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The "dark ages" of German macroeconomics and other alleged shortfalls in German economic thought

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  • Feld, Lars P.
  • Köhler, Ekkehard A.
  • Nientiedt, Daniel

Abstract

Ordoliberalism is often accused as being responsible for Germany's policy stance during the Eurozone crisis. Ordoliberalism originates from the so-called Freiburg School of Economics, founded by Walter Eucken during the 1930s at the University of Freiburg, which is in fact in Germany. It is however neither true that ordoliberal thought has continuously been predominant and a prevailing idea in German macroeconomic policy, nor that it is responsible for Germany's policy stance during the crisis in EMU. In this paper, we show why a proper analysis must arrive at this conclusion by referring to Eucken's thinking and the development of German ordoliberalism across time in relation to the "Rules vs. Discretion" debate and to Constitutional Economics. Although ordoliberalism may have had some influence on the design of EMU, pragmatism, the status-quo and national interests are dominant in German economic policy.

Suggested Citation

  • Feld, Lars P. & Köhler, Ekkehard A. & Nientiedt, Daniel, 2017. "The "dark ages" of German macroeconomics and other alleged shortfalls in German economic thought," Freiburg Discussion Papers on Constitutional Economics 17/03, Walter Eucken Institut e.V..
    • Handle: RePEc:zbw:aluord:1703
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    References listed on IDEAS

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    1. Feld Lars P., 2013. "Zur Bedeutung des Manifests der Marktwirtschaft oder: Das Lambsdorff-Papier im 31. Jahr," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 62(3), pages 227-243, December.
    2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    3. Jochen Andritzky & Désirée I. Christofzik & Lars P. Feld & Uwe Scheuering, 2019. "A mechanism to regulate sovereign debt restructuring in the euro area," International Finance, Wiley Blackwell, vol. 22(1), pages 20-34, May.
    4. Markus K. Brunnermeier & Harold James & Jean-Pierre Landau, 2016. "The Euro and the Battle of Ideas," Economics Books, Princeton University Press, edition 1, number 10828.
    5. Fratianni, Michele & von Hagen, Jurgen, 2001. "The Konstanz Seminar on monetary theory and policy at 30," European Journal of Political Economy, Elsevier, vol. 17(3), pages 641-664, September.
    6. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447.
    7. Feld, Lars P., 2012. "Europa in der Welt von heute: Wilhelm Röpke und die Zukunft der Europäischen Währungsunion," Freiburg Discussion Papers on Constitutional Economics 12/2, Walter Eucken Institut e.V..
    8. Issing Otmar & Wieland Volker, 2013. "Monetary Theory and Monetary Policy: Reflections on the Development over the last 150 Years," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(3), pages 423-445, June.
    9. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44(1), pages 1-1.
    10. Fratianni, Michele & von Hagen, Jürgen, 2001. "The Konstanz Seminar on Monetary Theory and Policy at Thirty," ZEI Working Papers B 02-2001, University of Bonn, ZEI - Center for European Integration Studies.
    11. Feld, Lars P. & Köhler, Ekkehard A. & Nientiedt, Daniel, 2015. "Ordoliberalism, pragmatism and the eurozone crisis: How the German tradition shaped economic policy in Europe," Freiburg Discussion Papers on Constitutional Economics 15/04, Walter Eucken Institut e.V..
    12. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    13. James, Harold, 2012. "Making the European Monetary Union," Economics Books, Harvard University Press, number 9780674066830, Spring.
    14. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    15. Köhler, Ekkehard & Kolev, Stefan, 2011. "The conjoint quest for a liberal positive program: "Old Chicago", Freiburg and Hayek," HWWI Research Papers 109, Hamburg Institute of International Economics (HWWI).
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    Cited by:

    1. Stefano Figuera & Guglielmo Forges Davanzati & Andrea Pacella, 2022. "Considerations on the Legacy of Ordoliberalism in European Monetary Policy," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2022(2), pages 95-122.

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    More about this item

    Keywords

    Ordoliberalism; Eurozone Crisis; Constitutional Economics; Monetary and Fiscal Policy;
    All these keywords.

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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