the case. These grounds include the additional investment of capital in human resources through purchase and maintenance of slaves, the exposure of slave property to all manner of economically irrational influences, the peculiar instability of the slave market, and uncertainty of recruitment of a slave labour force. A second class of factors concerns the relation of slave labour to particularistic Gemeinschaft ties, notably family ties. The permission of family relationships to slaves has greatly increased the cost of their use because their families have to be maintained, and has decreased mobility. Hence ‘the most complete exploitation of slave labour has been possible only when they were separated from family relationships and subjected to a ruthless discipline.’¹⁴ Finally, Weber notes that it is impossible, with slave labour, to exercise stringent selection according to efficiency, and to dismiss according to the fluctuations of the business situation. This would be theoretically possible if a perfectly mobile slave market existed, but there has never been any very close approach to such a condition. Weber’s conclusion is that the possibilities of a high level of economic rationality with the employment of slave labour are empirically very narrowly limited, far more so than is the case with the modern system of free labour.

There is a further aspect of the modern property system which is clearly implied in Weber’s treatment, but which he does not bring out explicitly nearly so clearly as these others. That is the separation of the economically significant aspect of the concrete objects of appropriation, goods, human means of production and others, from their other aspects. This is by no means generally the case. For instance under feudalism it was impossible simply to ‘own’ land in the modern sense. The holder of a fief was, in the German terms, not merely a Grundbesitzer but necessarily also a Grundherr. That is to say, what we treat as property rights, and political jurisdiction (in certain respects) were inseparable. It was impossible to have the one without the other. Perhaps the clearest point at which this important consideration comes out in Weber’s analysis is in his discussion, in a slightly different context, of the separation, in the modern economy, of the enterprise from the budgetary units of the owner or of others involved in its functioning.¹⁵ The profit-making enterprise is primarily of economic significance. A budgetary unit may be, but this is generally not the case. If it is a unit of final consumption (exclusively or in addition to productive functions) it is never the case, since by definition consumption cannot be carried on as such for economic ends. In general then, the budgetary unit is one in which its economic aspects tend to be inseparably bound up with elements, hence modes of orientation, other than the economic. Many of these are, as Weber points out, ‘irrational’ from the point of view of economic orientation, that is of rational economic calculation, and are hence disturbing elements in the economy. But this separation, which is functionally so important to the economy, cannot be carried out on a grand scale without institutional foundations in the definitions of the content of property rights, that is the legitimation of separate treatment of different aspects of human relations to the same concrete objects of appropriation. Among many other sources of its importance, a very important element of the essential mobility of the means of production depends on this separation being carried through to a high degree.¹⁶

In all three of these respects the modern system of appropriation is relatively unstable. Perhaps the most familiar tendencies in conflict with it are those in the direction of introducing limitations on the control and disposal of resources on the part of those responsible for their economic exploitation. One of the most familiar cases is that of land. Probably the commonest case is for land to be ‘tied up’ through mandatory hereditary succession in the hands of kinship groups or of village or other communities which are continuous from generation to generation. This means above all that land is inalienable, and this generally goes with traditional modes of use such that its use for other purposes encounters serious obstacles. One of the best-known examples was the necessity, in England in the eighteenth century, for something like the enclosure movement to break up the ‘open field system’ before a thoroughgoing reform of the technical procedures of agriculture could become possible.

In the clearest cases these limitations on the optimum economic use of a resource consist in a system of appropriated rights of others in the same resource. We think of the ‘vested interests’ of owners in the modern sense as a serious obstacle to changing the use to which resources are put—for instance to putting them in the service of socially more important ends. But even here through such procedures as eminent domain these resistances can relatively easily be broken down. But it is safe to say that a complex of appropriated rights, such as the feudal institutions of control of the land and its use, would present far more serious obstacles. Indeed any considerable weakening of the relative absoluteness of centralized control over resources given by modern ownership would with high probability result in a greatly increased rigidity of the economic system, and would favour traditional stereotyping of the modes of exploitation of resources.

There are many classes of persons and rights which may potentially challenge the fullness of control of ‘owners’ as those primarily responsible for economic use, over resources. Only one of these, but one particularly important for the present situation, consists in the workers involved in the same organized process of production. Weber has no difficulty in showing that, unlike the handicrafts and small peasant agriculture, the technical conditions of production in large organized units completely preclude the appropriation of the principal means of production by the individual worker. Centralized control over the process as a whole is functionally essential to efficiency, and this control cannot exist without what we consider property rights.¹⁷ But there is another possibility, namely that appropriation should be in the hands of an association of the workers. This would point to the system of ‘producers’ co-operation.’ Weber notes the fact that historically this is an exceedingly rare phenomenon. That is not to say that ‘communal’ appropriation by working groups as groups is unknown. Far from it—indeed this is the commonest form of agricultural village economy the world over. But these groups are not functionally specialized economic groups—they are all-inclusive covering all the most important areas of social interest. The social control system in one of these areas dovetails with that in others to give a strength to the structure as a whole which is out of the question in an economic group in the modern sense. Weber sees little possibility of producers’ co-operatives successfully taking over the functions of modern industrial management and control—an opinion with which the great majority of economists would agree.

Nevertheless there are, as Weber points out, important tendencies in the present situation for workers’ groups to appropriate important elements of control over the means of production. This above all touches the conditions of the contract of employment, and hence the power of selection in the hands of management. Weber felt that this tendency had serious potentialities of replacing selection on the basis of productive efficiency by essentially different criteria, such as loyalty to the union or usefulness to it as an organization. Undoubtedly the power of hiring and firing in the hands of management has often been used ‘arbitrarily’ according to criteria other than the productive efficiency of the worker. But it does not follow that limitations on this power imposed by workers’ organizations will predominantly limit only this ‘arbitrary’ area leaving the concern with productive efficiency essentially free of ‘abuses.’ By its reduction of the mobility of labour resources, and limiting of the area of free choice open to management, it can readily work in the direction of traditional stereotyping. The most essential thing here for Weber was the tendency he thought he saw to treat occupancy of the particular job, or group of jobs, as an appropriated right of the individual worker, or of the union.¹⁸

The converse of the tendency to appropriation of the non-human means of production by the workers is that to the appropriation of human means of production by ‘owners.’ The extreme is of course full slavery, but as is too well known to need comment, short of this there are very many different kinds and degrees of ‘unfreedom’ in the status of labour forces, and some form of unfree labour is, especially in the ‘higher’ civilizations, at least almost as much the rule as the exception. That it is not altogether incompatible with some of the variants of Western civilization in a broad sense is shown by its role in our own history, from the slavery of classical Antiquity through the various forms of medieval serfdom to the slavery of the more modern era in colonial areas and in the Southern United States. To be sure personal unfreedom, perhaps particularly in the labour relationship, is deeply repugnant to the moral sentiments of at least the ‘liberal’ part of modern Western society. But its possibility, which ought to be evident from its role in our history, has been dramatically brought to the fore again as a possibility of deliberate public policy in the treatment of ‘subject peoples’ by National Socialist Germany.

Quite apart from deliberate public policy, however, Weber’s analysis shows that the possibility is not as remote as many of us think. Perhaps his most important insight is that there is both a similarity of effect and an instrinsic connexion between appropriation of the means of production by workers and appropriation of workers by owners.¹⁹ As to effect, both tend to break down the mobility of economic resources, human and nonhuman, and to open the door to traditionalistic stereotyping of economic structures.

But any strong tendency to the one also creates conditions favourable to the development of the other. Perhaps the most fundamental reasons for this may be stated as follows: If the rights of control over non-human resources could be abstracted from social relationships of dependency it would be different. Thus if the worker works entirely or largely independently and has stable unproblematical marketing channels for his product there is no problem. But large-scale organization and the necessity for a wide market subject him necessarily to authority in the organization of production and to dependency on those who control access to markets. These two types of dependency are compatible with personal freedom only so far as they are associated with relatively stable expectancies, and are rather strictly limited in the scope of interests involved. Thus typically in our society it touches only the discipline of the working functions, and the conditions of the labour contract—wages, etc. But appropriation in important degree of rights to his job on the part of the worker increases the scope of his ‘stake’ in the job. Above all it is part of a more general tendency to rigidity in the system, and just as this appropriation makes it more difficult for the employer to deprive him of his status, it at the same time binds him more tightly to it—since it is more difficult to find other jobs.²⁰

Again, this would work to the ‘advantage’ of the worker if it were not for the continuing intrinsic significance of the two relations of dependency in which he stands. But with the continuance of a more permanent stable relation to his status, and a broader scope of interests bound up with it, there also grows a different order of obligations, which seen from another point of view tend to become rights in the hands of those upon whom he is dependent. Above all, if the employer cannot dismiss him except on very onerous conditions, it is likely to develop that the worker cannot leave except under more or less equally onerous conditions. In so far then as the ‘employer’ gains rights over the worker’s ‘personal freedom’ which are outside the limits of individual contract, the latter has fallen into an ‘unfree’ status, a stereotyped institutionalized dependency in place of the more or less definite factual dependency of being a formally free ‘wage slave.’

The only escape from this consequence would seem to lie either in a strength of the moral sentiments opposed to personal unfreedom which, apart from congruence with the realistic balance of social forces, is extremely unlikely to be maintained in the long run, or in the maintenance of a favourable balance of power on the worker’s side. But it would seem to be certain that this latter is possible only through the intervention of large-scale workers’ organizations, and probability then favours the development of dependent status within the organization and, probably, some kind of coalescence between the leadership of the workers’ organization and management. It does not solve the dilemma of the individual worker.

Though subject of course to quantitative differences of judgment, the essential point of Weber’s analysis of this problem is that too great depar- from the combination of relatively unrestricted rights to non-human property in the hands of those responsible for the organization of production, with relatively unrestricted personal freedom (i.e. exemption from being an object of property rights) on the part of the human factors in production, would, whatever end it started from, tend to lead to a state of affairs where restrictions on the ‘freedom of property’ would be likely to be combined with restrictions on personal freedom, with some form of system of unfree labour. What he envisaged was undoubtedly a traditionally stereotyped kind of economy where authority in the management of production was, as compared with the present, greatly restricted through traditional barriers, especially those arising from fusion of this authority with social interests of other than economic significance. At the same time, largely as a result of the same sort of fusions with non-economic elements, authority and conversely dependency, would be extended into areas which are now specifically exempted by our institutional patterns. Of course these tendencies are greatly strengthened by their relation to the strains inherent in a free market economy which have been discussed above.

The only essentially non-economic social structure with the impingement of which on the modern economic order Weber deals at all fully in this chapter is the political authority.²¹ A brief summary of the important problems he takes up here is in order. In the first place, as has been noted above, he lays great emphasis on the importance for a free market economy of a rational monetary system. As with all the other institutional prerequisites he discusses he shows that this is not something to be taken for granted. It is both shown by comparative study to be highly exceptional in history, and functionally to be dependent on relatively precarious conditions. Above all, writing in 1919 before the catastrophic stage of the German inflation was reached, Weber warned strongly that the pressures working toward an inflationary breakdown of the monetary system were exceedingly strong, far stronger than many of the monetary experts of the day, like G. F. Knapp, realized. These pressures he analysed primarily in terms of the interrelations of the state with the market economy.

The second factor on which Weber lays emphasis is that of a system of law which favours optimum calculability in economic relationships, both in the relations of economic enterprise to the state, and in the relations of private economic actors to each other, in commodity, money and labour markets, and in the general support of the sanctity of contracts. The analysis, however, of the factors on which such a legal system depends is not developed in this chapter, but is partly deferred to the next chapter, and still more to his treatment of the Sociology of Law.²²

The third phase of the impingement of the political structure on the economic which Weber takes up is the provision of such bodies with the economic means necessary to carry on their activities, what he calls ‘financing.’ Here again we find the same basic themes. The modern system of money taxation is highly exceptional in history. It is both dependent on a high development of a market economy, and has an important influence upon it. It is most appropriate to a type of organization of the state in which those who ‘make their living’ out of the activities of the state are primarily remunerated in the form of money salaries and where there is the same kind of separation between the sphere of ‘office’ and of private life that there is in ‘capitalistic’ economic organization. This implies the absence of appropriation, by the holders of political authority, of any rights to such authority independently of legitimate election or appointment. But such appropriation is exceedingly common historically and with it generally goes a quite different system of financing, by ‘benefices.’ These, according to Weber, are appropriated sources of income which the incumbent of the political status enjoys as a right. The tendency under this system is to attempt to secure the maximum control over these sources of income (in money or in kind) with the result of drastic restriction of the area of free market relationships. It is one of the main paths to the combination of economic with other aspects of a concrete system of action which leads to relations of personal dependency and the traditional stereotyping of the economic order.

Toward the end of the chapter²³ Weber sums up the principal institutional conditions of maximum ‘formal rationality’ of capital accounting, hence, with some qualification of rationalized economic systems generally. The most important are as follows: (I) Complete appropriation of all non-human means of production by owners and absence of formal appropriation of opportunities for profit in the market; (2) autonomy in the selection of management by owners; (3) absence of appropriation of jobs by workers and conversely absence of appropriation of workers by owners; (4) absence of substantive regulation of consumption, production, prices, i.e. substantive freedom of contract; (5) calculability of technical conditions of the productive process (including labour discipline) ; (6) calculability of functioning of public administration and the legal order, with a legal guarantee of contracts; (7) separation of the enterprise from the budgetary unit; (8) a formally rational monetary system.

There has been much discussion, in connexion with Weber’s work and elsewhere, of the concept of ‘modern capitalism.’ Any critical treatment of that question should keep in mind the whole background of Weber’s analysis in this chapter, and the considerations brought to the fore in the above discussion of it. In one essential point, however, he gives a particularly clear statement toward the end of the chapter. For him a fundamental phenomenon is the development of profit-making enterprises rationally oriented to ‘capital accounting’ that is to the goal of increase of money resources at the command of the enterprise. It is this phenomenon, as such, in terms of which he defines the general concept ‘capitalism.’ There are, however, a variety of different possibilities within this, only some of which are typical of or particularly highly developed in the modern business economy. Weber makes the following distinctions between types of capitalistic orientation: (1) A continuous process of purchase and sale on a free market or a continuous productive enterprise with capital accounting; (2) trading and speculation in money funds and various forms of indebtedness and the extension of credit; (3) the exploitation of opportunities for ‘booty’ through influence with political groups or persons with political power; (4) the exploitation of sources of profit through domination by force or under special protection of political authority (’colonial capitalism,’ etc.); (5) the exploitation of unusual transactions with political bodies, such as financing wars, etc.; (6) speculation in commodities and securities, the promotional financing of enterprises, and the profitable regulation of market situations.

He goes on to say²⁴

Types 1 and 6 are to a large extent peculiar to the modern Western World. The other types have been common all over the world for thousands of years where the possibilities of exchange, money economy, and money financing have been present. In the Western World they have not had such a dominant importance as modes of profit-making as they had in Antiquity, except in restricted areas and for relatively brief periods, particularly in times of war… It is only in the modern Western World that rational capitalistic enterprises with fixed capital, free labour, the rational specialization and combination of functions, and the allocation of productive functions on the basis of capitalistic enterprises, bound together in a market economy, are to be found… This difference calls for an explanation and the explanation cannot be given on economic grounds alone.

The other four types of orientation Weber classifies together as constituting ‘politically oriented capitalism.’ Thus among the various phenomena which, in the most elementary sense, can be called ‘capitalistic’ it is by their uneven differential incidence at least as much as by the quantitative development of capitalism as such that Weber characterizes the modern economy. To what extent the institutional structure of the modern world as a whole, including its ‘economic’ aspect, is best characterized as ‘capitalism’ as Weber himself tended to do, is a question which, in terms of Weber’s own analysis and its possible extension, will be briefly taken up in the final section of this introduction.

A few remarks may be made about Weber’s approach to the fundamental problem of economic motivation. As may perhaps be expected his treatment is fragmentary. The section with that title²⁵ does not really deal with it, but consists rather in a schematic classification of the sources of income.²⁶ Scattered through the chapter are, however, a good many remarks on various aspects of the problem. The first thing to be said is that Weber, with his strong emphasis on institutional variability, was almost completely free of the grosser biases involved in the received economic doctrine of ‘rational self-interest.’ He was aware of the complexity of the motivational forces underlying economic activity, particularly in giving weight to the more or less direct expression of valueattitudes in the idea of the calling, and showing a realization of the importance of social prestige. Above all his institutional relativism and his functional analysis of the instabilities of an economic system, particularly the modern market economy, opens up the problem of motivation on an entirely new level from that of the traditional economics. But in accordance with his defective treatment of psychological problems, as noted above, there is relatively little of connected motivational analysis to take the place of the older doctrines.

There is, however, one train of thought which is worthy of calling attention to, as its further development would lead far into the problems of the relation of institutions and individual motivation. Weber is strong in his insistence on the distinction between ‘routine’ economic arrangements and certain forms which play a part outside settled routine conditions. Of these, two particularly important ones are the systematic organization of the use of force in military structures, and the direct expression in the profane world of other worldly religious attitudes. ²⁷Both tend to forms of ‘communistic’ provision for economic requirements, and both generate strong tensions where they impinge upon the workaday world. In his very definition of the concept of economic activity Weber insists on excluding the use of force from the category of ‘economic means’ saying that it follows radically different laws from the peaceful processes of provision for needs and acquisition.²⁸ War is always to him an unsettling element in an economic situation, and the influence of groups primarily oriented to military values is in general economically ‘irrational.’ For somewhat different reasons the same is true of religious orientations: ‘take no thought for the morrow, God will provide,’ Weber cites as a typical example of the uneconomic orientation of religious sentiment.

The specific connexion of economic rationality with settled routine conditions points to a peculiar connexion between institutional patterns, backed by moral sentiments, and the ‘self-interest’ of the mass of individual persons. In a sense in which it is not true of these other cases, in a settled economy interests are harnessed into conformity with an established institutionalized order. Weber’s many remarks about the importance of ‘vested interests’ are indicative of this. This points strongly to a theory of economic motivation in an integrated institutional system which is closely related to that of Durkheim, and of such anthropologists as Mahnowski.²⁹ But this lay on the periphery of Weber’s interests, and, so far as his own analytical scheme had developed, his competence. Its further development is, however, one of the most important tasks of social science in completing the work Weber began.

Even though it is in a certain sense incidental to his main theoretical purpose, this chapter constitutes what is in many ways the framework of a unique kind of analysis of the modern economic order. It is unique in that it starts from all the main definitions of the facts which have been current in economic science, but brings to bear upon them a totally different perspective and a quite new institutional kind of analysis. The result is a kind of orientation to a great many of the most crucial empirical problems very different from almost any other to be found in the literature. It is probably, especially when taken in connexion with the other relevant parts of Weber’s works, the most comprehensive and all things considered the most successful essay into the field of ‘economic sociology’ which has yet been attempted.

It is to be expected that anything so comprehensive would, with the perspective of time, show inadequacies and one-sidedness in certain connexions. Here, in conclusion, one such ‘bias’ may be singled out for comment. Weber seems to be very particularly concerned with the modern economy as a system of market relationships. It is true that he had a great deal to say about the organization of productive enterprise but, in spite of his emphasis on bureaucracy, perhaps not as much as might have been expected. Along with this he was especially interested in the impingement on the economy of the political power system of the modern state, and of value-attitudes associated with the religious and cultural tradition.

It may at least be suspected, if not more, that a somewhat different perspective would have emerged if he had put greater stress on a different mode of approach which has come to be well established in more recent sociology. He might, that is, have thought of a society more as a system of differentiated and co-operating roles, which are subject to the same order of institutional variability in structure as the elements Weber considered. Then his attention would presumably have become more strongly focused on the fundamental structure of ‘occupational’ roles which characterized the modern Western World and which, in its basic structural uniformities, cuts across the distinctions between economic, political and other ‘spheres’ of social life. It is noteworthy that Weber introduces the concept of occupation very briefly and only at the end of his discussion of the ‘division of labour,’ not at the beginning.³⁰ It is probable that Weber’s own analysis of value-attitudes applies even better to occupational roles than it does to ‘economic activities’ as such. This emphasis on the economic rather than the occupational perhaps tends to account for one of Weber’s conspicuous blind spots in this field, his failure to bring out the structural peculiarities of the modern professions and to differentiate between the organization of professional services and what may be called the ‘administrative hierarchy’ of occupational structure types. His ‘bureaucracy’ is a composite of both. This tendency of his in turn probably has its roots in ‘Marxian’ modes of thought in that, though polemically attacking the Marxian theory of history, Weber tended to take the Marxian form of statement of the problems implicitly for granted and treated the ‘economic system’ as a more autonomous entity, functioning according to laws of its own, than it really is. It is interesting to raise the question whether a systematic reworking of Weber’s problems taking these considerations into account might not somewhat alter his sense of the tragic dilemma, of the dependence of the whole modern institutional order on a peculiarly unstable system of competitively determined prices in a free market economy. At most, however, it would probably lead to a difference of emphasis, not a ‘refutation’ of Weber’s views.

1 Chap, iv constitutes a fragmentary beginning of a similar analysis of social stratification. It is, however, too fragmentary to justify extended critical comments.

2 P. 158.

3 Cf. especially his Introduction to the whole series on the Sociology of Religion, translated in the same volume as the Protestant Ethic.

4 Cf. sec. 7, pp. 179 ff.

5 Cf. secs. 10 and 11.

6 Cf. sec. 9, pp. 184 ff.

7 Cf. sec. 30, pp. 275 ff.

8 Cf. sec. 12, especially pp. 207 ff.

9 Cf. chap, iii, secs. 3-5. Also Wirtschaft und Gesellschaft, part iii, chap. vi.

10 One of those conditions to which Weber devotes considerable attention which has not been taken up here, is a stable rational monetary system. The modern monetary system is to him as distinctive of our society as the other features discussed. But in his analysis of it Weber brings out the same underlying elements of instability that he does in the other connexions. See sees. 32-37 of chap. ii.

11 It would be interesting to compare Weber’s analysis of the instabilities of the modern capitalistic economy with that of a common Anglo-Saxon type of ‘heterodox’ economics in the United States, particularly Veblen. Veblen undoubtedly lays his finger on some of the factors of instability in the modern ‘business’ economy, in his analysis of business relationships as a process of jockeying for strategic position, etc. In so doing he, with considerable success, pricks the bubble of the Utopian optimism of the existing order so common among orthodox economists, especially of the past generation. But as compared with Weber his analysis even of elements of instability is exceedingly narrow. Quite adequate comprehension of all Veblen’s real contributions can be found in Weber’s work—many of them he took for granted as too obvious to need demonstration. Weber, however, was able to understand the positive functional significance of the modern price system, more broadly the business economy, in a way which was entirely inaccessible to Veblen. Furthermore, though he is at least as effective in deflating ‘individualistic* utopianism, he is singularly free from anything corresponding to the counterutopianism of Veblen, his idealization of ‘technology.’ The conclusion seems inescapable that Veblen was a highly unsophisticated person who demonstrates the typical reaction of a disillusioned idealist in his scientific work. Weber, who it should be remembered was a close contemporary, was on a totally different level of scientific and cultural sophistication. The fact that a Veblen rather than a Weber gathers a school of ardent disciples around him bears witness to the great importance of factors other than the sheer weight of evidence and analysis in the formation of ‘schools’ of social thought.

12 Sec. 10, pp. 139 ff.

13 Cf. sec. 30, pp. 275 ff.

14 P. 276.

15 Cf. especially p. 200.

16 Cf. the editor’s article ‘The Professions and Social Structure,’ Social Forces, May 1939.

17 This does not preclude the existence of ‘rights’ which are contingent on maintenance of the worker’s status within the organization. Thus there may be ‘his’ machine and ‘his’ stock of materials which no other worker, without something like ‘cause,’ can interfere with or even the management. But a full property right would make this independent of a controlled status in the organization.

18 It does not follow that the growth of unionism is as such undesirable, or anything other than inevitable. It seems probable that the ideal type of complete ‘expropriation’ of the workers from the right to jobs and to access without management’s consent to the means of production, generates social tensions of such magnitude that its maintenance is not in the long run possible. (Of course the most important tensions probably do not lie at the exact points formulated in the explicit ‘grievances’ talked of by the vocal spokesmen of labour.) Hence it is probable that considerable modification of this ideal type situation is essential to a stable functioning of the organization of industrial labour. But admitting this, as Weber at least in part would readily have done, does not justify the conclusion that the greater the limitation placed on control by management the better. Optimum efficiency is a matter of delicate balance of these tendencies, not of maximization of one or the other.

Weber had little to say about any important tendency to extension of appropriation by the workers beyond the ‘job’ to the material means of production. Since he wrote, however, there has appeared the phenomenon of the ‘sit-down strike.’ Though this is as yet far from being recognized as an institutionalized right, if it should be, it is in the logic of the measure that it implies a claim on the part of the workers in a plant, to something like a property right in their premises of work—not of course necessarily full ‘ownership.’

In this whole connexion it should be noted that the vital problem is that of the relation of the worker to ‘management,’ that is to the persons who have authority over him, over his employment or dismissal and over the discipline of the work process. Whether management in this sense is that of a capitalistic enterprise or some other sort of unit such as an organ of government is for many purposes secondary. Full socialization would not, ipso facto, destroy the ‘expropriation’ of the workers unless one were to consider the socialistic state as one enormous producers’ co-operative. But even if it were such in principle the average individual would be so remote from the points of controlling decision that he could hardly have a much greater sense of personal participation in the decisions than he does in those of his present ‘capitalistic’ employers. One wonders how far the decisions of the Soviet planning commission are felt to be those of the ‘workers’ by most Soviet workers.

19 P. 237.

20 Since they are appropriated by other workers.

21 Cf. secs. 32-6 on money, 37-9.

22 Rechtssoziologie, part ii, chap. vii of Wirtschaft und Gesellschaft. This is not included in the present translation. A separate translation, however, is to appear under the auspices of the Association of American Law Schools.

23 Sec. 30, pp. 275 ff.

24 P. 279.

25 Sec. 41.

26 It may be suspected that the section is incomplete, that Weber classified sources of income as a preliminary to an analysis of motivation.

27 Sec. 26, pp. 265 ff.

28 Pp. 159-160.

29 Cf.De la division du travail social and L’Education morale and Malinowski’s Coral Gardens and their Magic, vol. i.

30 Sec. 24, pp. 250 ff.