Friedrich A. Lutz’ Epistemological and Methodological Messages During the German-Language Business Cycle Debate

Friedrich A. Lutz’ 1932 habilitation thesis is considered the last highlight in a German-language business cycle debate that took place during the interwar period. This debate, initiated by Adolf Löwe, concentrated on the necessary conditions in defining a dynamic theory that should explain the business cycle understood as a dynamic disequilibrium phenomenon in a deductive way. This article contributes to Lutz scholarship by focusing on Lutz’ criticism of Clément Juglar’s “unconditional” observations. This constituted the basis for the problematic concept of wave-like fluctuation subsequently adopted by the Historical School and Joseph Schumpeter. I establish a relationship between Lutz’ criticism and his statement that this perspective does not find support in economic history. Lutz asserted that each crisis represents a unique historical phenomenon caused by specific factors whose impact on the economy depends on its institutional framework. From this, I derive an epistemological claim, namely that the equilibrium tendencies within the market order should be the subject of inquiry, and a methodological call, namely the development of models showing hypothetically what factors can disturb these tendencies. The paper contextualizes Lutz’ criticism and messages into the formation of the Freiburg School’s research program.