Rethinking The Social Market Economy – A Basic Outline

The purpose of this paper is to contribute to rethinking the Social Market Economy with respect to modern economic and technological structures. In doing so, we explore the limits of the traditional Social Market Economy for solving the economic problems of our time. We find that the Social Market Economy's rigid focus on competitive markets as the corner stone for a decentralized economic order has become outdated and that the basic principle of competition should be extended to decentralized institutions and policies. It is proposed that the preferred choice of specific institutions and policies should reflect their legitimacy, i.e. a combination of their effectiveness and their public acceptance. On the basis of our findings, we propose to amend some of the principles of the traditional Social Market Economy and to supplement them with new ones. The principles relate to the economy, to politics, as well as to the uncertainty inherent in the long run future. The proposed principles are illustrated with general examples covering regional economic policy, monetary policy, financial crises, and environmental sustainability.