Erich Preiser (1900–1967): Growth and Distribution in a Monetary Economy

Erich Preiser (1900–1967) was one of the most influential economists in Germany after the Second World War. He introduced Keynesian concepts and helped German economics join the international discussion again. Preiser was concerned with business cycles, growth, and distribution theories. This paper discusses two aspects of Preiser’s work that are of special importance to his contribution to the development of economic thought in Germany after 1945: his analysis of growth—which is closely connected to his analysis of business cycles—and his distribution theory. In his analysis of growth, Preiser elaborates on the importance of monetary factors in the process of growth, especially the creation of money and credit by the banking system. In Preiser’s theory, credit creation by banks is necessary for growth; money is no longer a veil but an essential factor in the economic process. This helps him to clarify the connections between saving, investment, consumption, and interest; savings are no longer a precondition for investment, but investment creates the necessary savings. This shows that Preiser refers heavily to Keynes’ theories but uses insights from the General Theory and theoretical elements of the Treatise on Money. These elements are combined to develop a dynamic analysis which avoids several obscurities of Keynes’ system and the static character of the General Theory. Furthermore, Preiser shows that money is an endogenous variable in the economic process. In this regard, he anticipated essential aspects of modern post-Keynesian theory. In his distribution theory, Preiser starts with the neoclassical marginal productivity theory but goes far beyond it by developing a macroeconomic theory of distribution that combines classical and Keynesian elements: on the one hand, he uses Kaldor’s theory of distribution, which explains the functional income distribution by the size of the investment rate; on the other hand he introduces the social structure as a variable that the mechanism of supply and demand cannot explain. For Preiser, it is not only economic laws but also power factors that determine the functional distribution of income.