11
ready mentioned, we consider the neglect of production – combined with the equality assump-
tion discussed above – to be the main reason why Anglo-Saxon economics produces theories of
harmony, like Samuelson’s factor-price equalisation. Standard economic theory ignores a) the
difference between production processes in their ability to absorb new knowledge and b) the his-
torical increasing returns which are created by this new knowledge, producing a ‘national rent’
to economies engaged in the economic activities which carry the new economic stage or para-
digm.
Thirdly, Bücher squarely places himself in the German tradition since Christian Wolff, in
which Man and his Needs (Der Mensch und seine Bedürfnisse) are at the core of economic the-
ory. This contrasts with English theory which came to be built around a utility maximising
Homo Economicus. Bücher’s definition of Volkswirtschaft, which includes also all institutional
aspects of economic life, shows this
[193] clearly: ‘Die Gesamtheit der Veranstaltungen, Ein-
richtungen und Vorgänge, welche die Bedürfnisbefriedigung eines ganzen Volkes hervorruft,
bildet die Volkswirtschaft
33
, which I would attempt, not quite literally, to translate as ‘The total-
ity of institutions, measures and processes which are called upon to satisfy the needs of a nation
form the National Economy.’ It is evident that both policy and law -founded in national institu-
tions, measures, and processes – are at the core of the National Economy in Bücher’s system.
The recent concept of a National Innovation System would then fit neatly into Bücher’s concep-
tion of a Volkswirtschaft.
This third contrast is why we call classical German economics anthropocentric economics,
rather than the barter- and capital-centred English political economy. In the Anglo-Saxon tradi-
tion Man is generally reduced to being a factor of production – an input. In the German tradition
meeting the needs of this factor of production was the whole object of the exercise of economics,
whereas in Anglo-Saxon tradition the reward to Man the factor of production is not an issue at
all.
4. Stage Theories and Economic Development: An Overview
4.1 Early Theories – from Cycles to Stages
When trying to put order in the concept of time, the idea of ordering history chronologically ob-
viously suggests itself. A system of ordering periods according to the rulers of the reign also
seems a ‘natural’ system. The idea that human history alternatively may be divided into qualita-
tively different periods or
stages has been with us since the Bible. Mankind’s first stage, Para-
dise, gives way to a period when Man shall only eat his bread ‘in the sweat of his face’ (Genesis
3, 19). In this first ‘stage theory’ there is no natural improvement from one stage to the next,
there is indeed a qualitative retrogression. Only towards the end of his stay on Earth may Man-
kind again aspire to
[194] repossess the qualities which he was forced to leave behind in the first
stage.
As we have already mentioned, the idea of dividing human history into qualitatively different
stages was essentially born with the idea of progress itself, with the Renaissance. The idea of the
Renaissance – Rebirth – was itself a consequence of an acute awareness of retrogression: Man-
kind, compared to previous achievements, had ‘fallen behind’, but could ‘forge ahead’ if a social
system encouraging and ordering Man’s creativity could be created. Jean Bodin (1530-1596),
33
P. 85, all references to pages alone are to the 11th Edition of Die Entstehung.
12
French, and Hugo Grotius (1583-1645), Dutch – both lawyers – share a historical view empha-
sising changing division of labour in different historical periods.
34
The first division of labour, as
Bücher would point out, was that inside the household, between husbandry and what was for a
long time called housewifery. The very name ‘economies’, of course, comes from a Greek word
describing this ‘household management’. The idea of a further division of labour is found in
Plato’s Republic and Laws and, less spelt out, in Aristotle’s Ideal City.
35
To Grotius the first di-
vision is between agriculture and husbandry: ‘Hierbey ging bereits eine Art Theilung vor.’
36
Stage theories of history differ from their predecessors – cyclical theories of history – in that
they offer continuous improvement as a possibility, but not as a necessary outcome. In all stage
theories it is understood that different areas of the world will normally be at different stages, and
some of them specify the possibility for retrogression.
The 14
th
Century is considered a ‘dark’ age in most of Europe, except for an early Renais-
sance blooming in Sienna. This century produced a prolific Muslim historian and philosopher,
Ibn-Khaldun (1332-1406, called Abenjaldún in the Spanish literature). Born in Tunis, and serv-
ing various of the potentates who divided Moslem North Africa and Spain between them, Ibn-
Khaldun served as a pro-
[195]fessor of law and a judge in Cairo. Based on the studies of the
Arab peoples, he emphasises the distinction between nomads and town dwellers, but – typically
of pre-Renaissance thought – he saw history developing in cycles, advancing only to later fall
back to the previous stage. Ibn-Khaldun describes the nomadic tribes of the desert, organised in
clans originating in blood relationships. The entry on him in the Encyclopaedia of Social Sci-
ences further describes the cycle of human societies as follows: ‘The need for justice in the clan
causes leaders to arise, and when the groups become sufficiently numerous, they migrate to fer-
tile lands and ultimately change into town dwellers or subdue already existing town communi-
ties, adopting the previously established civilisation. The town dwellers become luxurious and
lose their capacity for self-defence. The rulers, as their wants increase, must resort to constantly
increasing taxation; and resenting the claims of their clansmen to equality with themselves they
rely for aid on foreign supporters, who become necessary moreover because of the decline of
clansmen as warriors. Thus the state grows decrepit and becomes the pray of a fresh group of
nomads, who undergo the same experience.’
37
Ibn-Khaldun fixes the duration of the cycle of human societies to 120 years, or 4 generations
of 30 years. In the 14
th
Century Ibn-Khaldun describes societal retrogression based on a mecha-
nism similar to the one described by Michael Porter in his 1990 book ‘The Competitive Advan-
tage of Nations’. Porter’s cycle of retrogression is described below. The Perez-Freeman frame-
work of techno-economic paradigms also expressly includes the possibility that a paradigm shift
not only opens windows of opportunity for improvement, but also opens ‘a back door’ which let
some nations to fall behind. In today’s process of globalisation, the possibilities of retrogression
merit, in our view, a much closer scrutiny.
Pre-Renaissance Europe was acutely aware of the historical cycles of violence that would op-
erate. During the Renaissance, therefore, an important argument was that economic growth was
34
For a discussion of this, see Kuczynski, Jürgen, Studien zu einer Geschichte der Gesellschaftswissenschaften,
Berlin, Akademie-Verlag, 1978, Vol. 8, pp. 69-71.
35
The relevant original texts are found in M. L. W. Laistner’s translation in his Greek Economics, London, Dent,
1923. (The
Library of Greek Thought).
36
Quoted in Kuczynski (1978), p. 71.
37
Margoliouth, David S., in The Encyclopaedia of Social Sciences, Vol. 7, New York, Macmillan, 1932, p. 564-565.