Jellegzetes részlet A. Schütz elméletéből

Részlet Schütz elméletéből

Forrás: TAMOP 4.2.5 Pályázat könyvei

Szociológiaelmélet

Julius Morel, Eva Bauer, Meleghy Tamás, Heinz-Jürgen Niedenzu, Mac Preglau, Helmut Staubmann (2000) Osiris Kiadó

Részlet

3. Az életvilág elemzése

A következőkben megpróbáljuk áttekinteni Alfred Schütz általános szociológiáját, s ismertetni a mindennapi értelemértelmezési és -tételezési folyamatokról adott elemzését. A középpontban annak taglalása áll, amit Schütz, Husserl nyomán az életvilág struktúráinak nevez. Elsősorban azé a világé, amelyben „a természetes beállítódásban tapasztaljuk a természetet, a kultúrát és a társadalmat, állást foglalunk ezek tárgyaival kapcsolatban, azok befolyásolnak bennünket, mi meg hatunk rájuk. Ebben a beállítódásban az életvilág létezését és tartalmainak tipikáját minden további nélkül kétségbevonhatatlanul adottnak fogadjuk el” … Mivel ez a „természetes beállítódás” és a világtapasztalás neki megfelelő módja jellemző a mindennapok észlelésére és cselekvésére, Schütz ezt a világot a mindennapok világa fogalommal jelöli.

A szociológia szempontjából mármost azért érdekes ez a mindennapi világ, mert az, Schütz szerint az interszubjektívkultúra világa: „Interszubjektív, mert úgy élünk benne, mint ember az emberek között, akikhez közös ténykedésekkel és munkával kapcsolódunk, akiket megértünk, s akik megértenek bennünket. Kulturális világ, mert a köznapi élet világa kezdettől fogva jelentésteli univerzum, tehát értelemösszefüggés, amelyet értelmeznünk kell ahhoz, hogy kiismerjük magunkat benne, és tisztába jöjjünk vele” …

A mindennapi élet világának mint az interszubjektív kultúra világának elemzésével a 3.1. részben foglalkozunk.

Az emberi értelemértelmezési és -tételezési képesség azonban nem merül ki a mindennapi világon belüli észleléssel és cselekvéssel. Az emberi szellem más területeken is otthon van, az értelemteli tevékenység más formái iránt is elkötelezett – említsük meg csak a képzelet világát, az álomvilágot, a tudományos elmélet világát. Az életvilág elméletét ezért Schütz a sokféle valóság elméletével bővítette és egészítette ki, amelynek erről a többi értelemtartományról kell számot adnia .. A sokféle valóság ezen elméletével a 3.2. részben foglalkozunk.

3.1. A mindennapi világ valósága

a) Helyzetmeghatározás és cselekvés a mindennapokban

A mindennapokban uralkodó természetes beállítódásban a tapasztalati világ léte és ígyléte, valamint a reá való hatás lehetősége minden további nélkül adottnak számítanak – a gondolkodás és a cselekvés, mint Schütz mondja, alapvetően két idealizáció alapján zajlik: az és így tovább, illetve a meg tudom ismételni idealizációja alapján: „Az első ahhoz a feltevéshez vezet, hogy ami eddigi tapasztalásunkban érvényesnek bizonyult, az továbbra is érvényes marad; a második ahhoz a várakozáshoz, hogy amit ebben a világban és erre a világra hatva eddig el tudtam végezni, azt a jövőben újból és újból véghez tudom vinni”…

Most azt ismertetjük, hogyan észleli a természetes beállítódásban az egyén tapasztalati világát, és hogyan hat rá cselekvése során.

Az egyén először azzal a feladattal kerül szembe, hogy meg kell ismernie a valóság készen talált szeletét, az abban található tárgyakat és azok mineműségét; W. I. Thomas amerikai szociológus nyomán Schütz a helyzetmeghatározás szükségességéről beszél.

Hogyan történik ez a helyzetmeghatározás? Schütz szerint világunk minden értelmezése „saját vagy szüleink vagy tanáraink által közvetített korai világtapasztalatok készletére támaszkodik, amelyek »rendelkezésre álló tudásként« vonatkoztatási sémát alkotnak” … Ennek a rendelkezésre álló tudásnak vagy kéznél levő tudáskészletnek és a benne felhalmozott tipikának (lehetséges tárgyak és tulajdonságok tipológiája) köszönhető, hogy a világ nem rendezetlen, körvonalak nélküli káosznak mutatkozik számunkra, hanem úgy, mint többé vagy kevésbé már közelről ismert, otthonos és rendezett világ.

A tér dimenziójában például azt tapasztaljuk a világról, hogy az egy általunk megváltoztatható és kezelhető tényleges hatókörű világra és egy potenciális hatókörű világra tagolódik, ez utóbbiban pedig elkülönül egy olyan szektor, amely korábban hatókörünkben volt (visszaállítható hatókör) és egy másik szektor, amely valamikor a hatókörünkben lesz (elérhető hatókör). Az idő dimenziójában azt tapasztaljuk, hogy a világ múltra, élő jelenre és jövőre tagolódik …

Mint már tudjuk, a rendelkezésre álló tudásban felhalmozott típusosság fényében egyetlen tárgyat sem elszigetelten észlelünk, hanem mint olyasmit, ami „eleve az otthonosság és ismerősség horizontjába ágyazódik” …

Természetesen nem minden tárgyat ismerünk egyformán jól. Tudásunk a világról pontossága szerint otthonos tudásra, ismertségre és puszta hitre tagolódik. Otthonos tudáson Schütz azt a tudásterületet érti, amelyben „alapos […] ismeretünk nemcsak a »mi«-ről és a »hogyan«-ról van, hanem a »miért«-et is értjük”, amelyben tehát szakértők vagyunk (például a telefonműszerész tudása arról, hogyan működik a telefon). Az ismertség fokán viszont a tudás „csak a »mi«-re irányul, és nem kérdez rá a »hogyan«-ra” (például a telefonhasználó tudása, aki tudja, mit kell tennie, ha valaki másnak akar tárcsázni, de azt már nem, hogyan és miért működik a telefon). Ott, ahol még a miről sem tudok, kezdődik a puszta hit szférája, amely „a jól megalapozottságtól, a valószínűségen, az ismerősségen, az idegen tekintélybe vetett bizalmon, a vak elfogadáson át egészen tökéletes tudatlanságig számtalan módon tagolódik” …

Ha mármost meghatározott helyen és időben s meghatározott cél érdekében próbáljuk kiismerni magunkat a világban, akkor észlelő tevékenységünk az észlelt tárgynak mindig csak bizonyos oldalaira összpontosul, a többit pedig figyelmen kívül hagyja. Adott helyzetben például csakis azért érdekelhet bizonyos kő, mert rá lehet ülni; ebben a pillanatban nem lényeges számomra, hogy fel is tudnám emelni, és ütőszerszámnak vagy hajítóeszköznek használhatnám.

Az érdeklődés, amely figyelmem irányát meghatározza, egyrészt életrajzilag meghatározott helyzetemből fakad, amelyben „nemcsak a fizikai tér és a kozmikus idő keretei között, nemcsak a társadalmi rendszeren belüli státusra és szerepre vonatkozóan” van bizonyos helyem, hanem „erkölcsi és ideológiai álláspontom” is van … Érdeklődésem, amely a kőre mint ülőalkalmatosságra irányul, például azzal is összefügghet, hogy éppen vidéken vagyok (fizikai tér) szabadságon (kozmikus idő), a turisták rendszerint sétákat tesznek (státus és szerep), helyénvaló letelepedni, ha az ember fáradt (erkölcsi álláspont), és a hozzám hasonló romantikus embernek nincs jobb helye arra, hogy kipihenje magát, mint egy kő (ideológiai álláspont). Az érdeklődés másrészt, ennek az életrajzi helyzetnek megfelelő tervrendszer folyománya, amely „egy órára vagy egész napra, munkára vagy szabadidőre szól, s amelyben mindezek a résztervek valamely legfőbb, az összes többire kiterjedő, bár nem ellentmondásos, »élettervnek« nevezett rendszerré kapcsolódtak össze” … Példánkra visszatérve: a kő mint ülőalkalmatosság iránti érdeklődésemet talán az alapozza meg, hogy most tartom a tervezett szünetet, miután elértem a mára tervezett sétám során azt a pontot, amelyen a visszafordulást terveztem, ami viszont megint csak szabadságom tervének része volt stb.

Foglaljuk össze az eddig leírtakat: a helyzetmeghatározás során a figyelmem, amelyet az életrajzi helyzetem és a terveim rendszere által megszabott érdeklődés határoz meg, környezetem olyan kiválasztott oldalaira irányul, amelyeket tudáskészletemre, illetve kéznél levő tudáskészletemnek a számomra érdekes oldalak meghatározása szempontjából fontos részeire vonatkoztatva értelmezek.

Azt az érdeklődést, amely a helyzetmeghatározásra indít, s meghatározza környezetem bizonyos oldalainak és tudáskészletem a környezet ezen oldalainak értelmezéséhez szükséges részeinek kiválasztását, Schütz a motiváció szempontjából lényegesnek nevezi …

Normális esetben, tehát ha nem történnek meglepetések, meglevő tudáskészletem elegendő a környezet engem érdeklő oldalainak értelmezéséhez. De ez nem mindig van így. Időközben új elemek is jelentkezhetnek, amelyeket a tudáskészletemben felhalmozott tapasztalatokra vonatkoztatva nem tudok kielégítően vagy egyáltalán nem tudok meghatározni. Ekkor „szükségem lesz arra, hogy ezekről az elemekről »többet tudjak«, akár új ismeretek szerzésével, akár úgy, hogy meglevő tudásomat az ismertség más fokára kell helyeznem”…. Például az a kő, amelyet először ülőhelynek szemeltem ki, közelebbről megnézve különösnek tűnhet – furcsa színeivel, ritka felületi szerkezetével –, és hirtelen már egyáltalán nem vagyok biztos abban, hogy egyáltalán kőről van-e szó. Mielőtt leülök, rá kell jönnöm arra, tulajdonképpen mi is ez a dolog előttem.

Az ilyen új, kérdéses és rákérdezésre érdemes elem, amelyet először azonosítanom kell, mielőtt adott esetben visszatérhetek az engem eredetileg érdeklő tevékenységhez, oly módon vált számomra lényegessé, amit Schütz tematikus relevanciának nevez. Emellett a motiváció szempontjából lényeges érdeklődés is tovább hat, amennyiben „megszabja, mikor kell kielégítettnek számítania a tematikusan releváns kifürkészésére irányuló kíváncsiságunknak” …

Az újonnan jelentkező elem meghatározását megkísérelve természetesen ismét használjuk tudáskészletünket, mégpedig azon részeit, „amelyek a témában jelentkező probléma megoldása szempontjából […] relevánsak” …Példánknál maradva, kezdünk elgondolkodni azon, és megpróbáljuk apró kísérletekkel kitalálni, miről is van szó „ennél a dolognál” – talán teknősbékáról, de akkor a fej és a lábak számára lyukaknak kellene lenniük benne; talán óriás pöfeteggombáról, de akkor botütésre fel kellene hasadnia; talán mégis bizonyosfajta kőről, amilyet azonban még sohasem láttam. A tudáskészletnek azt a részét, amelyet a témában rejlő probléma megoldására bevonok, Schütz az értelmezés vagy az interpretáció szempontjából relevánsnak nevezi.

Ha az értelmezés sikerül, nemcsak az engem eredetileg érdeklő tevékenységhez térhetek vissza; új tudásom egyszersmind mint üledék kerül be tudáskészletembe, ezáltal kognitív eszközeim bővülnek jövőbeli értelmezésekhez…

A helyzetmeghatározás a mindennapokban nem öncél; mindig azért következik be, hogy cselekvőleg hathassunk környezetünkre. A következőkben ezt a mindennapi cselekvést vesszük szemügyre …

Cselekvésen Schütz az emberi viselkedés olyan folyamatát érti, „amelyet a cselekvő elővételez, másként kifejezve, amely valamilyen előzetes terven alapul”. Cselekedeten ennek megfelelően „a folyamatnak az eredményét, tehát az elvégzett cselekvést” érti…. Ez a cselekvés lehet fedett (célirányos, módszeres elmélkedés) és nyílt (házépítés építési terv szerint), de mulasztás formáját is öltheti (a kívánt állapot nem beavatkozás által való előidézése).

A cselekvés viszont kéznél levő tudáskészletemmel és a tudáskészlet fényében meghatározott helyzetemmel áll kapcsolatban: „Jövőbeli cselekedetem megtervezését […] olyan korábban végzett cselekedetekre vonatkozó tudásomra alapozom, amelyek típusosan hasonlóak a mostani cselekedethez.” Ezt a tudást Schütz recepttudásnak is nevezi. Tervemet továbbá „annak a helyzetnek a típusosan releváns sajátosságaira vonatkozó tudásomra alapozom, amelyben a tervezett cselekvésnek folynia kell” … A tapasztalt építőmester például tudja, hogyan kell a talajviszonyokat, a munkások teljesítőképességét, a szállítók pontosságát, az építészeti hatóság alaposságát figyelembe véve reálisan elkészítenie építési tervét.

Az, hogy a cselekvési terv a mindennapi tudástól függ, azzal a következménnyel jár, hogy a cselekvés rendszerint korántsem ésszerű. Hiszen a releváns cselekvési helyzetet nem szoktuk behatóan elemezni, a cselekvés szándékolt következményeit és mellékes következményeit nem mérlegeljük valamely értékrendszerrel egybevetve, s nem a leghatékonyabb eszközöket vetjük be a cél elérése érdekében: az ésszerűség ebben az értelemben olyan eszmény, amelyet a mindennapokban legfeljebb megközelítően lehet egyes cselekvésterületeken elérni …). A mindennapi cselekvés rendszerint legfeljebb részben ésszerű rutincselekvés.

A cselekvésre Schütz szerint továbbá az jellemző, hogy indítéka van. Schütz az indítékok két osztályát különbözteti meg: „azért, hogy indítékok” és „azért, mert indítékok”.

Az azért, hogy indítékok a végállapotra vonatkoznak, tehát arra a célra, amelyet a cselekvésnek létre kellene hoznia: az építőmester azért szervezi meg az építkezést, hogy „az építési folyamat a lehető leginkább zökkenőmentes legyen”. Az azért, hogy indítékok Schütz szemében azok, amelyeket Max Weber a cselekvés szubjektíven vélt értelmének nevezett. Az azért, mert indítékokban ezzel szemben a múlt csapódik le, a cselekvő élettörténete, amely bizonyos személyiségvonások vagy viselkedési hajlamok kialakulásához vezetett, s ezek most szintén meghatározzák a cselekvést: építészünk talán csak azért épít házakat, mert ezzel egy régi gyermekkori álmát akarja megvalósítani. Az azért, mert indítékokra jellemző, hogy a cselekvő a cselekvés során nem tartja szem előtt őket. Csak utólag képes „mint önmaga megfigyelője visszatekinteni múltbeli cselekvésére, és megvizsgálni, milyen körülmények vitték rá arra, hogy úgy cselekedjen, ahogy cselekedett” …

Mint Schütz hangsúlyozza, az indítékok két osztályát korántsem véletlenül választjuk, illetve nem véletlenül hatnak a cselekvésre. Az „azért, hogy indítékok” a terveknek abba a rendszerébe integrálódnak, amelyről korábban beszéltünk. Ez azt jelenti, hogy a cselekedet szubjektíven vélt értelmét végső soron a terveknek ez a rendszere határozza meg. Ha élettörténetünk során megváltozik az élettervünk, akkor visszamenőleg minden egyes cselekedet is más értelmet nyerhet.

„Azért, mert” indítékainkat is egy rendszer elemeinek kell felfognunk: meghatározott személyiség, jellem folyományai, annak típusos kifejeződései …

Az imént leírt cselekvés segítségével a cselekvő alakítja és megváltoztatja a világot; mégpedig nemcsak a fizikai világba avatkozik bele, hanem – hiszen a cselekvés értelemteli terveket valósít meg – a kulturális világba is.

b) A társadalmi világ tipizálása és a társadalmi kapcsolat

A mindennapok világa, mint korábban már megállapítottuk, abban az értelemben társadalmi világ, hogy más emberekkel közösen lakunk benne, velük kell együttműködnünk és megértésre jutnunk. Emiatt felvetődik az a kérdés, hogy a mindennapi világ lakói miként tipizálják a társadalmi világot, és hogyan jönnek létre abban társadalmi kapcsolatok…

A társadalmi világ először is-sez is tudáskészletünk egyik eleme – környezetre, a társak világára, az elővilágra és az utóvilágra tagoltan mutatkozik számunkra.

A környezetben a másik emberrel úgy találkozunk, mint embertársunkkal. Velem van térben, vagyis „a külvilág meghatározott szektora egyformán valamennyi partner hatókörében van [.] és közös érdeklődésre számot tartó, közös relevanciájú tárgyakat tartalmaz”; de velem van időben is, vagyis „mindenki részt vesz a másik életfolyamatában […], és eleven jelenvalóságában foghatja fel a másik gondolatainak fokozatos felépülését”…. Az embertársak közötti kapcsolatokat Schütz tiszta vagy közvetlen mi-kapcsolatoknak nevezi. Ez a fogalom a barátok közötti beszélgetést éppúgy jelenti, mint a véletlen találkozást a vonat fülkéjében.

Schütz szerint ebben a tiszta mi-kapcsolatban van leginkább esély arra, hogy a másikat egyszeri egyénnekfogjam fel, és megértsem gondolkodása és cselekvése vélt értelmét. Nézetei és indítékai ugyanis a közvetlen szemléletből és közlésből is hozzáférhetők számomra.

Az embertársunkról, valamint gondolkodásának s cselekvésének értelméről alkotott képünk persze ilyen körülmények között is szükségképpen részleges, mint korábban láttuk, valamely gondolat vagy cselekedet értelme csak a cselekvő teljes tervrendszerének ismeretében érthető meg, s azt a másik ember természetesen nem láthatja át, s nem is közölhető vele. Így a másik ember s vele gondolkodása és cselekvése értelmének belátása a mi-kapcsolatban is szükségképpen hiányos marad. A rejtett részekre csak hipotetikusan következtethetünk. Más szavakkal, a másik átlátása során típusos konstrukciókra, „bizonyos típusos minta mögötti indítékokra, bizonyos személyiségtípus típusos viselkedésmódjaira” támaszkodunk – ezeket a konstrukciókat Schütz szubjektív személyes típusoknak nevezi … Mintegy laikus pszichológusként ténykedünk, aki a másikat, például útitársát és annak viselkedését diagnosztizálja: mondjuk, jellegzetes kérkedőnek tartjuk, aki jól akarja adminisztrálni magát. Ezek a típusok is a kéznél levő tudáskészlet részei.

Ez a személyes típusok által közvetített mindennapi megértés alapozza meg az embertársak közötti kapcsolatokat mint akciók és reakciók egymásra vonatkozó sorát: ezen a ponton nyúlhatunk vissza a fent tárgyalt megkülönböztetésre „azért, hogy indítékok” és „azért, mert indítékok” között, és ezt mondhatjuk: a megértés teszi lehetővé, hogy a társadalmi kapcsolaton belül az egyik fél „azért, hogy indítékai” a másik „azért, mert indítékaivá” váljanak, és megfordítva. A azért kérdez, hogy választ kapjon, B viszont azért válaszol, mert kérdezték. Még ha ez nem is így van, és a kölcsönös megértés fent említett szükségszerűen nem teljes volta miatt teljes mértékben nem is lehet így, a mindennapokban mégis abból az idealizációból indulunk ki, mintha létezne az indítékoknak ez a kölcsönössége.

A környezeten túl – cseppfolyós átmenetben – kezdődik az, amit Schütz a mások társvilágának nevez. Ezek a mások mellettem léteznek, amennyiben nincs részük a hatókörömben levő világban, és nem osztoznak (szubjektív) élő jelenemben. Ebben az esetben tehát csupán közvetett társadalmi kapcsolatról van szó. Ilyen közvetett társadalmi kapcsolatra példa a postai ügyfél és a levelét továbbító postahivatali tisztviselők, a polgár és a politikusok vagy az egyszerű munkás és a bérszámláját vezető könyvelési alkalmazott közötti kapcsolat. Mindezekben az esetekben a kapcsolatban résztvevők egyáltalán nem vagy csak kivételesen s akkor csak üzleti okból kerülnek egymás szeme elé. A közvetett társadalmi kapcsolatban nincs betekintésem a partner individualitásába, gondolkodásának és cselekvésének egyediségébe; számomra inkább névtelen, felcserélhető funkcióhordozónak vagy ügyintézőnek mutatkozik.

De ha nem a közvetlen részvételre, vajon mire támaszkodik ebben az esetben a kapcsolat létrejöttéhez és fenntartásához szükséges megértés? Schütz ismét ezt válaszolja: típusok konstruálására, aminek során ezúttal mintegy laikus szociológusként járunk el, és „a többé vagy kevésbé névtelen cselekvőknek egy sor állítólag állandó indítékot tulajdonítunk, amelyek cselekvésüket vezérlik” …. Mivel ezek a típusok nem rendkívül személyes tulajdonságokra és indítékokra, hanem névtelen, felcserélhető cselekvők tulajdonságaira és motívumaira támaszkodnak, Schütz itt cselekedettípusokról beszél, és maga is utal a rokonságra ezen fogalom és a társadalmi szerep fogalma között.

Ennek a tipizálásnak azonban, mint Schütz kiemeli, szükségképpen bizonyos öntipizálás felel meg: „Amennyiben meghatározom a másik szerepét, magam is szerepet vállalok. Amennyiben a másik viselkedését tipizálom, a sajátoméval is ezt teszem, amely kapcsolódik az övéhez; mondjuk az utazó vagy a fogyasztó, az adófizető, az olvasó vagy a megfigyelő bőrébe bújok.” Eközben számomra is érvényes, hogy az ilyen kapcsolatban „nem teljes személyiségemmel, hanem csak bizonyos személyiségrétegekkel” veszek részt … Ezen a módon a közvetett társadalmi kapcsolatokban is létrejön az indítékok kölcsönössége.

Egyébként maga Schütz hívja fel a figyelmet az öntipizálás fogalma és a Mead-féle me fogalom közötti párhuzamra …

Schütz arra is utal, hogy a reciprok cselekvéstípusoknak ez a konstrukciója „gyakran viselkedési mérceként intézményesül, hagyományos és visszatérő szokások kezeskednek róla (azok legitimálják – a szerző), és [.] úgynevezett társadalmi ellenőrzési eljárások […] garantálják” …

Az elmondottakat megvilágítandó térjünk vissza egyik példánkhoz: amikor bedobok egy levelet a postaládába, kapcsolatot teremtek a postahivatali tisztviselővel. Ennek a tisztviselőnek mint funkcióhordozónak bizonyos indítékokat – például azt, hogy mint tisztviselő teljesíteni akarja kötelességét – és cselekedeteket – például leveleket továbbít és hord ki – tulajdonítok. Emiatt nekem is típusos postai ügyfélként kell viselkednem, az ilyen ügyfél típusos indítékaival – azt akarom, hogy a posta továbbítsa a levelemet – és típusos cselekedetekkel – bérmentesítenem kell a levelet, tartanom kell magam a nyitvatartási időhöz, használnom kell a postaládát stb. Eközben abból indulhatok ki és abból is kell kiindulnom, hogy a postai ügyfelek és a postatisztviselők jogait és kötelességeit társadalmilag kötelezően rögzítették – intézményesítették, s azokat valamennyi érintett többé vagy kevésbé értelemtelinek és ésszerűnek ismeri el – legitimálja –, s azokat adott esetben az akaratom ellenére is érvényesítik, tehát társadalmi ellenőrzés alatt állnak (ha nem teszek bélyeget a levélre, portót kell fizetnem).

Befejezésül foglalkozzunk még röviden az elővilággal és az utóvilággal, valamint a hozzájuk fűződő kapcsolattal.

A kapcsolat mindkét esetben jellegzetes aszimmetriát mutat: az elődök elővilága hat ránk, de mi már nem hathatunk rá. Amit, akár szóbeli hagyomány, akár dokumentumok formájában ránk hagytak, az „egyre újabb értelmezésre sokféle, tartalommal teli típusban van feladva” számunkra. Utódaink utóvilágára ezzel szemben mi hatunk, de azok ránk nem hatnak. Ami ott történik, meghatározatlanul és meg- határozhatatlanul „alapvetően üres névtelenségben” létezik számunkra (Schütz 1971b, 156).

c) A tudás szocializálódása

Mint kezdetben megállapítottuk, a mindennapok világa interszubjektív kultúrvilág – működés-összefüggés olyan emberek között, akiknek meg kell érteniük egymást, jelentésuniverzum, amelyet értelmezni kell. De miként lehetséges az említett együttműködés és megértés? Miként képesek különböző emberek többé-kevésbé egybehangzóan értelmezni a jelentések univerzumát? Schütz a következőképpen válaszol ezekre a kérdésekre: azért tudunk együttműködni, egymást megérteni és félig-med- dig egybehangzó értelmezésre jutni a kultúrvilág jelentéséről, mert a tudás, amely gondolkodásunk, cselekvésünk és megértésünk alkalmazási keretét alkotja, szocializált, mégpedig három szempontból is: – strukturális szempontból: a tudásom, annak elemei és szerveződése nem csak az én magántulajdonom, közös is; legalábbis részben „objektív és anonim, vagyis […] elkülönült és független az én helyzetmeghatározásomtól és embertársaimétól is, egyedi életrajzi előadottságainktól s valóságos és lehetséges céljainktól, amelyek mindenkori életrajzunkkal hozzáférhetők”…Ebben az eltárgyiasí- tott formában – mint kimondott szó, leírt szöveg, elismert és kodifikált intézmény – mindenki hozzáférhet (vö. ehhez Mead jelentéssel bíró szimbólum fogalmát).

A fennálló egyéni különbségeket egy idealizáló feltevéssel, a látószögek reciproci- tásának generáltézisével lehet meghaladni, vagy legalábbis jelentéktelenné tenni. A látószögek reciprocitásának generáltézise két egymást kiegészítő feltevést tartalmaz: a különböző emberek esetében az álláspontok felcserélhetőségének és a relevanciarendszerek összhangjának feltevését: ha álláspontomból adódóan másként látom is a világot, mint a velem szemben álló ember, elvileg az ő álláspontját is elfogadhatom, és akkor a relevanciarendszerek összhangja folytán a világot úgy fogom látni, ahogy most ő látja (vö. ehhez a másik szerepének, illetve cselekedetének átvételét Meadnél);

– genetikai szempontból: Schütz arra utal, hogy „a világról való tudásomnak csak igen kicsiny része (ered) személyes tapasztalatomból. A nagyobbik része társadalmilag levezetett, barátaim, szüleim, tanáraim s tanáraim tanárai ruházták rám” …. A szocializációs folyamat során jutok el a bebocsátásig a társadalmilag objektivált tudásba, ismerem meg azt, tanulom meg alkalmazni s a világot ennek a tudásnak a fényében értelmezni;

– a tudás elosztásának szempontjából: nem minden egyén szerez ugyanakkora részt a társadalmilag objektivált tudásból. Az egyéni tudás a foglalkozás, a társadalmi réteghez és természetesen a kultúrkörhöz tartozás függvényében változik.

A tudásnak ez a társadalmi elosztása azt vonja maga után, hogy kevés olyan terület van, amelyen mindenkinek egyforma a tudásszintje, sok olyan van viszont, ahol csak az egyik ember szakértő (tehát otthonos tudása van), míg a másik ízig-vérig laikus (csupán ismertségi vagy hiten alapuló tudása van). A modern társadalmakban például mindenkinek esélye van arra, hogy az anyanyelvén megtanuljon beszélni, írni és olvasni. Társadalmi réteghez tartozástól függően természetesen e téren is alapvető tudás- és képességbeli különbségek vannak. Még nagyobbak ezek a különbségek a magas műveltség, a műveltségtudás szintjén; mai munkamegosztáson alapuló szakmai világunkban mindenki szakember egy szűk területen, és laikus minden másban.

Schütz arra is utal, hogy a tudás elosztásához tartozó tudás maga is az általános, mindenki számára hozzáférhető tudás egyik eleme: ha beteg vagyok, és nem vagyok orvos, akkor magamon ugyan nem tudok segíteni, de tudom, hogy ki alkalmas arra, hogy segítsen nekem …

3.2. Túl a mindennapok világán: az értelemtartományok sokfélesége

Mint a 3. rész elején megállapítottuk, Schütz szerint az értelemteli emberi tevékenység nem korlátozódik a mindennapi élet világára. Most legalább áttekintésszerűen ezt a mindennapi világon és annak sajátosságain túl levő értelemteli tevékenységet kívánjuk a mindennapi világban tapasztalható értelemértelmezéssel és -tételezéssel összehasonlítva megvizsgálni.

Ezekhez a mindennapi világon túli valóságokhoz sorolja Schütz „az álmok, a képzelgések és a fantázia világát s különösen a művészet, a vallási tapasztalás, a tudományos elmélkedés világát, a gyermek játékvilágát és a tébolyét” (…

Schütz szerint e világok mindegyike zárt értelemtartomány, mindegyikre külön önmagára hangolt megismerési stílus jellemző. A mindenkori uralkodó megismerési stílusok hat dimenzió mentén különböznek egymástól, mégpedig …

– a tudati feszültség foka,

– az uralkodó epokhé fajtája,

– a spontaneitás formája,

– az öntapasztalás formája,

– a szocialitás formája,

– az időperspektíva fajtája szerint.

Hogy mit jelentenek ezek a dimenziók, az … a különböző értelemtartományok ismertetése során világossá válik.

Mindegyik ilyen értelemtartományba úgyszólván belemerülhetek, s ily módon, mint Schütz mondja: „valósághangsúlyt adhatok neki”. Az egyik értelemtartományról egy másikra való átmenetet sokknak éljük meg (például amikor felijedünk egy álomból).

A következőkben néhány ilyen értelemtartomány – a mindennapi élet, a képzeletvilág, az álomvilág és a tudományos elmélet világa – sajátosságait ismertetjük a fent említett hat dimenzió összefüggésében.

a) A mindennapi világ

A mindennapok világában a legnagyobb a tudati feszültség foka. A tudatot „csak az élet és annak követelményei érdeklik”, éberen figyel a külső valóság által felvetett problémákra.

Már ismerjük a mindennapi világban uralkodó epokhét – a természetes beállítódás epokhéját, amelyben hatályon kívül helyezünk mindenfajta, a világ létezésére vonatkozó kétséget. A spontaneitásnak a mindennapokban uralkodó formája a ténykedés, vagyis a tervek fizikai tevékenység útján történő megvalósítása, amelyre emberi élőlényként való létezésem iránti alapvető aggódás, a haláltól való félelem sarkall. Ennek felel meg az öntapasztalás egyik sajátos formája: a cselekvő teljesen feloldódik spontán tevékenységében, Schütz megfogalmazásában össz-énnek tapasztalja magát.

A szocialitást a mindennapokban az életproblémák leküzdése (néha: az eközben való kölcsönös akadályoztatás) során megnyilvánuló kommunikációnak, együttműködésnek, egymásrautaltságnak tapasztaljuk: a kommunikáció és a társadalmi cselekvés közös interszubjektív világának.

A mindennapi világot végül a benne uralkodó időperspektíva jellemzi: ahhoz, hogy részt vehessünk a külvilág – a természet és a társadalom – eseményeiben, mintegy arra kényszerülünk, hogy belső óránkat, belső időnket (durée) összehangoljuk az objektív, fizikai idő és az interszubjektív társadalmi idő folyásával. Ha nem akarunk túl későn érkezni, és elszalasztani a csatlakozást, a durée és a kozmikus idő metszéspontjában levő standard időben kell élnünk.

Mivel a mindennapi világ olyan világ, amelyben, a külvilággal aktívan szembeszegülve és más emberekkel együttműködve fizikai létezésünk biztosítása a lényeg, Schütz a mindennapi élet valóságát kiváltságos valóságnak nevezi. Ezt tartja az eredeti modellnek, „valóságtapasztalásunk őstípusának; az összes többi értelemterületet belőle levezetettnek tekinthetjük” ….

b) A fantáziák és képzelgések világa

A fantázia világában messzemenően elveszítjük érdeklődésünket az élet és követelményei iránt, és szabad folyást engedünk képzelőerőnknek- a tudati feszültség mértéke tehát csökken.

Elhatározzuk, hogy elfeledjük a mindennapok ténykedéseit, ebben az értelemben tehát zárójelbe tesszük azokat, epokhét alkalmazunk rájuk – ezzel megtiltunk minden reális kételyt is a fantázia világát illetően.

Az uralkodó spontán tevékenység a szabad képzelgés, nem foglalkozunk az alapvető aggódással és azzal sem, hogy megvalósíthatók-e ezek a fantáziák – mihelyt ugyanis ebből a szempontból vizsgáljuk fantáziáinkat, már nem a képzelet világában vagyunk, hanem visszatértünk a valóságba.

A fantázia világában természetesen tetszés szerint változtathatjuk meg külső megjelenésünket is – nagyobbnak vagy kisebbnek, erősebbnek vagy gyengébbnek, szebbnek vagy csúnyábbnak képzelhetjük magunkat –, és bármely vágyott szerepbe belehelyezkedhetünk – cipőtisztítóból milliomosok lehetünk, ami a valóságban nem lehetséges, jól tudva, hogy valójában természetesen egyik szerep sem a miénk. Fiktív szerepeket játszó rész-énnek éljük meg magunkat.

Képzelegni – s ezzel térünk rá a szocialitás uralkodó formájára – egyedül és közösen is tudunk, a fantázia tartalma természetesen kitalált kapcsolat is lehet. Ami a képzelgés idői (és térbeli) struktúráját illeti, itt megszűnnek az interobjektív tér és az interszubjektív standard idő béklyói: gondolatban már helyekre és időkbe képzelhetjük magunkat, elmulasztott alkalmakat pótolhatunk be, sikeresen lehetünk úrrá a jövőn …

c) Az álomvilág

Az álomvilágban uralkodó tudatállapot a teljes elernyedés, az élettől való teljes elfordulás.

A mindennapi élet valósága itt is zárójelbe kerül, s ezzel ki van kapcsolva minden, az álomvilág valóságát illető kétely is.

Természetesen az álomban is létezik spontán tevékenység: éppenséggel álomképeket észlelünk – s eközben kis észleleteket (éhség, fájdalom), egyúttal nappali maradványokat is (a fogalom Sigmund Freudtól ered, aki a mindennapok benyomásaira és problémáira gondolt) feldolgozunk, „amelyek az ébrenlét állapotában – az élet támasztotta feladatokkal kapcsolatos rendkívül gyakorlatias beállítottság következtében – megkülönböztethetetlenek és megragadhatatlanok maradnak” … Ezeket a nappali maradványokat persze nem aktív cselekvés, hanem passzív figyelem formájában dolgozzuk fel.

Ennek felel meg, hogy az álmodó gyakran úgy éli meg önmagát, hogy céltalanul bonyolódik bele az álomcselekménybe.

Az álomvilág szocialitását illetően elmondható, hogy az álomvilágban nincs kommunikáció, legalábbis nem két álmodó között. A másik álomvilága csak közvetett kommunikáció – éber állapotban való közlés, amely viszont már a mindennapi világ hatálya alatt áll, tehát egy, az álomtól idegen értelemtartományhoz tartozik – útján érhető el.

Ami végül az álomvilág időperspektíváját illeti, itt is érvényes: a standard idő és annak rendje megszűnt, a belső idő elkülönült tőle, az előtt és az után, a múlt, a jelen és a jövő – legalábbis a mindennapi világ látószögéből – reménytelenül összekeverednek …

d) A tudományos elmélet világa

Schütz szerint a tudományos elmélet világában is kisebb a tudati feszültség, mint a mindennapi világban: a tudóst sem csak az élet és annak követelményei érdeklik, inkább a kívülálló megfigyelő szerepét tölti be, s csupán az érdekli, hogy várakozásai és hipotézisei „kiállják-e a további tapasztalatok láncolatából álló igazolódás próbáját” …. Az élet iránti érdektelensége miatt a mindennapok szempontjából a tudós néha szórakozott professzornak látszik.

A tudományos világra jellemző epokhé, mint Schütz kissé körülményesen mondja, „a természetes beállítódás epokhéjának epokhéja”: míg a mindennapokban a világ létezésére vonatkozó kételyt tesszük zárójelbe, addig a tudós megfordítva, éppen létezésének kétségtelenségét teszi zárójelbe: az elméletek érvényességére vonatkozó kételyt emeli elvvé és erénnyé. Emiatt a tulajdonság miatt látszik életidegennek a tudós a mindennapi világ nézőpontjából.

A tudományban ennek megfelelően nem is az alapvető aggódás vezérelte spontán cselekvés uralkodik, hanem az elméleti szemlélődés, amely célja nem „a világ feletti uralom, hanem annak megfigyelése és lehetőség szerinti megértése” …. A tudományos tudást természetesen a gyakorlatban is lehet alkalmazni, s a társadalmat mindenekelőtt e miatt az alkalmazás miatt érdekli a tudomány. De ez az alkalmazhatóság csak a mindennapi világ szemszögéből érdekes. A tudós és elméleti tevékenysége szempontjából – legalábbis Schütz így véli – teljesen lényegtelen, bár mint ennek a társadalomnak a tagja (márpedig az) ő is hasznot húzhat a tudomány alkalmazásából, vagy kára lehet belőle.

Ez vezet át bennünket a tudomány világának következő dimenziójához, nevezetesen az öntapasztalás itt uralkodó formájához. A tudós nem érvényesítheti teljes emberi létét a tudományában, ennek megfelelően a tudomány világában „csak részleges én, szerepjátszó »felépített én«, nevezetesen a teoretikus” …

A szocialitásnak a tudományban uralkodó formájaként a tudományos párbeszédet nevezhetjük meg, amelynek tárgyai „a mások által kidolgozott eredmények, a mások által felvetett problémák, a mások által javasolt megoldások és a mások által kifejlesztett módszerek”…. A mindennapi világgal való kommunikáció mindazonáltal hasonló fordítási problémákat vet fel, mint amelyekkel az álomvilág esetében találkozunk: itt is csak közvetett kommunikációról lehet szó. Gondoljunk például arra, mennyire nehéz népszerűen, „szemléltetően” bemutatni mondjuk a magfizikát.

Mint tudós, a tudós is a standard időn kívül él, olyan (tudományos) jelenben, amelyben a (tudományos) múltban felvetődött problémákat dolgozzák fel, s olyan (tudományos) jövőt vetít előre, amelyben a feldolgozott probléma megoldódik, másként kifejezve: időperspektíváját a tudományos problémák megoldási ciklusa szabja meg. Szórakozott professzorunk munkájába merülve néha elfelejti, milyen későre jár már a standard idő kategóriái szerint – és ilyenkor könnyen figyelmen kívül hagy valamilyen magánprogramot.

A tudományos elmélet világát Schütz sok közül az egyik értelemtartományként és sok közül az egyik megismerési stílusként jellemzi. Ez mintha a tudomány érvényességi igényének viszonylagossá tételére futna ki. Ezáltal felvetődik a kérdés, vajon lehet-e, s ha igen, mennyiben, a tudományos megismerés objektivitásáról beszélni …

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Habermas’ theories

(Content based on a Wikipedia essay on the subject.)

The Theory of Communicative Action (German: Theorie des kommunikativen Handelns) is a two-volume 1981 book by Jürgen Habermas, in which the author continues his project of finding a way to ground “the social sciences in a theory of language”

Theory

The theory of communicative action is a critical project which reconstructs a concept of reason which is not grounded in instrumental or objectivistic terms, but rather in an emancipatory communicative act. This reconstruction proposes “human action and understanding can be fruitfully analysed as having a linguistic structure”,and each utterance relies upon the anticipation of freedom from unnecessary domination. These linguistic structures of communication can be used to establish a normative understanding of society….This conception of society is used “to make possible a conceptualization of the social-life context that is tailored to the paradoxes of modernity.”

This project started after the critical reception of Habermas’s book Knowledge and Human Interests (1968), after which Habermas chose to move away from contextual and historical analysis of social knowledge toward what would become the theory of communicative action.The theory of communicative action understands language as the foundational component of society and is an attempt to update Marxism by “drawing on Systems theory (Luhmann), developmental psychology (Piaget, Kohlberg), and social theory (Weber, Durkheim, Parsons, Mead, etc.)”.

Based on lectures initially developed in On the Pragmatics of Social Interaction Habermas was able to expand his theory to a large understanding of society.

Thomas A. McCarthy states that

The Theory of Communicative Action has three interrelated concerns: (1) to develop a concept of rationality that is no longer tied to, and limited by, the subjectivistic and individualistic premises of modern philosophy and social theory; (2) to construct a two-level concept of society that integrates the lifeworld and systems paradigms; and, finally, (3) to sketch out, against this background, a critical theory of modernity which analyzes and accounts for its pathologies in a way that suggests a redirection rather than an abandonment of the project of enlightenment.

Theory of Communicative Action, Vol. 1

The Theory of Communicative Action, Volume 1 sets out “to develop a concept of rationality that is no longer tied to, and limited by, the subjectivistic and individualistic premises of modern philosophy and social theory.” With this failure of the search for ultimate foundations by “first philosophy” or “the philosophy of consciousness”, an empirically tested theory of rationality must be a pragmatic theory based on science and social science. This implies that any universalist claims can only be validated by testing against counterexamples in historical (and geographical) contexts – not by using transcendental ontological assumptions. This leads him to look for the basis of a new theory of communicative action in the tradition of sociology. He starts by rereading Max Weber‘s description of rationality and arguing it has a limited view of human action. Habermas argues that Weber’s basic theoretical assumptions with regard to social action prejudiced his analysis in the direction of purposive rationality, which purportedly arises from the conditions of commodity production.Taking the definition of action as human behaviour with intention, or with subjective meaning attached, then Weber’s theory of action is based on a solitary acting subject and does not encompass the coordinating actions that are inherent to a social body.

According to Weber, rationalisation (to use this word in the sense it has in sociological theory) creates three spheres of value: the differentiated zones of science, art and law. For him, this fundamental disunity of reason constitutes the danger of modernity. This danger arises not simply from the creation of separate institutional entities but through the specialisation of cognitive, normative, and aesthetic knowledge that in turn permeates and fragments everyday consciousness. This disunity of reason implies that culture moves from a traditional base in a consensual collective endeavour to forms which are rationalised by commodification and led by individuals with interests which are separated from the purposes of the population as a whole.

This ‘purposive rational action‘ is steered by the “media” of the state, which substitute for oral language as the medium of the coordination of social action. An antagonism arises between these two principles of societal integration—language, which is oriented to understanding and collective well being, and “media”, which are systems of success-oriented action.

Following Weber, Habermas sees specialisation as the key historical development, which leads to the alienating effects of modernity, which ‘permeate and fragment everyday consciousness’.

Habermas points out that the “sociopsychological costs” of this limited version of rationality are ultimately borne by individuals, which is what György Lukács had in mind when he developed Marx’s concept of reification in his History and Class Consciousness (1923). They surface as widespread neurotic illnesses, addictions, psychosomatic disorders, and behavioural and emotional difficulties; or they find more conscious expression in criminal actions, protest groups and religious cults. Lukács thought that reification, although it runs deep, is constrained by the potential of rational argument to be self-reflexive and transcend its occupational use by oppressive agencies.Habermas agrees with this optimistic analysis, in contrast to Adorno and Horkheimer, and thinks that freedom and ideals of reconciliation are ingrained in the mechanisms of the linguistically mediated sociation of humanity.

Theory of Communicative Action, Vol. 2

Habermas finds in the work of George Herbert Mead and Émile Durkheim concepts which can be used to free Weber’s theory of rationalisation from the aporias of the philosophy of consciousness. Mead’s most productive concept is his theoretical base of communication and Durkheim’s is his idea of social integration. Mead also stressed the social character of perception: our first encounters are social.

From these bases, Habermas develops his concept of communicative action: communicative action serves to transmit and renew cultural knowledge, in a process of achieving mutual understandings. It then coordinates action towards social integration and solidarity. Finally, communicative action is the process through which people form their identities.

Following Weber again, an increasing complexity arises from the structural and institutional differentiation of the lifeworld, which follows the closed logic of the systemic rationalisation of our communications. There is a transfer of action co-ordination from ‘language’ over to ‘steering media’, such as money and power, which bypass consensus-oriented communication with a ‘symbolic generalisation of rewards and punishments’. After this process the lifeworld “is no longer needed for the coordination of action”. This results in humans (‘lifeworld actors’) losing a sense of responsibility with a chain of negative social consequences. Lifeworld communications lose their purpose becoming irrelevant for the coordination of central life processes. This has the effect of ripping the heart out of social discourse, allowing complex differentiation to occur but at the cost of social pathologies.

“In the end, systemic mechanisms suppress forms of social integration even in those areas where a consensus dependent co-ordination of action cannot be replaced, that is, where the symbolic reproduction of the lifeworld is at stake. In these areas, the mediatization of the lifeworld assumes the form of colonisation”. Habermas argues that Horkheimer and Adorno, like Weber before them, confused system rationality with action rationality. This prevented them from dissecting the effects of the intrusion of steering media into a differentiated lifeworld, and the rationalisation of action orientations that follows. They could then only identify spontaneous communicative actions within areas of apparently ‘non-rational’ action, art and love on the one hand or the charisma of the leader on the other, as having any value.

According to Habermas, lifeworlds become colonised by steering media when four things happen:

1. Traditional forms of life are dismantled.

2. Social roles are sufficiently differentiated.

3. There are adequate rewards of leisure and money for the alienated labour.

4. Hopes and dreams become individuated by state canalization of welfare and culture.

These processes are institutionalised by developing global systems of jurisprudence. He here indicates the limits of an entirely juridified concept of legitimation and practically calls for more anarchistic ‘will formation’ by autonomous networks and groups.

“Counterinstitutions are intended to dedifferentiate some parts of the formally organised domains of action, remove them from the clutches of the steering media, and return these ‘liberated areas’ to the action co-ordinating medium of reaching understanding“.

Once we have extricated ourselves from Weber’s overly negative use of rationalisation, it is possible to look at the Enlightenment ideal of reason in a fresh light. Rationality is redefined as thinking that is ready to submit to criticism and systematic examination as an ongoing process. A broader definition is that rationality is a disposition expressed in behaviour for which good reasons can be given.

Habermas is now ready to make a preliminary definition of the process of communicative rationality: this is communication that is “oriented to achieving, sustaining and reviewing consensus – and indeed a consensus that rests on the intersubjective recognition of criticisable validity claims”. With this key definition he shifts the emphasis in our concept of rationality from the individual to the social. This shift is fundamental to the Theory of Communicative Action. It is based on an assumption that language is implicitly social and inherently rational.

Argument of some kind is central to the process of achieving a rational result. Contested validity claims are thematised and attempts are then made to vindicate or criticise them in a systematic and rigorous way. This may seem to favour verbal language, but allowance is also given for ‘practical discourses’ in which claims to normative rightness are made thematic and pragmatically tested. Non-verbal forms of cultural expression could often fall into this category.

Habermas proposes three integrated conditions from which argumentative speech can produce valid results:

The structure of the ideal speech situation (which means that the discourse is) immunised against repression and inequality in a special way… The structures of a ritualised competition for the better arguments… The structures that determine the construction of individual arguments and their interrelations“.

If we accept such principles of rational argumentation, Communicative Rationality is:

The processes by which different validity claims are brought to a satisfactory resolution.

The relations to the world that people take to forward validity claims for the expressions they deem important.

Weber continued Ch.2 §§14-39

Weber continued Ch.2. §§14-39

14. Market Economies and Planned Economies 

Want satisfaction will be said to take place through a "market econ- 
omy" so far as it results from action oriented to advantages in exchange 
on the basis of self-interest and where co-operation takes place only 
through the exchange process. It results, on the other hand, from a 
"planned economy" so far as economic action is oriented systematically 
to an established substantive order, whether agreed or imposed, which is 
valid within an organization. 

Want satisfaction through a market economy normally, and in propor- 
tion to the degree of rationality, presupposes money calculation. Where 
capital accounting is used it presupposes the economic separation of the 
budgetary unit (household) and the enterprise. Want satisfaction by 
means of a planned economy is dependent, in ways which vary in kind 
and degree according to its extensiveness, on calculation in kind as the 
ultimate basis of the substantive orientation of economic action. For- 
mally, however, the action of the producing individual is oriented to the 
instructions of an administrative staff, the existence of which is in- 
dispensable. In a marke't economy the individual units are autocephalous 
and their action is autonomously oriented. In the administration of 
budgetary units (households), the basis of orientation is the marginal 
utility of money holdings and of anticipated money income; in the case 
of intermittent entrepreneurship CGelegenheitserwerhen), the probabili- 
ties of market gain, and in the case of profit-making enterprises, capital 
accounting are the basis of orientation. In a planned economy, all eco- 
nomic action, so far as "planning" is really carried through, is oriented 
heteronomously and in a strictly "budgetary" manner, to rules which 
enjoin certain modes of action and forbid others, and which establish a 
system of rewards and punishments. When, in a planned economy, 
die prospect of additional individual income is used as a means of stimu- 
lating self-interest, the type and direction of the action thus rewarded is 
substantively heteronomously determined. It is possible for the same 
thing to be true of a market economy, though in a formally voluntary 



,r 

I I O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION f Ch. 11 

way. This is true wherever the unequal distribution of wealth, and 
particularly of capital goods, forces the non-owning group to comply 
with the authority of others in order to obtain any return at all for the 
utilities they can offer on the market — either with the authority of a 
wealthy householder, or with the decisions, oriented to capital accounting, 
of the owners of capital or of their agents. In a purely capitalistic organiza- 
tion of production, this is the fats of the entire working class. 

: - The following are decisive as elements of the motivation of economic 
activity under the conditions of a market economy: ( i ) For those without 
substantial property: (a) the fact that they run the risk of going entirely , 
without provisions, both for themselves and for those personal depend- 
ents, such as children, wives, sometimes parents, whom the individual 
typically maintains on his own account; (b) that, in varying degrees sub- 
jectively they value economically productive work as a mode of life. 
(2) For those who enjoy a privileged position by virtue of wealth or the 
education which is usually in turn dependent on wealth: (a) opportuni- 
ties for large income from profitable undertakings; (b) ambition; (c) the 
valuation as a "calling" of types of work enjoying high prestige, such as 
intellectual work, artistic performance, and work involving high tech- 
nical competence. (3) For those sharing in the fortunes of profit-making 
enterprises: (a) the risk to the individual's own capital, and his own op- 
portunities for profit, combined with (b) the valuation of rational acquisi- 
tive activity as a "calling." The latter may be significant as a proof of the 
individual's own achievement or as a symbol and a means of autonomous 
control over the individuals subject to his authority, or of control over 
economic advantages which are culturally or materially important to an 
indefinite plurality of persons — in a word, power. 

A planned economy oriented to want satisfaction must, in proportion 
as it is radically carried through, weaken the incentive to labor so far as 
the risk of lack of support is involved. For it would, at least so far as there 
is a rational system of provision for wants, be impossible to allow a 
worker's dependents to suffer the full consequences of his lack of effici- 
ency in production. Furthermore, autonomy in the direction of organized 
productive units would have to be greatly reduced or, in the extreme 
case, eliminated. Hence it would be impossible to retain capital risk and 
proof of merit by a formally autonomous achievement. The same would 
be true of autonomous power over other individuals and important fea- 
tures of their economic situation. Along with opportunities for special 
material rewards, a planned economy may have command over certain 
ideal motives of wliat is in the broadest sense an altruistic type, which 
can be used to stimulate a level of achievement in economic production 
comparable to that which autonomous orientation to opportunities for 



14 ] Market Economies and Planned Economies i i i 

profit, by producing for the satisfaction of effective demand, has em- 
pirically been able to achieve in a market economy. Where a planned 
economy is radically carried out, it must further accept the inevitable 
reduction in formal, calculator^ rationality which would result from the 
elimination of money and capital accounting. Substantive and formal (in 
the sense of exact calculation') rationality are, it should be stated again, 
after all largely distinct problems. This fundamental and, in the last 
analysis, unavoidable element of irrationality in economic systems is one 
of the important sources of all "social" problems, and above all, of the 
problems of socialism. 

The following remarks apply to both sees. 13 and 14. 

1. The above exposition obviously formulates only things which are 
generally known, in a somewhat more precise form. The market econ- 
omy is by far the most important case of typical widespread social action 
predominantly oriented to "self-interest." The process by which this type 
of action results in the satisfaction of wants is the subject matter of eco- 
nomic theory, knowledge of which in general terms is here presupposed. 
The use of the term "planned economy" (Planwirtschaft) naturally does 
not imply acceptance of the well-known proposals of the former German 
Minister of Economic Affairs. 26 The term has been chosen because, 
while it does not do violence to general usage, it has, since it was used 
officially, been widely accepted. This fact makes it preferable to the term 
used' by Otto Neurath, "administered economy" (yerwaltungswirt- 
schaft), which would otherwise be suitable. 

2. So far as it is oriented to profit-making, the economic activity of 
organizations, or that regulated by organizations, is not included in the 
concept of "planned economy," whether the organization be a guild, a 
cartel, or a trust. "Planned economy" includes the economic activity of or- 
ganizations only so far as it is oriented to the provision for needs. Any 
system of economic activity oriented to profit-making, no matter how 
strictly it is regulated or how stringently controlled by an administrative 
staff, presupposes effective prices, and thus capital accounting as a basis 
of action; this includes the limiting case of total cartellization, in which 
prices would be determined by negotiation between the cartel groups 
and by negotiated wage agreements with labor organizations. In spite of 
the identity of their objectives, complete socialization in the sense of a 
planned economy administered purely as a budgetary unit and partial 
socialization of various branches of production with the retention of cap- 
ital accounting are technically examples of quite different types. A pre- 
liminary step in the direction of the budgetary planned economy is to he 
found wherever consumption is rationed or wherever measures are taken 
to effect the direct "in-kind" distribution of goods. A planned direction 
of production, whether it is undertaken by voluntary or authoritatively 
imposed cartels, or by agencies of the government, is primarily con- 
cerned with a rational organization of the use of means of production 
and labor resources and cannot, on its own terms, do without price 



112 SOCIOLOGICAL ' CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

or at least, not yet. It is thus by no means fortuitous that the "rationing- 
type" of socialism gets along quite well with the "works councils" (Be- 
triebsrate') type of socialism which, against the will of its leading person- 
alities (who are in favor of a rationalistic solution), must pursue the 
income interests of the workers. 

3. It will not be possible to enter at this point into a detailed discus- 
sion of the formation of such economic organizations as cartels, corpora- 
tions or guilds. Their general tendency is orientation to the regulation or 
monopolistic exploitation of opportunities for profit. They may arise by 
voluntary agreement, but are more generally imposed even where for- 
mally voluntary. Compare in the most general terms, chap. I, sec. 10, 
and also the discussion of the appropriation of economic advantages, sec. 
ioff. of the present chapter. 

The conflict between two rival forms of socialism lias not died down 
since the publication of Marx's Mis&re de la Philosophic. On the one 
hand, there is the type, which includes especially the Marxists, which 
is evolutionary and oriented to the problem of production; on the other, 
the type which takes the problem of distribution as its starting point and 
advocates a rational planned economy. The latter is again tcday corning 
to be called "communism." The conSict within the Russian socialist 
movement, especially as exemplified in the passionate disputes between 
Plekhanov and Lenin, was, after all, also concerned with this issue. 
While the internal divisions of present-day socialism are very largely 
concerned with competition for leadership and for "benefices." along with 
these issues goes the same set of problems. In particular, the economic ( 
experience of the War has given impetus to the idea of a planned econ- 
omy, but at the same time to the development of interests in appropria- 
tion. 

The question of whether a planned economy, in whatever meaning 
or extent, should be introduced, is naturally not in this form a scientific 
problem. On scientific grounds it is possible only to inquire, what would 
be the probable results of any given specific proposal, and thus what 
consequences would have to be accepted if the attempt were made. Hon- 
esty requires that all parties should admit that, while some of the factors 
are known, many of those which would be important are only very par- 
tially understood. In the present discussion, it is not possible to enter 
into the details of the problem in such a way as to arrive at concretely 
conclusive results. The points which will be taken up can be dealt with 
only in a fragmentary way i:i connection with forms of organizations, 
particularly the state. It was possible above only to introduce an un- 
avoidably brief discussion of the most elementary aspects of the techni- 
cal problem. The phenomenon of a regulated market economy has, for 
the reasons noted above, not yet been taken up. 

4. The organization of economic activity on the basis of a market 
economy presupposes the appropriation of the material sources of utili- 
ties on the one hand, and market freedom on the other. The effective- 
ness of market freedom increases with the degree to which these sources 
of utility, particularly the means of transport and production, are ap- 



14 ] Market Economies and Planned Economies i i 3 

propriated. For, the higher the degree of marketability, the more will 
economic action be oriented to market situations. But the effectiveness 
of market freedom also increases with the degree to which appropriation 
is limited to material sources of utility. Every case of the appropriation 
of human beings through slavery or serfdom, or of economic advantages 
through market monopolies, restricts the range of human action which 
can be market-oriented. Fichte, in his Der geschlossene Handelsstaat 
(Tubingen, 1800), was right in treating this limitation of the concept 
of "property" to material goods, along with the increased autonomy of 
control over the objects which do fall under this concept, as characteris- 
tic of the modern market-oriented system. All parties to market relations 
have had an interest in this expansion of property rights because it in- 
creased the area within which they could orient their action to the op- 
portunities of profit offered by the market situation. The development 
of this type of property is hence attributable to their influence. 

5. For reasons of accuracy of expression, we have avoided the term 
"communal economy" (_GemeinwirtschafO, which others have frequently 
used [in the German discussions of 1 918-1920], because it pretends the 
existence of a "common interest" or of a "feeling of community" (G«- 
meinschaftsgefuhY) as the normal thing, which conceptually is not re- 
quired: the economic organization of a feudal lord exacting corvee labor 
or that of rulers like the Pharaohs of the New Kingdom belongs to the 
same category as a family household. Both are equally to be distin- 
guished from a market economy. 

6. For the purposes of the definition of a "market economy," it is in- 
different whether or to what extent economic action is "capitalistic," that 
is, is oriented to capital accounting. This applies also to the normal case 
of a market economy, that in which the satisfaction of wants is effected 
in a monetary economy. It would be a mistake to assume that the devel- 
opment of capitalistic enterprises must occur proportionally to the 
growth of want satisfaction in the monetary economy, and an even larger 
mistake to believe that this development must take the form it has as- 
sumed in the Western world. In fact, the contrary is true. The extension 
of money economy might well go hand in hand with the increasing 
monopolization of the larger sources of profit by the oikos economy of a 
prince. Ptolemaic Egypt is an outstanding example. According to the 
evidence of the accounts which have survived, it was a highly developed 
money economy, but its accounting remained budgetary accounting and -* 
did not develop into capital accounting. It is also possible that with the 
extension of a money, economy could go a process of "feudal ization" 
(Verpfrundung) of fiscal advantages resulting in a traditionalistic stabi- 
lization of the economic system. This happened in China, as will have 
to be shown elsewhere. Finally, the capitalistic utilization of money 
resources could take place through investment in sources of potential 
profit which were not oriented to opportunities of exchange in a free 
commodity market and thus not to the production of goods, For reasons 
which will be discussed below, this has been almost universally true out- 
side the area of the modern Western economic order. 



I I 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

15. Types of Economic Division of Labor 

Every type of social action in a group which is oriented to economic 
considerations and every associative relationship of economic significance 
involves to some degree a particular mode of division and organization of 
human services in the interest of production. A mere glance at the facts 
of economic action reveals that different persons perform different types 
of work and that these are combined in the service of common ends, 
with each other and with the non-human means of production, in the 
most varied ways. The complexity of these phenomena is extreme, but 
yet it is possible to distinguish a few types. 

Human services for economic purposes may be distinguished as (a) 
"managerial," or (b) oriented to the instructions of a managerial agency. 
The latter type will be called "labor" for purposes of the following dis- 
cussion. 

It goes without saying that managerial activity constitutes "labor" in 
the most definite sense if labor is taken to mean the expenditure of time 
and effort as such. The use of the term "labor" in the sense defined 
above, as something distinct from managerial activity, has, however, 
come to be generally accepted for social reasons, and this usage will be 
followed in the present discussion. For more general purposes, the terms 
"services" or "work" CLeistungen') will be used. 

Within a social group the ways in which labor or other work may be 
carried on may be classified in the following way: (1) technically, ac- 
cording to the way in which the services of a plurality of co-operating 
individuals are divided up and combined, with each other and with the 
non-human means of production, to carry out the technical procedures' 
of production; (z) socially. In the first place, classification may be accord- 
ing to whether particular services do or do not fall within the jurisdiction 
of autocephalous and autonomous economic units, and according to the 
economic character of these units. Closely connected with this is classi- 
fication according to the modes and extent to which the various services, 
the material means of production, and the opportunities for economic 
profit used as sources of profit or as means of acquisition, are or are not 
appropriated. These factors determine the mode of occupational differen-, 
tiation, a social phenomenon, and the organization of the market, an 
economic phenomenon; (3) finally, an economic criterion: for every 
case of combination of services with each other and with material means 
of production, of division among different types of economic units, and 
of mode of appropriation, one must ask separately whether they are used 
in a context of budgetary administration or of profit-making enterprise. 

For this and the following section, compare the authoritative discus- 
sion by Karl Biicher in his article "Gewerbe" in the Handworterbvch 



1 5 ] Types of Economic Division of Labor i 1 5 

der Staatwissensckaften and in his book, Die Entstehung der Volkswirt- 
schaft?* These are fundamentally important works. Both the terminol- 
ogy and the classification here presented have departed from Bucher*s 
only where it seemed necessary for reasons of convenience. There is 
little reason to dte other references, for the following exposition does not 
pretend to achieve new results, but only to provide a scheme of analysis 
useful for the purposes of this work. 

1. It should be emphatically stated that the present discussion is 
concerned only with a brief summary of the sociological aspects of these 
phenomena, so far as they are relevant to its context. The economic 
aspect is included only insofar as it is expressed in what are formally 
sociological categories. The presentation would be economic in the sub- 
stantive sense only if the price and market conditions, which so far have 
been dealt with only on the theoretical level, were brought in. But these 
substantive aspects of the general problem could be worked into such a 
summary introduction only in the form of terse theses, which would 
involve some very dubious distortions. The explanatory methods of pure 
economics are as tempting as they are misleading. To take an example: 
4 It might be argued that for the development of medieval, corporately 
regulated, but "free" labor the decisive period should be seen in the 
"dark" ages from the tenth to the twelfth century, and in particular in 
the situation during that period of the skilled Cpeasant, mining, and 
artisan) labor force whose production activity was oriented to the reve- 
nue chances of the feudal lords with rights over the land, the persons, 
and the courts — powers which were fighting for their separate interests 
and competing for these revenue sources. The decisive period for the 
development of capitalism could be claimed to be the great chronic price 
revolution of the sixteenth century. The argument would be that this 
led both to an absolute and a relative increase in the prices of almost all 
products of the soil in the West, and hence — on the basis of well-known 
principles o* agricultural economics — provided both incentives and pos- 
sibilities for market production and thus for production on a large scale; 
in part, as in England, this took the form of capitalistic enterprise, and 
in part, as in the lands between the Elbe river and Russia, that of 
corvee-labor estates. For non-agricultural products, this inflation signified 
in most cases a rise in absolute prices, but, it would be argued, rarely 
one in relative prices; typically, relative prices for industrial goods would 
fall, thus stimulating, so far as the necessary organizational and other 
external and subjective preconditions were given, attempts to create 
market enterprises able to stand up under competitive conditions. The 
claim that these preconditions were not given in Germany would be 
adduced to account for the economic decline which started there about 
that time. The later consequence of all this, the argument would run, 
was the development of capitalist industrial entrepreneurship. A neces- 
sary prerequisite for this would be the development of mass markets. An 
indication that this was actually happening could he seen in certain 
changes of English commercial policy, to say nothing of other phenom- 
ena. 

In order to verify theoretical reasoning about the substantive eco- 



I I 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

nomic conditions of the development of economic structure, theses such 
as these and similar ones would have to be utilized. But this is simply 
not admissible. These and numerous other equally controversial theories, 
even so far as they could be proved not to be wholly erroneous, cannot 
be incorporated into the present scheme which is intentionally limited to 
sociological concepts. In renouncing any attempt of this sort, however, 
the following exposition in this chapter explicitly repudiates any claim 
to concrete "explanation" and restricts itself to working out a sociological 
typology. The same is true of the previous discussion in that it con- 
sciously omitted to develop a theory of money and price determination. 
This must be strongly emphasized. For only the facts of the economic 
situation provide the fiesh and blood for a genuine explanation of also 
that process of development relevant for sociological theory. What can 
be done here is only to supply a scaffolding adequate, to provide the 
analysis with relatively unambiguous and definite concepts. 

It is obvious not only that no attempt is made here to do justice to 
the historical aspect of economic development, but also that the typol- 
ogy of the genetic sequence of possible forms is neglected. The present 
aim is only to develop a schematic system of classification. 

2. A common and justified objection to the usual terminology of eco- 
nomics is that it frequently fails to make a distinction between the 
business "establishment" (Betricfc) and the "firm" QUnternehmung).* 1 In 
the area of economically oriented action, "establishment" is a technical 
category which designates the continuity of the combination of certain 
types of services with each other and with material means of production. 
The antithesis of this category is either intermittent action, or action 
which is constitutionally discontinuous (such as is found in every house- 
hold). By contrast, the antithesis to "firm," which is a category of economic 
orientation (to profit), is the "budgetary unit" (Haushalt), which is eco- 
nomically oriented to provision for needs. But the classification in terms 
of "firro' f and "budgetary unit" is not exhaustive, for there exist actions 
oriented to acquisition which cannot be subsumed under the category 
"firm." All activity in which earnings are due purely to "work," such as 
the activity of the writer, the artist, the civil servant, is neither the one nor 
the other. The drawing and consumption of rents and annuities, however, 
obviously belong into the category of "budgetary administration." 

In spite of this distinction [between the "establishment" and the 
"firm"], we have in the earlier discussion used the term "profit-making 
establishment" (Erwerbsbetrieb^) wherever continuously coordinated, un- 
interrupted entrepreneurial activity was meant; 18 such activity is in fact 
unthinkable without the constitution of an "establishment," if only one 
consisting of nothing but the entrepreneur's own activity without the aid 
of a staff. Our concern so far was mainly to stress the separation of the 
household (budgetary unit) and the continuously organized business 
establishment. It should now be noted that use of the term "profit-making 
establishment" as a substitute for "continuously organized business firm" 
is fitting and unambiguous only in the simplest case where the technical 
unit, the "establishment," coincides with the economic unit, the "firm." 



i 5 ] Types of Economic Division of Labor 1 i 7 

In the market economy this need not be the case, For several technically 
separate "establishments" can be combined into a single "firm." The latter 
is not, of course, constituted through the mere relationship of the various 
technical units to the same entrepreneur, but through the fact that in their 
exploitation for profit these units are oriented to a coordinated plan; hence 
transitional forms are possible. When the term "establishment ' or "enter- 
prise" QBetrieb~) is used by itself, it will always refer to such technical 
units consisting of buildings, equipment, labor, and a technical manage- 
ment, the tatter possibly heteiocephalous and heteronomous — units such 
as exist even in the communist economy (as the terminology presently in 
use also recognizes). The term "profit-making establishment or enterprise" 
will henceforth be used only in cases where the technical and the eco- 
nomic unit (the "firm") are identical. 

The relation between "establishment" and "firm" raises particularly 
difficult terminological questions in the analysis of such categories as 
"factory" and "putting-out enterprise." The latter is quite clearly a type of 
"firm." In terms of "establishments," it consists of two types of units: a 
commercial establishment, and establishments which are component parts 
of the workers' households (in the absence of larger workshops such as 
' might be organized by master craftsmen as intermediaries under a "hi ring- 
boss" system); the household establishments perform certain specified 
functions for the commercial establishment, and vice versa. Viewed only 
from the point of view of "establishments," the process as a whole cannot 
be understood at all; for this it is necessary to employ additional categories, 
such as: market, firm, household (of the individual workers), commercial 
exploitation of purchased services. 

The concept of "factory" could, as has been proposed, be defined in 
entirely non-economic terms as a mode of technical organization, leav- 
ing aside consideration of the status of the workers, whether free or un- 
free, the mode of division of labor, involving the extent of internal 
technical specialization, and the type of means of production, whether 
machines or tools. That is, it would be defined simply as an organized 
workshop. However, it would seem necessary in addition to include in 
the definition the mode of appropriation of premises and means of pro- 
duction — namely: to one owner — , for otherwise the concept would 
become as vague as that of the ergpsterion. 2 * But once this is done, it 
would as a matter of principle seem more expedient to classify "factory" 
and "putting-out enterprise" as two strictly economic categories of the 
"firm" conducted on the basis of capital accounting. In a fully socialist 
order the category "factory" could then occur as little as that of "putting- 
out enterprise," but only such categories as: workshops, buildings, tools, 
shop labor services and domestic labor services of all kinds. 

3. The question of stages of economic development will be consid- 
ered only insofar as it is absolutely necessary, and then only inci- 
dentally. The following points will suffice for the present. 

It has fortunately become more common lately to distinguish types 
of economic system from types of economic policy.* The stages which 
Schonberg first suggested and which, in a somewrsat altered form, have 



I I 8 SOCIOLOGICAL CATEGORIES OE ECONOMIC ACTION [ Ck. II 

become identified with Schmoller's name, "domestic economy," "village 
economy," with the further stages of "seigneurial and princely patri- 
monial household economy" "town economy," "territorial economy," 
and "national economy,"" were in his terminology defined by the type 
of organization regulating economic activity, But it is not claimed that 
even the types of regulation, to which economic activity has been sub- 
jected by the different organizations thus classified in terms of the extent 
of their jurisdiction, were at all different. Thus the so-called territorial 
economic policies in Germany consisted to a large extent simply of an 
adoption of the measures developed in the town economy. Furthermore, 
such innovations as did occur were not greatly different from the 
"mercantilist" policies of those of the patrimonial states which had al- 
ready achieved a relatively high level of rationality; they were thus to 
that . extent "national economic policies," to use the common term, 
which, however, is not very appropriate. This classification, further, 
cbarly does not claim that the inner structure of the economic system, 
the modes in which work roles were assigned, differentiated, ana com- 
bined, the ways in which these different functions were divided be- 
tween independent economic units, and the modes of appropriation of 
control over labor, means of production, and opportunities for profit, in 
any way were correlated with the dimensions of the organizations which 
were (potential) agents of an economic policy; above all this classifica- 
tion does not claim that they always changed in the same direction with 
changes in these dimensions. A comparison of the Western World with 
Asia, and of the modern West with that of Antiquity, would show the 
untenahility of such an assumption. At the same time, in considering 
economic structure, it is by no means legitimate to ignore the existence 
or absence of organizations with substantive powers of regulation of 
economic activity, nor to ignore essential purposes of their regulation. 
The modes of profit-making activity are strongly influenced by such 
regulation, hvt it is by no means only political organizations which are 
important in this respect. 

4. In this connection, as well as others, the purpose of the discus- 
sion has been to determine the optimum conditions for the formal 
rationality of economic ;icnvity and its relation to the various types of 
substantive demands which itiay be made on the economic system. 



1 6 . Types of the Technical Division of Labor 

From a technical point of view the division of labor may be classified 
as follows: CO In the first place, it may vary according to modes of 
differentiation and combination of work services as such; (a) They may 
vary according to the type of functions (.Leistungen) undertaken by the 
same person. He may combine managerial functions with those of carry- 
ing ouv specifications; or his work may be specialized in terms of_one or 
the other. 



i6 ] _ Types of Technical Division of Labor i i 9 

The distinction is naturally relative. It is common for an individual 
who normally supervises to take a hand in the work from time to time, 
as in the case of the peasants with larger holdings. The type cases of 
combination of the two functions are: The small peasant, the independ- 
ent artisan, or the small boatman. 

Further, a given individual may (b) perform functions which are 
technically different and contribute to different results, or he may per- 
form only technically specialized functions. In the first case, the lack of 
specialization may be due to the technical level of work which does not 
permit further dividing up, to seasonal variation, or to the exploitation of 
labor services as a side line at times when they are not taken up by their 
primary occupation. In the second case, the function may be specialized 
in terms of the product in such a way that the same worker carries out 
all the processes necessary for this product, though they differ technically 
from each other. In a sense, this involves a combination of different 
functions and will be called the "specification of function." On the other 
hand, the functions may be differentiated according to the type of work, 
so that the product is brought to completion only by combining, simul- 
taneously or successively, the work of a number of persons. This is the 
"specialization of function." The distinction is to a large extent relative, 
but it exists in principle and is historically important. 

The case where there is little division of labor because of the low 
technical level is typical of primitive household economies. There, with 
the exception of the differentiation of sex roles (of which more in Part 
Two, ch. III) every individual performs every function as the occasion 
arises. Seasonal variation has been common in the alternation of agri- 
cultural work in the summer with the crafts in the winter. An example 
of side lines is the tendency for urban workers to take up agricultural 
work at certain times, such as the harvest, and also the various cases of 
secondary functions undertaken in otherwise free time, which is com- 
mon even in modem offices. 

The case of specification of function is typical of the occupational 
structure of the Middle Ages: a large number of crafts, each of which 
specialized in the production of a single article, completely unperturbed by 
the technical heterogeneity of the functions involved. There was thus a 
combination of functions. The specialization of functions, on the other 
hand, is crucial to the modern development of the organization of labor. 
There are, however, important physiological and psychological reasons 
why it has virtually never been pushed to the absolute extreme of isola- 
tion, even on the highest levels of specialization. There is almost always 
an element of specification of function involved. It is not, however, as in 
the Middle Ages, oriented to the final product. 

(2) The differentiation and combination of different functions may 
further vary according to the modes in which the services of a plurality 
of persons are combined to achieve a co-ordinated result. There are two 



I 2 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

main possibilities: (a) the "accumulation" of functions; that is the em- 
ployment of a number of persons all performing the same function to 
achieve a result. This may take the form either of identical, but tech- 
nically independent efforts co-ordinated in parallel, or of identical efforts 
organized technically into a single collective effort. 

Examples of the first case are the functions performed by mowers or 
road pavers, several of whom work in parallel. The second type was ex- 
emplified on a grand scale in ancient Egypt in such cases as the transporta- 
tion of huge stones by thousands of workers, large numbers of them 
performing the same acts, such as pulling on ropes, on the same object. 

The second type, (b) is the "combination" of functions — that is, of 
efforts which are qualitatively different, and thus specialized — in order to 
achieve a result. These erTorts may be technically independent and either 
simultaneous or successive; or they may involve technically organized 
co-operation in the simultaneous performance of technically comple- 
mentary efforts. 

i. A particularly simple example of simultaneous, technically inde- 
pendent functions is furnished by the parallel spinning of the warp and 
the woof for a given cloth. In the same class are to be placed a very 
large number of processes which are, from a technical point of view, 
undertaken independently, but are all designed as part of the produc- 
tion of the same final product. 

2. An example of the successive type of technically independent 
processes is furnished by the relation of spinning, weaving, Fulling, 
dyeing, and finishing. Similar examples are to be found in every in- , 
dustry. 

3. The combination of specialized functions is found all the way 
from the case of an assistant holding a piece of iron while a blacksmith 
forges it, a case which is repeated in every modem foundry, to the com- 
plicated situations, which, though not specific to modem factories, are 
an important characteristic of them. One of the most highly developed 
types outside the factory is the organization of a symphony orchestra or 
of the cast of a theatrical production. 



1 7. Types of the Technical Division of Labor — 
(Continued) 

The division of labor efforts varies also, from a technical point of 
view, in terms of the extent and nature of combinations with comple- 
mentary material means of production. 

1 . Forms may vary according to whether they consist purely in per- 
sonal services, as in the case of wash-women, barbers, the performance of 



l 7 ] TyP es °f Technical Division of Labor (cont.) i 2 1 

actors, or whether they produce or transform goods by "working up" or 
transporting raw materials. The latter may consist in construction work, 
as that of plasterers, decorators, and stucco workers, in production of 
commodities and in transport of commodities. There are many transi- 
tional forms between them. 

2. They may be further distinguished according to the stage at 
which they stand in the progression from original raw material to con- 
sumption: thus, from the original products of agriculture and mining to 
goods which are not only ready to be consumed, but available at the 
desired place for consumption. 

3. The forms may further vary according to the ways in which they 
use: (a) Fixed plant and facilities (Anlagen). These may consist in 
sources of power; that is, means of harnessing energy, either that of 
natural forces, such as the power of water, wind, or heat from fire, or 
that which is produced mechanically, especially steam and electrical 
power, or in special premises for work, or they may use (b) implements 
of work (ArbeitsmitteV), which include tools, apparatus, and machines. 
In some cases only one or another of these means of production may be 
used, or none. "Tools" are those aids to labor, the design of which is 
adapted to the physiological and psychological conditions of manual 
labor. "Apparatus" is something which is "tended" by the worker. 
"Machines" are mechanized apparatus. These rather vague distinctions 
have a certain significance^For characterizing epochs in the development 
of industrial technology. 

The use of mechanized sources of power and of machinery, char- 
acteristic of modem industry, is from a technical point of view due to 
their specific productivity and the resulting saving of human labor, and 
also to the uniformity and calculability of performance, both in quality 
and quantity. It is thus rational only where there exists a sufficiendy 
wide demand for the particular types of products. In the case of a market 
economy, this means adequate purchasing power for the relevant goods; 
and this in rum depends on a certain type of income distribution. 

It is quite out of the question here to undertake to develop even the 
most modest outline of a theory of the evolution of the technology and 
economics of tools and machinery. The concept of "apparatus" refers to 
such things as the type of loom which was operated by a foot-pedal and 
to numerous other similar devices. These already involve a certain rela- 
tive independence on the part of the mechanical process, as distin- 
guished from the functioning of the human or, in some cases, the ani- 
mal organism. Without such apparatus — which included in particular 
various devices for moving materials in mines — machines, with their 
importance in modem technology, would never have come into exist- 
ence. Leonardo's famous inventions were types of apparatus. 



12 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

1 8 . Social Aspects of the Division of Labor 

From the social point of view, types of the division of labor may be 
classified in the following .way-. In the first place, according to the ways 
in which qualitatively different, especially complementary functions, are 
distributed among more or less autocephalous and autonomous economic 
units, which may further be distinguished economically according to 
whether these are budgetary units or profit-making enterprises. There 
are two polar possibilities: 

(i) A "unitary" economy (Uinheitswinschaft) where the specializa- 
tion (or specification) of functions is wholly internal, completely hetero-" 
cephalous and heteronomous and determined on a purely technical basis. 
The same would be true of the co-ordination of functions. A unitary 
economy may, from an economic point of view, be either a budgetary 
unit or a profit-making enterprise. 

' On the largest possible scale, a communist national economy would 
be a unitary budgetary economy; on the smallest scale it was the primi- 
tive family unit; which included all or the great majority of production 
functions in a "closed household economy." The type case of a "unitary" 
profit-making enterprise with purely internal specialization and co- 
ordination of functions is naturally the great vertical combination" 
which treats with outsiders only as an integrated unit. These two dis- 
tinctions will suffice for the moment as a treatment of the development 
of autonomous unitary economy. 

(2) The distribution of functions may, on the other hand, take place 
between autocephalous economic units, (a) It may consist in the spe- 
cialization or specification of functions between heteronomous, but auto- 
cephalous units which are oriented to an order established by agreement 
or imposed. The order, in turn, may be substantively oriented in a variety 
of ways. Its main concern may be to provide for the needs of a superior 
economic unit, which may be the budgetary unit (household) of a lord, 
an oikos, or it may be oriented to profit-making for an economic unit 
controlled by 3 political body or lord. The order may, on the other hand, 
be concerned with providing for the needs of the members of some 
closed group {genossenschaftHcher Verband). From an economic point 
of view, this may be accomplished .either in the "budgetary" (household) 
or in the "profit-making" mode. The organization in all these cases may 
either be confined to the mere regulation of economic activity or it may, 
at the same time, be engaged in economic action on its own account, 
(b) The other main type is the specialization of autocephalous and 
autonomous units in a market economy, which are oriented on the one 
hand substantively only to their own self-interest, formally only to the 



i8 ] Social Aspects of the Division of Labor i 2 3 

brder of an organization such as the laissez-faire state, which enforces 
only formal, rather than substantive rules (See above, chap. II, sec. 5-"d). 

1. A typical example of the organization which, limiting its function 
to the regulation of economic activity, takes the form of a budgetary 
unit administered by an association of the members under case 2GO, is 
the organization of village handicrafts in India ("establishment"). An 
organization with autocephalous but heteronomous units '■ oriented in 
their economic activity to the household of a lord, as under 2(a), may 
be illustrated by structures which provide for the household wants of 
princes or landlords (in the case of princes, also for the political wants) 
by means of contributions from the individual holdings of subjects, de- 
pendents, serfs, slaves, cottars, or sometimes "demiurgic" (see below) 
village artisans, such are found everywhere in the world. The exactions 
of services or products for a landlord or a town corporation should usu- 
ally be classified as "mere regulation of economic activity," insofar as 
they usually served only fiscal, not substantive ends. A case of market 
order with units oriented to profit-making for the lotd exists where 
putting-out type production tasks contracted for are reallocated to the 
individual households. 

The types where there is specialization and specification of function 
between heteronomous units under the aegis of a co-operative organiza- 
tion can be illustrated by the specialization common in many very old 
small-scale industries. The Solingen metal trades were originally organ- 
ized in terms of a voluntary association determining the division of labor 
by agreement. It was only later that they became organized in terms of 
domination, namely as a "putting-out industry." The type where the 
autocephalous economic units are subject only to regulation by an 
organization is illustrated by innumerable cases of the rules established 
by village communities and town corporations for the regulation of trade, 
so far at least as these have a substantive influence on the processes of 
production. 

The case of specialization as between autonomous and autocephalous 
units in a market economy is best illustrated by the modem economic 
. order. 

2. A few further details may be added. The order of the organiza- 
tions which attempt to provide for the wants of their members on a 

' budgetary basis is 'budgetary" in a particular way — that is, it is oriented 
to the prospective needs of the individual members, not of the organized 
group, such as a village itself. Specified service obligations of this kind 
will be called "demiurgic liturgies," 33 and this type of provision for 
needs, correspondingly, "demiurgic provision." It always is a question of 
corporate regulation governing the division of labor and, in some cases, 
the mode of combination of labor services. 

This term will not, on the other hand, be applied to an organization, 
whether it is based on domination or on voluntary co-operation, if it 
carries on economic activity on its own account, contributions to which 
are sub-allocated on a specialized basis. The type cases of this category 



124 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Cfe. II 

are the specialized and specified contributions in kind of corvie estates 
(Fremfcofs), seigneurial estates, and other types of large household units. 
But sub-allocated obligations are also common in various types of organi- 
zations which are not primarily oriented to economic ends, such as the 
households of princes, political groups and the budgetary administration 
of local communities. These contributions are generally for the benefit 
of the budgetary needs of the governing authority or for corporate pur- 
poses. These in-kind obligations of services and products imposed on 
peasants, artisans, and tradesmen will be called "oifeos liturgies in kind" 
when they are owed to the household establishment of an individual, 
and "corporate liturgies in kind" when they are payable to the budgetary 
unit of an organization as such. The principle governing this mode of 
provision for the budgetary needs of an organization engaged in eco- 
nomic action, is called "liturgical provision." This mode of organization 
has played an exceedingly important historical role and will have to be 
discussed frequently. In political organizations, it held the place of 
modern "public finances," and in economic groups it made possible a 
decentralization of the main household by providing for its needs 
through actors who were no longer maintained and utilized in it. Each 
sub-unit managed its own affairs, but assumed the obligation to fulfill 
certain functions for the central unit and to. that extent was dependent 
on it. Examples are peasants and serfs subject to various kinds of labor 
services and payments in kind; craftsmen attached to an estate; and a 
large number of other type;:. Rodbertus 34 was the first to apply the 
term "oikos" to the large-scale household economies of Antiquity. He 
accepted as the principal criterion the essential autarky of want satisfac- 
tion through utilization of the services of household members or of de- 
pendent labor, materia] means of production being made available on 
a non-exchange basis. It is a fact that the landed estates, and still more 
the royal households, of Antiquity, especially of the New Kingdom in 
Egypt, were cases where the greater part of the needs of the unit were 
provided by services and payments in kind, which were obligations of 
dependent household units, although the degree of approach to the pure 
type varies widely. The same phenomena are to be found at times in 
China? and India, and to a less extent in our own Middle Ages, be- 
ginning with the capitulate de villis. 3 ^ It is true that exchange with the 
outside was generally not entirely lacking, but it tended to have the 
character of budgetary exchange. Obligations to money payment have 
also not been uncommon, but have generally played a subsidiary part in 
the main provision for needs and have tended to be traditionally fixed. 
For the economic units subject to liturgical obligations it also has not 
been uncommon to be involved in exchange relations. But the decisive 
point is that the bulk of the subsistence of these units was covered by 
the in-kind benefits — either in the form of certain quotas of products, or 
in that of the use of pieces of land — which they received in compensa- 
tion for the liturgical deliveries imposed on them. There are, of course, 
many transitional forms. But in each case there is some kind of regula- 



i8 ] ~ Social Aspects of the Division of Labor i 2 5 

tion of functions by an organization which is concerned with the mode 
of division of labor and of its co-ordination. 

3. The cases where an organization regulating economic activity is 
oriented to considerations of economic profit are well illustrated by those 
economic regulations of the communes of medieval Europe, and by the 
guilds and castes of China and India, which restricted the number of 
master craftsmen and their functions and also the techniques of the 
crafts, that is, the way ir which labor was oriented in the handicrafts. 
They belonged to this tyoe so far as the rules were intended not pri- 
marily to secme provision of the consumer with the products of the 
craftsmen, but, as was often though not always the case, to secure the 
market position of the artisans by maintaining the quality of perform- 
ance and by dividing up the market. Like every other type of economic 
regulation, this type also involved limitations on market- freedom and 
hence on the fully autonomous business orientation of the craftsmen. It 
was unquestionably intended to maintain the "livings" for the existing 
craft shops, and to that extent, in spite of its apparent "business" char- 
acter, it was more closely related to the budgetary mode of orientation. * 4. The case of an organization itself engaged in economic activity 
with an orientation to profit-making can be illustrated, apart from the 
pure type of putting-out industry already discussed, by the agricultural 
estates of the German East with a labor force holding small plots of 
estate land on a service tenure and entirely oriented to the order of the 
estate Qnsthute*), or by those of the German NorthAVest with similar 
types of tenant labor (Hewer/i«ge) who, however, hold their plots on a 
rental basis. The agricultural estates, just like the putting-out industries, 
are profit-making organizations of the landlord and the entrepreneur, 
respectively. The economic units of the tenants and home-industry 
workers are oriented, both in the imposed division of functions and in 
the mode of combining work efforts, as in the whole of their economic 
conduct, primarily to the obligations which the order of the estate or 
the putting-out relationship dictates to them. Apart from that, they are 
households. Their acquisitive efforts are not autonomous, but heterono- 
nious efforts oriented to the enterprise of the landlord or the entrepre- 
neur. Depending upon the degree to which this orientation is substan- 
tively standardized, the division of functions may approach the purely 
technical type of division within one and the same enterprise which is 
typical of the factory. 



1 9. Social Aspects of the Division of Labor — 
(Continued) 

From a social point of view, the modes of the division of labor may bv 
further classified according to the mode in which the economic advan- 
tages, which are regarded as returns for the different functions, are ap- 



I 2 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

propriated. Objects of appropriation may be: the opportunities of 
disposing of, and obtaining a return from, human labor services QLeis- 
tungsverwertungsckancerO; the material means of production;* 8 and the 
opportunities for profit from managerial functions. 41 (On the sociological 
concept of appropriation, see above, chap. I, sec. i o). 

When the utilization rights for labor services are appropriated, the 
services themselves may either, (i) go to an individual recipient (a lord) 
or to an organization, or (2) they may be sold on the market. In either 
case one of the following four, radically different, possibilities may ap- 

(a) Monopolistic appropriation of the opportunities for disposal of 
labor services by the individual worker himself: the .case of "craft- 
organized free labor." The appropriated rights may either be hereditary 
and alienable, in which case type (1) above is illustrated by the Indian 
village artisan and type (2) by certain medieval non-personal craft 
rights; or they may be strictly personal and inalienable, as under type 
CO all "rights to an office"; or, finally, they may be hereditary, but 
inalienable, as under types (O and (2) certain medieval, but above all 
Indian, craft rights, and medieval "offices" of the most diverse kind. In 
all these cases appropriation may be unconditional or subject to certain 
substantive conditions. 

(b) The second possibility is that the right of utilization of labor 
services is appropriated to an "owner" of the worker: the case of "unfree 
labor." The property rights in the worker may be both hereditary and 
alienable — the case of slavery proper. Or, though it is hereditary, it may 
not be freely alienable, but, e.g., only together with the material means 
of production, particularly the land. This includes serfdom and heredi- 
tary dependency. 

The appropriation of the use of labor by a lord may be limited by 
substantive conditions, as in serfdom. The worker cannot leave his status 
of his own free will, but neither can it arbitrarily be taken from him. 

The appropriated rights of disposal of labor services may be used by 
the owner for .purposes of budgetary administration, as a source of 
income in kind or in money, or as a source of labor services in his house- 
hold, as in the case of domestic slaves or serfs. Or it may be used as a 
means of profit. In that case the dependent may be obligated to deliver 
goods or to work on raw materials provided by the owner. The owner 
will then sell the product. This is unfree domestic industry. He may, 
finally, use his laborer in an organized shop — a slave or serf workshop. 

The person herein designated as the "owner" may be involved in the 
work process himself in a managerial capacity or even in part as a work- 



la ] Social Aspects of ike Division of Labor (cont.) 127 

er, but this need not be true. It may be that his position as owner, if so 
facto, makes him the managing agent. But this is by no means neces- 
sary and is very generally not the case. 

The use of slaves and serfs, the latter including various types of 
dependents, as part of a process of budgetary administration and as 
source of rent revenue, but not as workers in a profit-making enterprise, 
was typical of Antiquity and of the early Middle Ages. There are, for 
instance, cuneiform inscriptions which mention slaves of a Persian 
prince who were bound out as apprentices, possibly to be used later for 
labor services in the household, but perhaps to be set to work in sub- 
stantive freedom for their own customers, making a regular payment to 
the owner (an early equivalent of the Greek airo<f>opa, the Russian 
ohrok, and the German Hals- or Leihzins). Though by no means 
without exception, this tended to be the rule for Greek slaves; and in 
Rome this type of independent economic activity with a peculium or 
merx -peculiaris and, naturally, payments to the owner, found reflection 
in various legal institutions. In the Middle Ages, body serfdom Q^eib- 
herrschaft) frequently involved merely a right to claim payments from 
' otherwise almost' independent persons. This was usual in western and 
southern Germany. In Russia, also, de facto limitation to the receipt of 
these payments (obrok*) from an otherwise independent serf was, if not 
universal, at least very common, although the legal status of these per- 
sons remained precarious. 

The use ofunfree labor for "business" purposes has taken the follow- 
ing principal forms, particularly in the domestic industries on seigneur- 
ial estates, including various royal estates, among them probably those of 
the Pharaohs: (1) Unfree obligation to payments in kind — the delivery 
of goods in kind, the raw material for which was produced by the work- 
ers themselves as well as worked on by them. Flax is an example; (2) 
unfree domestic industry — work on material provided by the lord. The 
product could be sold at least in part for money by the lord. But in 
many cases, as in Antiquity, the tendency was to confine market sale to 
occasional instances. In early modern times, however, particularly in the 
German-Slavic border regions this was not the case; it was there, though 
. not only there, that domestic industries developed on the estates of land- 
lords. The utilization in a continuous organization could take the form 
of unfree home-industry labor or of unfree workshop labor. Both forms 
are common. The latter was one of the various forms of the ergasterion 
of Antiquity. It was found on the estates of the Pharaohs, in temple 
workshops, and according to the testimony of tomb frescoes, also on the 
estates of private owners or lords, in the Orient, in Greece (Demosthe- 
nes' shops in Athens), in the Roman estate workshops (see the descrip- 
tion by Gummerus), in the Carolingian genitium (that is, a gynaik* 
eion), and in more recent times for example in the Russian serf factories 
(see Tugan-Baranovskii's book on the Russian factory). 38 

(c) The third possibility is the absence of any sort of appropriation: 
formally "free" labor, in this sense that the services of labor are the sub- 



I 2 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

ject of a contractual relationship which is formally free on both sides. 
The contract may, however, be substantively regulated in various ways 
through a conventional or legal order governing the conditions of labor. 
Freely contracted labor may be used in various ways. In the first 
place, in a budgetary unit, as occasional labor (what Bucher calls 
Lohnwerfc), either in the household of the employer (Stor^ or in that 
of the worker himself (Heimwerk in Biicher's terminology). Or it may 
be permanent, again performed in the household of the employer, as in 
the case of domestic service, or in that of the worker, as typical of the 
colonate. It may, on the other hand, be used for profit, again on an 
occasional or a permanent basis; and in both cases either in the worker's 
own home or on premises provided by the employer. The' latter is true of 
workers on an estate or in a workshop, but especially of the factory. 

Where the worker is employed in a budgetary unit, he is directly in 
the service of a consumer who supervises his labor. Otherwise, he is in 
the service of a profit-making entrepreneur. Though the form is often 
legally identical, economically the difference is fundamental. Coloni 
may be in either status; but it is more typical for them to be workers in 
an oikos. & 

(d) The fourth possibility is that opportunities for disposal of labor 
services may be appropriated by an organization of workers, either with- 
out any appropriation by the individual worker or with important limita- 
tions on iuch appropriation. This may involve absolute or relative closure 
against outsiders and also prohibition of the dismissal of workers from 
employment by management without consent of the workers, or at least 
some kind of limitations on power of dismissal. 

Examples of the type of appropriation involving closure of the group 
are castes of workers or the type of miners' association found in the Me- 
dieval mining industry, the organized groups or retainers sometimes 
found at courts, or the "thresher tenure" (Dreschgartner') on landed 
estates in Germany. This type of appropriation is found throughout the 
social history of all parts of the world in an endless variety of forms. The 
second type involving limitations on powers of dismissal, which is also 
very widespread, plays an important part in the modern situation in the 
"closed shop" of trade unions and especially in the "works councils." 

Every form of appropriation of jobs in profit-making enterprises by 
workers, like the converse case of appropriation of the services of workers 
by owners, involves limitations on the free recruitment of the labor force. 
This means that workers cannot be selected solely on grounds of their 
technical efficiency, and to this extent there is a limitation on the formed. 
rationalization of economic activity. Appropriation of jobs also imposes 
substantive limitations on technical rationality, namely: (i) it the ex- 



19 ] Social Aspects of the Division of Labor (cont.) i 2 9 

ploitation fer profit of the products of labor is appropriated by an owner, 
through the tendency to restrict the work effort, either by tradition, or 
by convention, or by contract; also through the reduction or complete 
disappearance (if the worker is fully owned, a slave) of the worker's 
own interest in optimal effort; (2) if the exploitation for profit of the 
products is also appropriated by the workers, there may be a conflict of 
the worker's self-interest, which lies in the maintenance of his traditional 
mode of life, with the attempts of his employer to get him to produce 
at the optimum technical level or to use other means of production in 
place of labor. For employers, there is always the possibility of transform- 
ing their exploitation of labor into a mere source of income. Any ap- 
propriation of the exploitation of products by the workers thus generally 
leads under otherwise favorable circumstances to a more or less complete 
expropriation of the owner from management. But it also regularly tends 
to place workers in a state of dependence on people with whom they 
deal who enjoy a more favorable market position. These, such as putting- 
out entrepreneurs, thvm tend to assume a managerial position. 

4 1. The very opposite forms of appropriation — that of jobs by work- 
ers and that ~£ workers by owners — nevertheless have 'in practice very 
similar results. This should not be surprising. In the first place, the two 
tendencies are very generally formally related. This is true when appro- 
priation of the workers by an owner coincides with appropriation of op- 
portunities for jobs by a closed organization of workers, as has happened 
in the manor associations. In such cases it is natural that exploitation of 
labor services should, to a large extent, be stereotyped; hence, that work 
effort should be restricted and that the workers have little self-interest in 
the output. The result is generally a successful resistance of workers 
against any sort of technical innovation. But even where this does not 
occur, the fact that workers are appropriated by an owner means in prac- 
tice that he is obliged to make use of this particular labor force. He is 
not in a position, like the modern factory manager, to select according 
to technical needs, but must utilize those he has without selection. This 
is particularly true of slave labor. Any attempt to exact performance from 
appropriated workers beyond that which has become traditionally estab- 
lished encounters traditional obstacles. These could only be overcome by 
the most ruthless methods, which are not without their danger from the 
point of view of the owner's self-interest, since they might undermine 
the traditionalistic bases of his authority. Hence almost universally the 
work effort of appropriated workers has shown a tendency to restriction. 
Even where, as was particularly true of eastern Europe at the beginning 
of the modem age, this was broken by the power of the lords, the devel- 
opment of higher technical levels of production was impeded by the ab- 
sence of the selective process and by the absence of any element of self- 
interest or own risk-taking on the part of the appropriated workers. 



130 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

When jobs have been formally appropriated by workers, the same result 
has come about even more rapidly. 

2, Appropriation by workers was typical for the development in the 
early Middle Ages (10th to 13th century). The Carolingian Beunden* 9 
and all other beginnings of large-scale agricultural enterprise declined 
and disappeared. The rents and dues paid to landlords and lords holding 
rights over persons became stereotyped at a low level; and an increasing 
proportion of the products in kind, in agriculture and mining, and of 
the money proceeds from the handicrafts, went to the workers. In just 
this form this development was peculiar to the Western world. The 
principal circumstances which favored it were as follows: ( a ) The fact 
that the propertied classes were heavily involved in political and military 
activity; (b) the absence of a suitable administrative staff. These two 
. circumstances made it impossible for them to utilize these workers in any 
other way than as a source of rent payments; (c) the fact that the free- 
dom of movement of workers between the potential employers competing 
for their services could not easily be restricted; (d) the numerous oppor- 
tunities of opening up new land, new mines, and new local markets; 
(e) the primitive level of the technical tradition. The more the appro- 
priation of profit opportunities by the workers replaced the ■appropriation 
of workers by owners, the more the owners were dispossessed of their 
rights of control and became mere recipients of rents and dues. Classical 
examples are the mining industry and the English guilds. Even at this 
early period the process tended to go further, to the point of redemption 
or repudiation of the obligation to make payments to a lord altogether, 
on the principle that "A townsman is a freeman." Almost immediately 
all this led to a differentiation of the opportunities of making profit by 
market transactions, arising either from within the group of workers 
themselves or from without through the development of trade. 



20. Social Aspects of the Division of Labor: The Appro- 
priation of the Material Means of Production 

The material means of production may be appropriated by workers 
as individuals or as organizations, by owners, or by regulating groups 
consisting of third parties. 

When appropriated by workers, it may be by the individual worker 
who then becomes the "owner" of the material means of production; or 
the appropriation may be carried out by a completely or relatively closed 
group of workers so that, though the individual worker is not the owner, 
the organization is. Such an organization may carry out its functions as a 
unitary economy on a "communist" basis, or with appropriation of shares 
(genossenschaftlich^). In all these cases, appropriation may be used for 
the purposes of budgetary administration or for profit making. 



zo ] Appropriation of Material Means of Production i 3 1 

Appropriation of the means of production by individual workers may 
exist in a system of complete market freedom of the small peasants, arti- 
sans, boatmen, or carters, or under the aegis of a regulating group. 
Where it is not the individual but an organization which owns the means 
of production, there is a wide variety of possibilities, varying particularly 
with the extent to which the system is of a budgetary or a profit- 
making character. The household economy, which is in principle not 
necessarily by origin or in fact communistic (see Part Two, ch. HI), may 
be oriented wholly to provision for its own needs. Or it may, perhaps 
only occasionally, dispose of surpluses of certain types of raw material 
accumulated by virtue of a favorable location, or of products derived 
from some particular technical skill, as a means to better provision. This 
occasional sale may then develop into a regular system of profit-making 
exchange. In such cases it is common for "tribal" crafts to develop, with 
interethnic functional specialization and trade between the tribes, since 
the chances of finding a market often depend on maintaining a monop- 
oly r which in turn is usually secured by inherited trade secrets. From 
this may develop ambulatory crafts or possibly pariah 40 crafts or, where 
these groups are united in a political structure and where there are ritual 
barriers between the ethnic elements, castes, as in India. 

The case where members of the group possess appropriated shares is 
that of "producers' co-operation."* 1 Household economies may, with the 
development of money accounting, approach this type. Otherwise, it is 
occasionally found as an organization of workmen. It was of great signifi- 
cance in one important case, that of the mining industry of the early 
Middle Ages. 

Since appropriation by organized groups of workers has already been 
dealt with, appropriation by "owners" or organized groups of them can 
only mean the expropriation of the workers from the means of produc- 
tion, not merely as individuals, but as a whole. An owner may in this 
connection appropriate one or more of the following items: land, includ- 
ing water; subterranean wealth; sources of power, work premises; labor 
equipment, such as tools, apparatus and machinery; and raw materials. 
In any given case all these may be concentrated in a single ownership 
or they may be appropriated by different owners. The owners may em- 
ploy the means of production they appropriate in a context of budgetary 
administration, either as means to provide for their own needs or as 
sources of income by lending them out. In the latter case, the loans may 
in turn be used by the borrower for budgetary purposes or as means for 
earning a profit, either in a profit-making establishment without capital 
accounting or as capital goods (in their own enterprise). Finally, the 
owner may use them as capital goods in his own enterprise. 

The appropriating agency may be an organization engaged in eco- 
nomic activity. In this case, all the alternatives just outlined are open to 
it. 



I 3 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

It is, finally, also possible that the means of production should be 
appropriated by an organization which only regulates economic activity, 
which does not itself use them as capital goods or as a source of income, 
but places them at the disposal of its members. 

I. When land is appropriated by individual economic units, it is usu- 
ally for the period of actual cultivation until the harvest or, so far as, by 
virtue of clearing or irrigation, land is itself an artifact, for the period of 
continuous cultivation- It is only when scarcity of land has become no- 
ticeable that it is common for rights of cultivation, pasturage and use of 
timber to be reserved to the members of a settlement group, and for the 
extent of their use to be limited. 

(i) When that happens, appropriation may be carried out by an or- 
ganization. This may be of differing sizes, according to the mode of use, 
to which the land is put — for gardens, meadows, arable land, pastures, 
or woodland. These have been appropriated by progressively larger 
groups, from the individual household to the whole tribe. Typical cases 
are the appropriation of arable land, meadows, and pastures by a kin- 
ship group or a neighborhood group, usually a village. Woodland has 
usually been appropriated by broader territorial groups, differing greatly 
in character and extent. The individual household has typically appro- 
priated garden land and the area around the house and has had snares 
in the arable fields and meadows. The system of shares may find ex- 
. pressiofi CO in the de facto egalitarianism of the assignment of newly 
tilled Gelds where cultivation is "ambulatory" (as in the so-called field- 
grass husbandry), or (ii) in rationally systematic redistribution under 
sedentary cultivation. The latter is usually the consequence of either 
fiscal claims for which the village members are collectively held respons- * 
ible, or of political claims of the members for equality. The unit of the 
production organization has usually been the household (on which see 
Part Two, ch. Ill and IV). 

(2) Appropriation of the land may also be to a lord or seigneur 
(Grwndfeerr). This seigneurial position, as will be discussed later, may 
be based primarily on the individual's position of authority in a kinship 
group or as tribal chieftain with claims to exact labor services (see Part 
Two, ch. IV), or on fiscal or military authority, or on some form of or- 
ganization for ; the systematic exploitation of new land or an irrigation 
project. Seigneurial domination over land (.Grundherrxhaft) may be 
. made a . source of utilities by the employment of the unfree labor of 
slaves or serfs* This, in turn, may be administered as part of a budgetary 
unit, through deliveries in kind or labor services, or as a means of profit, 
as a "plantation." On the other hand, it may be exploited with free 
labor. Here again it may be treated in budgetary terms, drawing income 
from the land in the form of payments in kind or from share-cropping 
by tenants or of money rents from tenants. In both cases the equipment 
used may be provided by the tenant himself, or by the seigneur (colo- 



20 ] _ Appropriation of Material Means of Production i 3 3 

nate). A lord may also exploit his holding as a source of profit in the 
form of a large-scale rational economic enterprise. 

Where the land is used as part of a budgetary economy with unfree 
,. labor, the lord is apt to be bound traditionally in his exploitation of it, 
.both with respect to his labor personnel, which is not subject to selec- 
fcn, and to their functions. The use of unfree labor in .a profit-making 
establishment, the "plantation," occurred only in a few cases, notably 
in Antiquity in Carthage and in Rome, and in modern times in the 
plantations of colonial areas and in the Southern States of North Amer- 
ica. The use of land in large-scale profit-making enterprises with free 
labor has occurred only in the modem Western \Vorld. It is the mode 
of development of the medieval landlordship or seigneurie (Grundherr- 
schaft),. in particular the way in which it was broken up, which has 
been most decisive in determining the modern forms of land appropria- 
tion. The modern pure type knows only the .following categories: the 
owner of the land, the capitalistic tenant, and the propertyless agricul- 
tural laborer. But this pure type is exceptional, found principally in 
England. 

II. Sources of wealth adapted to exploitation by -mining may be 
4 appropriated in the following ways: (a) By the owner of the land, who 
in the past has usually been a seigneur; (b) by a political overlord 
(owner of the regal prerogatives or "royalties"); (c) by any person dis- 
covering deposits worthy of mining (Bergbaufretheity, (d) by an organ- 
ization of workers; and (e) by a profit-making enterprise. Seigneurs and 
owners of "royalties" may administer their holdings themselves, as they 
did occasionally in the early Middle Ages; or they may use them as a 
source of income, by leasing them to an organized group of workers or 
to any discoverer whatever or to anyone who was a member of a given 
group. This was the case with the "freed mountains" (gefreite Berge) 
of the Middle Ages and was the origin of the institution ' of "mining 
freedom" (Bergbaufreikeit).** 

In the Middle Ages, the groups of organized mine workers were 
typically closed membership groups with shares held by the members, 
where each member was under obligation, either to the seigneurial 
owner, or to the other members collectively responsible to him, to work 
' in the mine. This obligation was balanced by a right to a share in the 
products. There was also a type of a pure "owners" association, each 
sharing in the proceeds or the contributions required due to losses. TTie 
tendency was for the seigneurial owners to be progressively expropriated 
in favor of the workers; but these, in him, as their need for investment 
in installations increased, became more and more dependent on groups 
with command over capital goods. Thus in the end, the appropriation 
took the form of a capitalistic Gewerkschaft, a limited liability company. 

HI. Means of production which are fixed installations, such as 
sources of power, particularly water power, "mills" for various different 
purposes, and workshops, sometimes including the fixed apparatus in 
them, have in die past, particularly in the Middle Ages, generally been 



I 3 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

appropriated in one of the following ways: (a) by princes or seigneurs; 
(b) by towns (either as economically active or merely regulating organ* 
izations); (c) by associations of workers, such as guilds (as "regulating" 
groups), without the development, in any of them, of a unified produc- 
tion organization (Betrjefe). 

In the first two cases, they were usually exploited as a source of 
income, a charge being made for their use. This has often been com- 
bined with interdiction of rival facilities and the compulsory use of those 
belonging to the lord- Each production unit would make use of the facil- 
ities in turn, according to need or, under certain circumstances, it was 
made the monopoly of a closed regulative group. Baking ovens, various 
kinds of grinding mills for grain or oil, fulling mills, polishing installa- 
tions, slaughter-houses, dye-works, bleaching installations, forges — which 
were usually, to be sure, leased — , breweries, distilleries, other installa- 
tions including particularly shipyards in the possession of the Hanseatic 
towns, and all kinds of market sfe'ls have been appropriated in this 
precapitalistic way, to be exploited by allowing workers to use them in 
return for a payment; they were thus used as part of the Budgetary 
wealth (Verindgen), rather than as capital of the owners (individuals 
or organizations, including town corporations). This type of production 
and budgetary exploitation of fixed installations as a source of invest- 
ment income for the owning individual or group, or possibly production 
by a producers' co-operatiye group, has preceded the creation of "fixed 
capital" of individual business units. Those using such installations have 
tended to treat them in part as means of meeting their own household 
needs, especially in the case of baking ovens and of brewing and dis- 
tilling installations, and in part for profit-making operations. 

IV. For maritime transport the typical arrangement in the past has 
been the appropriation of the ship by a plurality of owners, who tended , 
to become more and more sharply differentiated from the actual sea- 
farers. The fa^t that the organization of maritime enterprise then tended 
to develop into a system of risk-sharing with shippers, in which ship 
owners, officers, and even the crew, were associated as shippers of 
freight, did not, however, produce any fundamentally new forms of 
appropriation. It affected only the forms of setding accounts and hence 

- the distribution of profit-making possibilities. 

j- V. Today, it is usual for the installations of all kinds and the tools 
to be appropriated under one controlling agency, as is essential to the 
modem factory; but in earlier times, this has been exceptional. In partic- 
ular, the economic character of the Greek and Byzantine ergasterion and 
the corresponding Roman ergastulwn has been highly ambiguous, a fact 
which historians have persistently ignored^ It was a "workshop" which 
might, (i) be a part of a budgetary unit in which slaves would carry 
out production for the owner's own needs, as for the needs of a landed 
estate, or subsidiary production of goods for sale. But 00 the workshop 
might also be used as a source of rent revenue, part of the holdings of a 
private individual or of an organization, which latter might be a town, 



20 ] Apfropriation of Material Means of Production 135 

as was true of the ergasteria of the Piraeus. Such ergasteria would then 
be leased to individuals or to organized closed groups of workers. Thus, 
when it is stated that an ergasterion was exploited, especially a municipal 
one, it is always necessary to inquire further to whom it belonged 
and who was the owner of the other means of production necessary for 
the work process. Did free labor work there? Did they work for their 
own profit? Or did slaves work there, in which case it is necessary to know 
who their owners were, and whether they were working on their own 
account, making faofapd payments to their master, or directly for their 
master. According to the ways in which these questions are answered, 
the structure would be radically different from an economic point of 
view. In the great majority of cases, as late as the Byzantine and Mo- 
hammedan types, the ergasterion seems to have been primarily a source 
of rent revenue, and was hence fundamentally different from the modem 
factory or even its early predecessors. From an economic point of view, 
this category is/in its economic ambiguity, most closely comparable to 
the various types of mills found in the Middle Ages. 

VI. Even in cases where the workshop and the means of production 
are appropriated by an individual owner who hires labor, the situation is 
t not, from an economic point of view, necessarily what would usually 
be called a "factory" today. For this it would be necessary in addition to 
have the use of mechanical power, of machinery, and of an elaborate 
internal differentiation and combination of functions. The factory today 
is a category of the capitalistic economy. Hence in the present discussion 
the concept "factory" will be confined to a type of establishment which 
is at least potentially under the control of a profit-making firm with 
fixed capital, which thus takes the form of an organized workshop with 
internal differentiation of function, with the appropriation of all non- 
human means of production and with a high degree of mechanization of 
the work process by the use of mechanical power and machinery. The 
great workshop of "Jack of Newbury"** of the early sixteenth century, 
which was sung about by balladeers of a later day, did not have any of 
these features. It is alleged to have contained hundreds. of hand looms, 
which were his property and for the workers of which he bought the 
raw materials, and also all manner of "welfare" arrangements. But each 
, worker worked independently as if he were at home. Internal differenti- 
ation and combination of functions could, to be sure, exist in an Egyp- 
tian, Greek, Byzantine or Mohammedan ergasterion which a master 
worked with his unfree laborers. But the Greek texts show clearly that 
even in such cases is was common for the master to be content with the 
payment of an &wo<jiopd from each worker and perhaps a higher one 
from the foreman. This alone is sufficient to warn us not to consider 
such a structure economically equivalent to a factory or even to a work- 
shop like that of "Jack of Newbury." The closest approximation to the 
factory in the usual sense is found in royal manufactories, like the impe- 
rial Chinese porcelain manufactory and the European manufactories of 
court luxuries, which were modelled on it, and especially those for the 



I $6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Cfc. 11 

production of military equipment. No one can be blamed for calling 
these "factories." And the Russian workshops operating with serf labor 
seem at first sight to stand even closer to the modern factory. Here the 
appropriation of the workers themselves is added to that of the means of 
production. Neverthe&ss, for present purposes the concept "factory" will, 
for the reasons stated, be limited to organized workshops where the ma- 
terial means of production are fully appropriated by an owner, but the 
workers are not; where there is internal specialization of functions, and 
where mechanical power and machines which must be "tended" are. 
used. All other types of organized workshops will he designated by that 
word, with the appropriate adjectives. " '~ 



z i .* Social Aspects of the Divisiotfof Labor: The Appro- 
priation of Managerial Functions 

(0 In all cases of the management of traditional budgetary (house- 
hold) units, it is typical for the appropriation of managerial functions 
to take place either by the titular head himself, such as the head of the 
family or the kinship group, or by members of an administrative staff 
appointed for the management of the unit, as in the case of service fiefs 
of household officials. 

(2) In the case of profit-making enterprises, it occurs in the follow- 
ing situations: (a) When management and ordinary labor are entirely 
or very nearly identical. In this case there is usually also appropriation 
of the material means of production by the worker. This type of ap- 
propriation may be unlimited, that is, hereditary and alienable on the 
part of the individual, with or without a guaranteed market. It may, on 
the other hand, be appropriation to an organized group, with appropria- 
tion of the function by the individual restricted to personal tenure* 4 or 
subject to substantive regulation, thus limited and dependent on various 
conditions. Again, a market may or may not be guaranteed, (b) Where 
management and ordinary work are separated, there may be a monopo- 
listic appropriation of entrepreneurial functions in various possible forms, 
notably to closed membership groups, such as guilds, or to monopolies 
granted by the political authority. 

(3) In cases where managerial functions are, from a formal point of 
view, wholly unappropriated, the appropriation of the means of produc- 
tion or of the credit necessary for securing control over them is in prac- 
tice, in a capitalistic form of organization, identical with appropriation of 
control of management by the owners of the means of production. 
Owners can, in such cases, exercise their control by personally managing 
the business or by appointment of the actual managers. Where there is 



2i ] - Appropriation of Managerial Functions 137 

a plurality of owners, they will co-operate in the selection. These points 
are so obvious that there is no need of comment. 

Wherever there is appropriation of technically complementary means 
of production, it generally means, in practice, at least some degree of 
effective voice in the selection of management and, to a relative extent 
at least, the expropriation of the workers from management. The ex- 
propriation of the individual workers, however, does not necessarily 
imply the expropriation of workers in general. Though they are formally 
expropriated, it is possible for an association of workers to be in fact in a 
position to exact for itself an effective share in management or in the 
selection of managing personnel. 



22. The Expropriation of Workers from the Means of 
Production 

The expropriation of the individual worker from ownership of the 
means of production is determined by purely technical factors in the 
following cases: (a) if the means of production require the services of 
many workers, at the same time or successively; (b) if sources of power 
can be rationally exploited only by using them simultaneously for many 
similar types of work under a unified control; (c) if a technically rational 
organization of the work process is possible only by combining many 
complementary processes under continuous comrr.jn supervision; (d) if 
special technical training is needed for the management of co-ordinated 
processes of labor which, in turn, can only be exploited rationally on a 
large scale; (e) if unified control over the means of production and raw 
materials creates the possibility of subjecting labor to a stringent disci- 
pline and hence of controlling the speed of work and of attaining 
.standardization of effort and of product quality. 

These factors, however, do not exclude the possibility of appropria-. 
tion by an organized group of workers, a producers' co-operative. They 
necessitate only the separation of the individual worker from the means 
of production. 

The expropriation of workers in general, including clerical personnel 
and technically trained persons, from possession of the means of produc- 
tion has its economic reasons above all in the following factors : (a) The 
fact that, other things being equal, it is generally possible to achieve a 
higher level of economic rationality if the management has extensive 
control over the selection and the modes of use of workers, as compared 
with the situation created by the appropriation of jobs or die existence of 



I 3 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11 

rights to participate in management. These latter conditions produce 
technically irrational obstacles as well as economic irrationalities. In 
particular, considerations appropriate to small-scale budgetary administra- 
tion and the interests of workers in the maintenance of jobs ("livings") 
are often in conflict with the rationality of the organization, (b) In a 
market economy a management which is not hampered by any estab- 
lished rights of the workers, and which enjoys unrestricted control over 
the goods and equipment which underlie its borrowings, is of superior 
credit-worthiness. This is particularly true if the management consists of 
individuals experienced in business affairs and with a good reputation 
for "safety" derived from their continuous conduct of business. 00 From 
a historical point of view, the expropriation of labor has arisen since the 
sixteenth century in an economy characterized by the progressive ex- 
tensive and intensive expansion of the market system on the one hand, 
because of the sheer superiority and actual indispensability of a type of 
management oriented to the particular market situations, and on the 
other because of the structure of power relationships in the society. 

In addition to these general conditions, the effect of the fact that 
enterprise has been oriented to the exploitation of market advantages has 
in the following ways favored such expropriation: (a) because it put a 
premium on capital accounting — which can be effected in the tech- 
nically most rational manner only with full appropriation of capital 
goods to the owner — as against any type of economic behavior with less 
rational accounting procedures; (b) because it put a premium on the 
purely commercial qualities of the management, as opposed to the tech- 
nical ones, and on the maintenance of technical and commercial secrets; 
(c) because it favored a speculative business policy, which again requires 
expropriation. Further, and in the last analysis quite regardless of the 
degree of technical rationality, this expropriation is made possible, (d) 
by the sheer bargaining superiority which in the labor market any kind 
of property ownership grants vis-a-vis the workers, and which in the 
commodity markets accrues to any business organization working with 
capital accounting, owned capital equipment and borrowed funds vis-a- 
vis any type of competitor operating on a lower level of rationality in 
methods of calculation or less well situated with respect to capital and 
credit resources. The fact that the maximum of formal rationality in 
capital accounting is possible only whe*re the workers are subjected to 
domination by entrepreneurs, is a further specific element of substantive 
irrationality in the modern economic order. Finally, (e), a further 
economic reason for this expropriation is that free labor and the com- 
plete appropriation of the means of production create the most favorable 
conditions for discipline. 



23 ] Expropriation of Workers from Means of Production 139 

23. The Expropriation of Workers from the Means of 
Production — (Continued) 

The expropriation of all the workers from the means of production 
may in practice take the following forms: (1) Management is in the 
hands of the administrative staff of an organization. This would be true 
very particularly also of any rationally organized socialist economy, 
which would retain the expropriation of all workers and merely bring 
it to completion by the expropriation of the private owners. (2) Man- 
agerial functions are, by virtue of their appropriation of the means of 
production, exercised by the owners or by persons they appoint. The 
appropriation of control over the persons exercising managerial authority 
by the interests of ownership may have the following forms: (a) Man- 
agement by one or more entrepreneurs who are at the same time owners the immediate appropriation of entrepreneurial functions. This situa- 
tion, however, does not exclude the possibility that a wide degree of 
control over the policies of management may rest in hands outside the 
'enterprise, by virtue of their powers over credit or financing — for in- 
stance, the bankers or financiers who finance^ the enterprise; (d) separa- 
tion of managerial functions from appropriated ownership, especially 
through limitations of the functions of owners to the appointment of 
management and through shared free (that is, alienable) appropriation 
of the enterprise as expressed by shares of the nominal capital (stocks, 
mining shares). This state, which is related to the purely personal form 
of appropriation through various types of intermediate forms, is rational 
in the formal sense in that it permits, in contrast to the case of permanent 
and hereditary appropriation of the management itself of accidentally 
inherited properties, the selection for managerial posts of the persons best 
qualified from the point of view of profitability. But in practice it may 
mean a number of things, such as: That control over the managerial 
position may come, through appropriation, into the hands of "outside 
interests" representing the resources of a budgetary unit, or mere wealth 
(Venndgen; see above, ch. II, sec. 10), and seeking above all a high rate 
of income; or that control over the managerial position comes, through 
temporary stock acquisitions, into the hands of speculative "outside in- 
terests" seeking gains only through the resale of their shares; or that 
disposition over the managerial position comes into the hands of outside 
business interests, by virtue of power over markets or over credit, such 
as hanks or "financiers," which may pursue their own business interests, 
often foreign to those of the organization as such. 

We call "outside interests" those which are not primarily oriented to 
the long-run profitability of the enterprise. This may be true of any kind 



140 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

of budgetary "wealth" interests. It is particularly true, however, of inter- 
ests' which consider their control over the plant and capital goods of the 
enterprise or of a share in it not as a permanent investment, but as a 
means of making a purely short-ran speculative profit. The types of out- 
side interest which are most readily reconciled with those of the enter- 
prise — that is, its interests in present and long-run profitability — are 
those seeking only income (rentiers). 

The fact that such "outside" interests can affect the mode of control 
over managerial positions, even and especially when the highest degree 
of formal rationality in their selection is attained, constitutes a further 
element of substantive irrationality specific to the modem economic 
order. These might be entirely private "wealth" interests, or business 
interests which are oriented to ends having no connection whatsoever 
with the organization, or finally, pure gambling interest. By gaining 
control of shares, all of these can control the appointment of the man- 
aging personnel and, more important, the business policies imposed on 
this management. The influence exercised by speculative interests out- 
side the producing organizations themselves on the market situation, 
especially that for capital goods, and thus on the orientation of the produc- 
tion of goods, is one of the sources of the phenomena known as the 
"crises" of the modern market economy. This cannot, however, be fur- 
ther discussed here. 



24. The Concept of Occupation and Types of 
Occupational Structure 

The term "occupation" (Berwf) will be applied to the mode of 
specialization, specification, and combination of the functions of an 
individual so far as it constitutes for him the basis of a continuous 
opportunity for income or earnings. The distribution of occupations 
may be achieved in the following ways: (1) by means of a heteronomous 
assignment of functions and of provisions for maintenance within an 
organization regulating economic activity — unfree differentiation of 
occupations — or through autonomous orientation to the state of the 
market for occupational services — free differentiation of occupations; 

(2) it may rest on the specification or the specialization of functions; 

(3) it may involve economic exploitation of the services by their bearers 
on either an autocephalous or a heterocephalous basis. 

The structure of occupational differentiation and that of opportuni- 
ties for business income are closely related. This will be discussed in 
relation to die problems of "class" and "status" stratification. 



24 ] "Occupation" & Types of Occupational Structure i 4 1 

On occupation as a basis of status, and on classes in general, see 
chap. IV, below." 

1. Unfree organization of occupations exists in cases where there is 
compulsory assignment of functions within the organization of a royal 
estate, a state, a feudal manor, or a commune on the basis of liturgies or 
of the oikos type of structure. The free type of distribution arises from 
the successful offer of occupational services on the labor market or suc- 
cessful application for free "positions." 

z. As was pointed out above in sec. 16, specification of functions 
was typical of the handicrafts in the Middle Ages; specialization is 
characteristic of the modem rational business organization. The distri- 
bution of occupations in a market economy consists to a large extent of 
technically irrational specification of functions, rather than of rational 
specialization of functions, because such an economy is oriented to- the 
market situation and hence to the interests of purchasers and consum- 
ers. This orientation determines [the uses to which] the entire bundle 
of labor services offered by a given productive unit will be put in a 
manner often different from the specialization of functions [of the given 
labor force], thus making necessary modes ot combination of functions 
which are technically irrational. 

4 3. Cases of autocephalous occupational specialization are the inde- 
pendent "business" of an artisan, a physician, a lawyer, or an artist. The 
factory worker and the government official, on the other hand, occupy 
heterocephalous occupational positions. 

The occupational structure of a given social group may vary in the 
following ways: (a) According to the degree in which well-marked and 
stable occupations have developed at all. The following circumstances 
are particularly important in this connection: the development of con- 
sumption standards, the development of techniques of production, and 
the development of large-scale budgetary units in the case of unfree oc- 
cupational organization, or of market systems in that of free organization; 
(b) according to the mode and degree of occupational specification of 
specialization of individual economic units. This will be decisively in- 
fluenced by the market situation for the services or products of special- 
ized units, which is in turn dependent on adequate purchasing power. 
It will also be influenced by the mode of distribution of control over 
' capital goods; (c) according to the extent and kind of continuity or 
change in occupational status. This in turn depends above all on two 
factors: on the one hand, on the amount of training required for the 
specialized functions, and on the other hand the degree of stability or 
instability of opportunities for earnings from them. Tne latter is in tu*n 
dependent on the type and stability of distribution of income and on the 
state of technology. 

Finally, it is always important in studying occupational structure to 
know the status stratification, with the attendant status-tied types of ed- 
ucation and other advantages and opportunities which it creates for cer- 
tain kinds of skilled occupations. '■■''■ 

It ts only functions which require a certain minimum of training and 



I 4 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

for which opportunity of continuous remuneration is available which 
become the objects of independent and stable occupations. The choice 
of occupation may rest on tradition, in which case it is usually hered- 
itary; on goal-oriented rational considerations, especially the possibility 
of returns; on charismatic or on affectual grounds; and finally, in partic- 
ular, on grounds of prestige with particular reference to status. Origi- 
nally, the more directly individual "callings" have been dependent 
primarily on charismatic (magical) elements, while all the rest of the 
occupational structure, so far as in a differentiated form it existed at all, 
was traditionally fixed. The requisite charismatic qualities, so Ear as they 
were not specifically personal, tended to become the object of a tradi- 
tional "training" in closed groups, or of hereditary transmission. Individ- 
ual occupations which were "not of a strictly charismatic character first 
appeared on a liturgical basis in the large-scale households of princes 
and landed lords, and then in the market economy of the towns. Along- 
side of this, however, a large role in their development was always 
played by the literary forms of education with a nigh status esteem, 
which arose in close connection with magical, ritual, or priestly ("cleri- 
cal") professional training. 

From what has been said it will be seen that occupational specializa- 
tion does not necessarily imply continuous rendering of services, either 
on a liturgical basis for an organization — in a royal household or a 
workshop — or for a completely free market. Other forms are not 
only possible but common: (1) Propertyless occupationally specialized 
workers may be employed on an occasional basis as needed in the 
service of a relatively stable group of either consumers in household 
units or employers in profit-making enterprises. In the case of work for 
households, we have the possibility of the expropriation from the worker 
of at least the raw materials (and hence of the control over the final 
product); services may be rendered on this basis either on the consumer's 
premises (Stor), whether it be by itinerant workers or by sedentary 
workers moving around the households of a local clientele, or on the 
workers' premises: shop or household ("wage work" [in Bucher's termi- 
nology] 46 ). In either case the consumer household provides the raw 
materials, but it is customary for the worker to own his took — the mower 
his scythe, the seamstress her sewing equipment, etc. The cases of Stdr 
involve temporary membership in the consumer's household. 

The case, contrasting with the above, in which the worker owns all 
means of production, Biicher terms "price work." 

Occupationally specialized workers may be employed on an oc- 
casional basis by profit-making enterprises when at least the raw material, 
and thus also control over the product, belongs to the employer. In this 
case there may be migratory labor for a variety of different employers in 
different units, or occasional or seasonal work for an employer, the work 



2,4 ] "Occupation" & Types of Occupational Structure i 4 3 

being done in the worker's own household. Migratory harvest labor is 
an example of the first type. The second type may be illustrated by any 
type of occasional work at home which supplements the work in the 
workshop. 

Occupational specialization without continuous engagement of the 
types noted above can also exist if: (2) Economic activity is conducted 
with appropriated means of production and CO there is capital account- 
ing and partial appropriation — especially, appropriation restricted to the 
fixed installations — by owners. Examples are workshops and factories 
transforming raw materials owned by others (Lohnfabriken') and, above 
all, factories producing under contract for an outside entrepreneur who 
takes charge of sales and other entrepreneurial functions (yerlegte 
Fabriken); the former have existed for a long time, while the latter have 
recendy become common. Or, if (ii) there is complete appropriation of 
the means of production by the workers, with the following possibilities: 
(a) in small-scale units without capital accounting, either producing for 
households ("price work" for customers), or producing for commercial 
enterprises. The latter is a case of domestic industry without expropria- 
tion of the means of production. The worker is formally a free craftsman, 
but is actually bound to a monopolistic group of merchants who are 
buyers for his product; (b) on a large scale with capital accounting and 
production for a fixed group of purchasers. This is usually, though not 
always, the result of market regulation by cartels. 

Finally, it must be pointed out that not every case of acquisitive 
action is necessarily part of an occupational profit-making activity; nor 
is it necessary that involvement in acquisitive action, however frequent, 
should imply a continuous specialization with 2 constant meaningful 
orientation. With respect to the first observation, we note that "occasional 
acquisition" is found as a result of the disposal of surpluses produced 
in a budgetary unit. Corresponding to these is occasional trading of goods 
by large-scale budgetary units, especially seigneurial estates. From this 
starting point, it is possible to develop a continuous series of possible 
"occasional acquisitive acts," such as the occasional speculation of a 
rentier, occasional publication of an article or a poem by a person who is 
not a professional author, and similar modem phenomena, to the case 
where such things constitute a "subsidiary occupaiton" ( Nebenberuf ). 

As to the second observation, it should be remembered that there are 
ways of making a living which are continually shifting and funda- 
mentally unstable. A person may shift continually from one type of 
"occasional" profitable activity to another; or even between normal 
legitimate earning and begging, stealing, or highway robbery. 

The Following must be treated in special terms: (a) Support from 






14 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11 

purely charitable sources; (b) maintenance in an institution on other 
than a charitable basis, notably a penal institution; (c) regulated acquisi- 
tion by force; and (d) criminal acquisition; that is, acquisition by force 
or Fraud in violation of the rules of an order. The cases of (b) and (d) 
are of relatively litde interest; (a) has often been of tremendous impor- 
tance for hierocratic groups, such as mendicant orders; while (c) has 
been crucial for many political groups in the form of the booty gained 
from war, and in both cases the economy was profoundly affected. It is 
characteristic of both these cases that they lie outside the realm of 
economic activity as such. Hence this is not the place to enter into a 
more detailed classification. The forms will be treated elsewhere. For 
reasons which are in part the same, the earnings of civil servants, in- 
cluding military officers, have been mentioned below (sec. 38) only in 
order to give them a place as a sub-type of the earnings of labor, but 
without going into the details. To do this, it would be necessary to dis- 
cuss the structure of relations of domination in the context of which 
these types of earnings are to be placed. 



2,4a. The Principal Forms of Appropriation and of 
Market Relationship 

According to the theoretical schemes which have been developed 
starting with sec. 15, the classification of the modes of appropriation in 
their technical, organizational aspects, and of the market relationships/is 
exceedingly complex. But actually, only a few of the many theoretical 
possibilities play a really dominant role. 

( l ) With respect to agricultural land : (a) There is the "ambulatory" 
cultivation by household units, which changes its location whenever the 
land has been exhausted. The land is usually appropriated by the tribe 
while its use is temporarily or permanently appropriated by neighbor- 
hood groups, with only temporary appropriation of the use of land to 
individual households. 

The extent of the household group may vary from the individual 
conjugal family, through various types of extended family groups, to 
organized kin groups or a widely extended household community. 
(Agriculture is "ambulatory" as a rule only in relation to arable land, 
much less commonly and at longer intervals for farmyard sites.) 

(b) Sedentary agriculture. The use of arable fields, meadows, pas- 
tures, woodland, and water is usually regulated by territorial or village 
associations for the smaller family household. Gardens and the land 



2^a ] Forms of Appropriation and of Market Relationship 1 4 5 

immediately-surrounding the buildings are normally appropriated by the 
immediate family; arable fields, usually meadows, and pastures, by the 
village organization; woodland, by more extensive territorial groups. 
Redistribution of land is usually possible according to the law, but has 
generally not been systematically carried through and is hence usually 
obsolete. Economic activities have generally been regulated by a system of 
rules applying to the whole village. This is a "primary village economy." 

It is only in exceptional cases, such as China, that the extended kin- 
ship group has constituted an economic unit. Where this is the case, it 
has generally taken the form of a rationalized organization, such as a 
clan association. 

(c) Seigneurial rights over land (Grundherrschaft) and persons 
(Leibherrsckaft~) with a central manor of the lord (Jrronhof*) and de- 
pendent peasant farms obligated to deliveries in kind and labor services. 
The land itself and the workers are appropriated by the lord, the use 
of the land and rights to work by the peasants. This is a simple case of 
manorial organization based on income in kind. 

t (d) Seigneurial or fiscal monopoly of control over the land, with col- 
lective responsibility of the peasant community for meeting fiscal obliga- 
tions. This leads to communal control over and regular systematic 
redistribution of the land. The land is, as a correlate of the fiscal burden, 
by decree permanently appropriated to the organized peasant community, 
not to the individual household; the latter enjoys only rights of use and 
these are subject to redistribution. Economic activity is regulated by the 
rules imposed by the manorial or the political lord! This is manorial or 
fiscal field community (_Feldgemeinsckaft). 

(e) Unrestricted seigneurial land proprietorship with exploitation of 
the dependent peasants as a source of rent income. The land is appropri- 
ated by the lord; but cohni* 7 sharecroppers, or tenants paying money 
rent carry out the actual economic activities. 

(f) The plantation. The land is freely appropriated and worked by 
purchased slaves. The owner uses both as means of profit-making in a 
capitalistic enterprise with unfree labor. 

(g) The "estate. economy" (GutswirtschafO. The land is appropri- 
ated to owners who either draw rent from it by leasing it to large-scale 
tenant farmers or farm it themselves for profit. In either case free labor 
is used, living in their own homesteads "or those supplied by the landlord, 
and — in both cases again — conducting some agricultural production or, 
in the marginal case, none at all on own account. 

(h) Absence of seigneurial ownership (Grundherrschaft): a peasant 
economy with appropriation of the land by the farmer (peasant). In 
practice this form of appropriation may mean that the land farmed is 



I 4 & SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. 11 

predominantly inherited land, or, on the other hand, that land lots are 
freely bought and sold. The former is typical of settlements with scattered 
farms and large-scale peasant proprietors; the latter, where setdement is 
in villages and the scale is small.** 

Where tenants pay a money rent and where peasant proprietors buy 
and sell land, it is necessary to presuppose an adequate local market for 
the products of peasant agriculture. 

(2) In the field of industry and transport, including mining, and of 
trade: 

(a) Household industry carried on primarily as a means of occasional 
exchange of surpluses, only secondarily as a means of profit. This may 
involve an inter-ethnic division of labor, out of which in turn caste oc- 
cupations have occasionally developed. In both cases appropriation of the 
sources of raw materials, and hence of the raw material production, is 
normal; purchase of raw materials and transformation of non-owned raw 
material ("wage work") are secondary phenomena. In the case of inter- 
ethnic specialization, formal appropriation is often absent. TheTe is, how- 
ever, generally, and in the case of caste, always, hereditary appropriation 
of the opportunities for earnings from specified functions by kinship or 
household groups. (b) "Tied" craft production directly for customers: specification of 
functions in the service of an organized group of consumers. This may be 
a dominating group (oikos or seigneurial specification), or it may be a 
closed membership group (demiurgic specification). 

There is no market sale. In the first case, we find organization of 
functions on a budgetary basis, or of labor in a workshop, as in the 
ergasterion of the lord. In the second case, there is hereditary appropria- 
tion of the status of the workers which may, however, become alienable, 
and work is carried out for an appropriated group of customers (con- 
sumers). There are the following very limited possibilities of develop- 
ment: (i) Appropriated (formally unfree) workers who are carriers of 
specified functions — of a trade — may be used either as a source of income 
payments to their owner, in which case they are usually and in spite 
of their forma! servility substantively free, working in most cases directly 
for their own customers (rent slaves); or again, they might be used as 
unfree domestic craft producers, producing for the owner's profit; or, 
finally, as workers in the owner's workshop or ergasterion, also producing 
for profit, (ii) This may also develop into a liturgical specification of 
functions for fiscal purposes, similar to the type of caste occupations. 

In the field of mining, there are similar forms, notably the use of 
unfree labor, slaves or serfs, in productive units controlled by princes or 
seigneurial owners. 



24« ] Forms of Appropriation and of Market Relationship i 4 7 

In inland transportation, it is common for transportation installations 
[roads] to be appropriated by a seigneurial owner as a source of rent 
revenue. Maintenance services are then compulsorily imposed on spec- 
ified small peasant holdings. Another possibility is small-scale caravan 
trade regulated by closed membership groups. The traders would then 
appropriate the goods themselves. 

In the field of maritime transportation: (i) The ownership of ships 
by an oikos, a seigneur or a patrician trading on own account; (ii) 
co-operative construction and ownership of ships, captain and crew par- 
ticipating in trade on their own account, small travelling merchants con- 
stituting the shippers, all parties sharing the risks, and voyages made in 
strictly regulated "caravans." In all these cases "trade" was still identical 
with inter-local trade, that is, with transport. 

(c) Free non-agricultural trades. Free production for consumers in 
return for a wage, either on the customer's premises or on that of the 
worker. Usually the raw materials were appropriated by the customer, 
the tools by the worker, premises and installations, if any were involved, 
by a lord as a source of income or by organized groups with rights of use 
in rotation. Another possibility is that both raw materials and tools should 
be appropriated by the worker who thus managed his own work, whereas 
premises and stationary equipment belonged to an organized group of 
workers, such as a guild. In all these cases, it is usual for the regulation 
of profit-making activity to be carried on by guilds. 

In mining, deposits have usually been appropriated by political 
authorities or by seigneurial owners as sources of rent, while the rights 
of exploitation have been appropriated by organized groups of workers. 
Mining operations have been regulated on a guild basis with participation 
in the work an obligation of the members to the lord, who was interested 
in the rent, and to-the working group (BfirggenwincJe), which was collec- 
tively responsible to him and had an interest in the proceeds. 

In the field of inland transport, we find boatmen and teamster guilds 
' with fixed rotation of travel assignments among the members and regu- 
lation of their opportunities for profit. 

In the field of maritime transport, shared ownership of ships, travel- 
ling in convoys, and travelling merchants acting as commenda partners 
for businessmen staying at home are typical everywhere. 

There are the following stages in the development toward capitalism: 

(a) Effective monopolization of money capital by entrepreneurs, used 
as a means to make advances to labor. Connected with this is the assump- 
tion of powers of management over the process of production by virtue 
of the.extension of credit, and of control over the product in spite of the 
fact that appropriation of the means of production has continued for- 



148 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

mally in the hands of the workers, as in the handicrafts and in mining; 
(b) appropriation of the right of marketing products on the basis of 
previous monopolization both of knowledge of the market and hence" of 
market opportunities and of money capital. This was made possible by 
the imposition of a monopolistic system of guild regulation or by privi- 
leges granted by the political authority in return for periodical payments 
or for loans; (c) the subjective disciplining of workers who stood in a 
dependent relationship in the putting-out system, via the supply of raw 
materials and apparatus by the entrepreneur. A special case is that of the 
rational monopolistic organization of domestic industries on the basis 
of privileges granted in the interests of public finances or of the employ- , 
ment of the population. The conditions of work were thereby regulated by 
imposition from above as part of the concession which made profit-making 
activity possible, (d) the development of workshops without a rational 
specialization of labor in the process of production, by means of the ap- 
propriation by the entrepreneur of all the material means of production. 
In mining this included the appropriation by individual owners of 
mineral deposits, galleries, and equipment. In transportation, shipping 
enterprises fell into the hands of large owners. The universal result was 
the expropriation of the workers from the means of production; (e) the 
final step in the transition to capitalistic organization of production was 
the mechanization of the productive process and of transportation, and 
its orientation to capital accounting. All material means of production 
become fixed or working capital; all workers become "hands." As a result 
of the transformation of enterprises into associations of stock holders^ 
the manager himself becomes expropriated and assumes the formal status 
of an "official." Even the owner becomes effectively a trustee of the sup- 
pliers of credit, the banks. 

Of all these various types, the following instances may be noted : 
1. In agriculture, type (a), migratory agriculture, is universal. But 
the sub-type where the effective unit has been the large-scale household 
or kinship group, is found only occasionally in Europe, quite frequently 
in East Asia, particularly China. Type (b), sedentary agriculture with 
land-use-regulating village associations, has been common in Europe and 
India. Type (c), seigneurial rights over the land with restrictions due to 
mutual obligations, has been found everywhere and is still common in 
some parts of the Orient. Type (d), seigneurial or fiscal rights over the 
land with systematic redistribution of the fields by the peasants, has 
existed in the more seigneurial type in Russia and in a variant involving 
the redistribution of land rents in India,** and in the more fiscal form in 
East Asia, the Near East, and Egypt. Type (e), unrestricted seigneurial 
land ownership drawing rent from small tenants, is typical of Ireland, 



24a ] Forms of Appropriation and of Market Relationship i 4 9 

but also occurs in Italy, southern France, China, and the eastern parts 
of the Hellenistic world in Antiquity. Type (f), the plantation with un- 
free labor, was characteristic of Carthage and Rome in Antiquity, of 
modern colonial areas, and of the Southern States of the United States. 
Type (g), the "estate economy" in the form which involves separation 
of ownership and exploitation, has been typical of England; in the form 
of owner management, of eastern Germany, parts of Austria, Poland, 
and western Russia. Finally, type (h), peasant proprietorship, has been 
found in France, southern and western Germany, parts of Italy, Scandi- 
navia, with certain limitations in south-western Russia, and with modi- 
fications particularly in modern China and India. 

These wide variations in the forms which the organization of agricul- 
ture has finally assumed are only partially explicable in economic terms, 
that is, from such factors as the difference between the cultivation of 
forest clearings and of areas requiring irrigation. Special historical cir- 
cumstances played a large role, and especially the forms taken by political 
and fiscal obligations and military organization. 
v 2. In the field of industry, the following outline of the distribution 
of types may be given. Our knowledge of the situation in transportation 
and mining is not sufficiently complete to give such an oudine for those 
fields. 

(a) The first type, tribal crafts, has been found universally; (b) or- 
ganization on the basis of occupational castes became general only in 
India. Elsewhere it has existed only for occupations considered dis- 
creditable and sometimes ritually impure; (c) the organization of in- 
dustry on the basis of the oikos is found in all royal households in early 
times, but has been most highly developed in Egypt. It has also existed 
on seigneurial manors all over the world. Production by demiurgic crafts 
was occasionally found everywhere, including the Western World, but 
has developed into a pure type only in India. The special case of the use 
of control over unfree persons simply as a source of rent was common in Mediterranean Antiquity. The liturgical specification of functions was 
characteristic of Egypt, of the Hellenistic period, of the later Roman 
Empire, and has been found at times in China and India; (d) the free 
handicraft organization with guild regulations is classically illustrated 
in the European Middle Ages and became the predominant form only 
there. It has, however, been found all over the world; and guilds, in 
particular, have developed very widely, especially in China and the Near 
East. It is notable, however, that this type was entirely absent from the 
economic organization of the period of Mediterranean "classical" An- 
tiquity. In India, the caste took the place of the guild. Of the stages in 
the development toward capitalism, only the second was reached on a 



I 5 o SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II 

large scale outside the Western World. This difference cannot be ex- 
plained entirely in purely economic terms. 



25. Conditions Underlying the Cahuhhility of the 

Productivity of Labor 

1. In the three typical communist forms of organization, non- 
economic motives play a predominant part (see below, sec. 26). But 
apart from these cases, there are three primary conditions affecting the 
optimization of calculable performance by labor engaged in carrying out 
specifications: ,(a) The optimurn 'of aptitude for the function; (b) the 
optimum of skill acquired through' practice; CO die optimum of inclina- 
tion for the work, Aptitude, regardless of whether it is th£ product of hereditary or 
environmental and educational influences, can only be determined by 
testing. In business enterprises in a market economy this usually takes 
the form of a trial period. The Taylor system involves an attempt to work 
out rational methods of accomplishing this. 

Practice, and the resulting skill, can only be perfected by rational and 
/continuous specialization. Today, it is worked out on a basis which is 
largely empirical, guided by considerations of minimizing costs in the 
interest of profitability, and limited by these interests. Rational specializa- 
tion with reference to physiological conditions is only in its beginnings 
(witness again the Taylor system). 

Inclination to work may be oriented to any one of the ways which 
are open to any other mode of action (see above, ch. I, sec. 2). But in the 
specific sense of incentive to execute one's own plans or those of persons 
supervising one's work, it must be determined either by a strong self- 
interest in the outcome, or by direct or indirect compulsion. The latter is 
particularly important in relation to work which executes the dispositions 
of others. This compulsion may consist in the immediate threat of physi- 
cal force or of other undesirable consequences, or in the probability that 
unsatisfactory performance will have an adverse effect on earnings. 

The second type, which is essential to a market economy, appeals im- 
mensely more strongly to the worker's self-interest. It also necessitates 
freedom of selection according to performance, both qualitatively and 
quantitatively, though naturally from the point of view of its bearing on 
profit, In this sense it has a higher degree of formal rationality, from the 
point of view of technical considerations, than any kind of direct compul- 
sion to work. It presupposes the expropriation of the workers from the 



25 ] Conditions of CahufabUity of Labor Productivity i 5 1 

means of production by owners is protected by force. As compared with 
direct compulsion to work, this system involves the transferral, in addi- 
tion to the responsibility for reproduction (in the family), of part of the 
worries about selection according to aptitude to the workers themselves. 
Further, both the need for capital and the capital risks are, as compared 
with the use of unfree labor, lessened and made more calculable. Finally, 
through the payment of money wages on a large scale, the market for 
goods which are objects of mass consumption is broadened. 

Other things being equal, positive motives for work are, in the ab- 
sence of direct compulsion, not obstructed to the same extent as they are 
for unfree labor. It is true, however, that whenever technical specializa- 
tion has reached very high levels, the extreme monotony of operations 
tends to limit incentives to purely material wage considerations. Only 
when wages are paid in proportion to performance on a piece-rate basis 
is there an incentive to increasing productivity. In the capitalistic system, 
the most immediate bases of willingness to work are opportunities for 
high piece-rate earnings and the danger of dismissal, 
* The following observations may be made about the situation of free 
labor separated from the means of production: (a) Other things being 
equal, the likelihood that people will be willing to work on affectual 
grounds is greater in the case of specification of functions than in that of 
specialization of functions. This is true because the product of the indi- 
vidual's own work is more clearly evident. In the nature of the case, this 
is almost equally true wherever the quality of the product is important; 
(b) traditional motivations to work are particularly common in agricul- 
ture and in home industries — both cases where also the general attitude 
toward life is traditional. It is characteristic of this that the level of per- 
formance is oriented either to products which are stereotyped in quantity 
and quality or to a traditional level of earnings, or both. Where such an 
attitude exists, it is difficult to manage labor on a rational basis, and 
production cannot be increased by such incentives as piece rates. Ex- 
t perience shows, on the other hand, that a traditional patriarchal relation- 
ship to a lord or owner is capable of maintaining a high level of affectual 
incentive to work; (c) motivations based on absolute values are usually 
the result of religious orientations or of the high social esteem in which 
the particular form of work as such is held. Observation seems to show 
that all other sources of motivations directed to ultimate values are only 
transitional. 

It goes without saying that the "altruistic" concern of the worker for 
his own family is a typical element of duty contributing to willingness 
to work generally. 

2. The appropriation of the means of production and personal con- 



I 5 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck- 11 

trol, however formal, over the process of work constitute one of the 
strongest incentives to unlimited willingness to work. This is the funda- 
mental basis of the extraordinary importance of small units in agriculture, 
whether in the form of small-scale proprietorship or small tenants who 
hope to rise to the status of owner. The classical locus of this type of 
organization is China. The corresponding phenomenon in the function- 
ally specified skilled trades is most marked in India, but it is very im- 
portant in all parts of Asia and also in Europe in the Middle Ages. In 
the latter case, the most crucial conflicts have been fought out over the 
issue of formal autonomy of the individual worker. The existence of the 
small peasant in a sense depends directly on the absence of capital oc- 
counting and on retaining the unity of household and enterprise. His 
is a specified arid not a specialized function, and he tends both to devote 
more intensive labor to it and to restrict his standard of living in the 
interest of maintaining his formal independence. In addition, this system 
of agriculture makes possible the use of all manner of by-products and 
even "waste" in the household in a way which would not be possible in 
a larger farm unit. All the information we have available goes to show 
that capitalistic organization in agriculture is, where management is in 
the hands of the owner, far more sensitive to cyclical movements than 
small-scale peasant farming (see the author's figures in the Verhandlun- 
gen des deutschen juristentogs, vol. xxiv). *'* 

In industry, the corresponding small-scale type has retained its im- 
portance right up to the period of mechanization and of the most minute 
specialization and combination of functions. Even as late as the sixteenth 
century, as actually happened in England [1555], it was possible simply 
to forbid the operation of workshops like that of "Jack of Newbury" 
without catastrophic results for the economic situation of the workers, 
This was true because the combination in a single shop of looms, ap- 
propriated by one owner and operated by workers, could not, under the 
market conditions of the time, without any far-reaching increase in the 
specialization and co-ordination of labor functions, lead to an improve- 
ment in the prospect of profit for the entrepreneur large enough to 
compensate with certainty for the increase in risk and the cost of operat- 
ing the shop. Above all, in industry an enterprise with large investments 
in fixed capital is not only, as in agriculture, sensitive to cyclical fluctua- 
tions, but also in the highest degree to every form of irrationality — that 
is, lack of calculability — in public administration and the administration 
of justice, as it existed everywhere outside the modern Western World. 
It has hence been possible, as in the competition with the Russian "fac- 
tory" and everywhere else, for decentralized domestic industry to domi 
nate the field. This was true up to the point, which was reached before 



25 ] Conditions of Calculability of Labor Productivity i 5 3 

the introduction of mechanical power and machine tools, where, with 
the broadening of market opportunities, the need for exact cost account- 
ing and standardization of product became marked. In combination with 
technically rational apparatus, using water power and horse-gins, this 
led to the development of economic enterprises with internal specializa- 
tion. Mechanical motors and machines could then be fitted in. Until this 
point had been reached, it was possible for all the large-scale industrial 
establishments, which occasionally had appeared all over the world, to be 
eliminated again without any serious prejudice to the economic situation 
of all those involved in them and without any serious danger to the 
interest of consumers. This situation changed only with the appearance 
of the factory. But willingness to work on the part of factory labor has 
been primarily determined by a combination of the transfer of responsi- 
bility for maintenance to the workers personally and the corresponding 
powerful indirect compulsion to work, as symbolized in the English 
workhouse system, and it has permanently remained oriented to the com- 
pulsory guarantee of the property system. This is demonstrated by the 
marked decline in willingness to work at the present time which resulted 
from the collapse of this coercive power in the [1918] revolution. 



26. Forms of Communism 

Communist arrangements for the communal or associational organiza- 
tion of work which are indifferent to calculation are not based on a con- 
sideration of means for obtaining an optimum of provisions, but, rather, 
on direct feelings of mutual solidarity. They have thus tended histori- 
cally, up to the present, to develop on the basis of common value attitudes 
of a primarily non-economic character. There are three main types : ( 1 ) 
The household communism of the family, resting on a traditional and affectual basis; (2) the military communism of comrades in an army; (3) 
the communism based on love and charity in a religious community. 

Cases (2) and (3) rest primarily on a specific emotional or charis- 
matic basis. Always, however, they either (a) stand in direct conflict 
with the rational or traditional, economically specialized organization 
of their environment; such communist groups either work themselves 
or, in direct contrast, are supported purely by contributions from patrons, 
or both. Or (b) they may constitute a budgetary organization of privi- 
leged persons, ruling over other household units which are excluded 
from their organization, and are supported by voluntary contributions 
or liturgies of the latter. Or (c) finally, they are consumer household 



I 5 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11 

units, distinct from any profit-making enterprises but drawing income 
from them, and thus in an associative relationship with them. 

The first of these modes of support (a) is typical of communities 
based on religious belief or some Weltanschauung — such as monastic 
communities which renounce the world altogether or carry on commu- 
nal labor, sectarian groups and Utopian socialists. 

The second mode (b) is typical of military groups which rest on a 
wholly or partially communistic basis. Examples are the "men's bouse" 
in many primitive societies, the Spartan syssitia, the Ligurian pirate 
groups, the entourage of Calif Omar, the communism, in consumption 
and partly in requisitioning, of armies in the field in every age. A sim- 
ilar state of affairs is found in authoritarian religious groups — as in the 
Jesuit state in Paraguay and communities of mendicant monks in India 
and elsewhere. 

The third mode (c) is typical of family households in a market econ- 
omy. 

Willingness to work and consumption without calculation within 
these communities are a result of the non-economic attitudes character- 
istic of them. In the military and religious cases, they are to an appreci- 
able extent based on a feeling of separateness from the ordinary everyday 
world and of conflict with it. Modern communist movements are, so far 
as they aim for a communist organization of the masses, dependent on 
"value-rational" appeals to their disciples, and on arguments from expedi- 
ency (zweckrationaO in their [external] propaganda. In both cases, 
thus, they rest their position on specifically rational considerations and, 
in contrast to the military and religious communities, on considerations 
concerned with the everyday profane world. 10 Their prospects of success 
under ordinary conditions rest on entirely different subjective conditions 
than those of groups which are oriented to exceptional activities, to other- 
worldly values, or to other primarily non-economic considerations. 



27. Capital Goods and Capital Accounting 

The embryonic forms of capital goods are typically found in com- 
modities traded in inter-local [as against local] or inter-tribal exchange, 
provided that "trade" (see sec. 29) appears as an activity clearly distinct 
from the mere procurement of goods on a household (budgetary) basis. 
For the swapping (EigenkandeV) of household economies — trading-o£F 
of surpluses— ^cannot be oriented to capital accounting. The inter-tribally 
sold products of household, clan or tribal crafts are commodities, while 
the means of procurement, as long as they remain one's own output, are 



xj ] Cafital Goods and Cafital Accounting i 5 5 

only tools or raw materials, but not capital goods. The same goes for the 
market products and means of procurement of the peasant and the feudal 
lord as long as economic activity is not oriented to capital accounting, if 
only in its most primitive forms such as were incipient already in [the 
manual oh estate management of the elder] Cato. 

It is obvious that the internal movement of goods within the domain 
of a feudal lord or of an oifeos, including occasional exchange and the 
common Forms of internal exchange of products, is the antithesis of trade 
based on capital accounting. The trade engaged in by an oikos, like that 
of the Pharaohs, even when it is not concerned solely with provision for 
need and thus does not act as a budgetary unit but as one oriented to 
profit, is not for present purposes necessarily capitalistic. This would 
only be the case if it were oriented to capital accounting, particularly to 
an ex-ante estimate in money of the chances of profit from a transaction. 
Such estimates were made by the professional travelling merchants, 
whether they were engaged in selling on commenda basis for others, or 
in disposing of goods co-operatively marketed by an organized group. It 
is here, in the form of "occasional" enterprise, that the source of capital 
accounting and of the use of goods as capital is to be found. 

Human beings (slaves and serfs) and fixed installations of all types 
which are used by seigneurial owners as sources of rent are, in the nature 
of the case, only rent-producing household property and not capital 
goods, similar to the securities which today yield interest or dividends 
for a private investor oriented to obtain an income from his wealth and 
perhaps some speculative gains. Investment of this household type should 
be clearly distinguished from the temporary investment of business 
capital by an enterprise. Goods which a lord over land or persons receives 
from his dependents in payment of the obligations due him by virtue of 
his seigneurial powers, and then puts up for sale, are not capital goods 
for the present terminological purposes, but only commodities. In such 
cases capital accounting — and above all, estimates of cost — are lacking 
in principle, not merely in practice. On the other hand, where slaves are 
used in an enterprise as a means of profit, particularly where there is an 
organized slave market and widespread purchase and sale of slaves, they 
do constitute capital goods. Where corvee-based production units QVron- 
betriehe) work with a labor force of (hereditary) dependents who are 
not freely alienable and transferable, we shall not talk of capitalistic eco- 
nomic establishments, but of profit-making economic establishments with 
bound labor, regardless of whether we are dealing with agricultural pro- 
duction or unfree household industry. The decisive aspect is whether the 
tie is mutual — whether the lord is also bound to the worker. 

In industry, production for sale by free workers with their own raw 



I J 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

materials and tools ("price work") is a case of small-scale capitalistic 
enterprise. The putting-out industry is capitalistic, but decentralized; 
whereas every case of an organized workshop under capitalistic control is 
centralized capitalistic organization. All types of "wage Work" of oc- 
casional workers, whether in the employer's or in the worker's home, are 
mere forms of dependent work which are sometimes exploited in the 
interest of the budgetary economy, sometimes in the interest of the 
employer's profit. 

The decisive point is thus not so much the empirical fact, but rather 
the theoretical possibility of the use of capital accounting. 



28. The Concept of Trade and Its Principal Forms 

In addition to the various types of specialized and specified functions, 
which have already been discussed, every market economy (even, nor- 
mally, one subject to substantive regulation) knows another function: 
namely mediation in the process of disposing of a producer's own control 
over goods or acquiring such control from others. This function can be 
carried out tn any one of the following forms: ( 1 ) By the members of the 
administrative staff of an organized economic group, in return for pay- 
ments in kind or in money which are fixed or vary with the services 
performed; (2) by an organized group created especially to provide for 
the selling and purchasing needs of its members; (3) by the members of 
a specialized occupational group working for their own profit and remu-, 
nerated by fees or commissions without themselves acquiring control of 
the goods they handle; they act, that is, as agents, but in terms of a wide 
variety of legal forms; (4) by a specialized occupational group engaged 
in trade as a capitalistic profit-making enterprise (trade on own account). 
Such persons purchase goods with the expectation of being able to resell 
them at a profit, or sell for future delivery with the expectation of being 
able to cover their obligations before that date at a profitable figure. This 
may be done by buying and selling entirely freely in the market or sub- 
ject to substantive regulation; (5) by a continuous regulated process, 
under the aegis of an organized political group, of expropriation of goods 
against compensation and of voluntary or enforced disposal of these goods 
to customers, again against compensation: compulsory trade; (6) by the 
professional lending of money or procurement of credit for the purpose 
of effectuating business payments or for the acquisition of means of pro- 
duction on credit; such transactions may be with business enterprises or 
with other organized groups, particularly political bodies. The economic 



28 ] _ "Trade" and Its Principal Forms i 5 7 

function of the credit may be to finance current payments or the acquisi- 
tion of capita] goods. 

Cases (4) and (5), and only these, will he called "trade." Case (4) 
is "free" trade, case (5) "compulsory monopolistic" trade. 

Type (r) is illustrated for budgetary units by the negj*> ores and 
actores who have acted on behalf of princes, landlords, monasteries, etc, 
and for profit -ma king enterprises by various types of travelling salesmen; 
type (2) is illustrated by various kinds of co-operative buying and selling 
agencies, including consumers' co-operative societies; type (3) includes 
brokers, commission merchants, forwarding agents, insurance agents, 
and various other kinds of agents; type (4) is illustrated for the case of 
free market transactions by modern trade, and for the regulated case by 
various types of heteronomously imposed or autonomously agreed divi- 
sions of the market with an allocation of the transactions with certain 
customers or of the transactions in certain commodities, or by the sub- 
stantive regulation of the terms of exchange by the order of a political 
body or some other type of co-operative group; type C?) is illustrated by 
t the state monopoly of the grain trade. 



29. The Concept of Trade and Its Principal Forms — 
(Continued) 

Free trade on own account (type 4), which alone will be dealt with 
for the present, is always a matter of profit-making enterprise, never of 
budgetary administration. It is hence under all normal conditions, iT not 
always, a matter of earning money profits by contracts of purchase and 
sale. It may, however, be carried on (a) by an organization subsidiary 
to a budgetary economy, or (b) it may be an inseparable part of a 
total function through which goods are brought to a state of local 
consumability, ' 

Case (a) is illustrated by members of a budgetary unit designated 
specifically to dispose of surpluses of that unit's production on their own 
account. If, however, it is a matter simply of "occasional" sale by differ- 
ent members at different rimes, it is not even a subsidiary enterprise, but 
where the members in question devote themselves entirely and on their own financial responsibility to sale or purchase, it is an example of the 
type (4), though somewhat modified. If, on the other hand, they act for 
the account of the unit as a whole, it is a case of the type (1). 

Case (b) is illustrated by peddlers and other small traders who travel 
with their goods, and who thus primarily perform the function of trans- 
porting goods to the place of sale. They have hence been mentioned 
above in connection with the function of transportation. Travelling 
commends traders may be a transitional form between types (3) an d 



I 5 8 SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. II 

(4). Whether the transportation service is primary and the trading profit 
secondary, or vice versa, is generally quite indefinite. In any case, all 
persons included in these categories are 'traders." 

Trade on the individual's own account (type 4) is always carried on 
on the basis of appropriation of the means of procurement, even though 
his control may he made possible only by borrowing. It is always the 
trader who bears the capital risk on his own account; and, correspond- 
ingly, it is he who, by virtue of his appropriation of the means of pro- 
curement, enjoys the opportunity for profit. 

Specialization and specification of functions in the field of free trade 
on own account may take place in a variety of different ways. From an 
economic point of view, it is for the present most important to distinguish 
them according to the types of economic unit between which the mer- 
chant mediates: (i) Trade between households (budgetary units) with a 
surplus and other households which consume the surplus; GO trade be- 
tween profit-making enterprises, themselves producers or merchants, and 
households (budgetary units) which consume the product. The latter 
include, of course, all types of organizations, in particular, political 
bodies; (in) trade between one profit-making enterprise and another. 

The first two cases come close to what is usually called "retail trade," 
which involves sale to consumers without reference to the sources from 
which the goods were obtained. The third case corresponds to "wholesale 
trade." 

Trade may be oriented to the market or to customers. In the former 
case it may be a consumers' market, normally with the goods actually, 
present. It may, on the other hand, be a market for business enterprises, 
in which case the goods may actually be present, as at fairs and exposi- 
tions (usually though not necessarily, seasonal), or the goods may not 
be present, as in trade on commodity exchanges (usually, though not 
necessarily, permanent). If trade is oriented directly to customers, pro- 
viding for the needs of a relatively fixed group of purchasers, it may be 
to households (budgetary units), as in retail trade, or to profit-making 
enterprises. The latter may in turn be producing units or retail enter- 
prises or, finally, other wholesale enterprises. There may be various levels 
of middlemen in this sense, varying from the one nearest the producers 
to the one who sells to the retailer. 

According to the geographical source of the goods disposed of, trade 
may he "interlocal" or "local." 

The merchant may be in a position in fact to secure purchases on his 
own terms from the economic units which sell to him — putting-out trade. 
He may, on the other hand, be in a position to dictate the terms of his 
sales to the economic units which buy from him — traders' monopoly. 



20 ] "Trade" and Its Principal Forms (com.) i 5 9 

The first type is closely related to the putting-out organization of industry 
and is generally found combined with it. The second is "substantively 
regulated" trade, a variety of type (4). 

It goes without saying that every market-oriented business enterprise 
must dispose of its own goods, even if it is primarily a producing enter- 
prise. This type of marketing is not, however, "mediation" in the sense 
of the above definition so long as no members of the. administrative staff 
are specialized for this and only this purpose (such as travelling sales- 
man). Only then is a specialized "trading" function being performed. 
There are, of course, all manner of transitional forms. 

The calculations underlying trading activity will be called "specula- 
tive" to the extent to which they are oriented to possibilities, the realiza- 
tion of which is .regarded as fortuitous and is in this sense uncslculable. 
In this sense the merchant assumes the burden of "uncertainty." 31 The 
transition from rational calculation to what is in this sense speculative 
calculation is entirely continuous, since no calculation which attempts 
to forecast future situations can he completely secured against unexpected 
"accidental" factors. The distinction thus has reference only to a differ- 
ence in the degree of rationality. 

The forms of technical and economic specialization and specification 
of function in trade do not differ substantially from those in other fields. 
The department store corresponds to the factory in that it permits the 
most extensive development of internal specialization of function. 



29a. The Concept of Trade and Us Principal Forms — 
(Concluded^) 

The term "banks" will be used to designate those types of profit- 
making "trading" enterprise which make a specialized function of ad- 
ministering or procuring money. 

Money may be administered for private households by taking private 
deposit accounts and caring for the property of private individuals. It may 
also be administered for political bodies, as when a bank carries the 
account of a government, and for profit-making enterprise, by carrying 
business deposits and their current accounts. 

Money may be procured for the needs of budgetary units, as in ex- 
tending private consumption credit to private individuals, or in extending 
credit £0 political bodies. It may be procured for profit-making enterprises 
for the purpose of making payments to third persons, as in the creation 
of bills of exchange or the provision of checks or drafts for remittances. 
It may also be used to make advances on future payments due from 



I 6 O SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. II 

customers, especially in the form of the discounting of bills of exchange. 
It may, finally, be used to give credit for the purchase of capital goods. 

Formally, it is indifferent whether the bank (i) advances this money 
from its own funds or promises to make it available on demand, as in the 
provision for over-drafts of a current account, and whether the loan is or 
is not accompanied by a pledge or any other form of security provided by 
the borrower; or, (2,) whether the bank, by some type of guarantee or in 
some other manner, influences others to grant the funds. 

In practice, the business policy of banks is normally aimed to make 
a profit by relending funds which have been lent to them or placed at 
their disposal. 

The funds which a bank lends may be obtained from stocks of bul- 
lion or of coin from the existing mints which it holds on credit, or by its 
own creation of certificates (fcafcco-money) or of means of circulation 
(bank notes), or, finally, from the deposits of private individuals who 
have placed their money at its disposal. 

Whether a bank borrows on its own to obtain the funds it lends out 
or creates means of circulation, it must, if it is acting rationally, attempt 
to provide for coverage to maintain its liquidity — that is, it must keep a 
sufficient stock of cash reserves or arrange the tenns of credit granted in 
such a manner that it can always meet its normal payment obligations. 

As a rule, the observance of liquidity ratios by money-creating (i.e., 
note-issuing) banks is provided for in imposed regulations by organiza- 
tions (merchant guilds or political bodies). These regulations are at the 
same time usually designed to protect the chosen monetary system of an 
area as far as possible against changes in the substantive validity of the' 
money, and thus to protect the (formal) rationality of the economic cal- 
culations of budgetary units, above all those of the political body, and of 
profit-making enterprises against disturbances from (substantive) ir- 
rationalities. In particular, the most stable rate of exchange possible for 
one's own money against the monies of other monetary areas, with which 
trade or credit relations exist or are desired, is usually striven for. This 
type of monetary policy, which atfempts to control the factors of irration- 
ality in the monetary field, will, following G. F. Knapp, be called "lytric" 
policy. In the strictly laissez-faire state, this is the most important func- 
tion in the realm of economic policy which the state would undertake. 
In its rational form this type of policy is entirely restricted to the modern 
state. 

The policy measures of the Chinese with respect to copper and paper 
money and the Roman coinage policy will be discussed at the proper 
point, but they did not constitute a modem lytric monetary policy. Only 
the banco-money policy of the Chinese guilds, which formed the model 



29a ] "Trade" and Its Principal Forms (concl.) 1 6 1 

for the Hamburg hanco mark, came up to modern standards of -rational- 
ity." 

The term "financing" (Finanziervngsgeschafte') will be applied to all 
business transactions which are oriented to obtaining control, in one of 
the following ways, of favorable opportunities for profit-making by busi- 
ness enterprise, regardless of whether they are carried on by banks or by 
other agencies, including individuals, as an occasional source of profit 
or as a subsidiary enterprise, or as part of the speculative operations of a 
"financier": (a) through the transformation of rights to appropriated 
profit opportunities into securities or other negotiable instruments, and 
by the acquisition of these securities, either directly or through such 
subsidiary enterprises as are described below under (c); (b) by the sys- 
tematic tender (or, occasionally, refusal) of business credit; (c) through 
compulsory joining, if necessary or desired, of hitherto competing enter- 
prises, either (i) in the form of monopolistic regulation of enterprises 
at the same stage of production (cartellization), or (ii) in the form of 
monopolistic fusion under one management of hitherto competing enter- 
prises for the purpose of weeding out the least profitable ones (merger), 
or (iii) in the not necessarily monopolistic form of the fusion of special- 
ized enterprises at successive stages of a production process (vertical com- 
bination), or finally (iv) in the form of an attempted domination of 
many enterprises through operations with their shares (trusts, holding 
companies) or the creation of new enterprises for the purpose of increas- 
ing profits or merely to extend personal power (financing as such). 

Of course, financing operations are often carried out by banks and, 
as a general rule, unavoidably involve their participation. But the main 
control often lies in the hands of stock brokers, like Harriman, or of 
individual large-scale entrepreneurs in production, like Carnegie. The 
formation of cartels is also often the work of large-scale entrepreneurs, 
like Kirdorf; while that of trusts is more likely to be the work of "finan- 
ciers," like Gould, Rockefeller, Stinnes, and Ratbenau. This will be 
further discussed below. 



30. The Conditions of Maximum Formal Rationality of 
Capital Accounting 

The following are the principal conditions necessary for obtaining a 
maximum of formal rationality of capital accounting in production enter- 
prises: (1) complete appropriation of all material means of production 
by owners and the complete absence of all formal appropriation of op- 
portunities for profit in the market; that is, market freedom; (2) complete 



I 6 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11 

autonomy in the selection of management by the owners, thus complete 
absence of formal apptopriation of rights to managerial functions; (3) 
complete absence of appropriation of jobs and of opportunities for earn- 
ing by workers and, conversely, the absence of appropriation of workers 
by owners. This implies free labor, freedom of the labor market, and 
freedom in the selection of workers; (4) complete absence of substantive 
regulation of consumption, production, and prices, or of other forms of 
regulation which limit freedom of contract or specify conditions of ex- 
change. This may be called substantive freedom of contract; (5) com- 
plete calculability of the technical conditions of the production process; 
that is, a mechanically rational technology; (6) complete calculability of 
the functioning of public administration and the legal order and a 
reliable purely formal guarantee of all contracts by the political authority. 
This is a formally rational administration and law; (7) the most complete 
separation possible of the enterprise and its conditions of success and 
failure from the household or private budgetary unit and its property 
interests. It is particularly important that the capital at the disposal of the 
enterprise should be clearly distinguished from the private wealth of the 
pwners, and should not be subject to division or dispersion through 
inheritance. For large-scale enterprises, this condition tends to approach 
an optimum from a formal point of view: in the fields of transport, 
manufacture, and mining, if they are organized in corporate form with 
freely transferrable shares and limited liability, and in the field of agri- 
culture, if there are relatively long-term leases for large-scale production 
units; (8) a monetary system with the highest possible degree of formal 
rationality. 

Only a few points are in need of comment, though even these have 
already been touched on, 

CO With respect to the freedom of labor and of jobs from appropri- 
ation, it is tru ■* that certain types of unfree labor, particularly full-fledged 
slavery, have guaranteed what is formally a more complete power of 
disposal o-°r the worker than is the case with employment for wages. 
But there are various reasons why this is less favorable to rationality 
and efficiency than the employment of free labor: (a) The amount of 
capital which it was necessary to invest in human resources through 
the purchase and maintenance of slaves has been much greater than that 
required by the employment of free labor; (b) the capital risk attendant 
on slave ownership has not only been greater, but specifically irrational 
in that slave labor has been exposed to all manner of non-economic in- 
fluences, particularly to political influence in a very high degree; (c) 
the slave market and correspondingly the prices of slaves have been par- 
ticularly subject to fluctuation, which has made a balancing of profit 
and loss on a rational basis exceedingly difficult; (d) for similar reasons, 



30 ] Formal Rationality of Capital Accounting i 6 3 

particularly involving the political situation, there has been a difficult 
problem of recruitment of slave labor forces; (e) when slaves have been 
permitted to enjoy family relationships, this has made the use of slave 
labor more expensive in that the owner has had to bear the cost of main- 
taining the women and of rearing children. Very often, he has had no 
way in which he could make rational economic use of these elements as 
part of his laboi force; (f) hence the most complete exploitation of slave 
labor has been possible only when they were separated from family rela- 
tionships and subjected to a ruthless discipline. Where this has hap- 
pened it has greatly accentuated the difficulties of the problem of recruit- 
ment; (g) it has in general been impossible to use slave labor in the 
operation of tools and apparatus, the efficiency of which required a high 
level of responsibility and of involvement of the operator's self-interest; 
(h) perhaps most important of all has been the impossibility of selection, 
of employment only after trying out in the job, and of dismissal in ac- 
cordance with fluctuations of the business situation or .when personal 
efficiency declined. 

Hence the employment of slave labor has only been possible in gen- 
era! under the following conditions: (a) Where it has been possible to 
» maintain slaves very cheaply; (h) where there has been an opportunity 
for regular recruitment through a well-supplied slave market; (c) in 
agricultural production on a large scale of the plantation type, or in very 
simple industrial processes. The most important examples of this type 
of relatively successful use of slaves are the Carthaginian and Roman 
plantations, those of colonial areas and of the Southern United States, 
and the Russian "factories." The drying up of the slave market, which 
resulted from the pacification of the Empire, led to the decay of the 
plantations of Antiquity. 58 In North America, the same .situation led to 
a continual search for cheap new land, since it was impossible to. meet 
the costs of slave:: and pay a land rent at the same time. In Russia, the 
serf ''factories" were barely able to meet the competition of the kustar 
type of household industry and. were totally unable to compete with free 
factory labor. I'-ven before the emancipation of the serfs, petitions for 
permission to dismiss workers were common, and the factories decayed 
with the introduction of shops using free labor. 

When workers are employed for wages, the following advantages^ 
industrial profitability and efficiency are conspicuous: (a) Capital risk 
and the necessary capital investment are smaller; (b) the costs of re- 
production and of bringing up children fall entirely on the worker. His 
wife and children must seek employment on their own account; (c) 
largely for this reason, the risk of dismissal is an important incentive to 
the maximization of production; (d) it is possible to select the labor 
force according to ability and willingness to work. 

(2) The following comment may be made on the separation of en- 
terprise and household. The separation in England of the producing 
farm enterprise, leasing the land and operating with capital accounting, 
from the entailed ownership of the land is by no means fortuitous, but 



164 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. U 

is die outcome of an undisturbed development over centuries which 
was characterized by the absence of an effective protection of the status 
of peasants. This in turn was a consequence of the country's insular 
position. Every joining of the ownershif of land with the cultivation of 
the land turns the land into a capital good for the economic unit, thus 
increasing the capita] requirements and the capital risks of this unit. It 
impedes the separation of the household from the economic establish- 
ment; the settlements paid out at inheritance, for instance, burden the 
resources of the enterprise. It reduces the liquidity of the entrepreneur's 
capital and introduces a number of irrational factors into his capital ac- 
counting. Hence the separation of landownership from the organization 
of agricultural production is, from a formal point of view, a step which 
promotes the rationality of capital accounting. It goes without saying, 
however, that any substantive evaluation of this phenomenon is quite 
another matter, and its conclusions may be quite different depending on 
the values underlying the judgment. 



31. The Principal Modes of Capitalistic Orientation of 
Profit- Making 

The "capitalistic" orientation of profit-making activity (in the case of 
rationality, this means: the orientation to capital accounting) can take 
a number of qualitatively different forms, each of which represents a 
definite type: 

1 . It may be orientation to the profit possibilities in continuous buy- 
ing and selling on the market ("trade") with free exchange — that is, 
absence of formal and at least relative absence of substantive compulsion 
to effect any given exchange; or it may be orientation to the profit pos- 
sibilities in continuous production of goods in enterprises with capital 
accounting. 

2. It may be orientation to the profit possibilities in trade and specu- 
lation in different currencies, in the taking over of payment functions 
of all sorts and in the creation of means of payment; the same with 
respect to the professional extension of credit, either for consumption or 
for profit-making purposes. 

3. It may be orientation to opportunities for predatory profit from 
political organizations or persons connected with politics. This includes 
the financing of wars or revolutions and the financing of party leaders 
by loans and supplies. 

4. It may be orientation to the profit opportunities in continuous 
business activity which arise by virtue of domination by force or of a 
position of power guaranteed by the political authority. There are two 



3 1 ] _, Modes of Capitalistic Orientation of Acquisition i 6 5 

main sub-types: colonial profits, either through the operation of planta- 
tions with compulsory deliveries or compulsory labor or through monopo- 
listic and compulsory trade, and fiscal profits, through the farming of 
taxes and of offices, whether at home or in colonies. 

5. It may be orientation to profit opportunities in unusual transac- 
tions with political bodies. 

6. It may be orientation to profit opportunities of the following types: 
(a) in purely speculative transactions in standardized commodities or in 
the securities of enterprises; (b) in the execution of the continuous 
financial operations of political bodies; (c) in the promotional financing 
of new enterprises in the form of sale of securities to investors; (d) in 
the speculative financing of capitalistic enterprises and of various other 
types of economic organization with the purpose of a profitable regula- 
tion of market situations or of attaining power. 

Types (0 and (6) are to a large extent peculiar to the modern West- 
em World. The other types have been common all over the world for 
thousands of years wherever the possibilities of exchange and money 
economy (for type 2) and money financing (for types 3-5) have been 
present. In the Western World they have not had such a dominant 
importance as modes of profit-making as they had in Antiquity, except 
in restricted areas and for relatively brief periods, particularly in times 
of war. Where large areas have been pacified for a long period, as in the 
Chinese and later Roman Empire, these types have tended to decline, 
leaving only trade, money changing, and lending as forms of capitalistic 
acquisition. For the capitalistic financing of political activities was every- 
where the product of the competition of states with one another for 
power, and of the corresponding competition for capital which moved 
freely between them. All this ended only with the establishment of the 
unified empires. 

The point of view here stated has, if the author's memory is accurate, 
been previously put forward in the clearest form by j. Plenge in his , 
Von der Diskontpolitik zut Herrschaft tiber den Geldmarkt (Berlin 
1913). Before that a similar position seems to have been taken only m 
the author's article, "Agrarverhaltnisse im Altertum," 1909 [reprinted in 
GAzSW, 1914; cf. 2758.] 

It is only in the modern Western World that rational capitalistic 
enterprises with fixed capital, free labor, the rational specialization and 
combination of functions, and the allocation of productive functions on 
the basis of capitalistic enterprises, bound together in a market economy, 
are to be found. In other words, we find the capitalistic type of organization 
of labor, which in formal terms is purely voluntary, as the typical and 
dominant mode of providing for the wants of the masses of the population, 



I 6 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

with expropriation of the workers from the means of production and ap- 
propriation of the enterprises by security owners. It is also only here 
that we find public credit in the form of issues of government securities, 
tlie "going public" of business enterprises, the floating of security issues and 
financing carried on as the specialized function of rational business 
enterprises, trade in commodities and securities on organized exchanges, 
money and capital markets, monopolistic organizations as a form of ra- 
tional business organization of the entrepreneurial production of goods, 
and not only of the trade in them. 

This difference calls for an explanation and the explanation cannot 
be given on economic grounds alone. Types (3) to (5) inclusive will be 
treated here together .as "politically oriented capitalism." The whole of 
the later discussiojp will be devoted particularly to the problem of explain- 
ing the difference. In general terms, it is possible only to make the fol- 
lowing statements: 

1 . It is clear from the very beginning that the politically oriented 
events and processes which open up these profit opportunities exploited 
by political capitalism are irrational from an economic point of view — 
that is, from the point of view of orientation to market advantages and 
thus to the consumption needs of budgetary units. 

2. It is further clear that purely speculative profit opportunities and 
pure consumption credit are irrational from the point of view both 
of want satisfaction and of the production of goods, because they are de- 
termined by the fortuitous distribution of ownership and of market ad- 
vantages. The same may also be true of opportunities for promotion and 
financing, under certain circumstances; but this is not necessarily always 
the case. 

Apart from the rational capitalistic enterprise, the modern economic 
order is unique in its monetary system and in the commercialization of 
ownership shares in enterprises through the various forms of securities. 
Both these peculiarities must be discussed — first the monetary system. 



32. The Monetary System of the Modern State and the 
Different Kinds of Money: Currency Money 

1. C a ) The modem*state has universally assumed the monopoly of 
regulating tbe monetary system by statute; and (b) almost without ex- 
ception, the n ipoly of creating money, at least for coined money. 

Originally, purely fiscal considerations were decisive in the creation 
of this monopoly — seigniorage Cminting fees) and other profits from 



32 ] The Modern Monetary System, Currency Money 167 

coinage. This was the motive for the prohibition of the use of foreign 
money. But the monopolization of issue of money has not been universal 
even up into the modern age. Thus, up until the currency reform [of 
1871-1873] foreign coins were current in Bremen. 

(c) With the increasing importance of its taxation and its own eco- 
nomic enterprises, the state has become both the largest receiver and the 
largest maker of payments in the society, .either through its own pay 
offices or through those maintained on its behalf. Quite apart from the 
monopoly of monetary regulation and issue, because of the tremendous 
importance of the financial transactions of the state the behavior of the 
state treasurers in their monetary transactions is of crucial significance 
for the monetary system — above all, what kind of money they actually ■ 
have at hand and hence can pay out, and what kind of money they force 
on the public as legal tender, and further, what kind of money they 
actually accept and what kind they partially or fully repudiate. 

Thus, paper money is partialiy repudiated if customs duties have to 
be paid in gold, and was fully repudiated (at least ultimately) in the 
case of the assignats of the French Revolution, the money of the Con- 
federate States of America, and that issued by the Chinese Government 
during the Tai Ping Rebellion. 

In terms of its legal properties, money can be defined as a "legal 
means of payment" which everyone, including also and especially the 
public pay offices, is obligated to accept and to pay, either up to a given 
amount or without limit. In terms of the behavior of the state (regi- 
minal) it may be defined as that money which public pay offices accept 
in payment and for which they in turn enforce acceptance in their pay- 
ments; legal compulsory money is that money, in particular, which they 
impose in their payments. The "imposition" may occur by virtue of exist- 
ing legal authority for reasons of monetary policy, as in the case of the 
[German silver] Taler and the [French silver] five-franc piece after the 
discontinuance — as we know, never really put into effect — of the coining 
of silver [1871 and 1876]; or it may occur because the state is incapable 
of paying in any other means of payment. In the latter case, an existing 
legal authority to enforce acceptance may now be employed for the first 
time, or an ad hoc legal authority may be created, as is almost always true 
in cases of resort to paper money. In this last case, what usually happens 
is that a means of exchange, which was previously by law or de facto 
redeemable in definitive money, whether its acceptance could be legally 
imposed or not, will now be de facto imposed and by the same token be- 
come de facto unredeemable. 

By passing a suitable law, a state can turn any object into a "legal 



I 6 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

means of payment" and any chartal object into "money" in the sense of 
a means of payment. It can establish for them any desired set of "value 
scales" or, in the case of "market money," "currency relations" [see above, 
ch. II, sec. 6]. There are, however, certain formal disturbances of the 
monetary system in these cases which the state can either not suppress at 
all or only with great difficulties', 

(a) In the case of administrative money, the forgery of notes, which 
is almost always very profitable; and (b) with all forms of metallic 
money, the non-monetary use of the metal as a raw material, where its 
products have a high value. This is particularly true when the metal in 
question is in an undervalued currency relation to others. It is also, in 
the case of market money, exceedingly difficult to prevent the export of 
the coins to other countries where that currency metal has a higher value. 
Finally, it is difficult to compel the offer of a legal monetary metal for 
coinage where it is undervalued with respect to the currency money 
(coins or paper). 

With paper money the rate of exchange of one currency unit of the 
metal with its nominal equivalent of paper always becomes too un- 
favorable for the metal when redeemability of the notes is suspended, 
and this is what happens when it is no longer possible to make payments 
in metal money. 

The exchange ratios between several kinds of market money may be 
determined (a) by fixing the relation for each particular case; (b) by 
establishing rates periodically; and (c) by legal establishment of per- 
manent rates, as in bimetallism. 

In cases (a) and (b) it is usual that only one metal is the effective 
currency (in the Middle Ages it was silver), while the others are used 
as trading coins with varying rates. The complete separation of the spe- 
cific modes of use of different types of market money is raTe in modem 
monetary systems, but has at times been common, as in China and in the Middle Ages. 

2. The definition of money as a legal means of payment and as the 
creature of the "lytric" administration of political bodies is, from a socio- 
logical point of view, not exhaustive. This definition, to put it in G. F. 
Knapp's words, starts from "the fact of the existence of debts,"' 4 espe- 
cially of tax debts to the state and of interest debts of the state. What is 
relevant for the legal discharge of such debts is the continuity of the 
nominal unit of money, even though the monetary material may have 
changed, or, if the nominal unit should change, the "historical defini- 
tion" of the new nominal unit. Beyond that, the individual today values 
the nominal unit of money as a certain proportional part of his nominal 
money income, and not as a chartal piece of metal or note. 



32 ] The Modern Monetary System. Currency Money i 6 9 

The state can through its legislation — or its administrative staff 
through the actual behavior of its pay offices — indeed dictate the formal 
validity of the "currency" of the monetary area which it rules. 

Provided, that is, that it employs modern methods of administration. 
It was not, however, possible at all times, for instance, in China. There 
in earlier times it has generally not been possible because payments by 
and to the government were too small in relation to the total held of 
transactions. Even recently it appears that the Chinese Government has 
not been able to make silver into a "limited money" currency with a 
gold feserve because it was not sufficiently powerful to suppress the 
counterfeiting which would undoubtedly have endued. 

However, it is not merely a matter of dealing with existing debts, but 
also with exchange in the present and the contraction of new debts to be 
paid in the future. But in this connection the orientation of the parties 
is primarily to the status of money as a means of exchange [see above, 
ch. II, sec, 6], and thus to the probability that it will be at some future 
time acceptable in exchange for specified or unspecified goods in price 
relationships which are capable of approximate estimate. 

1. Under certain circumstance, it is true, the probability that urgent 
debts can be paid off to the state or private individuals from the pro- 
ceeds may also be importandy involved. This case, may, however, be 
left out of account here because it only arises in emergency situations. 

2. In spite of the fact that it is otherwise absolutely correct and 
brilliantly executed, hence of permanently fundamental importance, it 
is at this point that the incompleteness of G. F. Knapp's Staatltche 
Theorie des Geldes becomes evident. 

Furthermore, the state on its part needs the money which it receives 
through taxation or from other sources also as a means of exchange, 
though not only for that purpose, but often in fact to a very large extent 
for the payment of interest on its debt. But its creditors, in the latter case, 
will then wish to employ it as a means of exchange; indeed this is the 
main reason why they desire money. And it is almost always true that 
. the state itself needs money to a large degree, sometimes even entirely, as 
a means of exchange to cover future purchases of goods and supplies in , 
the market. Hence, however necessary it is to distinguish it analytically, 
it is not, after all, the fact that money is a means of payment which is 
decisive. 

The exchange possibility of money against other specific goods, which 
rests on its valuation in relation to marketable goods, will be called its 
"substantive" validity, as opposed to its formal, legal validity as a means 
of payment and the frequently existing legal compulsion for its formal 
u** as ^ means of exchange. 



I 7 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

In principle, as an observable fact, a monetary unit has a substantive 
valuation only in relation to definite types of goods and only for each 
separate individual as his own valuation on the basis of the marginal 
utility of money for him, which will vary with his income. This marginal 
utility is changed for the individual with any increase in the quantity of 
money at his disposal. Thus the marginal utility of money to the issuing 
authority falls, not only, but above all, when it creates administrative 
money and uses it for obtaining goods by exchange or forces it on the 
public as a means of payment. There is a secondary change in the same 
direction for those persons who deal with the state and who, because of 
the higher prices resulting from the lowered marginal utility of money 
to public bodies, become the possessors of larger money stocks. The 
"purchasing power" now at their disposal — that is, the lowering of the 
marginal utility of money for these possessors — can in turn result in an 
increase in prices paid to those from whom they purchase, etc. If, on 
the other hand, the state were to withdraw from circulation part of the 
notes it receives — that is, if it should not pay them out again, but destroy 
them — the result would be that the marginal utility of money of its 
lessened money stocks would rise, and it would have to curtail its ex- 
penditures correspondingly, that is, it would reduce its demand prices 
appropriately. The results would be the exact opposite of those just out- 
lined. It is hence possible for administrative money, though by no 
means only this, to have an important effect on the price structure in 
any given monetary area. (The speed at which this will occur and the 
different ways in which it affects different goods cannot be discussed 
here). 

3. A cheapening and increase in the supply, or vice versa, a rise in 
cost and curtailment of the supply in the production of monetary metals 
could have a similar effect in all countries using it for monetary purposes. 
Monetary and non-monetary uses of metals are closely interdependent, 
but the only case in which the non-monetary use of the metal has been 
decisive for its valuation as money has been that of copper in China. 
Gold will enjoy an equivalent valuation in the nominal unit of gold 
money less costs of coining as long as it is used as a means of payment 
between monetary areas and is also the market money in the monetary 
areas of the leading commercial powers. In the past this was true also of 
silver and would be today if silver were still in the same position as 
gold. A metal which is not used as a means of payment between mone- 
tary areas, but constitutes market money in some of them, will naturally 
have a definite value in terms of the nominal monetary unit of those- 
areas. But these in turn will, according to the costs of adding to the sup- 
ply and according to the quantities in circulation, and, finally, according 



32 ] The Modern Monetary System. Currency Money i 7 r 

to the so-called "balance of payments," have a fluctuating exchange re- 
lationship to other currencies. Finally, a precious metal which is uni- 
versally used for restricted coinage into administrative money, but not as 
market money, is primarily valued on the basis of its non-monetary use. 
The question is always whether the metal in question can be profitably 
produced and at what rate. When it is completely demonetized, this 
valuation depends entirely on its money cost of production reckoned in 
international means of payment in relation to the non-monetary demand 
for it. If, on the other hand, it is used universally as market money and 
as an international means of payment, its valuation will depend on costs 
in relation primarily to the monetary demand for it. When, finally, it has 
a limited use as market or administrative money, its valuation will be 
determined in the long run by whichever of the two demands for it, as 
expressed in terms of international means of payment, is able to afford 
better to pay the costs of production. If its use as market money is 
limited to a particular monetary area, it is unlikely in the long run that 
its monetary use will be decisive for the valuation, for the exchange rate 
of such special -standard areas to other monetary areas will tend to fall, 
and it is only when international trade is completely cut off— as in China 
and Japan in the past, and in the areas still actually cut off from each 
other after the war today — that this will not affect domestic prices. The 
same is true for the case of a metal used as regulated [i.e., limited 
coinage] administrative money; the stricdy limited possibility of the use 
of the metal as money could be decisive for its valuation only if it would 
be minted in great quantities. The long-run outcome would in this case, 
however, be similar to that of a metal used as market money only in a 
restricted area. 

Though it was temporarily realized in practice in China, the monop- 
olization of the total production and use of a monetary metal is essen- 
tially a theoretical, limiting case. If several competing monetary areas are involved and wage labor is used, it does not alter the situation as 
much as possibly might be expected. For if all payments bv government 
agencies were made in terms of this metal, every attempt to limit its 
coinage or to tax it very heavily, which might well yield large profit, 
would have the same result as it did in the case of the very high Chinese 
seigniorage. First, in relation to the metal the monev would become 
very highly valued, and if wage labor were used, mining operations 
would to a large extent become unprofitable. As the amount in circula- 
tion declined, there would result a "contra-inflation"; and it is possible, 
as actually happened in China where this led at times to complete 
freedom of coinage, that this would go so far as to induce the use of 
money substitutes and a large extension of the area of natural economy. 
This also happened in China. If a market economy were to be main- 



I 7 2. SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

tained, it would be hardly possible for monetary policy in the long run 
to act otherwise than as if free coinage were legally in force. The only 
difference is that minting would no longer be left to the initiative of 
interested parties. With complete socialism, on the other hand, the 
problem ot money would cease to be significant and the precious metals 
would hardly be produced at all. 

4. The fact that the precious metals have normally become the 
monetary standard and the material from which money is made is his- 
torically an outcome of their function as ornaments and hence, spe- 
cifically, as gifts. But apart from purely technical factors, this use was 
also determined by the fact that they were goods which were typically " 
dealt with by weight. Their maintenance in this function is not at first 
sight obvious since today, for all except the smallest payments, everyone 
normally uses notes, especially bank-notes, and expects to receive them 
in payment. There are, however, important motives underlying retention 
of metal standards. 

5. In all modern states, not only is the issue of money in the form 
of notes legally regulated, but it is monopolized by the state. It is either 
carried out directly by the state itself, or by one or a few issuing agencies 
enjoying special privileges but subject to the control of the state — the 
banks of issue. 

6. The term "public currency money" (regiraiwa/es Kurantgeldy 5 
will be applied only to money which is actually paid out by public 
agencies and acceptance of which is enforced. On the other hand, any 
other money which, though not paid out under compulsory acceptance,' 
is used in transactions between private individuals by virtue of formal 
legal provisions, will be called "accessory standard money." Money 
which must legally be accepted in private transactions only up to a 
given maximum amount, will be called "change" (.Scheidegeld*). (This 
terminology is based on that of Knapp. This is even more definitely true 
in what follows.) 

"Definitive" currency money means public currency money; whereas 
any type of money is to be called "provisional" currency money so far 
as it is in fact effectively exchangeable for or redeemable in terms of 
definitive currency. 

7. In the long run, public currency money must naturally coincide 
with the effective currency. It cannot be a possibly separate, merely 
"official" legal tender currency. Effective currency, however, is neces- 
sarily one of three things: (a) free market money; (b) unregulated; or 
(c) regulated administrative money. The public treasury does not make 
its payments simply by deciding to apply the rules of a monetary system 
which somehow seems to it ideal, but its'acts are determined by. its own 
financial interests and those of important economic groups. 



32 ] The Modern Monetary System. Currency Money i 7 3 

With regard to its chartal form, an effective standard money may be 
metallic money or note money. ss Only metallic money can he a free 
market money, but this is not necessarily the case for all metallic money. 

It is free market money when the lytric administration will coin any 
quantity of the standard metal or will exchange it for chartal coins — 
"hylodromy,"'' 7 According, then, to the precious metal which is chosen 
as the standard, there will be an effective gold, silver, or copper standard. 
Whether the lytric administration is in fact in a position to maintain an 
actual hylodromic system does not depend simply on its own desires, 
but on whether individuals are interested in presenting metal for coinage. 

It is thus possible for hylodromy to exist "officially" without existing 
"effectively." Whatever the official position may he, it is not effective 
(a) when, given hylodromy with several metals, one or more of these is 
at the official rate imdervalued with respect to the market price of the 
raw material. In that case, naturally, only the overvalued metal will be 
offered to the rmnt for coinage and to creditors in payments. If the public 
pay offices do not participate in this trend, the overvalued coins will pile 
up in their hands until they, too, have nothing else to offer in their pay- 
ments. If the price relation is rigidly enough maintained, the under- 
valued coins will then he melted down, or they will be exchanged by 
weight, as commodities, against the coins of the overvalued metal. 

(b) Hylodromy is also not effective if persons making payments, 
including especially public agencies under stress of necessity, continually 
and on a large scale make use of their formal right or usurped power to 
compel acceptance of another means of payment, whether metal or notes, 
which is not presently provisional [i.e. redeemable] money, but either has 
been accessory money or, if previously provisional, has ceased to be re- 
deemable because of the insolvency of the issuing agency. 

In case (a) hylodromy always ceases, and the same thing happens in 
case (b) when accessory forms of money or forms which are no longer 
effectively provisional are forced on the public persistently on a large 
scale. 

The outcome in case (a) is to confine the maintenance of the fixed 
rate to the overvalued metal, which then becomes the only free market 
money; the result is thus a new- metallic, standard. In case (b) the 
accessory metal or notes which are no longer effectively provisional be- 
come the standard money. In, the first case we get a "restricted money" 
standard; in the second, a paper standard. 

It is also possible for hylodromy to he effective without being official 
in the sense of being legally established. 

An example is the competition of the various coining authorities in 
the Middle Ages, determined by their fiscal interest in seigniorage, to 



I 7 4 SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ck. II 

mint as much as possible of the monetary metals. There was no formal 
establishment of hylodiomy at that time, but the actual situation was 
much as if there had been. 

In view of what has just been said, a "monometallic legal standard," 
which may be gold, silver, or copper, will be said to exist when one metal 
is by law hylodromic. A "multimetallic legal standard," on the other 
hand, exists when more than one metal is used (it may be two or three) 
and they are freely coined in a fixed ratio to each other. A "parallel legal 
standard" exists when several metals are freely coinable without a fixed 
ratio. A standard metal and a metallic standard will only be spoken of 
for that metal which is effectively hylodromic, and thus, in practice, con- , 
stitutes actual market money. 

Legally, all countries of the Latin Union were under bimetallism 
until the suspension of the free coinage of silver, which followed the 
German currency reform [1871]. But effectively, as a rule, only the 
metal which was for the time being overvalued was actually a standard 
metal. The legal stabilization of the exchange ratio, however, worked 
so. well that the change was often scarcely noted and there seemed to be 
effective bimetallism. But insofar as the ratio shifted, the coins of the 
undervalued money became accessory money. (This account of the mat- 
ter coincides closely with that of Knapp). At least where there is com- 
petition between several autocephalous and autonomous minting agen- 
cies, bimetallism is an effective monetary state only as a transitory 
phenomenon and is usually only a legal, as opposed to an effective, state 
of affairs. 

The fact that the undervalued metal is not brought to the mint is , 
naturally the result not of administrative action, but of the changed 
market situation in relation to the persistence of the legal coinage ratio 
of the metals. It would, of course, be possible for the mint to continue 
to coin that metal at a loss as administrative money, but since the non- 
monetary uses of the money are more profitable, it ould not be kept in 
circulation. 



3 3 . Restricted Money 

Any type of metallic money which is not hylodromic will be called 
"restricted money" (Sperrgeld) if it is currency money. Restricted money 
may circulate as accessory money; that is, having a fixed relationship to 
some other currency money in the same monetary area. This latter may 
be another form of restricted money, paper money, or a market money. 

Or restricted money may be oriented to an international standard. 
This is the case when it is the sole currency money in its own area, and 



33 ] Restricted Money 175 

provision is made for having international means of payment available 
for making payments abroad, either in coin or in bullion. This is a 
"convertible restricted money" standard with a reserve fund of foreign 
exchange. 

(a) Restricted money will be called "psrticular" when it is the only cur- 
rency money, but is not oriented to an international standard. 

Restricted money may then be valued internationally ad hoc each 
time international means of payment or foreign exchange is bought; or, 
when this is possible, it may be given a fixed relation to the international 
standard. Taters and silver five-franc pieces were restricted money with 
a fixed relation to the currency money of the same country; both were 
accessory money. The Dutch silver gulden has been oriented to the 
international gold standard after having been "particular" for a short 
time after the restriction of coinage, and now the rupee is in the same 
position. This is also true of the Chinese dollar which, since the coin- 
age regulation of 24 May 1910, is "particular" as long as hyiodromy, 
which is not mentioned in the statute, does also de facto not exist. The 
prientation to the international gold standard, as recommended by the 
American Commission, was rejected. 

In the case of. a "restricted" money, free coinage at fixed ratef 
(hyiodromy) would be very profitable to the private owners of the 
precious metals. Nevertheless, and precisely for this reason, restriction 
is maintained because it js feared that the introduction of hyiodromy of 
the metal of the formerly restricted money would lead to abandonment 
as unprofitable of the hyiodromy of the other metal which was fixed in 
too low a ratio to it. The monetary stock of this metal, which would now 
become "obstructed" (see next paragraph), would be put to more profita- 
ble non-monetary uses. The reason why a rational lytric administration 
wishes to avoid this is that the other metal, which would be forced out, is 
an international means of payment. 

(b) Restricted currency money will be called "obstructed" market 
money when, contrary to the case just cited, free coinage exists legally, 
but is unprofitable to private business and hence does not take place. This 
lack of profitability may rest on an unfavorable relation between, the 
market price of the metal and its monetary ratio to the market money, 
if a metal, or to paper money. Such money must at some time in the past 
have been market money; but, with multimetallism, changes in the rela- 
tive market prices of the metals or, with multi- or monometallism, finan- 
cial catastrophes, must have made the payment of metallic money by 
the government impossible and must have forced it to adopt paper money 
and to make it irredeemable. In consequence the private business pre- 
conditions of effective hyiodromy have ceased to exist. This money will 



176 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

then no longer be used in transactions — at least, insofar as action is 
rational. 

(0 Apart from restricted currency money, which alone has been 
called "restricted money" here, there may be restricted "change" money that is, money which must be accepted as means of payment only up 
to a given amount. Usually, though not necessarily, it is then inten- 
tionally coined at a rate which overvalues it in relation to standard coin 
to protect it from being melted down. Usually, then, it has the status of 
provisional money in that it is redeemable at certain places. (This case 
is a phenomenon of everyday experience and has no special importance 
for present purposes.) 

All "change" money and many types of restricted metallic money 
occupy a place in monetary systems similar to that of note (today: 
paper) money. They differ from it only in that the monetary metal has 
a non- monetary use which is of some importance. Restricted metallic 
money is very nearly a means of circulation when it is provisional money; 
that is, when there is adequate provision for redemption in market 
money. 



34. Note Money 

Note money naturally is always administrative money. For the pur- 
poses of a sociological theory of money, it is always the specific chartal 
form of the document including the specific formal meaning printed on 
it which constitutes "money," and not the claim to something else which 
it may, though it need not, represent. Indeed, in the case of unredeema- 
ble paper money, such a claim is altogether absent. 

From a formal legal point of view, note money may consist in (at 
least officially) redeemable certificates of indebtedness, acknowledged by 
a private individual, as in the case of the English goldsmith? in the 
seventeenth century, by a privileged bank, as in the case of bank-notes, 
or by a political body, as in the case of government notes. If it is effec- 
tively redeemable and thus functions only as -a circulating medium or 
provisional money, it may be fully covered— thus constituting a certifi- 
cate- — -or it may be covered only sufficiently to meet normal demands 
for redemption, which makes it a circulating medium. Coverage may be 
in terms of specified weights of bullion (as in the case of a banco- 
currency) or of metal coin. 

It is almost always the case that note money has first been issued as 
a reedemable form of provisional money. In modern times, itjias been 



34 3 Note Money i 7 7 

typically a medium of circulation, almost always in the form of bank- 
notes. They have therefore been denominated in terms of units of an exist- 
ing metallic standard. 

1. The first part of the last paragraph, naturally, is not true of cases 
where one form of note money has been replaced by another; for ex- 
ample, where government notes have been replaced by bank-notes, or 
vice versa. But this is not a case of a primary issue of money. 

z. It is of course true that means of exchange and of payment may 
exist which do not take a ehartal form, i.e., are not coins or notes or 
other material objects. There is no doubt of this. It is not, however, 
expedient to speak of these as "money," but to use the term "unit of 
account" or some other term which, according to the particular case, 
is appropriate. It is characteristic of money that it is associated with par- 
ticular quantities of ehartal artifacts. This is a property which is very far 
from being merely external or of secondary importance. 

If what has previously been provisional money has its re dee inability 
suspended, it is important to distinguish whether the interested parties 
regard this as a temporary measure or as definitive for as long as they 
can predict. In the first case it would be usual, since metallic money or 
bullion is sought after for all international payments, for the note money 
to fall to a discount in relation to its nominal metal equivalent. This is 
not, however, by any means inevitable; ai.d the discount is often mod- 
erate. The discount may, however, become large if the need for foreign 
exchange is very acute. In the second case, after a time 3 definitive 
"paper money standard" will develop. Then it is no longer appropriate 
to speak of a "discount" on the monetary unit, but rather, at least in the 
usage of the past, of "debasement." 

It is not beyond the range of possibilities that the market price of 
the metal of the former market money, which is now obstructed, and in 
terms of which the issue is denominated, may for some reason fail radi- 
cally relative to international means of payment, while the fall in the 
value of the paper currency is less marked. This must have the result (as 
it actually did in Austria and Russia) that what was earlier the nominal 
unit in terms of weight of the metal (of silver in those two cases) could 
now be purchased with a smaller nominal amount in the notes, which 
had now become independent of it. That is readily understandable. 
Thus, even though in the initial stages of a pure paper standard the unit 
of paper money is probably without exception valued in international 
exchange at a lower figure than the same nominal amount of metal, be- 
cause this step always results from inability to pay, the subsequent de- 
velopment depends, as in the cases of Austria and Russia, on the 
development of the balance of payments which determines the foreign 
demand for domestic means of payment, on the amount of paper money 
issued, and on the degree of success with which the issuing authority is 



I 7 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

able to obtain an adequate supply of international means of payment. 
These three factors can (and in fact at times did) shape up in such a 
way that the exchange rate against the international means of payment in this case: gold— of the paper money is increasingly stabilized or 
even rises, while at the same time the earlier standard metal falls in 
price relative to the international standard. In the case of silver, this 
happened (vis-a-vis gold) because of the increased and cheapened pro- 
duction of the metal and because of its progressive demonetization. A 
true independent paper standard exists in the case where there is no 
longer any prospect of effective resumption of redemption in terms of 
metal at the former rate. 



35. The Formal and Substantive Validity of Money 

It is true that by law and administrative action a state can today 
insure the formal validity of a type of money as the standard in its own 
area of power, provided it remains itself in a position to make payments 
in this money. 

It will not remain in s position to do this if it has allowed what was 
previously an accessory or provisional type of money to become free 
market money (in the case of a metallic money) or autonomous paper 
money (in the case of note money). This is because these types of money 
will then accumulate in the hands of the government until it commands 
no other kind and is hence forced to impose them in its own payments. 
(Knapp has rightly maintained that this is the normal process in the 
case of "obstruct ional" changes in the standard.) 

But naturally this formal power implies nothing as to the substantive 
validity of money; that is, the rate at which it will be accepted in ex- 
change for commodities. Nor does it yield any knowledge of whether and 
to what extent the monetary authorities can influence its substantive 
validity. Experience shows that it is possible for the political authority 
to attain, by such measures as the rationing of consumption, the control 
of production, and the enforcement of maximum or minimum prices, a 
high degree of control of this substantive validity, at least with respect 
to goods or services which are present or produced within its own terri- 
tory. It is equally demonstrable from experience, however, that there are 
exceedingly important limits to the effectiveness of this kind of control, 
which will be discussed elsewhere. But in any case, such measures 
obviously do not belong in the category of monetary administration. The 
rational type of modern monetary policy has, on the contrary, had quite 
a different aim. The tendency has been to attempt to influence the sub- 
stantive valuation of domestic currency in terms of foreign currency, 



35 ] The formal and Substantive Validity of Money i 7 9 

that is, the market price of the home currency ^ expressed in units of 
foreign currencies, usually to maintain stability or in some cases to attain 
the highest possible ratio.- Among the interests determining such policy 
are those of prestige and political power. But on the economic side, the 
decisive ones are financial interest, with particular reference to future 
foreign loans, and other very powerful business interests, notably of im- 
porters and of industries which have to use raw materials from abroad. 
Finally, the interests as consumers of those elements in the population 
which purchase imported goods are involved. Today there can be no 
doubt that "lytric" policy is in fact primarily concerned with regulation 
of the foreign exchanges. 

Both this and what follows are closely in agreement with Knapp. 
Both in its form and content, his book is one of the greatest master- 
pieces of German literary style and scientific acumen. It is unfortunate 
that most of the specialist critics have concentrated on the problems 
which he deliberately ignored — a small number indeed (although in 
some cases not altogether unimportant). 

While England probably still came into the gold standard somewhat 
reluctandy, because silver, which was desired as the official standard, was 
undervalued by the official ratio, all the other states in the modern world 
with a modern form of organization have chosen their monetary standard 
with a view to the most stable possible exchange relation with the 
English gold standard. They chose either a pure gold standard, a gold 
standard with restricted accessory silver monfey, or a restricted silver or 
regulated note standard with a lytric policy concerned primarily with the 
maintenance of gold reserves for international payments. The adoption 
of pure paper standards has always been a result of political catastrophe, 
wherever this has been the only way to meet the problem of inability to 
pay in what was previously the standard money. This is happening on a 
large scale today.** 

It seems to be true that for the purpose of stabilizing foreign ex- 
change in relation to gold, the free coinage of fixed rates of gold in one's 
own monetary system is not the only possible means. The parity of ex- 
change between different types of hylodromic chartal gold coinage can 
in fact become seriously disturbed, although it is true that the possibility 
of obtaining international means of payment in case of need by means 
of exporting and recoining gold is always greatly improved by internal 
hylodromy and can be temporarily negated only through natural ob- 
stacles to trade or embargoes on the export of gold as long as this 
hylodromy exists. But on the other hand it is also true, as experience 
shows, that under normal peace-time conditions it is quite possible for 






I 8 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ 01. 11 

an area with a well-ordered legal system, favorable conditions of produc- 
tion and a lytric policy which is deliberately oriented to procuring 
adequate foreign exchange for international payments, to maintain a 
relatively stable exchange rate. Yet, if other things are equal, this in- 
volves markedly higher burdens to state finances and to persons in need 
of gold, Exacdy the same would be true, of course, if silver were the 
principal means of payment in international transactions and were rec- 
ognized as such in the principal trading nations of the world. 



$6. Methods and Aims of Monetary Policy 

^anong the more elementary of the typical methods (specific measures 
will not in general be dealt with here) of lytric policy in relation to 
foreign exchange are the following: 

(a) In countries with gold hylodromy, (i) The backing of the cir- 
culating medium, so far as it is not covered by gold, with commercial 
paper; that is, claims to payments for goods which have been sold, which 
are guaranteed by safe persons or, in other words, proved entrepreneurs. 
The transactions of the note issuing banks on their own account are as 
far as possible limited to dealing with such bills, to making loans on 
the security of stocks of goods, to the receipt of deposits, the clearing of 
check payments, and, finally, acting as financial agent for the state; 
(2) the "discount policy" of the banks of issue. This consists in raising 
the rate of interest charged on bills discounted when there is a probability 
that payments abroad will create a demand for gold sufficient to threaten 
the internal stock of gold, especially that in the hands of the issuing 
bank. The purpose is to encourage owners of foreign balances to take 
advantage of the higher rate of interest and to discourage domestic 
borrowing. 

(b) In areas with a resected metal standard other than gold or with 
a paper standard, the following are the principal measures : ( i ) Discount 
policy similar to that described under (a-.2) in order to check undue 
expansion of credit; (2) a gold-premium policy. This is a measure which 
is also common in gold-standard areas with an accessory restricted silver 
currency; (3) a deliberate policy of gold purchases and deliberate control 
of the foreign exchange rale by purchase and sale of foreign bills. 

This policy is in the first instance oriented purely to lytric considera- 
tions, but under certain circumstances it may come to involve substan- 
tive regulation of economic activity. The note-issuing banks occupy a 
position of great power in lW system of commercial banks, since the. 
latter are often dependent on the credit extended by the bank of issue. 



36 ] - Methods and Aims vA t/i--ir-..-.utry Policy 



: T 



The bank of issue may influence the other banks to regulate the moisey 
market, that is, the conditions on whidi SiK*Herm credit is given, in a 
uniform way, and from there proceed to a deliberate regulation of busi- 
ness credit, thereby influencing the directioa of the productidn of goods. 
This is, within the framework of a capitalistic economic order, the closest 
approach to a planned economy. It is formally merely a matter of volun- 
tary adjustments, but actually involves substantive regulation of eco- 
nomic activity within the territory controlled by the political authority in 
question. 

These measures were all typical before the war. They were used in 
the interest of a monetary policy which was primarily oriented to the 
stabilization of a currency or, in case changes were desired, as in coun- 
tries with restricted or paper money, at most to attempts to bring about 
a gradual rise in the foreign exchange value of the currency. It was, thus, 
in the last analysis, oriented to the hylodromic monetary systems of the 
most importar t trading nations. 

But strong interests exist which desire just the reverse policy. They 
favor a lytric policy of the following type: (1) Measures which would 
lead to a fall in the foreign exchange price of their own money in order 
to improve the position of exporting interests; (2) by increasing the 
issue of money through free coinage of silver in addition to gold (which 
would have meant instead of it), and even in some cases deliberate issue 
of paper money, to decrease the value of money in relation to domestic 
goods and thereby, what is the same thing, to raise the money prices of 
domestic goods. The object has been to improve prospects for profit in 
the production of such goods, an increase in the price of which as 
reckoned in terms of domestic currency was thought to be the first con- 
sequence of the increase of the amount of domestic money in circulation 
and of the attendant fall in its foreign exchange value. The intended 
process is termed "inflation." 

The following points may be noted: (1) though its quantitative 
importance is still controversial, it is very probable that with any type of 
hylodromy a very great cheapening in the production of the precious 
metal or other source of increase in its supply, as through very cheap 
forced seizures, will lead to a noticeable tendency toward a rise in the 
prices at least of many products in areas where that metal is the monetary 
standard, and in differing degrees of all products. (2) It is at the same 
time an undoubted fact that, in areas with an independent paper stand- 
ard, situations of severe financial pressure, especially "war, lead the 
monetary authorities to orient their policy overwhelmingly to the 
financial requirements of the war. It is equally cle^r that countries with 
hylodromy or with restricted metallic money have, in similar circum- 



I 8 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. If 

stances, not only suspended redemption of their notes in circulation, but 
have gone further to establish a definitive and pure paper standard. But 
in the latter case, the metal money, now become accessory money, could, 
because its premium in relation to notes is ignored, only be used for non- 
monetary purposes. It thus disappeared from circulation. Finally, it is a 
fact that in cases of such shifts to a pure paper standard, occurring along 
with unlimited issue of paper money, inflation has in fact ensued with 
all its consequences on a colossal scale. 

When all these processes are compared, it will be seen that so long 
as freely coined market money exists, the possibility of inflation will be 
narrowly limited. This will be true in the first place for mechanical" 
reasons: though it is somewhat elastic, the quantity of the precious metal 
in question available for ■ monetary use is ultimately firmly limited. 
Secondly, there are economic reasons in that here the creation of money 
takes place on the initiative of private interests, so that the demand for 
coinage is oriented to the needs of the market system for means of pay- 
ment. Inflation, then, is only possible if restricted metal money (such as 
today silver in gold-standard countries) is thrown open to free coinage. 
However, if the restricted metal can be produced very cheaply and in 
large quantities, the effect may be very great 

Inflation through an increase in the quantity of "means of circula- 
tion" is conceivable only as the result of a very gradual increase in the 
circulation through a lengthening of credit terms. The limits are elastic, 
but in the last resort this process is stricdy limited by the necessity for 
maintaining the solvency of the note-issuing bank. There is acute danger 
of inflation only if there is danger that the bank will become insolvent. 
Normally this is likely to occur only where there is a paper standard 
resulting from war needs. (Cases like the gold inflation of Sweden dur- 
ing the war, resulting from the export of war materials, are the result of 
such special circumstances that they need not be considered here.) 

Where an independent paper standard has once been established, 
there may not be any greater danger of inflation itself (since in time of 
war-^almost all countries soon go over to a paper standard), but in general 
there is a noticeably greater possibility of the development of the conse- 
quences of inflation. The pressure"^ financial difficulties and of the 
increased wage and salary demands and other costs which are caused by 
the higher prices will noticeably strengthen the tendency of financial 
administrations to continue the inflation even if there is no absolute 
necessity to do so and in «pite of the possibility to suppress it if strong 
sacrifices are" incurred. The differences in this respect between paper 
currency and other currencies is, even if only quantitative, certainly 
noticeable, as the financial conduct [during and after the War] of the 



36 ] Methods and Aims of Monetary Policy 1 8 3 

Allies as a group, of Germany, and of both Austria and Russia finally, 
can show. 

Lytric policy may thus, especially in the case of accessory restricted 
metal or of paper money, be an inflationary policy. In a country which, 
like the United States, has had relatively so little interest in the foreign 
exchange value of her money, this has been true for a time under quite 
normal conditions without being based on any motives derived from 
financial needs of the state. In a number of countries which fell into 
inflationary measures during the War, the pressure of necessity has been 
such as to lead to the continuance of an inflationary policy afterwards. 

This is not the place to develop a theory of inflation. Inflation always 
means, in the first place, a particular way of increasing the purchasing 
power of certain interests. We will only note that any lytric policy 
oriented to the substantive rationality of a planned economy, which it 
would seem to be far easier to develop with administrative and especially 
paper money, is at the same time far more likely to come to serve interests 
which, from the point of view of exchange rate stabilization, are irra- 
'tional. For formal rationality (of the market-economy type) of lytric 
policy, and hence of the monetary system, can, in conformity with the 
definition of "rationality" consistently held to here, only mean: the 
exclusion of all such interests which are either not market-oriented, like 
the financial interests of the state, or are not interested in the mainte- 
nance of stable exchange relations with other currencies as an optimum 
basis for rational calculation, but which, on the contrary, are primarily 
oriented to the creation of purchasing power for certain interest groups 
by means of inflation and to its maintenance even if there is no longer 
any iieed for the issue of new money from the point of view of public 
finances. Whether especially this latter process is to be praised or cen- 
sured is, naturally, not a. question capable of solution en empirical 
grounds. Of its empirical existence there can be no doubt- 

It is furthermore true that proponents of a point of view which is 
oriented to substantive social ideals can find a very important opening 
for criticism in the very fact that the creation of money and currency is, 
in a pure market economy, made an object of the play of interests 
oriented only to profitability, and is not considered in terms of the 
"right" volume or the "right" type of money. They might with reason 
argue that it is only administrative money which can be "managed," but 
not market money. Thus the use of administrative money, especially 
paper money, which can be cheaply produced in any desired form and 
quantity is, from the point of view of a substantive rationality, whatever 
its goals, the only correct way to handle the monetary question. This 
argument is conclusive in formal logical terms. Its value, however, is 



: 8 4 SOCIOLOGICAL categories o> S-CCJVGMIC ACTION [ Ck. II 

naturally limited in view of the fact ths- in the future as in the past it 
will be the "interest's" of individuals rather than the "ideas" of an eco- 
nomic administration which will rule the world.* 9 Thus, the possibility 
of conflict between formal rationality in the present sense and the 
substantive rationality which could theoretically be constructed for a 
lytric authority sntiieiy free of any obligation to maintain hylodromy of 
a metal, has besn demonstrated also for this point. That was the sole 
purpose of this discussion. 

It is evident that this whole treatment of money consists only in a 
kind of discussion with Knapp's magnificent book, Die Staatlkke The- 
orie des Geldes, a discussion which is, however, confined to points rele- 
vant teethe present problems and carried out on a highly schematic basis, 
entirely neglecting the finer points. Quite at variance with its author's 
intentions, though perhaps not entirely without fault on his part, the 
work immediately was utilized in support of value judgments. It was 
naturally greeted with especial warmth by the Austrian lytric adminis- 
tration, with its partiality to paper money. Events have by no meins dis- 
proved Knapp's theory in any point, chough they have shown, what was 
known beforehand, that it is incomplete in its treatment of the sub- 
stantive validity of money. It will now he necessary to justify this state- 
ment in more detail'. 



36a. Excursus: A Critical Note on the "State Theory 
of Money" 

Knapp victoriously demonstrates that in every case the recent mone- 
tary policy both of stares themselves and of agencies under the direction 
of the state have, in their efforts to adopt a gold standard or some other 
standard approximating this as closely as possible, been primarily con- 
cerned with the exchange value of their currency in terms of others, 
particularly the English. The object has been to maintain a certain 
exchange parity with the English gold standard, the money of the world's 
largest trading area which was universally used as a means of payment 
in international trade. To accomplish this, Germany first demonetized 
silver; then France, Switzerland, and the other countries cf the Latin 
Union, Holland, and finally India ceased to treat silver as market money 
and made it into restricted money. Apart from this they undertook in- 
directly gold-hylodromic measures to provide for foreign payments in 
gold. Austria and Russia did the same, in that the lytric administration 
of these countries using unredeemable, independent paper money took 
indirectly gold-hylodromic measures so as to be in a position to make at 



i6a ] Excursus on Knopf's "State Theory of Money" i 8 5 

least foreign payments in gold at any time. They were thus concerned 
entirely with obtaining the greatest possible stability of their foreign 
exchange rates. Knapp concludes from this that stabilization of the 
foreign exchange rate is the only factor which makes the particular 
monetary material and hylodromy at all significant He concludes that 
this end of foreign exchange rate stability is served just as well by the 
indirectly hylodromic measures of the paper currency administrations (as 
in Austria and Russia) as by direcdy hylodromic measures. His claim is 
not, to be sure, stricdy and literally true under ceteris paribus conditions 
for areas of full hylodromy in the same metal. For, as long as two areas 
which maintain a hylodromic coinage in the same metal refrain from 
embargoes on the exportation of the monetary metal, whether they are 
both gold-standard or silver-standard countries, the fact of the existence 
of the same hylodromy on both sides undoubtedly facilitates the mainte- 
nance of exchange parity considerably. Yet, under normal conditions 
Knapp's conclusion is to a large extent correct. But this does not prove 
t that in the choice of a monetary material — above all today in the choice 
between a metal, whether gold or silver, and note money — this would 
be the only set of considerations which could be important. (The special 
circumstances which are involved in bimetallism and restricted money 
have already been discussed and can reasonably be left aside here.) 

Such a claim would imply that a paper standard and a metallic stand- 
ard behave in all other respects in the same way. But even from a formal 
point of view the difference is significant. Paper money is necessarily a 
form of administrative money, which may be true of metallic money, 
but is not necessarily so. It is impossible for paper money to be "freely 
coined." The difference between depreciated paper money, such as the 
assignats, and the type of depreciation of silver which might at some 
future time result from its universal demonetization, making it ex- 
clusively an industrial raw material, is not negligible; it is true, however, 
that Knapp occasionally grants this. Paper has been and is today (1920) 
by no means a freely available good, just as the precious metals are not. 
But the difference, both in the objective possibility of increased produc- 
tion and in the costs of production in relation to probable demand, is 
enormous, since the production of metals is to a relative degree so defi- 
nitely dependent on the existence of mineral deposits. This difference 
justifies the proposition that a lytric administration was, before the war, 
in a position to produce paper money, if it so desired, in unlimited 
quantities. This is a significant difference even from copper, as used in 
China, certainly from silver, and very decidedly from gold. The costs 
would be, relatively speaking, negligible. Furthermore, the nominal 
value of the notes could be determined arbitrarily and need bear no 



I 8 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II 

particular relation to the amount of paper used. In the case of metallic 
money, this last has been true only of its use as "change" money; thus 
not in any comparable degree or sense. It was certainly not true of cur- 
rency metal. In the latter case, the available quantity was indeed some- 
what elastic, but nevertheless immensely more rigidly limited than the 
produceability of paper. This fact has imposed limits on the arbitrariness 
of monetary policy. It is of course true that, so far as the lytric administra- 
tion has been oriented exclusively to the maintenance of the greatest 
possible stability of foreign exchange rates, it would be subject to very 
definite normative limitations on its creation of note money, even though 
not to technical limitations. This is the answer Knapp might well give, 
and in giving it he would be right, although only from a formal point of 
view. And how about fully "independent" paper money? The situation 
is the same, Knapp would say, pointing to Austria and Russia: "only" 
the purely technical limitations imposed by the scarcity of monetary 
metals are absent. The question is, whether this absence is an altogether 
unimportant difference — a question which Knapp ignores. "Against" 
death," he might say, meaning that of a currency, "no potion has yet 
been found." If the present (1920) absolute and abnormal obstruction 
of paper production he ignored, there unquestionably have been and still 
are certain factors tending to unlimited issue of paper money. In the 
first place, there are the interests of those in political authority who, as 
Knapp also assumes, bear ultimate responsibility for monetary policy, 
and there are also certain private interests. Both are not of necessity 
primarily concerned with the maintenance of stable foreign exchange 
rates. It is even true, at least temporarily, that their interests might lie in 
the directly opposite direction. These interests can, either from within 
the political and monetary administration or by exercising a strong pres- 
sure on it, have an important influence on policy which would lead to 
"inflation" or what Knapp, who stricdy avoids the term, could only 
describe as a case of the issue of paper money which is not "admissible" 
because it is not oriented to the international rate of exchange. 

There are, in the first place, financial temptations to resort to infla- 
tion. An average depreciation. of the German mark by inflation to i/2oth 
of its former value in relation to the most important domestic com- 
modities and property objects would — once profits and wages had be- 
come adapted to this level of prices — mean, it may here be assumed, that 
all internal commodities and labor services would nominally he valued 
20 times as high as before. This would further mean, for those in this 
fortunate situation, a reduction of the war debt to i/2cth of its original 
level. The state, which would receive a proportionate increase in its in- 
come from taxation as nominal money incomes rose, would at least enjoy 



36a ] Excursus on Knapp's "State Theory, of Mvney" i 8 7 

important relief from this source. This is indeed an attractive prospect. 
It is clear that someone would have to hear the costs, but it would be 
neither the state nor one of these two categories of private individuals, 
entrepreneurs and wage earners. The prospect is even more attractive 
of being able to pay old foreign debts in a monetary unit which can be 
manufactured at will and at negligible cost. Apart from the possibility 
of political intervention, there is of course the objection that the use of 
this policy toward foreign loans would endanger future credit. But the 
state is often more concerned with the present than with the more or 
less remote future. Furthermore, there are entrepreneurs who would 
be only too glad to see the prices of their products increased twenty-fold 
through inflation if, as is altogether possible, the nominal wages of 
workers, because of lack of bargaining power or through lack of under- 
standing of the situation or for any other reason, were to increase "only" 
five- or possibly ten-fold. 

It is usual for acute inflation from public finance motives of this kind 
to be sharply disapproved by experts in economic policy. It is certainly 
not compatible with Knapp's form of exchange-rate oriented monetary 
policy. On the other hand, a deliberate but very gradual increase of the 
volume of means of circulation, of the type which is sometimes under- 
taken by central banks by facilitating the extension of credit, is often 
looked upon favorably as a means of stimulating speculative attitudes. 
By holding out prospect of greater profits, it is held to stimulate the spirit 
of enterprise and with that an increase in capitalistic production by en- 
couraging the investment of free money in profit-making enterprise 
rather than its investment in fixed-interest securities.- We have to ask, 
however, what is the effect of this more conservative policy on the 
stability of the exchange rate? Its direct effect — that is, the consequence^ 
of the stimulation of the spirit of enterprise — may be to create 3 mojjl 
favorable balance of payment, or at least to check the fall in the foreign 
exchange position of the domestic currency. How often this works out 
and how strong the influence is, is, of course, another question. Also, no 
attempt will here be made to discuss whether the effects of a modera^ 
increase in the volume of currency caused by state requirements for 
money would be similar. The costs of such an expansion of the stock of 
currency money, which would be relatively harmless to the foreign ex- 
change position, would be gradually paid by the same groups which 
would be subject to "confiscation" in a case of acute inflation. This in- 
cludes all those whose nominal income remains the same or who have 
securities with a constant nominal value, above all, the receivers of 
fixed-interest bond income, and those who eam salaries which are 
"fixed" in that they can be raised only through a severe struggle. It is 



I 8 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Clt. II 

thus not possible to interpret Knapp as meaning that it is only the sta- 
bility of foreign exchange which is significant as a criterion for the 
management of paper money; indeed, he does not claim this. Nor is it 
legitimate to believe, as he does, that there is a very high probability that 
this will empirically be the only criterion. It cannot, however, be denied 
that it would indeed be the decisive criterion of a lytric policy which is 
completely rational in Knapp's sense, that is, one which seeks as far as 
possible to prevent disturbances of the price relations resulting from 
monetary policies (a definition which Knapp does hot himself spell out). 
But it cannot be admitted, and Knapp does not claim this either, that 
the practical significance of the kind of monetary policy formulated is 
limited to the question of the stability of foreign exchange rates. 

Inflation has here been spoken of as a source of price revolutions or 
at least slow price level increases, and it has been pointed out that it may 
be caused by the desire to bring about such price level changes. Natu- 
rally, an inflation so extensive as to create a price revolution will inevita- 
bly upset the stability of foreign exchange; though this is by no means 
necessarily true of gradual increases in the circulating medium. Knapp 
would admit that. He obviously assumes, and rightly, that there is no 
place in his theory for* a currency policy concerned with commodity 
prices, whether it be revolutionary, evolutionary, or conservative. Why 
does he do this? Presumably for the following formal reasons: 

The exchange relationship between the standards of two or more 
countries is expressed daily in a small number of formally unambiguous 
and uniform market prices of currencies, which can be used as a guide 
to a rational lytric policy. It is further possible for a lytric authority, 
especially one concerned with the means of circulation, to make certain 
estimates (but only estimates, based on anterior demand conditions 
periodically observed in the market) of the probable fluctuations of a 
given stock of means of payment which will be required, for payment 
purposes alone, by a given population linked in market relationships over 
a certain future period, provided conditions in general remain approxi- 
mately unchanged. But it is not possible to estimate in the same sense, 
quantitatively, the effect on prices — revolutionary or gradual increase, or 
perhaps a decrease — of a currency expansion or contraction over a cer- 
tain future period. To do thisj ii would, in the case of inflation, to which 
attention will be confined, be necessary to know the following additional 
facts: (i) The existing distribution of income; (2) connected with this, 
the present policy conclusions derived therefrom of the different indi- 
viduals engaged in economic activity; (3) the channels the inflationary 
process would follow, that is, who would be the primary and subsequent 
recipients of newly-issued money. This would involve knowing the se- 



2,6a ] Excursus on Knapp's "State Theory of Money' 7 189 

quence in which nominal incomes are raised by the inflation and the 
extent to which this would take place; (4) the way in which the newly- 
created demand for goods would be exercised, for consumption, for 
building up property investments, or for new capital. This would be 
important quantitatively, but even more so qualitatively; (5) the direc- 
tion of the consequent changes in prices and of the further income 
changes resulting in turn, and all the innumerable further attendant 
phenomena of purchasing power redistribution, and also the volume of 
the (possible) stimulated increase in goods production. All these are data 
which would depend entirely on the decisions made by individuals when 
faced with the new economic situation. And these decisions would in 
ttim react on the expectations as to prices of other individuals; only the 
consequent struggle of interests can determine the actual future prices. 
In such a situation there can clearly be no question of forecasting in the 
form of such predictions as that the issue of an additional billion of cur- 
rency units would result in increases in the pig-iron price of "X" or in 
the grain price of "Y." The prospect is made even more difficult by the 
fact that it is possible temporarily to establish effective price regulation 
of domestic commodities, even though these can only be maximum and 
not minimum prices and their effectiveness is definitely limited. But 
even if this impossible task of calculating specific prices were accom- 
plished, it would be of relatively little use. This would only determine 
the amount of money required as a means of payment, but in addition to 
this, and on a much larger scale, money would be required in the form 
of credit as a means of obtaining capital goods. Here, possible conse- 
quences of a proposed inflationary measure are involved which are in- 
accessible to any kind of accurate forecasting. It is thus understandable 
that, all things considered, Knapp should have entirely neglected the 
possibility of inflationary price policies being used in the modem market 
economy as a deliberate rational policy comparable to that of mainte- 
nance of foreign exchange stability. 

But historically the existence of such policies is a fact. To be sure, 
in a crude form and under much more primitive conditions of money 
economy, inflation and deflation have been repeatedly attempted with 
the Chinese copper currency, though they have led to serious failures. 
In America, inflation has been proposed. Knapp, however, since his book 
operates on the basis only of what he calls demonstrable assumptions, 
contents himself with giving the advice that the state ought to be careful 
in the issue of independent paper money. Since he is entirely oriented 
to the criterion of exchange rate stability, this advice appears to be rela- 
tively unequivocal; inflationary debasement and depreciation in foreign 
exchange are usually very closely associated. But they are not identical, 



19 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

and it is far from true that every inflation is primarily caused by the 
foreign exchange situation. Knapp does not explicitly admit, but neither 
does he deny, that an inflationary money regime has been urged for 
reasons of price policy among others by the American silver producers 
during the free silver campaign and by the farmers who demanded 
"greenbacks," but not only in these cases. It is probably comforting to 
V him that it has never been successful over a long period. 

But the situation is by no means so simple as this. Whether or not 
they have been intended simply to raise the price level, inflations of this 
sort have in fact often taken place; and even in the Far East, to say 
nothing of Europe, such catastrophes as met the asstgnats are by no 
means unknown. This is a fact which a substantive theory of money 
must deal with. Knapp? of all people, certainly would not maintain that 
there is no difference whatever between the depreciation of silver and 
the depreciation of the asstgnats- Even formally this is not the case. 
What has been depreciated is not silver coin, but, on the contrary, the 
raw silver for industrial purposes. Coined chartaJ silver, on the con- 
trary, being restricted, has often had the opposite fate. On the other 
hand, it was not the paper available for industrial purposes which was 
"depreciated," but only the chartal asstgnats It is true, as Knapp would 
rightly point out, that they would fall to zero or to their values to col- 
lectors or as museum pieces only when they had finally been repudiated 
by the state. Thus even this results from a "state" action- This may be 
granted, but their material value may have fallen to a minute proportion 
of what it formerly was, before their formal repudiation, in spite of the 
fact that they were still nominally valid for making payments of public 
obligations. 

But quite apart from such catastrophes, history provides a consider- 
able number of examples of inflation, and, on the other hand, in China, 
of deflationary movements as a result of non-monetary use of monetary 
metals. It is necessary to do more than merely to note that under some 
circumstances certain kinds of money which were not accessory before, 
have become so, have tended to accumulate in the hands of the state, 
and have rendered obstructional changes in the standard necessary. A 
substantive theory of money should at least formulate the question as to 
how prices and income, and hence the whole economic system, are in- 
fluenced in such cases, even though it is, for the reasons which have 
been given, perhaps questionable how far it will be able to achieve a 
theoretical solution. Similarly, a problem is suggested by the fact that, as 
a result of relative decline in the prices of either silver or gold in terms 
of the other, France, which has been formally a country of bimetallism, 
in fact has operated at rimes on a gold standard alone, and at others on 



2,6a } Excursus on Knapp's "State Theory of Money" i 9 1 

a silver standard, while the other metal became accessory- In such a case 
it is not sufficient merely to call attention to the fact that the resulting 
price changes originate from a monetary source. The same is true in 
other cases where the monetary material has been changed. We also 
want to know what are the sources of an increase in the supply of a 
precious metal, whether it has stemmed from booty (as in the case of 
Cortez and Pizano), from enrichment through trade (as in China early 
in the Christian era and since the sixteenth century), or from an increase 
of production. So far as the latter is the source, has production merely 
increased, or has it also become cheaper, and why? What is the part 
which may have been played by changes in the non-monetary uses of 
the metal? It may be that for a particular economic area, as, for instance, 
the Mediterranean area in Antiquity, a definitive exporthas taken place 
to an entirely distinct area like China or India, as happened in the early 
centuries of, the Christian era. Or the reasons may lie wholly or partly 
in a change in. the monetary demand arising from changes in customs 
touching the use of money, such as use in small transactions. How all 
these and various other possibilities tend to affect the situation is a sub- 
ject which ought to be discussed in a monetary theory. 

Finally, it. is necessary to discuss the regulation of the "demand" for 
money in a market economy, and to inquire into the meaning of this 
concept. One thing is clear, that it is the actual demand for means of 
payment on the part of the parties to market relationships which deter- 
mines the creation of free market money under free coinage. Further- 
more, it is the effective demand for means of payment and, above all, 
for credit, on the part of market participants, in combination with care 
for the solvency of the banks of issue and the norms which have been 
established with this in view, which determines the policies for means 
of circulation of modern banks of issue. All this is oriented to the re- 
quirements of interested parties, as is in conformity with the general 
character of the modern economic order. 

It is only this which, under the formal legal conditions of our 
economic system, can correcdy be called "demand for money." This 
concept is thus quite indifferent with respect to substantive criteria, as 
is the related one of effective demand for goods. In a market economy 
there is an inherent limit to the creation of money only in the case of 
metallic money. But it is precisely the existence of this limit, as has 
already been pointed out, which constitutes the significance of the pre- 
cious metals for monetary systems. The restriction of standard money to 
a material which is not capable of unlimited production at will, par- 
ticularly to one of the precious metals, in combination with the "cover- 
age" of means of circulation by this standard, sets a limit to any sort of 



I$2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. H 

creation of money. Even though it does not exclude a certain elasticity 
and does not make an evolutionary type of credit inflation altogether 
impossible, it still has a significant degree of rigidity. Where money is 
made out of a material which is, for practical purposes, capable of un- 
limited production, like paper, there is no such mechanical limit. In this 
case, there is no doubt that it is the free decision of the political authori- 
ties which is the regulator of the quantity of money, unimpeded by 
any such mechanical restraints. That, however, means, as has been 
indicated, determination by their conception of the financial interests of 
the political authority or even, under certain circumstances, the purely 
personal interests of the members of the administrative staff, as was true 
of the use of the printing presses by the Red armies. The significance 
of metallic standards today lies precisely in the elimination of these inter- 
ests from influence on the monetary situation, or more precisely, since 
they may always try to influence the state, urging it to abandon metal in 
favor of a pure paper standard, in a certain restraint on such interests. In 
spite of the mechanical character of its operation, a metallic standard 
nevertheless makes possible a higher degree of formal rationality in a 
market economy because it permits action to be oriented wholly to 
market advantages. It is, of course, true, as demonstrated by the experi- 
ence of Austria and Russia, that the monetary policy of lytric authorities 
under a pure paper standard is not necessarily oriented either to the 
purely personal interests of the authority or the administrative staff, or 
to the financial interests of the state (which would mean the least ex- 
pensive creation of the greatest possible volume of means of payment, 
without concern for what happens to the currency as a means of 
exchange). But the danger that such an orientation should become 
dominant is, nonetheless, continually present under a paper standard, 
while in a hylodromic system (free market money) it does not exist in a 
comparable sense. From the point of view of the formal order of a 
market economy, the existence of this danger is an "irrationar factor 
present in any form of monetary system other than a hylodromic stand- 
ard. This is true in spite of the fact that it may be readily admitted that, 
on account of its mechanical character, such a monetary system itself 
possesses only a relative degree of formal rationality. So much Knapp 
Could and should admit. 

However incredibly primitive the older forms of the quantity theory 
of money were, there is no denying that any inflation with the issue of 
paper money determined by financial needs of the state is in danger of 
causing "debasement" of the currency. Nobody, not even Knapp, would 
deny this- But his reasons for dismissing it as unimportant are thoroughly 
unconvincing. The "amphitropie" position of each individual, meaning 



36a ] Excursus on Knapp's "State Theory of Money" 1 9 3 

that every man is both a debtor and creditor, which Knapp in all seri- 
ousness puts forward as proof of the absolute indifference of any cur- 
rency "debasement," 60 is, as we now all know from personal experience, 
a mei£ phantom. What becomes of this position, not only for the rentier, 
but also for every one on a fixed salary, whose income remains constant 
in nominal units or, at best, is doubled if state finances and the mood 
of the bureaucracies permit, while bis expenditures may, in nominal 
units, have increased twenty-fold, as it happens to us nowadays> What 
becomes of it for any long-term creditor? Such radical alterations in the 
(substantive) validity of money today produce a chronic tendency 
toward social revolution, even if many entrepreneurs are in a position 
to profit from the international exchange situation, and if some (very 
few) workers are powerful enough to secure increases in their nominal 
wages. It is, of course, open to anyone to welcome this revolutionary 
effect and the accompanying tremendous unsettlement of the market 
economy. Such an opinion cannot be scientifically refuted. Rightly or 
wrongly, some can hope that this tendency will lead to the transforma- 
tion of a market economy into socialism. Or some may expect proof for 
the thesis that only a regulated economy with small-scale production 
units is capable of substantive rationality, regardless of the sacrifices its 
establishment would entajl. It is impossible for science to decide such 
questions, but at the same 1 time it is its duty to state the facts about these 
effects as clearly and objectively as possible. Knapp's assumption that 
people are both debtors and creditors in the same degree, which in the 
generalized form he gives the proposition is quite untenable, serves only 
to obscure the situation. There ate particular errors in his work, but the 
above seems to be the most important element of incompleteness in his 
theory. It is this which has led also some scholars who otherwise would 
have no reason to be hosrile *o his work, to attack his theory on grounds 
of "principle." 



37. The Non-Monetary Significance of Political Bodies 
for the Economic Order 

The significance for the economic system apart from the monetary 
order of the fact that autonomous political organizations exist lies above 
all in the following aspects: 

CO In the fact that, other things being nearly equal, they tend to 
prefer their own subjects as sources of supply for the utilities they need. 
The impact of this fact is the greater, the more the economy of these 



I 9 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. U ; 

political bodies has a monopolistic character or that of a system of budget- 
ary satisfaction of needs; hence it is presently on the increase. 

(2) In the possibility deliberately to encourage, restrain, or regulate 
trade transactions across its boundaries on the basis of some substantive 
criteria—that is, to conduct a foreign trade policy. 

(3) In the possibility of various types of formal and substantive 
regulation of economic activity by political bodies, differing in stringency 
and in type. 

(4) In the important consequences of the very great differences in 
the structure of authority and of political power and in the closely re- 
lated structure of administration and of social classes, especially of those 
which enjoy the highest prestige, and of the attitudes toward earning 
and profit-making which derive from these. 

(5) In the competition among the directing authorities of these 
political bodies to increase their own power and to provide the members 
under their authority, with means of consumption and acquisition and 
with the corresponding opportunities for earnings and profits. 

(6) In the differences in ways in which these bodies provide for 
their own needs. On this see the following section. 



38. The Financingof Political Bodies 

The most direct connection between the economic system and pri- 
marily non-economic organizations lies in the way in which they secure 
the means of carrying on their corporate activity as such; "that is, the 
activity of the administrative staff itself and that which is directed by it 
(see chap. I, sec. 12), This mode of provision may be called "financing" 
in the broadest sense, which includes the provision of goods in kind. 

Financing; — that is, the provision of corporate activity with" eco- 
nomically scarce means — may, considering only the simplest types, be 
organized in the following ways: 

(O Intermittendy, based either on purely voluntary or on compul- 
sory contributions or services. Voluntary "intermittent" financing may 
take one of three forms : 

(a) That of large gifts or endowments.* 1 This is typical in relation 
to charitable, scientific, and other ends which are primarily neither 
economic nor political. 

(b) That of begging. This is typical of certain kinds of ascetic com- 
munities. 

In India, however, we also find secular castes of beggars, and else- 
where, particularly in China, organized groups of beggars -are found. 



38 ] The Financing of Political Bodies i 9 5 

Begging may in these cases be extensively monopolized and systematized 
with territorial assignments. Also, because response is regarded as a duty 
or as meritorious, begging may lose its intermittent character and in fact 
tend to become a tax-like source of income. 

(c) That of gifts, which are formally voluntary, to persons recog- 
nized as politically or socially superior. This includes gifts to chiefs, 
princes, patrons, feudal lords over land or persons. "Because of the fact 
that they have become conventional, these may in fact be closely ap- 
proximated to compulsory payments. But usually, they are not worked 
out on a basis of rational expediency, but are generally made on certain 
traditional occasions, such as particular anniversaries or on the occasion 
of events of family or political significance. 

Intermittent financing may, on the other hand, be based on compul- 
sory contributions. 

The type case for compulsory "intermittent" financing is furnished 
by such organizations as the Camorra in southern Italy and the Mafia in 
Sicily, and similar organized groups elsewhere. In India there have ex- 
isted rituall y separated castes of "thieves" and "robbers," and in China 
sects and secret societies with a similar method of economic provision. 
The payments are "intermittent" only on the surface, because they are 
formally illegal. In practice they often assume the character of periodic 
"subscriptions," paid in exchange for the rendering of certain services— 
notably, of a guarantee of security. About twenty years ago, a Neapoli- 
tan manufacturer replied to my doubts concerning the effectiveness of 
the Camorra with respect to business enterprises: "Signore, la Camorra 
mi prende X lire nel mese, ma garantisce la sicurezza, — lo Stato me ne 
prende 10 • X, e garantisce: niente." [Sir, the Camorra takes X lire a 
month from me, but guarantees me security; the state takes ten times 
that amount, and guarantees me nothing.] The secret societies typical of 
Africa — perhaps rudiments of the former "men's house" — operate in a 
similar way (as secret courts), thus insuring security. Political groups 
may, like the Ligurian "pirate state," rest primarily on the profits of 
booty, but this has never been the exclusive source of support over a 
'long period. 

(2) Financing may, on the other hand, be organized on a perma- 
nent basis. 

A. — This may take place without any independent economic produc- 
tion on the part of the organization. It may then consist in contributions 
of goods, which may be based on a money economy. If so, money con- 
tributions are collected and provisions are obtained by the money 
purchase of the necessary utilities. In this case, all compensation of 
members of the administrative staff takes the form of money salaries. 
Contributions of goods may, on the other hand, be organized on the 
basis of a natural economy. Then, members are assessed with specific 



196 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

contributions in kind. Within this category, there are the following sub- 
types; the administrative staff may be provided for by benefices in kind 
and the needs of the group met in the same way. On the other hand, 
the contributions which were collected in kind may be sold wholly or 
in part for money and provision made in monetary terms. 

Whether in money or in kind, the principal elementary types of 
contribution are the following: 

(a) Taxes; that is, contributions which may be a proportion of all 
possessions (in the money economy: of wealth), or of all receipts (in 
the money economy: of incomes), or, finally, only of the means of 
production or from certain kinds of profit-making enterprises (so-called 
"yield taxes"). 

(b) Fees; that is, payments for using or taking advantage of facilities 
provided by the organization, of its property or of its services. 

(c) "Imposts" on such things as specific types of use or consumption 
of commodities, specific kinds of transactions, above all, the transportation 
of goods (customs) and the turn-over of goods (excise duties and sales 
tax). 

Contributions may be collected by the organization itself or leased 
out ("fanned") or lent out or pledged. The leasing of collection for a 
fixed sum of money ("tax farming") may have a rational effect on the 
fiscal system since it may be the only possible way to budget accounts. 
Lending and pledging are usually irrational from the fiscal point of 
view, normally resulting from financial necessity or usurpation on the 
part of the administrative staff, a result of the absence of a dependable 
administrative organization . 

A permanent appropriation of the receipts from contributions by 
creditors of the state, by private guarantors of the army or of tax pay- 
ments, by unpaid mercenary captains (conifctrieri) and soldiers, and, 
finally, by holders of rights to official positions, will he called the grant- 
ing of benefices (yeiffruv.dv.-ng). This may in turn take the form of 
individual appropriation or collective appropriation with freedom of re- 
placement from the group ivtiich has collectively cairi^d our tht* ap- 
propriation. 

Financing without any economic production en the part of the or- 
ganization itself may also take place by die imposition of obligations 10 
personal services; that is, direct personal services with specification °^ 
the work to be done. 

B. — Permanent financing may further, contrary to the above cases, 
£>e based on the existence of a productive establishment under the direct 
control of the organization. Such an establishment may be a budgetary 
unit, as an otkos or a feudal domain, or it may he a profit-making enter- 



5,* j 77*e Financing &{ Political Bodies i 9 7 

prise, which, an turn, may compete freely with other profit-making 
enterprises or be ? monopoly. 

Once more, exploitation may be directly under the administration of .he organisation or it may be farmed out, leased, or pledged. 

C. — Finally, it is possible for financing to be organized "liturgically'' 
by means of burdens which are associated with privileges. These may 
involve "positive privileges," as when a group is freed from the burden of 
malting particular contributions, or (possibly identical with the former 
case) "negative privileges," as when certain burdens are placed on par- 
ticular groups. The latter are usually cither status groups (Stotide) or 
property or income classes. Finally, the Jiturgic type may be organized 
"ccrrelarivsiy" by associating specific monopolies with the burden of 
performing certain services or supplying certain goods. This may take 
the form of organisation of "estates," that is, of compulsorily forming the 
members of the organization into hereditarily closed liturgical classes on 
the basis of property and occupation, each enjoying status privileges. 
Or it may be carried out capitalisn'cally, by creating closed guilds or 
cartels, with monopolistic rights and a corresponding obligation to make 
money contributions. 

This very rough classification applies to all kinds of organizations. 
Examples, however, will be given only in terms of political bodies. 

The system of provision through money contributions without eco- 
nomic production is typical of the modern state. It is, however, quite out 
of the question to attempt here even a summary analysis of modem sys- 
tems of taxation. What will first have to be discussed at length is the 
"sociological location" of taxation — that is, the type of structure of domi- 
nation that has typically led to the development of certain kinds of con- 
tributions (as, e.g., fees, excises, or taxes). 

Contributions in kind, even in the case of fees, customs, excises, and 
sales taxes, were common throughout the Middle Ages. Their commuta- 
tion into money payments is a relatively modem phenomenon. 

Deliveries of goods in kind are typical in the form of tribute or of 
assessments of products laid upon dependent economic units. The trans- 
portation of in-kind contributions is possible only for small political units 
or under exceptionally favorable transportation conditions, as were pro- 
vided by the Nile and the Chinese Grand Canal. Otherwise it is neces- 
sary for the contributions to be converted into money if the final recipi- 
ent ts to benefit from them. This was common in Antiquity. It is also 
possible for them to be exchanged, according to the distance they have 
to be transported, into objects with higher price-to-weight ratios. This is 
said to have been done in ancient China. 

Examples of obligations to personal service are obligations to military 
service, to serve in courts and on juries, to maintain roads and bridges, 
to work on a dyke or in a mine, and all sorts of compulsory service for 



I98 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

corporate purposes which are found in various types of organizations. The 
type case is furnished by the "corvie state," of which the best example 
is the New Kingdom of ancient Egypt. Similar conditions were found 
at some periods in China, to a lesser extent in India and to a still less 
extent in the late Roman Empire and in many organizations of the early 
Middle Ages. Support by die granting of benefices is illustrated by the 
following cases: (1) In China, collectively to the body of successful 
examinees for official positions; (2) in India, to the private guarantors 
of military services and tax payments; C3) to unpaid condottieri and 
mercenary soldiers, as in the late Caliphate and under the regime of the 
Mamelukes; (4) to creditors of the state, as in the sale of offices common 
everywhere. 

Provision from the organization's own productive establishment ad- 
ministered on a budgetary basis is illustrated by the exploitation of do- 
mains under direct control for the household of the king, and in the 
obligation of subjects to compulsory services if used, as in Egypt, to 
produce goods needed by the court or for political purposes in directly 
controlled production establishments. Modem examples are factories 
maintained by the state for the manufacture of munitions or of military 
clothing. 

The use of productive establishments for profit in free competition 
with private enterprise is rare, but has occurred occasionally, as, for 
instance, in the case of the [Prussian] Seefamdlung** On the other 
hand, the monopolistic type is very common in all periods of history, but 
reached its highest development in the Western World from the six- 
teenth to the eighteenth centuries. 

Positive privileges on a liturgical basis are illustrated by the exemp- tion of the literati in China from feudal obligations. There are similar 
exemptions of privileged groups from the more menial tasks all over the 
world. In many countries educated people have been exempt from mili- 
tary service. 

Negative privilege is to be found in the extra liturgical burdens 
placed upon wealth in the democracies of Antiquity, It is also illustrated 
by the burden placed on the classes who did not enjoy the exemptions 
in the cases just mentioned. 

To take the "correlative" case under (C.) above: the subjection of 
privileged classes to specified liturgical obligations is the most important 
form of systematic provision for public needs on a basis other than that 
of regular taxation. In China, India, and Egypt, the countries with the 
earliest development of "hydraulic" bureaucracy, liturgical organization 
was based on obligations to deliveries and services in kind. It was in part 
taken over from these sources by the Hellenistic states and by the late 
Roman Empire, though there, to be sure, to an important extent it took 
the form of liturgical obligations to pay money taxes rather than contri- 
. butions in kind. This type of provision always involves the organization 
of the population in terms of occupational] y differentiated classes. It is 
by no means out of the question that it might reappear again in the 
modem world in this form if public provision by taxation should fall 



38 ] The Financing of Political Bodies i 9 9 

down and tfie satisfaction of private wants by capitalistic enterprise be- 
comes subject to extensive regulation by the state. Up until now, the 
financial difficulties of the modem state could be adequately met by the 
compulsory creation of producer cartels with monopoly rights in ex- 
change against money contributions; an example could be the compul- 
sory control of the gunpowder factories in Spain with monopoly protec- 
tion against new foundations and a continuous high contribution to the 
state treasury. The idea is suggestive: one might proceed in the same 
way in the "socialization" of the capitalistic enterprises of individual 
branches, by imposing compulsory cartels or combinations with obliga- 
tions to pay large sums in taxes. Thus they could be made useful for 
fiscal purposes, while production would continue to be oriented ra- 
tionally to the price situation. - - 



39. Repercussions of Public Financing on Private 
Economic Activity 

The way in which political and hierocratic bodies provide for their 
corporate needs has very important repercussions on the structure of 
private economic activity, A state based exclusively on money contribu- 
tions, conducting the collection of the taxes (but no other economic 
activity) through its own staff, and calling on personal service contribu- 
tions only for political and judicial purposes, provides an optimal 
environment for a rational market-oriented capitalism. A state which 
collects money taxes by tax farming is a favorable environment for the 
development of politically oriented capitalism, but it does not encourage 
the orientation of profit-making activity to the market. The granting of 
rights to contributions and their distribution as benefices normally tends 
to check the development of capitalism by creating vested interests in the 
maintenance of existing sources of fees and contributions. It thus tends 
to stereotyping and traditionalizing of the economic system. 

A political body based purely on deliveries in kind does not promote 
the development of capitalism. On the contrary, it hinders it to the 
extent to which it involves rigid binding of the structure of production 
in a form which, from a point of view of profit-making enterprise, is 
irrational, 

A system of provision by compulsory services in kind hinders the 
development of market capitalism above all through the confiscation of 
the labor force and the consequent impediments to the development of a 
free labor market. It is unfavorable to politically oriented capitalism be- 
cause it removes the typical prospective advantages which enable it to 
develop. 

Financing by means of monopolistic profit-making enterprises has in 



200 SOCr-Oi-OGICAL CATEGORIES OV ECONOMIC -iCTV,-''-; \ Ch. U 

common with the use of contributions in kind which are sold for money 
and with liturgical obligations on property, the fact: that t?;sy are all 
unfavorable to the development of a type of capitalism which is autono- 
mously oriented to the market On the contrary, they tend to repress ii by 
fiscal measures which, from the point of view of the market, are irra- 
tional, such as the establishment of privileges and of opportunities for 
money making through other channels. They are, on the other hand, 
under certain conditions favorable to politically oriented capitalism. 

What is important for profit-making enterprises with fixed capital 
and careful capital accounting is, in formal terms, above all, the calcula-, 
biltty of the tax load. Substantively, it is important that there shall not be 
unduly heavy burdens placed on the capitalistic employment of re- 
sources, which means, above all, on market turnover. On the other 
hand, speculative trade capitalism is compatible with any form of or- 
ganization of public finances which does not, through tying it to 
liturgical obligations, directly inhibit the trader's exploitation of goods 
as commodities. 

Though important, the form of organization of the obligations im- 
posed by public finance is not sufficient to determine completely the 
orientation of economic activity. In spite of the apparent absence of all 
the more important obstacles of this type, no important development 
of rational capitalism has occurred in large areas and for long periods. 
On the other hand, there are cases where, in spite of what appear to 
be very serious obstacles placed in its way by the system of public 
finances, such a development has taken place. Various factors seern to 
have played a part. Substantively, state economic policy may be very 
largely oriented to non-economic ends. The development of the intel- 
lectual disciplines, notably science and technology, is important. In addi- 
tion, obstructions due to certain value-attitudes derived from ethical and 
religious sources have tended to limit the development of an autonomous 
capitalistic system of the modern type to certain areas. It must, further- 
more, not be forgotten that forms of establishment and of the firm must, 
like technical products, be "invented." In an historical analysis, we can 
only point out certain circumstances which exert negative influences on 
the relevant thought processes — that is, influences which impede or 
even obstruct them — or .such which exert a positive, favoring influence. 
It is not, however, possible to prove a strictly inevitable causal relation- 
ship in such cases, any more than it is possible in any other case of 
stricdy individual events.** 

Apropos of the last statement, it may be noted that the concrete indi- 
viduaJ events also in the field of the natural sciences can be rigorously 



39 ] Repercussions of Public Financing on the Economy 201 

reduced to their particular causal components only under very special 
circumstances. There is thus no difference in principle between the field 
of action and other fields.** 

At this point it is possible to give only a few provisional indications 
of the fundamentally important interrelationships between the form of 
organization and administration of political bodies and the economic 
system. 

1. Historically, the most important case of obstruction of the develop- ' 
ment of market capitalism by turning public contributions into privately 
held benefices is China. The conferring of contributions as fiefs, which 
often cannot be differentiated from this, had the same effect in the Near 
East since the time of the Caliphs. Both will be discussed in the proper 
place. Tax farming is found in India, in the Near East, and in the 
Western World in Antiquity and the Middle Ages. Particularly, how- 
ever, in Antiquity, as in the development of the Roman class of tax- 
farming financiers, the equites, it became decisive in determining the 
mode of orientation of capitalistic acquisition. In India and the Near 
East, on the other hand, it was more important in determining the de- 
velopment and distribution of wealth, notably of land ownership. 

2. The most important case in history of the obstruction or capital- 
istic development by a liturgical organization of public finance is that of 
later Antiquity. It was perhaps also important in India after the 
Buddhist era and at certain periods in China. This also will be discussed 
later. 

3. The most important historical case of the monopolistic diversion 
of capitalism is, after the Hellenistic, especially the Ptolemaic pre- 
cursors, the period of royal monopolies and monopolistic concessions in 
early modem times, which again will be discussed in the proper place. 
A prelude to this development might be seen in certain measures intro- 
duced by Emperor Frederick H in Sicily, perhaps following a Byzantine 
model, and its final struggle in the conflict of the Stuarts with the Long 
Parliament." 

This whole discussion in such an abstract form has been introduced 
only in order to make an approximately correct formulation of problems 
possible. But before returning to the stages of development of economic 
activity and the conditions underlying that development, it is necessary 
to undertake a strictly sociological analysis of the non-economic compo- 
nents. 



ao. The Influence of Economic Factors on the Formation 
of Orga?iizaiions 

Economic considerations have one very general kind of sociological 
importance for the formation of organizations if, as is almost always 
tme, the directing authority and the administrative staff are remunerated. 



20 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. 11 

If this is the case, an overwhelmingly strong set of economic interests 
become bound up with the continuation of the organization, even though 
its primary ideological basis may in the meantime have ceased to exist. 

It is an everyday occurrence that organizations of all kinds which, 
even in the eyes of the participants, have become "meaningless," con- 
tinue to exist because an executive secretary or some other official makes ■ 
his "living" in this manner and otherwise would have no means of support. 

Every advantage which is appropriated, or even under certain circum- 
stances one which has not been formally appropriated, may have the 
effect of stereotyping existing forms of social action. Among the op- 
portunities for economic profit or earnings in the field of the peaceful 
provision for everyday wants, it is in general only the opportunities open 
to profit-making enterprise which constitute autonomous forces that are 
in a rational sense revolutionary; but even of them this is not always true. 

For example, the interests of bankers in maintaining their commis- 
sions long obstructed the recognition of endorsements on bills of ex- 
change. Similfte-cases of the obstruction of formally rational institutions 
by vested interests, which may well be interests in capitalistic profits, 
will frequently be met with below. They are, however, appreciably rarer 
than obstructions resulting from such factors as appropriation of bene- 
fices, status advantages, and various economically irrational forces. 



4 1 . The Mainspring of Economic Activity 

All economic activity in a market economy is undertaken and carried 
through by individuals acting to provide for their own ideal or material 
interests. This is naturally just as true when economic activity is oriented 
to the patterns of order of organizations, whether they themselves are 
partly engaged in economic activity, are primarily economic in character, 
or merely regulate economic activity. Strangely ?1 enough, this fact is often 
not taken account of. 

In an economic system organized' on a socialist basis, there would be 
no fundamental difference iti this respect. The decision-making, of 
course, would lie in the hands of the central authority, and the functions 
of the individual engaged in the production of goods would be limited to 
the performance of "technical" services; that is, to "labor" in the sense of 
the term employed here. This would be true so long as the individuals 
were being administered "dictatorially," that is, by autocratic determina- 
tion from above in which they had no voice. But once any right of "co- 
determination" were granted to the population, this would immediately 



4i ] The Mainspring of Economic Activity 203 

make possible, also in a formal sense, the fighting^ out of interest con Hie ts 
centering on the manner of decision- ma king and, above all, on the ques- 
tion of how much should be saved 0-C, put aside from current produc- 
tion). But this is not the decisive point. What is decisive is that in 
socialism, too, the individual will under these conditions ask first whether 
to him, personally, the rations allotted and the work assigned, as com- 
pared with other possibilities, appear to conform with his own interests. 
This is the criscrion by which he would orient his behavior, and violent 
power struggles would be the normal result: struggles over the alteration 
or maintenance of rations once allotted— as, for instance, over ration 
supplements for lieavv labor; appropriations or expropriations of particu- 
lar jobs, sought after because of extra remuneration or pleasant working 
conditions; work cessations, such as in strikes or lock-outs; restrictions of 
production to enforce changes in the conditions of work in particular 
branches; boycotts and the forcible dismissal of unpopular supervisors — ■ 
in short, appropriation processes of all kinds and interest struggles would 
also then be the norma] phenomena of life. The fact that they would 
for the most part be fought out through organized groups, and that ad- 
vantages would be enjoyed on the one hand by the workers engaged in 
the most essential services, on the other hand by those who were physi- 
cally strongest, would simplv reflect the 'existing situation. But however 
that might be, it would be the interests of the individual, possibly or- 
ganized in terms of the similar interests of many individuals as opposed 
to those of others, which would underlie all action. The sir«cfwre of 
interests and the relevant situation would be different, and there would 
be other means of pursuing interests, but this fundamental factor would 
remain just as relevant as before. It is of course true that economic action 
which is oriented on purely ideological grounds to the interests of others 
does exist. But it is even more certain that the mass of men do not act 
in this way, and it is an induction from experience that thev cannot do 
so and never will. 

In a completely socialized planned economy there would be scope 
only for the following; (a) the distribution of real goods on the basis 
of planned rationed needs; (b) the production of these goods according 
to a plan of production. "Income" as a category of the money economy 
would necessarily disappear, but rationed "receipts" would be' possible. 

In a market economy the striving for income is necessarily the ulti- 
mate driving force of all economic activity. For every disposition, insofar 
as it makes a claim on goods or utilities which are not available to the 
actor in a form fully ^sady for whatever use he intends, presupposes the 
acquisition of and disposition over future income, and practically every 
existing power of control over goods and services presupposes previous 



2 O 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

income. All business profits of enterprises will at some stage and in some 
form be turned into the income of economically acting individuals. In 
a "regulated economy" the principal aim of the regulations is generally 
to affect in some manner the distribution of income. (In a "natural econ- 
omy" we find no "income" in the usage of the present terminology; 
instead there are "receipts" in the form of goods and services which 
cannot be valued in terms of a unitary means of exchange.) 

Income and receipts may, from a sociological point of view, take the 
following principal forms and be derived from the following principal 
sources : 

A. — Incomes and receipts from personal services derived from special- ^ 
ized or specified functions : 

(0 Wages: (a) Freely determined wage incomes or receipts con- 
tracted at fixed rates per time period; (b) the same, determined on some 
established scale (salaries or in-kind remuneration of public officials and 
civil servants); (c) the labor return of hired workers on contracted piece 
rates; (d) entirely open labor returns. 

(2) Gains: (a) Free exchange profits deriving from the procurement 
of goods and services on an entrepreneurial basis; (b) the same, but 
regulated. In cases (a) and (b), "incomes" are calculated as net returns 
after the deduction of costs, (c) Pisdatory gains; (d) Gains derived 
from positions of political authority, fee incomes of an office, bribes, tax 
farming, etc., obtained by the appropriation of power. In cases (c) and 
(d), costs will be deducted to calculate "income" only if the activity is 
conducted as a continuous organized mode of acquisition; otherwise the 
gvoss revenue is usually considered "income." 

B. — Income and receipts from property, derived from the exploitation * 
of control over important means of production: 

(1) Those in which "incorr>e' f is normally calculated as "net rent" 
after the deduction of costs, (a) Rent obtained from the ownership of 
human beings, as in the cssf of slaves, serfs or freedmen, These may 
be receipts in money or in Lnd; they may be fixed in amount or consist 
in shares of the source's earnings after the deduction of costs of main- 
tenance, (b) Appropriated revenues derived from positions of political 
authority (after the deduction of the costs of administration), (c) Rental 
revenues derived from the ownership of land C.ntetayage payments or 
fixed rents per unit of time, either in kind or in money, seigneurial rent 
revenues — after deduction cl land taxes and costs of maintenance), (d) 
House rents after deduction ;j£ expenses, (e) Rent receipts from ap 
propriated monopolies (feudii banetites, patent royalties after the deduc- 
tion of fees). 

(2.) Property income anH receipts normally not requiring deduction 



4i ] The Mainspring of Economic Activity 205 

of costs from gross revenues: (a) Investment income (interest paid to 
households or profit-making enterprises in return for the right to utilize 
their resources or capital — see above, ch. II, sec. n). (b) "Interest" 
fejm cattle loans O/iehrenten).** (c) "Interest" from other loans of con- 
cr|te objects, and contracted "annuities in kind" (Deputatrenten). (d) Interest on money loans, (e) Money interest on mortgages, (f ) Money 
returns from securities, which may consist in fixed interest or in dividends 
varying with profitability, (g) Other shares in profits, such as shares in 
the proceeds of "occasional" profit-making ventures and in profits from 
rational speculative operations, and shares in the rational long-run profit- 
making activities of all sorts of enterprises. 

All "gains" and the dividend incomes from shares are either not con- 
tracted (as to rate or amount) in advance, or only indirectly contracted 
incomes (namely, through the agreement on prices or piece rates). Fixed 
interest and wages, leases of land, and house rents are contracted in- 
comes. Income from the exercise of power, from ownership of human 
beings, from seigneurial authority over land, and predatory incomes all 
involve appropriation by force. Income from property may be divorced 
from any occupation in case the recipient lets others utilize the property. 
Wages, salaries, labor profits, and entrepreneurial profits are, on the other 
hand, occupational incomes. Other types of property incomes and gains 
may be either one or the other. An exhaustive classification is not in- 
tended here. 

Of all types of incomes, it is particularly those from business profits 
and the contracted piece rate or free labor incomes which have a dy- 
namic, revolutionary significance for economic life. Next to these stand 
incomes derived from free exchange and, in quite different ways, under 
certain circumstances, the "predatory" incomes. 

Those having a static, conservative influence on economic activity are 
above all incomes drawn in accordance with a predetermined scale, 
namely salaries, wages reckoned per unit of working time, gains from 
the exploitation of office powers, and normally all kinds of fixed interest 
and rents." 

The economic source of "incomes" (in an exchange economy) lies 
in a great majority of "cases in the exchange situation on the market for 
goods and labor services. Thus, in the last analysis, it is determined by 
consumers' demand, in connection with the more or less strong natural 
or statutory monopolistic position of the parties to market relationships. 

The economic source of "receipts" (in a natural economy) generally 
lies in the monopolistic appropriation of opportunities to exploit property 
or services for a return. 

The underpinning of all these incomes is nothing but the possibility 



2 06 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. 11 

of violence in the defence of appropriated advantages (see above, ch. II, 
sec. i, pt, 4). Predatory incomes and related modes of acquisition are the 
return on actual violence. An exhaustive classification had to be foregone 
in this very rough first sketch. 

In spite of mahy disagreements on particular points, I consider the 
sections on "income" in R. Liefmann's works to be among the most valu- 
able of his contributions. 68 The problems of economic theory involved 
cannot be explored any further here; the interrelations between the eco- 
nomic dynamics and the soda! order will have to be discussed time and 
again. 

Excerpts from Max Weber

Excerpts from Max Weber

(Source:)

ECONOMY AND SOCIETY 

AN OUTLINE OF INTERPRETIVE SOCIOLOGY 

Edited by Guenther Roth 
and Ckus Wittich 

University of California Press 
Berkeley • Los Angeles • London 

Expired Copyrights:

University of California Press, Berkeley and Los Angeles. California 

University of California Press, Ltd., London, England 

This printing, Copyright © 1978 by The Regents of the University of California 

1st printing, Copyright © 1968 by Bedminster Press Incorporated, New York. 



VOLUME ONE, PART ONE, CH 1. CH 2. §§ 1-13

PART ONE 

Conceptual Exposition 



CHAPTE 



hI 



BASIC SOCIOLOGICAL 
TERMS 



Prefatory Note 

An introductory discussion of concepts can hardly be dispensed with, 
in spite of the fact that it is unavoidably abstract and hence gives the 
impression of remoteness from reality. The method employed makes no 
claim to any kind of novelty. On the contrary it attempts only to formu- 
late what all empirical sociology really means when it deals with the 
same problems, in what it is hoped is a more convenient and somewhat 
more exact terminology, even though on that account it may seem 
pedantic. TTiis is true even where terms are used which are apparently 
new or unfamiliar. As compared to the author's essay in Logos, 1 the 
terminology has been simplified as far as possible and hence considerably 
changed in order to render it more easily understandable. The most 
precise formulation cannot always be reconciled with a form which can 
readily be popularized. In such cases the latter aim has had to be 
sacrificed. 

On the concept of "understanding" 2 compare the AUgemeine Psycho- 
pathologie of Karl Jaspers, also a few observations by Heinrich Rickert 
in the second edition of the Grenzen der naturwissenschaftlichen Be- 
griffshildung and particularly some of Simmel's discussions in the 
Probleme der Gesckichtsphilosophie. For certain methodological con- 
siderations the reader may here be referred, as often before in the 
author's writings, to the procedure of Friedrich Gottl in his work Die 
Herrsckaft des Wortes; this book, to be sure, is written in a somewhat 
difficult style and its argument does not appear everywhere to have been 
thoroughly thought through. As regards content, reference may be made 

[3] 



4 BASIC SOCIOLOGICAL TERMS [ Cfe. I 

especially to the fine work of Ferdinand Tonnies, Gemeinsckaft und 
Gesellschaft, and also to the gravely misleading book of Rudolf Stamm- 
let, Wirtschaft wnd Recht nach der materialistiscken Gesckichtsaufias- 
sung, which may be compared with my criticism in the Archiv fur 
Sozudwissenschaft (vol. 14, 1907, [GAzW, 291-359]). This critical 
essay contains many of the fundamental ideas of the following exposi- 
tion. The present work departs from Simmel's method (in his Soziologie 
and his Phihsophie des Geldes) in drawing a sharp distinction between 
subjectively intended and objectively valid "meanings"; two different 
things which Simmel not only fails to distinguish but often deliberately 
treats as belonging together. 



i . The Definition of Sociology and of Social Action 

Sociology (in the sense in which this-highly ambiguous word is used 
here) is a science concerning itself with the interpretive understanding 
of social action and thereby with a causal explanation of its course and 
consequences. We shall speak of "action" insofar as the acting individual 
attaches a subjective meaning to his behavior — be it overt or covert, 
omission or acquiescence. Action is "sociaTinsoiar as its subjective mean- 
ing takes account of the behavior of others and is thereby oriented in its 
course. 3 



A. METHODOLOGICAL FOUNDATIONS* 

i . "Meaning" may be of two kinds. The term may refer first to the 
actual existing meaning in the given concrete case of a particular actor, 
or to the average or approximate meaning attributable to a given plurality 
of actors; or secondly to the theoretically conceived pure type* of subjec- 
tive meaning attributed to the hypothetical actor or actors in a given 
type of action. In no case does it refer to an objectively "correct" mean- 
ing or one which is "true" in some metaphysical sense. It is this which 
distinguishes the empirical sciences of action, such as sociology and 
history, from the dogmatic disciplines in that area, such as jurisprudence, 
logic, ethics, and esthetics, which seek to ascertain the "true" and "valid" 
meanings associated with the objects of their investigation. 

2. The line between meaningful action and merely reactive behavior 
to which no subjective meaning is attached, cannot be sharply drawn 
empirically. A very considerable part of all sociologically relevant be- 
havior, especially purely traditional behavior, is marginal between the 



i ] Definitions of Sociology and of Social Action 5 

two. In the case of some psychophysical processes, meaningful, i.e., sub- 
jectively understandable, action is not to be found at all; in others it is 
discernible only by the psychologist. Many mystical experiences which 
cannot be adequately communicated in words are, for a person who is 
not susceptible to such experiences, not fully understandable. At the 
same time the ability to perform a similar action is not a necessary pre- 
requisite to- understanding; "one need not have been Caesar in order to 
' understand Caesar." "Recapturing an experience" is important for ac- 
curate understanding, but not an absolute precondition for its interpreta- 
tion. Understandable and non-understandable components of a process 
aje often intermingled and bound up together. 

3. All interpretation of meaning, like all scientific observations, 
strives for clarity and verifiable accuracy of insight and comprehension 
(EvicUnz).* The basis for certainty in understanding can be either 
rational, which can be further subdivided into logical and mathematical, 
or it can be of an emotionally empathic or artistically appreciative qual- 
ity. Action is rationally evident chiefly when we attain a completely clear 
'intellectual grasp of the action-elements in their intended context of 
meaning. Empathic or appreciative accuracy is attained when, through 
sympathetic participation, we can adequately grasp the emotional context 
in which the action took place. The highest degree of rational under- 
standing is attained in cases involving the meanings of logically or 
maEhematically related propositions; their meaning may be immediately 
and unambiguously intelligible. We have a perfectly clear understanding 
of what it means when somebody employs the proposition 2. X 2 = 4 or 
the Pythagorean theorem in reasoning or argument, or when someone 
correctly carries out a logical train of reasoning according to our accepted 
modes of thinking. In the same way we also understand, what a person 
is doing when he tries to achieve certain ends by choosing appropriate 
means on the basis of the facts of the situation, as experience has accus- 
tomed us to interpret them. The interpretation of such rationally pur- 
poseful action possesses, for the understanding of the choice of means, 
the highest degree of verifiable certainty. With a lower degree of 
certainty, which is, however, adequate for most purposes of explanation, 
we are able to understand errors, including confusion of problems of the 
sort that we ourselves are liable to, or the origin of which we can detect 
by sympathetic self-analysis. 

On the other hand, many ultimate ends or values toward which 
experience shows that human action may be oriented, often cannot be 
understood completely, though sometimes we are able to grasp them 
intellectually. The more radically they differ from our own ultimate 
values, however, the more difficult it is for us to understand them em- 



6 BASIC SOCIOLOGICAL TERMS [ Ch. I 

pathically. Depending upon the circumstances of the particular case we 
must be content either with a purely intellectual understanding of such 
values or when even that fails, sometimes we must simply accept them 
as given data. Then we can try to understand the action motivated by 
them on the basis of whatever opportunities for approximate emotional 
and intellectual interpretation seem to be available at different points in 
its course. These difficulties confront, for instance, people not susceptible 
to unusual acts of religious and charitable zeal, or persons who abhor 
extreme rationalist fanaticism (such as the fanatic advocacy of the 
"rights of man"). 

The more we ourselves are susceptible to such emotional reactions as 
anxiety, anger, ambition, envy, jealousy, love, enthusiasm, pride, venge- 
fulness, loyalty, devotion, and- appetites of all sorts, and to the "irrational" 
conduct which grows out of them, the more readily can we empathize 
with them. Even when such emotions are found in a degree of intensity 
of which the observer himself is completely incapable, he can still have 
a significant degree of emotional understanding of their meaning and 
can interpret intellectually their influence on the course of action and the 
selection of means. 

For the purposes of a typological scientific analysis it is convenient to 
treat all irrational, effectually determined elements of behavior as factors 
of deviation from a conceptually pure type of rational action. For ex- 
ample a panic on the stock exchange can be most conveniently analysed 
by attempting to determine first what the course of action would have 
been if it had not been influenced by irrational affects; it is then possible 
to introduce the irrational components as accounting for the observed 
deviations from this hypothetical course. Similarly, in analysing a polit- 
ical or military campaign it is convenient to determine in the first place 
what would have been a rational course, given the ends of the partici- 
pants and adequate knowledge of all the circumstances. Only in this 
way is it possible to assess the causal significance of irrational factors as 
accounting for the deviations from this type. The construction of a 
purely rational course of action in such cases serves the sociologist as 
a type (ideal type) which has the merit of clear understandability and 
lack of ambiguity. By comparison with this it is possible to understand 
the ways in which actual action is influenced by irrational factors of all 
sorts, such as affects and errors, in that they account for the deviation 
from the line of conduct which would be expected on the hypothesis 
that the action were purely rational. 

Only in this respect and for these reasons of methodological conven- 
ience is the method of sociology "rationalistic." It is naturally not legiti- 
mate to interpret this procedure as involving a rationalistic bias of 



i ] Definitions of Sociology and of Social Action . 7 

sociology, but only as a methodological device. It certainly does not in- 
volve a belief in the actual predominance of rational elements in human 
life, for on the question of how far this predominance does or does not 
exist, nothing whatever has been said. That there is, however, a danger 
of rationalistic interpretations where they are out of place cannot be 
denied. All experience unfortunately confirms the existence of this 
danger. 

4. In all the sciences of human action, account must be taken of 
processes and phenomena which are devoid of subjective meaning, in the 
role of stimuli, results, favoring or hindering circumstances. To be 
devoid of meaning is not identical with being lifeless or non-human; 
every artifact, such as for example a machine, can be understood only 
in terms of the meaning which its production and use have had or were 
intended to have; a meaning which may derive from a relation to exceed- 
ingly various purposes. Without reference to this meaning such an 
object remains wholly unintelligible. That which is intelligible or under- 
standable about it is thus its relation to human action in the role either 
'of means or of end; a relation of which the actor or actors can be said to 
have been aware and to which their action has been oriented. Only in 
terms of such categories isit possible to "understand" objects of this kind. 
On the other hand processes or conditions, whether they are animate or 
inanimate, human or non-human, are in the present sense devoid of 
meaning in so far as they cannot be related to an intended purpose. That 
is to say they are devoid of meaning if they cannot be related to action 
in the role of means or ends but constitute only the stimulus, the favor- 
ing or hindering circumstances. It may be that the flooding of the 
DoIIart [at the mouth of the Ems river near the Dutch-German border] 
in 1277 had historical significance as a stimulus to the beginning of 
certain migrations of considerable importance. Human mortality, indeed 
the organic life cycle from the helplessness of infancy to that of old age, 
is naturally of the very greatest sociological importance through the 
various ways in which human action has been oriented to these facts. 
To still another category of facts devoid of meaning, belong certain 
psychic or psychophysical phenomena such as fatigue, habituation, 
memory, etc.; also certain typical states of euphoria under some condi- 
tions of ascetic mortification; finally, typical variations in the reactions of 
individuals according to reaction-time, precision, and other modes. But 
in the last analysis the same principle applies to these as to other 
phenomena which are devoid of meaning. Both the actor and the soci- 
ologist must accept them as data to be taken into account. 

It is possible that future research may be able to discover non- 
interpretable uniformities underlying what has appeared to be specif- 



8 BASIC SOCIOLOGICAL TERMS [Ch. 1 

ically meaningful action, though little has been accomplished in this 
direction thus far. Thus, for example, differences in hereditary biological 
constitution, as of "races," would have to be treated by sociology as given 
data in the same way as the physiological facts of the need of nutrition 
or the effect of senescence on action. This would be the case if, and in- 
sofar as, we had statistically conclusive proof of their influence on socio- 
logically relevant behavior. The recognition of the causal significance 
of such factors would not in the least alter the specific task of sociological 
analysis or of that of the other sciences of action, which is the interpreta- 
tion of action in terms of its subjective meaning. The effect would be 
orly to introduce certain non-interpretable data of the same order as 
others which are already present, into the complex of subjectively under- 
standable motivation at certain points. (Thus it may come to be known 
that there are typical relations between the frequency of certain types of 
teleological orientation of action or of the degree of certain kinds of 
rationality and the cephalic index or skin color or any other biologically 
inherited characteristic.) 

5. Understanding may be of two kinds: the first is the direct observa- 
tional understanding 7 of the subjective meaning of a given act as such, 
including verbal utterances. We thus understand by direct observation, 
in this case, the meaning of the proposition 2X2 — 4 when we hear 
or read it. This is a case of the direct rational understanding of ideas. 
We also understand an outbreak of anger as manifested by facial expres- 
sion, exclamations or irrational movements. This is direct observational 
understanding of irrational emotional reactions. We can understand in 
a similar observational way the action of a woodcutter or of somebody 
who reaches for the knob to shut a door or who aims a gun at an animal. 
This is rational observational understanding of actions. 

Understanding may, however, be of another sort, namely explanatory 
understanding. Thus we understand in terms of motive the meaning an 
actor attaches to the proposition twice two equals four, when he states 
it or writes it down, in that we understand what makes him do this at 
precisely this moment and in these circumstances. Understanding in this 
sense is attained if we know that he is engaged in balancing a ledger or 
in making a scientific demonstration, or is engaged in some other task 
of which this particular act would be an appropriate part. This is ra- 
tional understanding of motivation, which consists in placing the act in 
an intelligible and more inclusive context of meaning.* Thus we under- 
stand the chopping of wood or aiming of a gun in terms of motive in 
addition {o direct observation if we know that the woodchopper is work- 
ing for a "Wage or is chopping a supply of firewood for his own use or 
possibly is doing it for recreation. But he might also be working off a 



i ] _ Definitions of Sociology and of Social Action 9 

fit of rage, an irrational case. Similarly we understand the motive of a 
person aiming a gun if we know that he has been commanded to shoot 
as a member of a firing squad, that he is fighting against an enemy, or 
that he is doing it for revenge. The last is affectually determined and 
thus in a certain sense irrational. Finally we have a motivational under- 
standing of the outburst of anger if we know that it has been provoked 
by jealousy, injured pride, or an insult. The last examples are all affec- 
tually determined and hence derived from irrational motives. In all the 
above cases the particular act has been placed in an understandable 
sequence of motivation, the understanding of which can be treated as an 
explanation of the actual course of behavior. Thus for a science which 
is concerned with the subjective meaning of action, explanation requires 
a grasp of the complex of meaning in which an actual course of under- 
standable action thus interpreted belongs, In all such cases, even where 
the processes are largely affectual, the subjective meaning of the action, 
including that also of the relevant meaning complexes, will be called the 
'intended meaning. 6 (This involves a departure from ordinary usage, 
which speaks of intention in this sense only in the case of rationally pur- 
posive action.) 

6. In all these cases understanding involves the interpretive grasp of 
the meaning present in one of the following contexts: (a) as in the his- 
toricaj approach, the actually intended meaning for concrete individual 
action; or (b) as in cases of sociological mass phenomena, the average of, 
or an approximation to, the actually intended meaning; or (c) the mean- 
ing appropriate to a scientifically formulated pure type Can ideal type) 
of a common phenomenon. The concepts and "laws" of pure economic 
theory are examples of this kind of ideal type. They state what course a 
given type of human action would take if it were strictly rational, un- 
affected by errors r>r emotional factors and if, furthermore, it were com- 
pletely and unequivocally directed to a single end, the maximization of 
economic advantage. In reality, action takes exactly this course only in 
unusual cases, as sometimes on the stock exchange; and even then there 
is usually only an approximation to the ideal type. (On the purpose of 
such constructions, see my essay in AfS, 19 [cf. n, 5] and point 1 1 below.) 

Every interpretation attempts to attain clarity and certainty, but no 
matter how clear an interpretation as such appears to be from the point 
of view of meaning, it cannot on this account claim to he the causally 
valid interpretation. On this level it must remain only a peculiarly 
plausible hypothesis. In the first place the "conscious motives" may well, 
even to the actor himself, conceal the various "motives" and "repressions" 
which constitute the real driving force of his action. Thus in such cases 
even subjectively honest self-analysis has only a relative value. Then it 



I O BASIC SOCIOLOGICAL TERMS [ Ch. I 

is the task of the sociologist to be aware of this motivational situation 
and to describe and analyse it, even though it has not actually been con- 
cretely part of the conscious intention of the actor; possibly not at all, 
at least not fully. This is a borderline case of the interpretation of mean- 
ing. Secondly, processes of action which seem to an observer to be the 
same or similar may fit into exceedingly various complexes of motive in 
the case of the actual actor. Then even though the situations appear 
superficially to be very similar we must actually understand them or 
interpret them as very different, perhaps, in terms of meaning, direcdy 
opposed. (Simmel, in his Probleme der Geschichtsphilosaphie, gives a 
number of examples.) Third, the actors in any given situation are often 
subject to opposing and conflicting impulses, all of which we are able to 
understand. In a large number of cases we know from experience it is 
not, possible to arrive at even an approximate estimate of tne relative 
strength of conflicting motives and very often we cannot be certain of 
our interpretation. Only the actual outcome of the conflict gives a solid 
basis of judgment. 

More generally, verification of subjective interpretation by compari- 
son with the concrete course of events is, as in the case of all hypotheses, 
indispensable. Unfortunately this type of verification is feasible with 
relative accuracy only in the few very special cases susceptible of 
psychological experimentation. In very different degrees of approximation, 
such verification is also feasible in the limited number of cases of mass 
phenomena which can be statistically described and unambiguously 
interpreted. For the rest there remains only the possibility of comparing 
the largest possible number of historical or contemporary processes 
which, while otherwise similar, -differ in the one decisive point of their 
relation to the particular motive or factor the role of which is being 
investigated. This is a fundamental task of comparative sociology. 
Often, unfortunately, there is available only the uncertain procedure 
of the "imaginary experiment" which consists in thinking away certain 
elements of a chain of motivation and working out the course of action 
which would then probably ensue, thus arriving at a causal judgment." 

For example, the generalization called Gresham's Law is a rationally 
clear interpretation of human action under certain conditions and under 
the assumption that it will follow a purely rational course. How far any 
actual course of action corresponds to this can be verified only by the 
available statistical evidence for the actual disappearance of under-valued 
monetary units from circulation. In this case our information serves to 
demonstrate a high degree of accuracy. The facts of experience were 
known before the generalization, which was formulated afterwards; 
but without this successful interpretation our need for causal understand- 



i ] Definitions of Sociology and of Social Action i i 

ing would evidently be left unsatisfied. On the other hand, without the 
demonstration that what can here be assumed to be a theoretically ade- 
quate interpretation also is in some degree relevant to an actual course 
of action, a "law," no matter how fully demonstrated theoretically, would 
be worthless for the understanding of action in the rea* world. In this 
case the correspondence between the theoretical interpretation of motiva- 
tion and its empirical verification is entirely satisfactory and the cases are 
numerous enough so that verification can be considered established. But 
to take another example, Eduard Meyer has advanced an ingenious 
theory of the causal significance of the batdes of Marathon, Salamis, and 
Platea for the development of the cultural peculiarities of Greek, and 
hence, more generally, Western, civilization." This is derived from a 
meaningful interpretation of certain symptomatic facts having to do 
with the attitudes of the Greek oracles and prophets towards the Per- 
sians. It can only be direcdy verified by reference to the examples of the 
conduct of the Persians in cases where they were victorious, as in 
Jerusalem, Egypt, and Asia Minor, and even this verification must neces- 
^sarily remain unsatisfactory in certain respects. The striking rational 
plausibility of the hypothesis must here necessarily be relied on as a sup- 
port. In very many cases of historical interpretation which seem highly 
plausible, however, there is not even a possibility of the order of verifica- 
tion which was feasible in this case. Where this is true the interpretation 
must necessarily remain a hypothesis. 

7. A motive is a complex of subjective meaning which seems to the 
actor himself or to the observer an adequate ground for the conduct in 
question. The interpretation of a coherent course of- conduct is "sub- 
jectively adequate" (or "adequate on the level of meaning"), insofar as, 
according to our habitual modes of thought and feeling, its component 
parts taken in their mutual relation are recognized to constitute a 
"typical" complex of meaning." It is more common to say "correct." The 
interpretation of a sequence of events will on the other hand be called 
causally adequate insofar as, according to established generalizations 
from experience, there is a probability that it will always actually occur 
in the same way. An example of adequacy on the level of meaning 
in this sense is what is, according to our current norms of calculation or 
thinking, the correct solution of an arithmetical problem. On the other 
hand, a causally adequate interpretation of the same phenomenon would 
concern the statistical probability that, according to verified generaliza- 
tions from experience, there would be a correct or an erroneous solution 
of the same problem. This also refers to currendy accepted norms but 
includes taking account of typical errors or of typical confusions. Thus 
causal explanation depends on being able to determine that there is a 



I 2 BASIC SOCIOLOGICAL TERMS [ Ck. 1 

probability, which in the rare ideal case can be numerically stated, but is 
always in some sense calculable, that a given observable event (overt or 
subjective) will be followed or accompanied by another event. 

A correct causal interpretation of a concrete course of action is arrived 
at when the overt action and the motives have both been correctly appre- 
hended and at the same time their relation has become meaningfully 
comprehensible. A correct causal interpretation of typical action means 
that the process which is claimed to be typical is shown to be both ade- 
quately grasped on the level of meaning and at the same time the inter- 
pretation is to some degree causally adequate- If adequacy in respect to 
meaning is lacking, then no matter how high the degree of uniformity 
and how precisely its probability can be numerically determined, it is 
still an incomprehensible statistical probability, whether we deal with 
overt or subjective processes. On the other hand, even the most perfect 
adequacy on the level of meaning has causal significance from a socio- 
logical point of view only insofar as there is some kind of proof for the 
existence of a probability" that action in fact normally takes the course 
which has been held to be meaningful. For this there must be some 
degree of determinable frequency of approximation to an average or a 
pure type. 

Statistical uniformities constitute understandable types of action, and 
thus constitute sociological generalizations, only when they can be 
regarded as manifestations of the understandable subjective meaning of 
a course of social action. Conversely, formulations of a rational course 
of subjectively understandable action constitute sociological types of 
empirical process only when they can be empirically observed with a, 
significant degree of approximation. By no means is the actual likelihood 
of the occurrence of a given course of overt action always direcdy pro- 
portional to the clarity of subjective interpretation. Only actual experi- 
ence can prove whether this is so in a given case. There are statistics of 
processes devoid of subjective meaning, such as death rates, phenomena 
of fatigue, the production rate of machines, the amount of rainfall, in 
exacdy the same sense as there are statistics of meaningful phenomena. 
But only when the phenomena are meaningful do we speak of socio- 
logical statistics. Examples are such cases as crime rates, occupational 
distributions, price statistics, and statistics of crop acreage. Naturally 
there are many cases where both components are involved, as in crop 
statistics. 

8. Processes and uniformities which it has here seemed convenient 
not to designate as sociological phenomena or uniformities because they 
are not "understandable," are naturally not on that account any the less 
important. This is true even for sociology in our sense which is restricted 



r ] _ Definitions of Sociology and of Social Action i 3 

to subjectively understandable phenomena — a usage which there is no 
intention of attempting to impose on anyone else. Such phenomena, 
however important, are simply treated by a different method from the 
others; they become conditions, stimuli, furthering or hindering circum- 
stances of action. 

9. Action in the sense of subjectively understandable orientation of 
behavior exists only as the behavior of one or more individual human 
beings. For other cognitive purposes it may be useful or necessary to 
consider the individual, for instance, as a collection of cells, as a complex 
of bio-chemical reactions, or to conceive his psychic life as made up of 
a variety of different elements, however these may be defined. Undoubt- 
edly such procedures yield valuable knowledge of causal relationships. 
But the behavior of these elements, as expressed in such uniformities, 
is not subjectively understandable. This is true even of psychic elements 
because the more precisely they are formulated from a point of view of 
natural science, the less they are accessible to subjective understanding. 
This is never the road to interpretation in terms of subjective meaning. 
On the contrary, both for sociology in the present sense, and for history, 
the object of cognition is the subjective meaning-complex of action. The 
behavior of physiological entities such as cells, or of any sort of psychic 
elements, may at least in principle be observed and an attempt made to 
derive uniformities from such observations. It is further possible to 
attempt, with their help, to obtain a causal explanation of individual phe- 
nomena, that is, to subsume them under uniformities. But the subjective 
understanding of action takes the same account of this type of fact and 
uniformity as of any others not capable of subjective interpretation. 
(This is true, for example, of physical, astronomical, geological, meteor- 
ological, geographical, botanical, zoological, and anatomical Facts, of those 
aspects of psycho-pathology which are devoid of subjective meaning, or 
of the natural conditions of technological processes.) 

For still other cognitive purposes — for instance, juristic ones — or for 
' practical ends, it may on the other hand be convenient or even indispensa- 
ble to treat social collectivities, such as states, associations, business corpora- 
tions, foundations, as if they were individual persons. Thus they may be 
treated as the subjects of rights and duties or as the performers of legally 
significant actions. But for the subjective interpretation of action in socio- 
logical work these collectivities must be treated as solely the resultants 
and modes of organization of the particular acts of individual persons, 
since these alone can be treated as agents in a course of subjectively 
understandable action. Nevertheless, the sociologist cannot for his pur- 
poses afford to ignore these collective concepts derived from other 
disciplines. For the subjective interpretation of action has at least three 



I 4 BASIC SOCIOLOGICAL TERMS [ Cfc. I 

important relations to these concepts. In the first place it is often neces- 
sary to employ very similar collective concepts, indeed often using the 
same terms, in order to obtain an intelligible terminology. Thus both in 
legal terminology and in everyday speech the term "state" is used both 
for the legal concept of the state and for the phenomena of social action 
to which its legal rules are relevant. For sociological purposes, however, 
d.e phenomenon "the sate" does not consist necessarily or even primarily 
of the elements which axe relevant to legal analysis; and for sociological 
purposes there is no such thing as a collective personality which "acts." 
When reference is made in a sociological context to a state, a nation, a 
corporation, a family, or an army corps, or to similar collectivities, 
what is meant is, on the contrary, only a certain kind of development of 
actual or possible social actions of individual persons. Both because of its 
precision and because it is established in general usage the juristic con- 
cept is taken over, but is used in an entirely different meaning. 

Secondly, the subjective interpretation of action must take account 
of a fundamentally important fact. These concepts of collective entities 
which are found both in common sense and in juristic and other tech- 
nical forms of thought, have a meaning in the minds of individual per- 
sons, partly as of something actually existing, partly as something with 
normative authority. This is true not only of judges and officials, but of 
ordinary private individuals as well. Actors thus in part orient their 
action to them, and in this role such ideas have a powerful, often a 
decisive, causal influence on the course of action of real individuals. This 
is above all true where the ideas involve normative prescription or pro- 
hibition. Thus, for instance, one of the important aspects, of the exist- 
ence of a modem state, precisely as a complex of* serial interaction of 
individual persons, consists in the fact that the action of various indi- 
viduals is oriented to the belief that it exists or should existj thus that 
its acts and laws are valid in the legal sense. This will be further dis- 
cussed below. Though extremely pedantic and cumbersome, it would be 
possible, if purposes of sociological terminology alone were involved, to 
.eliminate such terms entirely, and substitute newly-coined words. This 
would be possible even though the word "state" is used ordinarily not 
only to designate the legal concept but also the real process of action. 
But in the above important connexion, at least, this would naturally be 
impossible. 

Thirdly, it is the method of the so-called "organic" school of sociology 
— classical example: SchaffVs brilliant work, Bau und Leben des 
soztalen Korpers — to attempt to understand social interaction by using as 
a point of departure the "whole" within which the individual acts. His 
action and behavior are then interpreted somewhat in the way that a 



i ] _ Definitions of Sociology and of Social Action i 5 

physiologist would treat the role of an organ of the body in the "economy" 
of the organism, that is from the point of view of the survival of the 
latter. (Compare the famous dictum of a well-known physiologist: "Sec. 
10. The spleen. Of the spleen, gendemen, we know nothing. So much 
for the spleen." Actually, of course, he knew a good deal about the 
spleen — its position, size, shape, etc.; but he could say nothing about its 
function, and it was his inability to do this that he called "ignorance.") 
How far in other disciplines this type of functional analysis of the rela- 
tion of "parts" to a "whole" can be regarded as definitive, cannot be dis- 
cussed here; but it is well known that the bio-chemical and bio-physical 
modes of analysis of the organism are on principle opposed to stopping 
there. For purposes of sociological analysis two things can be said. First 
this functional frame of reference is convenient for purposes of practical 
illustration and for provisional orientation. In these respects, it is not 
only useful but indispensable. But at the same time if its cognitive value 
is overestimated and its concepts illegitimately "reified," 14 it can be highly 
^dangerous. Secondly, in certain circumstances this is the only available 
way of determining just what processes of social action it is important to 
understand in order to explain a given phenomenon. But this is only the 
beginning of sociological analysis as here understood. In the case of 
social collectivities, precisely as distinguished from organisms, we are in 
a position to go beyond merely demonstrating functional relationships 
and uniformities. We can accomplish something which is never attain- 
able in the natural sciences, namely the subjective understanding of the 
action of the component individuals. The natural sciences on the other 
hand cannot do this, being limited to the formulation of causal uni- 
formities in objects and events and the explanation of individual facts 
by applying them. We do not "understand" the behavior of cells, but can 
only observe the relevant functional relationships and generalize on the 
basis of these observations. This additional achievement of explanation 
by interpretive understanding, as distinguished from external observa- 
tion, is of course attained only at a price — the more hypothetical and 
fragmentary character of its results. Nevertheless, subjective understand- 
ing is the specific characteristic of sociological knowledge. 

It would lead too far afield even to attempt to discuss how far the 
behavior of animals is subjectively understandable to us and vice veisa; 
in both cases the meaning of the term understanding and its extent of 
application would be highly problematical. But in so far as such under- 
standing existed it would be theoretically possible to formulate a sociol- 
ogy of the relations of men to animals, both domestic and wild. Thus 
many animals "understand" commands, anger, love, hostility, and react to 
them in ways which are evidently often by no means purely instinctive 



I 6 BASIC SOCIOLOGICAL TERMS [ Ck. I 

and mechanical and in some sense both consciously meaningful and 
affected by experience. In a way, our ability to share the feelings of 
primitive men is not very much greater. We either do not have any 
reliable means of determining the subjective state of mind of an animal 
or what we have is at best very unsatisfactory. It is well known that the 
problems of animal psychology, however interesting, are very thorny 
ones. There are in particular various forms of social organization among 
animals: monogamous and polygamous "families/' herds, Hocks, and 
finally "states," with a functional division of labour. (The extent of func- 
tional differentiation found in these animal societies is by no means, 
however, entirely a matter of the degree of organic or morphological 
differentiation of the individual members of the species. Thus, the func- 
tional differentiation found among the termites, and in consequence that 
of the products of their social activities, is much more advanced than in 
the case of the bees and ants.) In this field it goes without saying that a 
purely functional point of view is often the best that can, at least for the 
present, be attained, and the investigator must be content with it Thus 
it is possible to study the ways in which the species provides for its 
survival; that is, for nutrition, defence, reproduction, and reconstruction 
of the social units. As the principal bearers of these functions, differenti- 
ated types of individuals can be identified: "kings," "queens," "workers," 
"soldiers," "drones," "propagators," "queen's substitutes," and so on. Any- 
thing more than that was for a long time merely a matter of speculation 
or of an attempt to determine the extent to which* heredity on the one 
hand and environment on the other would be involved in the develop-, 
ment of these "social" proclivities. This was particularly true of the con- 
troversies between Gotte and Weismann. 1 * The latter's conception in Die 
AUmacht der Natwztichtung was largely based on wholly non-empirical 
deductions. But all serious authorities are naturally fully agreed that the 
limitation of analysis to the functional level is only a necessity imposed 
by our present ignorance, which it is hoped will only be temporary. (For 
an account of the state of knowledge of the termites, for example, see 
the study by Karl Escherich, Die Termiten oder weissen Ameisen, 
1909.) 
' \ The researchers would like to understand not only the relatively 
obvious survival functions of these various differentiated types, but also 
the bearing of different variants of the theory of heredity or its reverse 
On the problem of explaining how these differentiations have come 
about. Moreover, they would like to know first what factors account for 
the original differentiation of specialized types from the still neutral 
undifferentiated species-type. Secondly, it would be important to know 
what leads the differentiated individual in the typical case to behave 



i ] Definitions of Sociology and of Social Action I 7 

in a way^which actually serves the survival value of the organized group. 
Wherever research has made any progress in the solution of these prob- 
lems it has been through the experimental demonstration of the prob- 
ability or possibility of the role of chemical stimuli or physiological 
processes, such as nutritional states, the effects of parasitic castration, 
etc., in the case of the individual organism. How far there is even a 
hope that the existence of "subjective" or "meaningful" orienntion could 
be made experimentally probable, even the specialist today would hardly 
be in a position to say. A verifiable conception of the state of mind of 
these social animals accessible to meaningful understanding, would seem 
to be attainable even as an ideal goal only within narrow limits. How- 
ever that may be, a contribution to the understanding of human social 
action is hardly to be expected from this quarter. On the contrary, in the 
field of animal psychology, human analogies are and must be continually 
employed. The most that can he hoped for is, then, that these biological 
analogies may some day be useful in suggesting significant problems. 
For instance they may throw light on the question of the relative role in 
,the early stages of human social differentiation of mechanical and in- 
stinctive factors, as compared with that of the factors which are accessible 
to subjective interpretation generally, and more particularly to the role 
of consciously rational action. It is necessary for the sociologist to be 
thoroughly aware of the fact that in the early stages even of human 
development, the first set of factors is completely predominant. Even in 
the later stages he must take account of their continual interaction with 
the others in a role which is often of decisive importance. This is par- 
ticularly true of all "traditional" action and of many aspects of charisma, 
which contain the seeds of certain types of psychic "contagion" and thus 
give rise to new social developments. These types of action are very 
closely related to phenomena which are understandable either only 
in biological terms or can be interpreted in terms of subjective motives 
only in fragments. But all these facts do not discharge sociology from the 
obligation, in full awareness of the narrow limits to which it is confined, 
to accomplish what it alone can do. 

The various works of Othmar Spann [1878-1950] are often full of 
suggestive ideas though at the same time he is guilty of occasional mis- 
understandings and above all of arguing on the basis of pure value 
judgments which have no place in an empirical investigation. But he is 
undoubtedly correct in doing something to which, however, no one seri- 
ously objects, namely, emphasizing the sociological significance of the 
functional point of view for preliminary orientation to problems. This is 
what he calls the "universalistic method." It is true that we must know 
what kind of action is functionally necessary for "survival," but even 



i 8 BASIC SOCIOLOGICAL TERMS _ [ Ch. 1 

more so for the maintenance of a cultural type and the continuity of the 
corresponding modes of social action, before it is possible even to inquire 
how this aaio.i has come about and what motives determine it. It is 
necessary to know what a "king," an "official," an "entrepreneur," a 
"procurer," or a "magician" does, that is, what kind of typical action, which 
justifies classifying an individual in one of these" categories, is important 
and relevant for an analysis, before it is possible to undertake the analysis 
itself. (This is what Rickert means by Wertbezogenheit.*) But it is only 
this analysis itself which can achieve the sociological understanding of 
the actions of typically differentiated human (and only human) indi- 
viduals, and which hence constitutes the specific function of sociology. 
It is a tremendous misunderstanding to think that an "individualistic" 
method should involve what is in any conceivable sense an individualistic 
system of values. It is as important to avoid this error as the related one 
which confuses the unavoidable tendency of sociological concepts to as- 
sume a rationalistic character with a belief in the predominance of 
rational motives, or even a positive valuation of rationalism. Even a 
socialistic economy would have to be understood sociologically in exacdy 
the same kind of "individualistic" terms; that is, in terms of the action 
of individuals, the types of officials found in it, as would be the case 
with a system of free exchange analysed in terms of the theory of mar- 
ginal utility or a "better," but in this respect similar theory). The real 
empirical sociological investigation begins with the question: What 
motives determine and lead the individual members and participants in 
this socialistic community to behave in such a way that the community 
came into being in the first place and that it continues to exist? Any ' 
form of functional analysis which proceeds from the whole to the parts 
can accomplish only a preliminary preparation for this investigation — 
a preparation, the utility and indispensability of which, if properly car- 
ried out, is naturally beyond question. 

10. It is customary to designate various sociological generalizations, 
as for example "Gresham's Law," as "laws." These are in fact typical 
probabilities confirmed by observation to the effect that under certain 
given conditions an expected course of social action will occur, which is 
understandable in terms of the typical motiyes and typical subjective 
intentions of the actors. These generalizations are both understandable 
and definite in the highest degree insofar as the typically observed course 
of action can be Understood in terms of the purely rational pursuit of 
an end, or where for reasons of methodological convenience such a 
theoretical type can be heuristically employed. In surh cases the relations 
of means and end will be clearly understandable on grounds of experi- 
ence, particularly where the choice of means was "inevitable." In such 



i ] _ Definitions of Sociology and of Social Action i 9 

cases it is legitimate to assert that insofar as the action was rigorously 
rational it could not have taken any other course because for technical 
reasons, given their clearly defined ends, no other means were available 
to the actors. This very case demonstrates how erroneous it is to regard 
any kind of psychology as the ultimate foundation of the sociological 
interpretation of action. The term psychology, to be sure, is today 
understood in a wide variety of senses. For certain cjuite specific method- 
ological purposes the type of treatment which attempts to follow the 
procedures of the natural sciences employs a distinction between 
"physical" and "psychic" phenomena which is entirely foreign to the 
disciplines concerned with human action, at least in the present sense. 
The results of a type of psychological investigation which employs the 
methods of the natural sciences in any one of various possible ways may 
naturally, like the results of any other science, have outstanding signif- 
icance for sociological problems; indeed this has often happened. But 
this use of the results of psychology is something quite different from 
*the investigation of human behavior in terms of its subjective meaning. 
Hence sociology has no closer relationship on a general analytical level 
to this type of psychology than to any other science. The source of error 
lies in the concept of the "psychic." It is held that everything which is 
not physical is ipso facto psychic. However, the meaning of a train of 
mathematical reasoning which a person carries out is not in the relevant 
sense "psychic." Similarly the rational deliberation of an actor as to 
whether the results of a given proposed course of action will or will not 
proinota certain specific interests, and the corresponding decision, do 
not become one bit more understandable by taking "psychological" con- 
siderations into account. But it is Jfrecisely on the basis of such rational 
assumptions that most of the taws of sociology, including those of eco- 
nomics, are built up. On the other hand, in explaining the irrationalities 
of action sociologically, that form of psychology which employs the 
method of subjective understanding undoubtedly can make decisively 
important contributions. But this does not alter the fundamental . ierf]- 
odological situation, 

1 r. We have taken for granted that sociology seeks to formulate type 
concepts and generalized uniformities of empirical process. This dis- 
tinguishes it from history/which is oriented to the causal analysis and 
explanation of individual actions, structures, and personalities possessing 
cultural significance. The empirical material which underlies the con- 
cepts of sociology consists to a very large extent, though by no means 
exclusively, of the same concrete processes of action which are dealt witjb 
by historians. An important consideration in the formulation of soci- 
ological concepts and generalizations is the contribution that sociology 



2 BASIC SOCIOLOGICAL TERMS [Ch. I 

can make toward the causal explanation of some historically and cul- 
turally important phenomenon. As in the case of every generalizing 
science the abstract character of the concepts of sociology is responsible 
for the fact that, compared with actual historical reality, they are rela- 
tively lacking in fullness of concrete content. To compensate for this 
disadvantage, sociological analysis can offer a greater precision of con- 
cepts. This precision is obtained by striving for the highest possible 
degree of adequacy on the level of meaning. It has already been re- 
peatedly stressed that this aim can be realized in a particularly high 
degree in the case of concepts and generalizations which formulate 
rational processes. But sociological investigation attempts to include in 
its scope various irrational phenomena, such as prophetic, mystic, and 
affectual modes of action, formulated in terms of theoretical concepts 
which are adequate on the level of meaning. In all cases, rational or 
.irrational, sociological analysis both abstracts from reality and at the 
same time helps us to understand it, in that it shows with what degree of 
approximation a concrete historical phenomenon can be subsumed under 
one or more of these concepts. For example, the same historical phenome- 
non may be in one aspect feudal, in another patrimonial, in another 
bureaucratic, and in still another charismatic. In order to give a pre- 
cise meaning to these terms, it is necessary for the sociologist to formulate 
pure ideal types of the corresponding forms of action which in each case 
involve the highest possible degree of logical integration by virtue of 
their complete adequacy on the level of meaning. But precisely because 
this is true, it is probably seldom if ever that a real phenomenon can be 
found which corresponds exactly to one of these ideally constructed pure 
types. The case is similar to a physical reaction which has been cal- 
culated on the assumption of an absolute vacuum. Theoretical differ- 
entiation (Ka$: isHk) is possible in sociology only in terms of ideal or 
pure types. It goes ithout saying that in addition it is convenient for 
the sociologist from time to time to employ average types of an em- 
pirical statistical character, concepts which do not require methodological 
discussion. But when reference is made to "typical" cases, the term should 
always be understood, unless otherwise stated, as meaning ideal types, 
which may in turn be: rational or irrational as the case may be (thus 
in economic theory they are always rational), but in any case are always 
constructed with a view to adequacy on the level of meaning. 

It is important to realize that in the sociological field as elsewhere, 
averages, and hence average types, can be formulated with a relative 
degree of precision only when* (hey are concerned with differences of 
degree in respect to action which remains qualitatively the same. Such 
cases do occur, but in the majority of cases of action important to. history 



i ] - Definitions of Sociology and of Social Action 2 1 

or sociology the motives which determine it are qualitatively heterogene- 
ous. Then it is quite impossible to speak of an "average" in the true sense. 
The ideal types of social action which for instance are used in economic 
theory are thus unrealistic or abstract in that they always ask what course 
of action would take place if it were purely rational and oriented to 
economic ends alone. This construction can be used to aid in the under- 
standing of action not purely economically determined but which in- 
volves deviations arising from traditional restraints, affects, errors, and 
the intrusion of other than economic purposes or considerations. This 
can take place in two ways. First, in analysing the extent to which in the 
concrete case, or on the average for a class of cases, the action was in 
part economically determined along with the other factors. Secondly, by 
throwing the discrepancy between the actual course of events and the 
ideal type into relief, the analysis of the non-economic motives actually 
involved is facilitated. The procedure would be very similar in employ- 
ing an ideal type of mystical orientation, with its appropriate attitude of 
Indifference to worldly things, as a tool for analysing its consequences 
for the actors relation to ordinary life — for instance, to political or eco- 
nomic affairs. The more sharply and precisely the ideal type has been 
constructed, thus the more abstract and unrealistic in this sense it is, the 
better it is able to perform its functions in formulating terminology, 
classifications, and hypotheses. In working out a concrete causal explana- 
tion of individual events, the procedure of the historian is essentially the 
same. Thus in attempting to explain the campaign of 1866, it is in- 
dispensable both in the case of Moltke and of Benedek to attempt to 
construct imaginatively how each, given fully adequate knowledge both 
of his own situation and of that of his opponent, would have acted. 
Then it is possible to compare with this the actual course of action and 
to arrive at a causal explanation of the observed deviations, which will 
he attributed to such factors as misinformation, strategical errors, logical 
fallacies, personal temperament, or considerations outside the realm of 
strategy. Here, too, an ideal-typical construction of rational action is 
actually employed even though it is not made explicit. 

The theoretical^ concepts of sociology are ideal types not only from the 
objective point of view, but also in their application to subjective proc- 
esses. In the great majority of cases actual action goes on in a state of in- 
articulate half-consciousness or actual unconsciousness of its subjective 
meaning. The actor is more likely to "be aware" of it in a vague sense than 
he is to "know" what he is doing or be explicitly self-conscious about it. 
In most cases his action is governed by impulse or habit. Only occasion- 
ally and, in the uniform action of large numbers, often- only in the case 
of a few individuals, is the subjective meaning of the action, whether 



2 2 BASIC SOCIOLOGICAL TERMS [ Ck*. I 

rational or irrational, brought clearly into consciousness. The ideal type 
of meaningful action where the meaning is fully conscious and explicit 
is a marginal case. Every sociological or historical investigation, in apply- 
ing its analysis to the empirical facts, must take this fact into account. 
But the difficulty need not prevent the sociologist from systematizing his 
concepts by the classification of possible types of subjective meaning. 
That is, he may reason as if action actually proceeded on the basis of 
clearly self-conscious meaning. The resulting deviation from the concrete 
facts must continually be kept in mind whenever it is a question of this 
level of concreteness, and must be carefully studied with reference both 
to degree and kind. It is often necessary to choose between terms which 
are either clear or unclear. Those which are clear will, to be sure, have 
the abstractness of ideal types, but they are none the less preferable for 
scientific purposes. (On all these questions see " 'Objectivity' in Social 
Science and Social Policy,") 



B. SOCIAL ACTION 

i. Social action, which includes both failure to act and passive 
acquiescence, may be oriented to the past, present, or expected future 
behavior of others. Thus it may be motivated by revenge for a past 
attack, defence against present, or measures of defence against future 
aggression. The "others" may be individual persons, and may be known 
to the actor as such, or may constitute an indefinite plurality and may 
be entirely Unknown as individuals. (Thus, money is a means of ex- 
chanj; ■ which the actor accepts in payment because he orients his action 
to the expectation that a large but unknown number of individuals he is 
personally unacquainted with will be ready to accept it in exchange on 
some ' uture occasion.) 

2. Not ew. ' kind of action, even of overt action, is "social" in the 
sense of the present discussion. Overt action is non-social if it is oriented 
solely to the behavior of inanimate objects. Subjective attitudes constitute 
social action only so far as they are oriented to the behavior of others. For 
example, religious behavior is not social if it is simply a matter of con- 
templation or of solitary prayer. The economic activity of an individual 
is social only if it takes account of the behavior of someone else. Thus 
very generally it becomes social insofar as the actor assumes that others 
will respect his actual control over economic goods. Concretely it is social, 
for instance, if in relation to the actors own consumption the future 
wants of others are taken into account and this becomes one considera- 
tion affecting the actor's own saving. Or, in another connexion, produc- 
tion may be oriented to the future wants of other people. 



i ]* Definitions of Sociology and of Social Action 2. 3 

3. Not every type of contact of human beings has a social character; 
this is rather confined to cases where the actor's behavior is meaning- 
fully oriented to that of others. For example, a mere collision of two 
cyclists may be compared to a natural event. On the other hand, their 
attempt to avoid hitting each other, or whatever insults, blows, or friendly 
discussion might follow the collision, would constitute "social action. 

4. Social action is not identical either with the similar actions of 
many persons Or with every action influenced by other persons. Thus, 
if at the beginning of a shower a number of people on the street put up 
their umbrellas at the same time, this would not ordinarily be a case of 
action mutually oriented to that of each other, but rather of all reacting 
in the same way to the like need of protection from the rain- It is well 
known that the actions of the individual are strongly influenced by 
the mere fact that he is a member of a crowd confined within a limited 
space. Thus, the subject matter of studies of "crowd psychology," such 
as those of Le Bon, will be called "action conditioned by crowds." It is 
also possible for large numbers, though dispersed, to be influenced simul- 
taneously or successively by a source of influence operating similarly on 
all the individuals, as by means of the press. Here also the behavior of 
an individual is influenced by his membership in a "mass" and by the 
fact that he is aware of being a member. Some types of reaction are only 
made possible by the mere fact that the individual acts as part of a 
crowd. Others become more difficult under these conditions. Hence it is 
possible that a particular event or mode of human behavior can give rise 
to the most diverse kinds of feeling — gaiety, anger, enthusiasm, despair, 
and passions of all sorts — in a crowd situation which would not occur at 
all or not nearly so readily if the individual were alone. But for this to 
happen there need not, at least in many cases, be any meaningful rela- 
tion between the behavior of the individual and the fact that he is a 
member of a crowd. It is not proposed in the present sense to call action 
"social" when it is merely a result of the effect on the individual of the 
existence of a crowd as such and the action is not oriented to that fact 
on the level of meaning. At the same time the borderline is naturally 
highly indefinite. In such cases as that of the influence of the demagogue, 
there may be a wide variation in the extent to which his mass clientele is 
affected by a meaningful reaction to the fact of its large numbers; and 
whatever this relation may be, it is open to varying interpretations. 

But furthermore, mere "imitation" of the action of others, such as that 
on which Tarde has rightly laid emphasis, will not be considered a case 
of specifically social action if it is purely reactive so that there is no 
meaningful orientation to the actor imitated. The borderline is, however, 
so indefinite that it is often hardly possible to discriminate. The mere 



2 4 BASIC SOCIOLOGICAL TERMS [ Ch. I 

fact that a person is found to employ some apparently useful procedure 
which he learned from someone else does not, however, constitute, in the 
present sense, social action. Action such as this is not oriented to the 
action of the other person, but the actor has, through observing the 
other, become acquainted with certain objective facts; and it is these to 
which his action is oriented. His action is then causally determined by 
the action of others, but not meaningfully. On the other hand, if the 
action of others is imitated because it is fashionable or traditional or 
exemplary, or lends social distinction, or on similar grounds, it is mean- 
ingfully oriented either to the behavior of the source of imitation or of 
third persons or of both. There are of course all manner of transitional 
cases between the two types of imitation. Both the phenomena discussed 
above, the behavior of crowds and imitation, stand on the indefinite 
borderline of social action. The same is true, as will often appear, of 
traditionalism and charisma. The reason for the indefiniteness of the 
line in these and other cases lies in the fact that both the orientation to 
the behavior of others and the meaning which can be imputed by the 
actor himself, are by no means always capable of clear determination and 
are often altogether unconscious and seldom fully self-conscious. Mere 
"influence" and meaningful orientation cannot therefore always be clearly 
differentiated on the empirical level. But conceptually it is essential to 
distinguish them, even though merely reactive imitation may well have 
a degree of sociological importance at least equal to that of the type 
which can be called social action in the strict sense. Sociology, it goes - 
without saying, is by no means confined to the study of social action; 
this is only, at least for the kind of sociology being developed here, its 
central subject matter, that which may be said to be decisive for its status 
as a science. But this does not imply any judgment on the comparative 
importance of this and other factors. 



2. Types of Social Action 

Social action, like all action, may be oriented in four ways. It may be: 

(i) instrwnentally rational (zweckrational), that is, determined by 
expectations as to the behavior of objects in the environment and of 
other human beings; these expectations are used as "conditions" or 
"means" for the attainment of the actor's own rationally pursued and 
calculated ends; 
(2) value-rational QwertrationaV), that is, determined by a conscious 



2 ] _ Types of Social Action 2 5 

belief in the value for its own sake of some ethical, aesthetic, religious, 
or other form of behavior, independently of its prospects of success; 

(3) affectual (especially emotional), that is, determined by the actor's 
specific affects and feeling states; 

(4) traditional, that is, determined by ingrained habituation. 

1. Strictly traditional behavior, like the reactive- type of imitation 
discussed above, lies very close to the borderline of what can justifiably 
be called meaningfully oriented action, and indeed often on the other 
side. For it is very often a matter of almost automatic reaction to habit- 
ual stimuli whicA guide behavior in a course which has been repeat- 
edly followed. The great bulk of all everyday action to which people 
have become habitually accustomed approaches this type. Hence, its 
place in a systematic classification is not merely that of a limiting case 
because, as will be shown later, attachment to habitual forms can be up- 
held with varying degrees of self -consciousness and in a variety of 
senses. In this case the type may shade over into value rationality 
( Wertratiotutlitat) . 

■. 1. Purely affectual behavior also stands on the borderline of what 
can be considered "meaningfully" oriented, and often it, too, goes over 
the line. It may, for instance, consist in an uncontrolled reaction to 
some exceptional stimulus. It is a case of sublimation when affectually 
determined action occurs in the form of conscious release of emotional 
tension. When this happens it is usually well on the road to rationali- 
zation in one or the other or both of the above senses. 

3. The orientation of value-rational action is distinguished from the 
affectual type by its clearly self-conscious formulation of the ultimate 
values governing the action and the consistently planned orientation of 
its detailed course to these values. At the same time the two types have a ' 
common element, namely that the meaning of the action does not lie in 
the achievement of a result ulterior to it, but in carrying out the speci- 
fic type of action for its own sake. Action is affectual if it satisfies a 
need for revenge, sensual gratification, devotion, contemplative bliss, or 
for working off emotional tensions (irrespective of the level of sublima- 
tion). 

Examples of pure value-rational orientation would be the actions of 
persons who, regardless of possible cost to themselves, act to put into 
practice their convictions of what seems to them to be required by duty, 
honor, the pursuit of beauty, a religious call, personal loyalty, or the 
importance of some "cause" no matter in what it consists. In our termi- 
nology, value-rational action always involves "commands" or "demands" 
which, in the actor's opinion, are binding on him. It is only in cases 
where human action is motivated by the fulfillment of such uncondi- 
tional demands that it will be called value-rational. This is the case in 
widely varying degrees, but for the most part only to a relatively slight 
extent Nevertheless, it will be shown that the occurrence of this mode 
of action is important enough to justify its formulation as a distinct type; 



2 6 ^ASIC SOCIOLOGICAL TERMS [ Ck, I 

though it may be remarked that there is no intention here of attempting 
to Formulate in any sense an exhaustive classification of type; of action. 

4. Action is instrumen tally rational Czweckrational^ when the end, 
the means, and the secondary results are all rationally taken into account 
and weighed. This involves rational consideration of alternative means 
to the end, of the relations of the end to the secondary consequences, 
and finally of the relative importance of different possible ends. Deter- 
mination of action either in affectual or in traditional terms is thus 
incompatible with this type. Choice between alternative and conflicting 
ends and results may well be determined in a value-rational manner. 
In that case, action is instrumentally rational only in respect to the 
choice of means. On the other hand, the actor may, instead of deciding 
between alternative and conflicting ends in terms of a rational orienta- 
tion to a system of values, simply take them as given subjective wants 
and arrange them in a scale of consciously assessed relative urgency. He 
may then orient his action to this scale in such a way that they are 
satisfied as far as possible in order of urgency, as formulated in the 
principle of "marginal utility." Value-rational action may thus have 
various different relations to the instrumentally rational action. From 
the latter point of view, however, value-rationality is always irrational. 
Indeed, the more the value to which action is oriented is elevated to the 
status of an absolute value, the more "irrational" in this sense the corre- 
sponding action is. For, the more unconditionally the actor devotes him- 
self to this value for its own sake, to pure sentiment or beauty, to abso- 
lute goodness or devotion to duty, the less is he influenced by consider- 
ations of the consequences of his action. The orientation of action 
wholly to the rational achievement of ends without relation to funda- 
mental values is, to be sure, essentially only a limiting case. 

5, It would he very unusual to find concrete cases of action, espe- 
cially of social action, which were oriented only in one or another of 
these ways. Furthermore, this classification of the modes of orientation 
of action is in no sense meant to exhaust the possibilities of the field, 
but only to formulate in conceptually pure form certain sociologically 
important types to which actual action is more or less closely approxi- 
mated or, in much the more common case, which constitute it.i ele- 
ments. The usefulness of the classification for the purposes of this 
investigation can only be judged in terms of its results. 



3 . The Concept of Social Relationship 

The term "social relationship" will be used to denote the behavior of 
a plurality of actors insofar as, in its meaningful content, the action of 
each takes account of that of the others and is oriented in these terms. 
The social relationship thus consists entirely and exclusivejy in the exist- 



3 ] The Concept of Social Relationship 2 7 

ence of a probability that there will be a meaningful course of social action 
— irrespective, for the time being, of the basis for this probability. 

1. Thus, as a defining criterion, it is essential that there should be 
at least a minimum of mutual orientation of the action of each to that 
of the others. Its content may be of the most varied nature: conflict, 
hostility, sexual attraction, friendship, loyalty, or economic exchange. It 
may involve the fulfillment, the evasion, or the violation of the terms 
of an agreement; economic, erotic, or some other form of "competition"; 
common membership in status, national or class groups (provided it 
leads to social action). Hence, the definition does not specify whether 
the relation of the actors is co-operative or the opposite. 

2. The "meaning" relevant in this context is always a case of the 
meaning imputed to the parties in a given concrete case, on the average, 
or in a theoretically formulated pure type — it is never a normal ively 
"correct" or a metaphysically "true" meaning. Even in cases of such 
forms of social organization as a state, church, association, or marriage, 
the social relationship consists exclusively in the fact that there has ex- 
isted, exists, or will exist a probability of action in some definite way 
appropriate to this meaning. It is vital to be continually clear about this 

' in order to avoid the "reineation" of these concepts. A "state," for ex- 
ample, ceases to exist in a sociologically relevant sense whenever there 
is no longer a probability that certain kinds of meaningfully oriented 
social action will take place. This probability may be very high or it may 
be negligibly low. But in any case it is only in the sense and degree in 
which it does exist that the corresponding social relationship exists. It is 
impossible to find any other clear meaning for the statement that, for 
instance, a given "state" exists or has ceased to exist. 

3. The subjective meaning need not necessarily be the same for all 
the parties who are mutually oriented in a given social relationship; 
there need not in this sense he "reciprocity." "Friendship," "love," 
'loyalty," "fidelity to contracts," "patriotism," on one side, may well be 
faced with an entirely different atdtude on the other. In such cases the 
parties associate different meanings with their actions, and the social 
relationship is insofar objectively "asymmetrical" from the points of view 
of the two parties. It may nevertheless be a case of mutual orientation 
insofar as, even though partly or wholly erroneously, one party pre- 
sumes a particular attitude toward him on the part of the other and 
orients his action to this expectation. This can, and usually will, have 
consequences for the course of action and the form of the relationship. 
A relationship is objectively symmetrical only as, according to the typi- 
cal expectations of the parties, the meaning for one party is the same as 
that for the other. Thus the actual attitude of a child to its father may be 
a least approximately that which the father, in the individual case, on 
the average or typically, has come to expect. A social relationship in 
which the attitudes are completely and fully corresponding is in reality 
a limiting case. But the absence of reciprocity will, for terminological 



2 8 BASIC SOCIOLOGICAL TERMS [ Ck. 1 

purposes, be held to exclude trie existence of a social relationship only 
if it actually results in the absence of a mutual orientation of the action 
of the parties. Here as elsewhere all sorts of transitional cases are the 
rule rather than the exception. 

4. A social relationship can be of a very fleeting character or of 
varying degrees of permanence. In the latter case there is a probability 
of the repeated recurrence of the behavior which corresponds to its sub- 
jective meaning and hence is expected. In order to avoid fallacious im- 
pressions, let it be repeated that it is only the existence of the probability 
that, corresponding to a given subjective meaning, a certain type of 
action will take place which constitutes the "existence" of the social 
relationship. Thus that a "friendship" or a "state" exists or has existed 
means this and only this: that we, the observers, judge that there is or has , 
been a probability that on the basis of certain kinds of known subjective 
attitude of certain individuals there will result in the average sense 3 
certain specific type of action. For the purposes of legal reasoning it is 
essential to be able to decide whether a rule of law does or does not 
carry legal authority, hence whether a legal relationship does or does 
not "exist." This type of question is not, however, relevant to sociologi- 
cal problems. 

5. The subjective meaning of a social relationship may change, thus 
a political relationship once based on solidarity may develop into a 
conflict of interests. In that case it is only a matter of terminological 
convenience and of the degree of continuity of the change whether we 
say that a new relationship has come into existence or that the old one 
continues but has acquired a new meaning. It is also possible for the 
meaning to be partly constant, pardy changing. 

6. The meaningful content which remains relatively constant in a 
social relationship is capable of formulation in terms of maxims which ( 
the parties concerned expect to be adhered to by their partners on the 
average and approximately. The more rational in relation to values or 
to given ends the action is, the more is this likely to be the case. There 
is far less possibility of a rational formulation of subjective meaning in 
the case of a relation of erotic attraction or of personal loyalty or any 
other affectual type than, for example, in the case of a business contract. 

7. The meaning of a social relationship may be agreed upon by 
mutual consent. This implies that the parties make promises covering 
their future behavior, whether toward each other or toward third per- 
sons. In such cases each party then normally counts, so far as he acts 
rationally, in some degree on the fact that the other will orient his ac- 
tion to the meaning of the agreement, as he (the first actor) under- 
stands it. In part he orients his action rationally (.zweckTational) to these 
expectations as given facts with, to be sure, varying degrees of subjec- 
tively "loyal" intention of doing his part. But in part also he is motivated 
value-rationally 'by a sense of duty, which makes him adhere to the 
agreement as he understands it. This much may be anticipated. (For 
a further elaboration, see sees. 9 and 13 below.) 



4 ] Types of Orientation: Usage, Custom, Self-interest 2 y 

4. Types of Action Orientation: Usage, Custom, 
Self-Interest 

Within the realm of social action certain empirical uniformities can 
be observed, that is, courses of action that are repeated by the actor or 
(simultaneously) occur among numerous actors since the subjective 
meaning is meant to be the same. Sociological investigation is concerned 
with these typical modes of action. Thereby it differs from history, the 
subject of which is rather the causal explanation of important individual 
events; important, that is, in having an influence on human destiny. 

If an orientation toward social action occurs regularly, it will be called 
"usage" (Branch*) insofar as the probability of its existence within a 
group is based on nothing but actual practice. A usage will be called a 
"custom" (Sitte) if the practice is based upon long standing. On the 
other hand, a uniformity of orientation may be said to be "determined 
by self-interest," if and insofar as the actors' conduct is instrumentally 
(gweckrarional*) oriented toward identical expectations." 

1. Usage also includes "fashion" (Mode). As distinguished from 
custom and in direct contrast to it, usage will be called fashion so far 
as the mere fact of the novelty of the corresponding behavior is the 
basis of the orientation of action. Its locus is in the neighborhood of 
"convention," 17 since both of them usually spring from a desire for social 
prestige. Fashion, however, will not be further discussed here. 

2. As distinguished from both "convention" and 'Taw," "custom" 
refers to rules devoid of any external sanction. The actor conforms with 
them of his own free will, whether his motivation lies in the fact that 
be merely fails to think about it, that it is more comfortable to conform, 
or whatever eke the reason may be. For the same reasons he can consider 
it likely that other members of the group will adhere to a custom. 

Thus custom is not "valid" in anything like the legal sense; conform- 
ity with it is not "demanded" by anybody. Naturally, the transition from 
this to validly enforced convention and to law is gradual. Everywhere 
what has been traditionally handed down has been an important source 
of what has come to be enforced. Today it is customary every morning to 
eat a breakfast which, within limits, conforms to a certain pattern. But 
there is no obligation to do so, except possibly for hotel guests, and it 
• has not always been customary. On the other hand, the current mode 
of dress, even though it has partly originated in custom, is today very 
largely no longer customary alone, but conventional. 

(On the concepts of usage and custom, the relevant parts of vol. II 
of R. von Jhering's Zweck im Recht are still worth reading. Compare 
also, P. Oertmann, Hechtsordnung und Verhehrssitte (1914); and 
more recently E, Weigelin, Sitte, Hecht und Moral (1919), which 
agrees with the author's position as opposed to that of Stammler.) 



3 O BASIC SOCIOLOGICAL TERMS [ Ck. 1 

3. Many of the especially notable uniformities in the course of 
social action are not determined by orientation to any sort of norm 
which is held to be valid, nor do they rest on custom, but entirely on 
the fact that the corresponding type of social action is in the nature of 
the case best adapted to the normal interests of the actors as they them- 
selves are aware of them- This is above all true of economic action, for 
example, the uniformities of price determination in a "free" market, 
but is by no means confined to such cases. The dealers in a market 
thus treat their own actions as means for obtaining the satisfaction of 
the ends denned by what they realize to be their own typical economic 
interests, and similarly treat as conditions the corresponding typical 
expectations as to the prospective behavior of others. The more strictly 
rational (xweckrationat) their action is, the more will they tend to react 
similarly to the same situation. In this way there arise similarities, uni- 
formities, and continuities in their attitudes and actions which are often 
far more stable than they would be if action were oriented to a system 
of norms and duties which were considered binding on the members of 
a group. This phenomenon— the fact that orientation to the situation 
in terms of the pure self-interest of the individual and of the others to 
whom he is related can bring about results comparable to those which 
imposednorms prescribe, very often in vain— has aroused a lively inter- 
est, especially in economic affairs. Observation of this has, in fact, been 
one of the important sources of economics as a science. But it is true in 
all other spheres of action as well, This type, with its c'arity of self- 
consciousness and freedom from subjective scruples, is the polar anti- 
thesis of every sort of unthinking acquiescence in customary ways as 
well as of devotion to norms consciously accepted as absolute values. 
One of the most important aspects of the process of "rationaliza- 
tion" of action is the substitution for the unthinking acceptance of 
ancient custom, of deliberate adaptation to situations in terms of self- 
interest. To be sure, this process by no means exhausts the concept of 
rationalization of action. For in addition this can proceed in a variety 
of other directions; positively in that of a deliberate formulation of 
ultimate values (WeTtrationalisieTung); or negatively, at the expense 
not only of custom, but of emotional values; and, finally, in favor of a 
morally sceptical type of rationality, at the expense of anv belief in 
absolute values. The many possible meanings of the concept of 
rationalization will often enter into the discussion. 1S (Further remarks 
on the analytial problem will be found at the end.) 18 

4. The stability of merely customary action rests essentially on 
the fact that the person who does not adapt himself to it is subjected 
to both petty and major inconveniences and annoyances as long as the 
majority of the people he comes in contact with continue to uphold 
the custom and conform with it. 

Similarly, the stability of action in terms of self-interest rests on 
the fact that the person who does not orient his action to the interests 
of others, does not "take account" of them, arouses their antagonism 



4 ] Types of Orientation: Usage, Custom, Self-interest 3 1 

or may end up in a situation different from that which he had fore- 
seen or wished to bring about. He thus runs the risk of damaging 
his own interests. 



5. Legitimate Order 

Action, especially social action which involves a social relationship, 
may be guided by the belief in the existence of a legitimate order. The 
probability that action will actually be so governed will be called the 
"validity" (Geltung) of the order in question. 

1. Thus, the validity of an order means more than the mere 
existence of a uniformity of social action determined by custom or 
self-interest. If furniture movers regularly advertise at the time many 
leases expire, this uniformity is determined by self-interest. If a 
salesman visits certain customers on particular days of the month or 
the week, it is either a case of customary behavior or a product of self- 

1 interested orientation. However, when a civil servant appears in his 
office daily at a fixed time, he does not act only on the basis of 
custom or self-interest which he could disregard if he wanted to; as 
a rule, his action is also determined by the validity of an order (viz., 
the civil service rules), which he fulfills partly because disobedience 
would be disadvantageous to him but also because its violation would 
be abhorrent to his sense of duty (of course, in varying degrees). 

2. Only then will the content of a social relationship be called 
an order if the conduct is, approximately or on the average, oriented 
toward determinable "maxims," Only then will an order be called 

' "valid" if the orientation toward these maxims occurs, among other 
reasons, also because it is in some appreciable way regarded by the 
actor as in some way obligatory or exemplary for him. Naturally, in 
concrete cases, the orientation of action to an order involves a wide 
variety of motives. But the circumstance that, along with the other 
sources of conformity, the order is also held by at least part of the 
actors to define a model or to be binding, naturally increases the 
probability that action will in fact conform to it, often to a very 
considerable degree. An order which is adhered to from motives of 
pure expediency is generally much less stable than one upheld on a 
purely customary basis through the fact that the corresponding behavior 
has become habitual. The latter is much the most common type of 
subjective attitude. But even this type of order is in turn much less 
stable than an order which enjoys the prestige of being considered 
binding, or, as it may be expressed, of 'legitimacy." The transitions 
between orientation to an order from motives of tradition or of ex- 
pediency to the case where a belief in its legitimacy is involved are 
empirically gradual. 



3 2 BASIC SOCIOLOGICAL TERMS [ Ck. 1 

3. It is possible for action to be oriented to an order in other 
ways tHan through conformity with its prescriptions, as they are 
generally understood by the actors. Even in the case of evasion or 
disobedience, the probability of their being recognized as valid norms 
may have an effect on action. This may, in the first place, be true 
from the point of view of sheer expediency. A thief orients bis action 
to the validity of the criminal law in that he acts surreptitiously. The 
fact that the order is recognized as valid in his society is made 
evident by the fact that he cannot violate it openly without punish- 
ment. But apart from this limiting case, it is very common for 
violation of an order to be confined to more or less numerous partial 
deviations from it, or for the attempt to be made, with varying degrees 
of good faith, to justify the deviation as legitimate. Furthermore, there 
may exist at the same time different interpretations of the meaning 
of the order. In such cases, for sociological purposes, each can be said 
to be valid insofar as it actually determines the course of action. The 
fact that, in the same social group, a plurality of contradictory 
systems of order may all be recognized as valid, is not a source of 
difficulty for the sociological approach. Indeed, it is even possible for 
the same individual to orient his action to contradictory systems of 
order. This can take place not only at different times, as is an every- 
day occurrence, but even in the case of the same concrete act. A 
person who fights a duel follows the code of honor; but at the same 
time, insofar as he either keeps it secret or conversely gives himself 
up to the police, he takes account of the criminal law. To be sure, 
when evasion or contravention of the generally understood meaning 
of an order has become the rule, the order can be said to be "valid" 
only in a limited degree and, ir the extreme case, not at all. Thus , 
for sociological purposes there does not exist, as there does for the 
law, a rigid alternative between the validity and lack of validity of a 
given order. On the contrary, there is a gradual transition between 
the two extremes; and also it is possible, as it has been pointed out, 
for contradictory systems of order to exist at the same time. In that 
case each is "valid" precisely to the extent that there is a probability 
that action will in fact be oriented to it. 

[Excursus:] ( Those familiar with the literature of this subject will 
recall the part played by the concept of "order" in the brilliant book 
of Rudolf Stammler, which was cited in the prefatory note, a book 
which, though like all his works it is very able, is nevertheless funda- 
mentally misleading and confuses the issues in 3 catastrophic fashion. 
(The reader may compare the author's critical discussion of it, which 
was also cited in the same place, a discussion which, because of the 
author's annoyance at Stammler's confusion, was unfortunately written 
in somewhat too acrimonious a tone.) Stammler fails to distinguish 
the normative meaning of "validity" from the empirical. He further 
fails to recognize that social action is oriented to other things beside 
systems of order. Above all, however, in a way which is wholly 



5 ] Legitimate Order 3 3 

indefensible from a logical point of view, he treats order as a "form" 
of social action and then attempts to bring it into a type of relation 
to "content," which is analogous to that of form and content in the 
theory of knowledge. Other errors in his argument will be left aside. 
But economic action, for instance, is oriented to knowledge of the 
relative scarcity of certain available means to want satisfaction, in 
relation to the actor's state of needs and to the present and probable 
action of others, insofar as the latter affects the same resources. But 
at the same time, of course, the actor in his choice of economic pro- 
cedures naturally orients himself in addition to the conventional and 
legal rules which he recognizes as valid, that is, of which he knows that 
a violation on his part would call forth a given reaction of other 
persons. Stammler succeeds in introducing a state of hopeless con- 
fusion into this very simple empirical situation, particularly in that 
he maintains that a causal relationship between an order and actual 
empirical action involves a contradiction in terms. It is true, of course, 
that there is no causal relationship between the normative validity of 
an order in the legal sense and any empirical process. In that context 
there is only the question of whether the order as correctly interpreted 
in the legal sense "applies" to the empirical situation. The question 
*is whether in a normative sense it should be treated as valid and, if so, 
what the content of its normative prescriptions for this situation 
should be. But for sociological purposes, as distinguished from legal, 
it is only the probability of orientation to the subjective belief in the 
validity of an order which constitutes the valid order itself. It is 
undeniable that, in the ordinary sense of the word "causal," there 
is a causal relationship between this probability and the relevant 
course of economic action. 



6 . Types of Legitimate Order: Convention and Law 

The legitimacy of an order may be guaranteed in two principal 
ways : i0 

I. The guarantee may he purely subjective, being either 

1. affectuai; resulting from emotional surrender; or 

2. value-rational: determined by the belief in the absolute validity 
of the order as the expression of. ultimate values of an ethical, 
esthetic or of any other type; or 

3. religious: determined by the belief that salvation depends upon 
obedience to the order. 

II. The legitimacy of an order may, however, be guaranteed also Cor 
merely) by the expectation of specific external effects, that is, by interest 
situations. 



3 4 BASIC SOCIOLOGICAL TERMS [Ch. I 

An older will be called 

(a) convention so far as its validity is externally guaranteed by the 
probability that deviation from it within a given social group will 
resillt in a relatively general and practically significant reaction of 
disapproval; 

(b) lav? if it is externally guaranteed by the probability that physical 
or psychological coercion will be applied by a staff of people in order 
to bring about compliance or avenge violation. 

(On the concept of convention see Weigelin, op. cit., and F. 
Tonnies, Die SUte [1909], besides Jhering, op, cit.') 

1. Trie term convention will be employed to designate that part of 
the custom followed within a given social group which is recognized 
as "binding" and protected against violation by sanctions of dis- 
approval. As distinguished from "law" in the sense of the. present 
discussion, it is not enforced by a staff. Stammfer distinguishes con- 
vention from law in terms of the entirely voluntary character of 
conformity. This is not, however, in accord with everyday usage and 

. does not even fit the examples he gives. Conformity with convention 
in such matters as the usual forms of greeting, the mode of dress 
recognized as appropriate or respectable, and various of the rules 
governing the restrictions on social intercourse, both in form and in 
content, is very definitely expected of the individual and regarded 
as binding on him. It is not, as in the case of certain ways of 
preparing food, a mere usage, which he is free to conform to or not 
as he sees fit. A violation of conventional rules — such as standards 
of "respectability" QStandesshte) — often leads to the extremely severe 
and effective sanction of an informal boycott on the part of members of 
one's status group. This may actually be a more severe punishment than ' 
any legal penalty. The only thing lacking is a staff with the specialized 
function of maintaining enforcement of the order, such as judges, prose- 
cuting attorneys, administrative officials, or sheriffs. The transition, how- 
ever, is gradual. The case of conventional guarantee of an order which 
most closely approaches the legal is the application of a formally threat- 
ened and organized boycott. For terminological purposes, this is best 
considered a form of legal coercion- Conventional rules may, in addition 
to mere disapproval, also be upheld by other means; thus domestic au- 
thority may be employed to expel a visitor who defies convention. This 
fact is not, however, important in the present context. The decisive 
point is that the individual, by virtue of the existence of conventional 
disapproval, applies these sanctions, however drastic, on his own author- 
ity, not as a member of a staff endowed with a specific authority for this 
purpose. 

2. For the purposes of this discussion the concept "law" will be 
made to turn on the presence of a staff engaged in enforcement, how- 
ever useful it might be to define it differently for other purposes. The 



6 ] Types of Legitimate Order. Convention and Law 3 5 

character of this agency naturally need not be at all similar to what is 
at present familiar. In particular it is not necessary that there should be 
any specifically "judicial" authority- The dan, as an agency of blood 
revenge and of the prosecution of feuds, is such an enforcing agency if 
there exist any sort of rules which governs its behavior in such situa- 
tions. But this is on the extreme borderline of what can be called legal 
enforcement. As is well known, it has often been denied that interna- 
tional law could be called law, precisely because there is no legal au- 
thority above the state capable of enforcing it. In terms of the present 
terminology this would be correct, for we could not call "law" a system 
the sanctions of which consisted wholly in expectations of disapproval 
and of the reprisals of injured parties, which is thus guaranteed entirely 
by convention and self-interest without the help of a specialized en- 
forcement agency. But for purposes of legal terminology exactly the 
opposite might well be acceptable. 

In any case the means of coercion are irrelevant. Even a "brotherly 
admonition," such as has been used in various religious sects as the first 
degree of mild coercion of the sinner, is "law" provided it is regulated 
by some order and applied by a staff. The same is to be said about the 
'[Roman] censorial reprimand as a means to guarantee the observance of 
ethical duties and, even more so, about psychological coercion through 
ecclesiastic discipline. Hence "law" may be guaranteed by hierocratic as 
well as political authority, by the statutes of a voluntary association or 
domestic authority or through a sodality or some other association. The 
rules of [German students' fraternities Jen own as] the Kcmmfittt [and 
regulating such matters as convivial drinking or singing] are also law in 
our sense, just as the case of those [legally regulated but unenforceable] 
duties which are mentioned in Section 888, paragraph 2 of the German 
Code of Civil Procedure [for instance, the duty arising from an engage- 
ment to many]. sl The leges imperfectae and the category of "natural 
obligations" are forms of legal terminology which express indirectly 
limits or conditions of the application of compulsion. In the same sense 
a trade practice which is compulsorily enforced is also law. See sees. 157 
and 242 of the German Civil Code. On the concept of "fair practice" 
Cgute Sȣte), that is, desirable custom which is worthy of legal sanction, 
see Max Rumelin's essay in the Schtvdhische Heimatgabe fur Theodor 
Hating (1918). 

3. It is not necessary for a valid order to be of a general and abstract 
character. The distinction between a legal norm and the judicial deci- 
sion in a concrete case, for instance, has not always and everywhere 
been as clearly made as we have today come to expect. An "order" may 
thus occur simply as the order governing a single concrete situation. The 
details of this subject belong in the Sociology of Law. But for present 
purposes, unless otherwise specified, the modem distinction between a 
norm and a specific decision will be taken for granted. 

4. A system of order which is guaranteed by external sanctions may 
at the same time be guaranteed by disinterested subjective attitudes* 



3 6 BASIC SOCIOLOGICAL TERMS [ Ch. I 

The relations of law, convention, and "ethics" do not constitute a problem 
for sociology. From a sociological point of view an "ethical" standard is 
one to which men attribute a certain type of value and which, by virtue 
of this belief, they treat as a valid norm governing their action. In this 
sense it can be spoken of as denning what is ethically good in the same 
w iy that action which is called beautiful is measured by esthetic stand- 
ards. It is possible for ethically normative beliefs of this kind to have a 
profound influence on action in the absence of any sort of external 
guarantee. This is often the case when the interests of others would be 
little affected by their violation. 

Such ethical beliefs are also often guaranteed by religious motives, 
but they may at the same time, in the present' terminology, be upheld 
to an important extent by disapproval of violations and the consequent 
boycott, or even legally with the corresponding sanctions of criminal or 
private law or of police measures. Every system of ethics which has in a 
sociological sense become validly established is likely to be upheld to a 
large extent by the probability that disapproval will result from its viola- 
tion, that is, by convention. On the other hand, it is by no means neces- 
sary that all conventionally or legally guaranteed forms of order should 
claim the authority of ethical norms. Legal rules, mych more often than 
conventional ones, may have been established entirely on grounds of 
expediency. Whether a belief in the validity of an order as such, which 
is current in a social group, is to be regarded as belonging to the realm 
of "ethics" or is a mere convention or a mere legal norm, cannot, for 
. sociological purposes, be decided in general terms. It must be treated as 
relative to the conception of what values are treated as "ethical" in the 
social group in question. 



7. Bases of Legitimacy: Tradition, Faith, Enactment 
The actors may ascribe legitimacy to a social order by virtue of: 

(a) tradition: valid is that which has always been; 

(b) affectual, especially emotional, faith: valid is that which is newly 
revealed or exemplary; 

(c) value-rational faith: valid is that which has been deduced as an 
absolute; 

(d) positive enactment which is believed to be legal. 
Such legality may be treated as legitimate because: 

(») it derives from a voluntary agreement of the interested parties; 
09) it is imposed by an authority which is held to be legitimate and 
therefore meets with compliance. 

AH further details, except for a few other concepts to be defined 
below, belong in the Sociology of Law and the Sociology of Domination. 
For the present, only a few remarks are necessary. 



7 ] _ Bases of Legitimacy: Tradition, Faith, Enactment 3 7 

1. The validity of a social order by virtue of the sacredness of tradi- 
tion is the oldest and most universal type of legitimacy. The fear of 
magical evils reinforces the general psychological inhibitions against any 
sort of change in customary modes of action. At the same time the mani- 

' fold vested interests which tend to favor conformity with an established 
order help to perpetuate it. (More in ch. III.) 

2. Conscious departures from tradition in the establishment of a 
new order were originally almost entirely due to prophetic oracles or at 
least to pronouncements which were sanctioned as prophetic and thus 
were considered sacred. This was true as late as the statutes of the 
Greek aisymnetai. Conformity thus depended on belief in the legiti- 
macy of the prophet. In times of strict traditionalism a new order — one 
actually regarded as new— was not possible without revelation unless it 
was claimed that it had always been valid though not yet rightly known, 
or that it had been obscured for a time and was now being restored to its 
rightful place, 

3. The purest type of legitimacy based on value-rationality is natural 
law. The influence of its logically deduced propositions upon actual con- 
duct has lagged far behind its ideal claims; that they have had some 
influence cannot be denied, however. Its propositions must be distin- 
guished from those of revealed, enacted, and traditional law. 

4. Today the most common form of legitimacy is the belief in legal- 
ity, the compliance with enactments which are formally correct and 
which have been made in the accustomed manner. In this respect, the 
distinction between an order derived From voluntary agreement and one 
which has been imposed is only relative. For so far as the agreement 
underlying the order is not unanimous, as in the past has often been 
held necessary for complete legitimacy, the order is actually imposed 
upon the minority; in this frequent case the order in a given group de- 
pends upon the acquiescence of those who hold different opinions. On 
the other hand, it is very common for minorities, by force or by the use 
of more ruthless and far-sighted methods, to impose an order which in 
the course of time comes to be regarded as legitimate by those who orig- 
inally resisted it. Insofar as the ballot is used as a legal means of altering 
an order, it is very common for the will of a minority to attain a formal 
majority and for the majority to submit. In this case majority rule is a 
mere illusion. The belief in the legality of an order as established by 
voluntary agreement is relatively ancient and is occasionally found 
among so-called primitive people; but in these cases it is almost always 
supplemented by the authority of oracles. 

5. So far as it is not derived merely from fear or from motives of 
expediency, a willingness to submit to an order imposed by one man or 
a small group, always implies a belief in the legitimate authority (Herr- 
schaftsgewali) of the source imposing it. This subject will be dealt with 
separately below : see sections 13 and 16 and ch. III. 

6. Submission to an order is almost always determined by a variety 
of interests and by a mixture of adherence to tradition and belief in 



3 8 BASIC SOCIOLOGICAL TERMS [ Ch. I 

legality, unless it is a case of entirely new regulations. In a very large 
proportion of cases, the actors subject to the order are of course not even 
aware how far it is a matter of custom, of convention, or of law, In such 
cases the sociologist must attempt to formulate the typical basis of valid- 
ity. 



8. Conflict, Competition, Selection 

A social relationship will be referred to as "conflict" (Kampf) insofar 
as action is oriented intentionally to carrying out the actor's own will 
against the resistance of the other party or parties. The term "peaceful" 
conflict will be applied to cases in which actual physical violence is not 
employed. A peaceful conflict is "competition" insofar as it consists in a 
formally peaceful attempt to attain control over opportunities and ad- 
vantages which are also desired by others. A competitive process is "regu- 
lated" competition to the extent that its ends and means are oriented to 
an order. The struggle, often latent, which takes place between human 
individuals or social types, for advantages and for survival, but without 
a meaningful mutual orientation in terms of -conflict, will be called "se- 
lection." Insofar as it is a matter of the relative opportunities of individ- 
uals during their own lifetime, it is "social selection"; insofar as it 
concerns differential chances for the survival of hereditary characteristics, 
"biological selection,". 

i. There are all manner of continuous transitions ranging from the i 
bloody type of conflict which, setting aside all rules, aims at the destruc- 
tion of the adversary, to the case of the battles of medieval chivalry, 
bound as they were to the strictest conventions, and to the strict regula- 
tions imposed on sport by the rules, of the game. A classic example of 
conventional regulation in war is the herald's call before the battle of 
Fontenoy: "Messieurs les Anglais, tirez Ies premiers/' 22 There are transi- 
tions such as that from unregulated competition of, let us say, suitors for 
. the favor of a woman to the competition for economic advantages in 
exchange relationships, bound as that is by the order governing the 
market, or to strictly regulated competitions for artistic awards or, finally, 
to the struggle for victory in election campaigns. The conceptual separa- 
tion of peaceful [from violent] conflict is justified by the quality of the 
means normal to it and the peculiar sociological consequences of its oc- 
currence (see ch. II and later). 

2. All typical struggles and modes of competition which take place 
on a large scale will lead, in the long run, despite the decisive im- 
portance in many individual cases of accidental factors and luck, to a 
selection of those who have in the higher degree, on the average, pos- 
sessed the personal qualities important to success. What qualities are 



8 ] Conflict, Competition, Selection 3 9 

important depends on the conditions in which the conflict or competi- 
tion takes place. It may be a matter of physical strength or of unscrupu- 
lous cunning, of the level of mental ability or mere lung power and 
skill in the technique of demagoguery, of loyalty to superiors or of 
ability to flatter the masses, of creative originality, or of adaptability, of 
qualities which are unusual, or of those which are possessed by the 
mediocre majority. Among the decisive conditions, it must not be for- 
gotten, belong the systems of order to which the behavior of the parties 
is oriented, whether traditionally, as a matter of rationally disinterested 
loyalty (wertrational'), or of expediency. Each type of order influences 
opportunities in the process of social selection differendy. 

Not every process of social selection is, in the present sense, a case of 
conflict. Social selection, on the contrary, means only in the first in- 
stance that certain types of behavior, and possibly of the corresponding 
personal qualities, lead more easily to success in the role of "lover," 
"husband," "member of parliament," "official," "contractor," "managing 
director," "successful business man," and so on. But the concept does not 
specify whether this differential advantage in selection for social success 
is brought to bear through conflict or not, neither does it specify 
whether the biological chances of survival of the type are affected one 
way or the other. 

It is only where there is a genuine competitive process that the term 
conflict will be used [i.e., where regulation is, in principle, possible]." 
It is only in the sense of "selection" that it seems, according to our 
experience, that conflict is empirically inevitable, and it is furthermore 
only in *he sense of biological selection that it is inevitable in principle- 
Selection is inevitable because apparently no way can be worked out of 
eliminating it completely. Even the most strictly pacific order can elimi- 
nate means of conflict and the objects of and impulses to conflict only 
partially. Other modes of conflict would come to the fore, possibly in 
processes of open competition. But even on the Utopian assumption that 
all competition were completely eliminated, conditions would still lead 
to a latent process of selection, biological or social, which would favor 
the types best adapted to the conditions, whether their relevant qualities- 
were mainly determined by heredity or by environment. On an empiri- 
cal level the elimination of conflict cannot go beyond a point which 
leaves room for some social selection, and in principle a process of bio- 
logical selection necessarily remains. 

3. From the struggle of individuals for personal advantages and sur- 
vival, it is naturally necessary to distinguish the "conflict" and the "selec- 
tion" of social relationships. It is only in a metaphorical sense that these 
concepts can be applied to the latter. For relationships exist only as 
individual actions with particular subjective meanings. Thus a process of 
selection or a conflict between them means only that one type of action - 
has in the course of time been displaced by another, whether it is action 
by the same persons or by others. This may occur in various ways. 
Human action may in the first place be consciously aimed to alter cer- 



4 O BASIC SOCIOLOGICAL TERMS [ Ch. I 

tain social relationships — that is, to alter the corresponding action — or it 
may be directed to the prevention of their development or continuance. 
Thus a "state" may be destroyed by war or revolution, or a conspiracy 
may be broken up by savage, suppression; prostitution may be suppressed 
by police action; "usurious" business practices, by denial of legal protec- 
tion or by penalties. Furthermore, social relationships may be influenced 
by the creation of differential advantages which favor one type over an- 
other. It is possible either for individuals or for organized groups to 
pursue such ends. Secondly, it may, in various, ways, be an unantici- 
pated consequence of a course of social action and its relevant conditions 
that certain types of social relationships (meaning, of course, the cor- 
responding actions) will be adversely affected in their opportunities to 
maintain themselves or to arise. All changes of natural and social condi- 
tions^have some sort of effect on the differential probabilities of survival 
of social relationships. Anyone is at liberty to speak in such cases of a 
process of "selection" of social relationships. For instance, he may say 
that among several states the "strongest," in the sense of the best 
"ad. - d," is victorious. It must, however, be kept in mind that this 
so-caiitd "selection" has nothing to do with the selection of types of 
human individuals in either the social or the biological sense. In every 
case it is necessary to inquire into the reasons which have led to a change 
in the chances of survival of one or another form of social action or 
social relationship, which have broken up a social relationship or per- 
mitted it to continue at the expense of other competing forms. The ex- 
planation of these processes involves so many factors that it does not 
seem expedient to employ a single term for them. When this is done, 
there is always a danger of introducing uncritical value- judgments into 
empirical investigation. There is, above all, a danger of being primarily 
concerned with justifying the success of an individual case. Since indi- 
vidual cases are often dependent on highly exceptional circumstances, 
they may be in a certain sense "fortuitous." In recent years there has 
been more than enough of this kind of argument. The fact that a given 
specific social relationship has been eliminated for reasons peculiar to a 
particular situation, proves nothing whatever about its "fitness to survive" 
in general terms. 



9. Communal and Associative Relationships 

A social relationship will be called "communal" (V ergemeinschaf- 
tung) if and so far as the orientation of social action — whether in the 
individual case, on the average, or in the pure type- — is based on a 
subjective feeling of the parties, whether affectual or traditional, that 
they belong together. 

A social relationship will be called "associative" QJergeselhchaftung) 
if and insofar as the orientation of social action within it rests on a 



o ] Communal and Associative Relationships 4 1 

rationally motivated adjustment of interests or a similarly motivated 
agreement, whether the basis of rational judgment be absolute values or 
reasons of expediency. It is especially common, though by no means 
inevitable, for the associative type of relationship to rest on a rational 
agreement by mutual consent. In that case the corresponding action is, 
at the pole of rationality, oriented either to a value-rational belief in one's 
own obligation, or to a rational (zweckrationale) expectation that the 
other party will live up to it. 

This terminology is similar to the distinction made by Ferdinand 
Tonnies in his pioneering work, Gemeinschaft und Gesellsckaft; but for 
his purposes, Tonnies has given this distinction a rather more specific 
meaning than would be convenient for purposes of the present discus- 
sion. 2 * The purest cases of associative relationships are: (a) rational free 
market exchange, which constitutes a compromise of opposed but com- 
plementary interests; (b) the pure voluntary association based on self- 
interest (Zweckverein'), a case of agreement as to a long-run course of 
action oriented purely to the promotion of specific ulterior interests, 
economic or other, of its members; (c) the voluntary association of indi- 
viduals motivated by an adherence to a set of common absolute values 
(Gesinnungsvere'm^), for example, the rational sect, insofar as it does not 
cultivate emotional and affective interests, but seeks only to serve a 
"cause." This last case, to be sure, seldom occurs in anything approach- 
ing the pure type. 

2. Communal relationships may rest on various types of affectual, 
emotional, or traditional bases. Examples are a religious brotherhood, an 
erotic relationship, a relation of persona] loyalty, a national community, 
the esprit de corps of a military unit. The type case is most conveniently 
illustrated by the family. But the great majority of social relationships 
has this characteristic to some degree, while being at the same time to 
some degree determined by associative factors. No matter how calculat- 
ing and hard-headed the ruling considerations in such a social relation- 
ship^ — -as that of a merchant to his customers — may be, it is quite pos- 
sible for it to involve emotional values which transcend its utilitarian 
significance. Every social relationship which goes beyond the pursuit of 
immediate common ends, which hence lasts for long periods, involves . 
relatively permanent social relationships between the same persons, and 
these cannot be exclusively confined to the technically necessary activi- 
ties. Hence in such cases as association in the same military unit, in the 
same school class, in the same workshop or office, there is always some 
tendency in this direction, although the degree, to he sure, varies enor- 
mously. Conversely, a social relationship which is normally considered 
primarily communal may involve action on the part of some or even all 
of the participants which is to an important degree oriented to consid- 
erations of expediency. There is, for instance, a wide variation in the 
extent to which the members of a family group feel a genuine com- 
munity of interests or, on the other hand, exploit the relationship for 



4 2 BASIC SOCIOLOGICAL TERMS [ Ch. J 

their own ends. The concept of communal relationship has been in- 
tentionally denned in very general terms and hence includes a very 
heterogeneous group of phenomena. 

3. The communal type of relationship is, according to the usual 
interpretation of its subjective meaning, the most radical antithesis of 
conflict. This should not, however, be allowed to obscure the fact that 
coercion of all sorts is a very common thing in even the most intimate of 
such communal relationships if one party is weaker in character than 
the other. Furthermore, a process of the selection of types leading to 
differences in opportunity and survival, goes on within these relation- 
ships just the same as anywhere else. Associative relationships, on the 
other hand, very often consist only in compromises between rival in- 
terests, where only a part of the occasion or means of conflict has been 
eliminated, or even an attempt has been made to do so. Hence, outside 
the area of compromise, the conflict of interests, with its attendant com- 
petition for supremacy, remains unchanged. Conflict and communal 
relationships are relative concepts. Conflict varies enormously according 
to the means, employed, especially whether they are violent or peaceful, 
and to the ruthlessness with which they are used. It has already been 
pointed out that any type of order governing social action in some way 
leaves room for a process of selection among various rival human types. 

4. It is by no means true that the existence of common qualities, a 
common situation, or common modes of behavior imply the existence of 
a communal social relationship. Thus, for instance, the possession of a 
common biological inheritance by virtue of which persons are classified 
as belonging to the same "race," naturally implies no sojS of communal 
social relationship between them. By restrictions on stjdal intercourse 
and on marriage persons may find themselves in a similar situation, a 
situation of isolation from the environment which imposes these distinc- 
tions. But even if they all react to this situation in the same way, this 
does not constitute a communal relationship. The latter does not even 
exist if they have a common "feeling" about this situation and its conse- 

Suences. It is only when this feeling leads to a mutual orientation of 
leir behavior to each other that a social relationship arises between 
them rather than of each to the environment Furthermore, it is only so 
far as this relationship involves feelings of belonging together that it is 
a "communal" relationship. In the case of the jews, for instance, except 
for Zionist circles and the action of certain associations promoting speci- 
fically Jewish interests, there thus exist communal relationships only to 
a relatively small extent; indeed, jews often repudiate the existence of a 
Jewish "community." 

A common language, which arises from a similarity of tradition 
through the family and the surrounding social enviror merit, facilitates 
mutual understanding, and thus the formation of all types of social rela- 
tionships, in the highest degree. But taken by itself it is not sufficient 
to constitute a communal relationship, rather, it facilitates intercourse 
within thegroups concerned, hence the development of associate rela- 
tionships. This takes place between individuals, not because they speak 



9 ] Communal and Associative Relationships 4 3 

the same language, but because they have other types of interests. 
Orientation to the rules of a common language is thus primarily impor- 
tant as a means of communication, not as the content of a social rela- 
tionship. It is only with the emergence of a consciousness of difference 
from third persons who speak a different language that the fact that 
two persons speak the same language, and in that respect share a com- 
mon situation, can lead them to a feeling of community and to modes of 
social organization consciously based on the sharing of the common 
language. 

Participation in a "market" is of still another kind. It encourages 
association between the exchanging parties and a social relationship, 
above all that of competition, between the individual participants who 
must mutually orient their action to each other. But no further modes 
of association develop except in cases where certain participants enter 
into agreements in order to better their competitive situations, or where 
they all agree on rules for the purpose of regulating transactions and of 
securing favorable general conditions for all. (It may further be re- 
marked that the market and the competitive economy resting on it form 
the most important type of the reciprocal determination of action in 
terms of pure self-interest, a type which is characteristic of modern eco- 
nomic life.) 



lo. Open and Closed Relationships 

A social relationship, regardless of whether it is communal or associ- 
ative in character, will be spoken of as "open" to outsiders if and inso- 
far as its system of order does not deny participation to anyone who 
wishes to join and is actually in a position to do so. A relationship will, 
on the other hand, bes called "closed" against outsiders, so tar as, accord- 
ing to its subjective meaning and its binding rules, participation of certain 
persons is excluded, limited, or subjected $0 conditions. Whether a rela- 
tionship is open or closed may be determined traditionally, afrectually, 
or rationally in terms of values or of expediency, It is especially likely to 
be closed, for rational reasons, in the following type of situation: a social 
relationship may provide the parties to it with opportunities for the 
satisfaction of spiritual or material interests, whether absolutely or instro- 
mentally, or whether it is achieved through co-operative action or by a 
compromise of interests. If the participants expect that the adnusskm of 
others will lead to an improvement of their situation, an improvement in 
degree, in kind, in the security or the value of the satisfaction, their inter- 
est will be in keeping the relationship open. If, on the other hand, their 
expectations are of improving their position by monopolistic tactics, their 
interest is in a closed relationship. 



4 4 BASIC SOCIOLOGICAL TERMS [ Ch. I 

There are various ways m which it is possible for a closed social rela- 
tionship to guarantee its monopolized advantages to the parties, (a) Such 
advantages may be left free to competitive struggle within the group; (b) 
they may be regulated or rationed in amount and kind, or (c) they may 
be appropriated by individuals or sub-groups on a permanent basis and 
become more or less inalienable. The last is a case of closure within, as 
well as against outsiders. Appropriated advantages will be called "rights." 
As determined by the relevant order, appropriation may be (i) for the 
benefit of the members of particular communal or associative groups (for 
instance, household groups), or (2) for the benefit of individuals. In 
the latter case, the individual may enjoy his rights on a purely personal 
basis or in such a way that in case of his death one or more other persons 
related to the holder of the right by birth (kinship), or by some other 
social relationship, may inherit the rights in question. Or the rights may 
pass to one or more individuals specifically designated by the holder. 
These are cases of hereditary appropriation. Finally, (3) it may be that 
the holder is more or less fully empowered to alienate his rights by volun- 
tary agreement, either to other specific persons or to anyone he chooses. 
This is alienable appropriation. A party to a closed social relationship 
will be called a "member"; in case his participation is regulated in such 
a way as to guarantee him appropriated advantages, a privileged mem- 
ber (Rechtsgenosse). Appropriated rights which are enjoyed by individ- 
uals through inheritance or by hereditary groups, whether communal or 
associative, will be called the "property" of the individual or of groups 
in question; and, insofar as they are alienable, "free" property. 

The apparently gratuitous tediousness involved in the elaborate def- 
inition of the above concepts is an example of the fact that we often 
neglect to think out clearly what seems to be obvious, because it is in- 
tuitively familiar. 

1. (a) Examples of communal relationships, which tend to be closed 
on a traditional basis, are those in which membership is determined by 
family relationship. 

(b) Personal emotional relationships are usually affectually closed. 
Examples are erotic relationships and, very commonly, relations of per- 
sonal loyalty. 

(c) Gosure on the basis of value-rational commitment to values is 
usual in groups sharing a common system of explicit religious belief. 

(d) Typical cases of rational closure on grounds of expediency are 
economic associations of a monopolistic or a plutocratic character. 

A few examples may be taken at random. Whether a group of peo- 
ple engaged in conversation is open or closed depends on its content. 
General conversation is apt to be open, as contrasted with intimate con- 
versation-ot the imparting of official information. Market relationships 



i o ] Of en and Closed Relationships 4 5 

are in most, or at least in many, cases essentially open. In the case of 
many relationships, both communal and associative, there is a tendency 
to shift from a phase of expansion to one of exclusiveness. Examples are 
the guilds and the democratic city-states of Antiquity and the Middle 
Ages. At times these groups sought to increase their membership in the 
interest of improving the security of their position of power by adequate 
numbers. At other times they restricted their membership to protect 
the value of their monopolistic position. The same phenomenon is not 
uncommon in monastic orders and religious sects which have passed 
from a stage of religious proselytizing to one of restriction in the interest 
of the maintenance of an ethical standard or for the protection of mate- 
rial interests. There is a similar close relationship between the extension 
of market relationships in the interest of increased turnover on the one 
hand, their monopolistic restriction on the other. The promotion of 
linguistic uniformity is today a natural result of the interests of pub- 
lishers and writers, as opposed to the earlier, not uncommon, tendency 
for status groups to maintain linguistic peculiarities or even for secret 
languages to emerge. 

2. Both the extent and the methods of regulation and exclusion in 
1 relation to outsiders may vary widely, so that the transition from a state 

of openness to one of regulation and closure is gradual. Various condi- 
tions of participation may be laid down; qualifying tests, a period of 
probation, requirement of possession of a share which can be purchased 
under certain conditions, election of new members by ballot, member- 
ship or eligibility by birth or by virtue of achievements open to anyone. 
Finally, in case of closure and the appropriation of rights within the 
group, participation may be dependent on the acquisition of an appro- 
priated right. There is * wide variety of different degrees of closure and 
of conditions of participation. Thus regulation and closure are relative 
concepts. There are all manner of gradual shadings as between an ex- 
clusive club, a theatrical audience the members of which have pur- 
chased tickets, and a party rally to which the largest possible number 
has been urged to come; similarly, from a church service open to the 
general public through the rituals of a limited sect to the mysteries of 
a secret cult. 

3. Similarly, closure within the group may also assume the most 
varied forms. Thus a caste, a guild, or a group of stock exchange 
brokers, which is closed to outsiders, may^Ilow to its members a per- 
fectly free competition for all the advantages which the group as a 
whole monopolizes for itself. Or it may assign every member strictly to 
the enjoyment of certain advantages, such as claims over customers 01 
particular business opportunities, for life or even on a hereditary basis. 
This is particularly characteristic of India. Similarly, a closed group of 
settlers (Markgenossensckaft) may allow its members free use of the 
resources of its area or may restrict them rigidly to a plot assigned to 
each individual household. A closed group of colonists may allow free 
use of the land or sanction and guarantee permanent appropriation of 



4 6 BASIC SOCIOLOGICAL TERMS [ Ch. I 

separate holdings. In such cases all conceivable transitional and inter- 
mediate forms can be found. Historically, the closure of eligibility to 
fiefs, benefices, and offices within the group, and the appropriation on 
the part of those enjoying them, have occurred in the most varied forms. 
Similarly, the establishment of rights to and possession of particr 1 
jobs on the part of workers may develop all the way from the "closed 
shop" to a right to a particular job. The first step in this development 
may be to prohibit the dismissal of a worker without the consent of the 
workers' representatives. The development of the "works councils" [in 
Germany after 1918] might be a first step in this direction, though it 
need not be." 

All the details must be reserved for the later analysis. The most 
extreme form of permanent appropriation is found in cases where par- 
ticular rights are guaranteed to an individual or to certain groups of 
them, such as households, clans, families, in such a way that it is speci- 
fied in the order either that, in case of death, the rights descend to specific 
heirs, or that the possessor is free to transfer them to any other person 
at will. Such a person thereby becomes a party to the social relation- 
ship so that, when appropriation has reached this extreme within the 
group, it becomes to that extent an open group in relation to outsiders. 
This is true so long as acquisition of membership is not subject to the 
ratification of the other, prior members. 

4. The principal motives for closure of a relationship are: (a) The 
maintenance of quality, which is often combined with the interest in 
prestige and the consequent opportunities to enjoy honor, and even 
profit, examples are communities of ascetics, monastic orders, especially, 
for instance, the Indian mendicant orders, religious sects like the Puri- 
tans, gitganized groups of warriors, of ntinisteriaUs and other tunc- , 
tionaries, organized citizen bodies as in the Greek States, craft guilds; 

(b) the contraction of advantages in relation to consumption needs 
Q'iahrungssfielTaum)** examples are monopolies of consumption, the 
most developed form of which is a self-subsistent village community; 

(c) the growing scarcity of opportunities for acquisition (Erwerksspiel- 
raum). This is found in trade monopolies such as guilds, the an- 
cient monopolies of fishing rights, and so on. Usually motive (a) is 
combined with (b) or (c). 



1 1 . The Imputation of Social Action: Representation and 
Mutual Responsibility 

■Within a social relationship, whether it is traditional or enacted, cer- 
tain kinds of action of each participant may be imputed to all others, in 
which case we speak o£ "mutually responsible members"; or the action 
ei certain members (the "representatives") may be attributed to the 



1 1 ] Re-presentation and Mutual Responsibility 4 7 

others (the "represented"). In both cases, the members will share the 
resulting advantages as well as the disadvantages. 

In accordance with the prevailing order, the power of representation 
may be (a) completely appropriated in all its forms — the case of self- 
appointed authority (JLigenvollmachi); (b) conferred in accordance with 
particular characteristics, permanently or for a limited term; (c) conferred 
by specific acts of the members or of outside persons, again permanently 
or for a limited term — the cases of "derived" or "delegated" powers. 

There are many different conditions which determine the ways in 
which social relationships, communal or associative, develop relations of 
mutual responsibility or of representation. In general terms, it is possible 
only to say that one of the most decisive is the extent to which the action 
of the group is oriented to violent conflict or to peaceful exchange as its 
end. Besides these, many special circumstances, which can only be dis- 
cussed in the detailed analysis, may be of crucial importance. It is not 
surprising that this development is least "conspicuous in groups which 
pursue purely ideal ends by peaceful means. Often the degree of closure 
against outsiders is c .osely related to the development of mutual responsi- 
bility or of representation. But this is by no means always the case. 

1. Imputation may in practice involve both active and passive mu- 
tual responsibility. All participants may be held responsible for the 
action of any one just as he himself is, and similarly may be entitled to 
enjoy any benefits resulting from this action. This responsibility may 
be owed to spirits or gods, that is, involve a religious orientation; or it 
may be responsibility to other human beings, as regulated by convention 
or by law. Examples of regulation by convention are blood revenge 
carried out against or with the help of members of the kin group, and 
reprisals against the inhabitants of the town or the country of the of- 
fender; of the legal type, formal punishment of relatives and members 
of the household or community, and personal liability of members of a 
household or of a commercial partnership for each other's debts. Mutual 
responsibility in relation to gods has also had very significant historical 
results. For instance, in the covenant of Israel with Jahveh, in early 
Christianity, and in the early Puritan community. 

On the other hand, the imputation may mean no more than that the 
participants in 3 closed social relationship, by virtue of the traditional 
or legal order, accept as legally binding a representative's decisions, 
especially over economic resources. (Examples are the "validity" of de- 
cisions by the executive committee of a voluntary association or by 
the responsible agent of a political or economic organization over re- 
sources which, as specified in the statutes, are meant to serve the group's 
purposes.) 

2. Mutual responsibility is typically found in the following cases: 
(a) In traditional, communal groups based on birth or th» sharing of a 



4 8 BASIC SOCIOLOGICAL TERMS [ Ch. I 

common life; for example, the household and the kinship unit; (b) 
in closed relationships which maintain by force a monopolized position 
and control over the corresponding benefits; the typical case is the 
political association, especially in the past, but also today, most strikingly 
in time of war; (c) in profit-oriented enterprises whose participants 
personally conduct the business; the type case is the business partner- 
ship; (d) in some cases, in labor associations; e.g., the [Russian] artel. 
Representation is most frequently found in associations devoted to 
specific purposes and in legally organized groups, especially when funds 
have been collected and must be administered in the interests of the 
group. This will be further discussed in the Sociology of Law. 

3. The power of representation is conferred according to characteris- 
tics when it goes by seniority or some other such rule. 

4. It is not possible to carry the analysis of this subject further in 
general terms; its elaboration must be reserved to the detailed investiga- 
tion. The most ancient and most universal phenomenon in this field is 
that of reprisal, meant either as revenge or as a means of gaining control 
of hostages, or some other kind of security against future injury. 



12. The Organization 

A social relationship which is either closed or limits the admission of 
outsiders will be called an organization (Verhand) when its regulations 
are enforced by specific individuals : a chief and, possibly, an administra- 
tive staff, which normally also has representative powers. The incumbency 
of a policy-making position or participation in the functions of the staff, 
constitute "executive powers" (,RegieTungsgewakten\ These may be ap- 
propriated, or they may be assigned, in accordan«*with the regulations 
of the organization, to specific persons or to individuals selected on the 
basis of specific characteristics or procedures. "Organized action" is (a) 
either the staff's action, which is legitimated by its executive or represent- 
ative powers and oriented to realizing the organization's order, or (b) 
the members' action as directed by the staff. 27 

1. It is terminologically indifferent whether the relationship is of a 
communal or associative character. It is sufficient for there to be a per- 
son or persons in authority — the head of a family, the executive com- 
mittee of an association, a managing director, a prince, a president, the 
head of a church — whose action is concerned with carrying into effect 
the order governing the organization. This criterion is decisive because 
it is not merely a matter of action which is oriented to an order, but 
which is specifically directed to its enforcement. Sociologically, this adds 
to the concept of a closed social relationship a further element, which is 
of far-reaching empirical importance. For by no means every closed com- 
munal or associative relationship is an organization. For instance,_ this is 



12 ] ^ The Organization 4 9 

not true of an erotic relationship or of a kinship group without a head. 

2. Whether or not an organization exists is entirely a matter of the 
presence of a person in authority, with or without an administrative staff. 
More precisely, it exists so far as there is a probability that certain persons 
wii' act in such a way as to carry out the order governing the organiza- 
tion; that is, that persons are present who can be counted on to act in 
this way whenever the occasion arises. For purposes of definition, it is 
indifferent what is the basis of the relevant expectation, whether it is a 
case of traditional, affectual or value-rational devotion (such as feudal 
fey'ty, loyalty to an officer or to a service). It may, on the other hand, 
be a matter of expediency, as, for instance, a pecuniary interest in the 
attached salary. Thus, for our purposes, the organization does not exist 
ap:\n from the probability that a course of action oriented in this way 
wiSi take place. If there is no probability of this type of action on the 
part of a particular group of persons or of a given individual, there is in 
shiest ten ns only a social relationship. On the other hand, so long as 
there is a probability of such action, the organization as a sociological 
phenomenon continues to exist, in spite of the fact that the specific 
individuals whose action is oriented to the order in question, may have 
been completely changed. The concept has been defined intentionally 
to include precisely this phenomenon. 

3. It is possible (a) that, in addition to the action of the adminis- 
trative staff itself or that which takes place under 'its direction, there 
may be other cases where action of the participants is intended to up- 
hold the authority of the order; for instance, contributions or 'liturgies," 
that is, certain types of personal services, such as jury service or military 
service. It is also possible (b) for the order to include norms to which it 
is expected that the action of the members of an organization will be 
oriented in respects other than those pertaining to the affairs of the 
organization as a unit. For instance, the law of the state includes rules 
governing private economic relations which are not concerned with the 
enforcement of the state's legal order as such, but with action in the 
service of private interests. This is true of most of the "civil" law. In 
the first case (a) one may speak of action oriented to organizational 
affairs (verbandsbezogenes Handeln); in the second (b) of action sub- 
ject to the organization's regulation (verbandsgeregeltes Handeln). It 
is only in the cases of the action of the administrative staff itself and of 
that deliberately directed by it that the term "organized action" (Ver- 
bandskandeln) will be used. Examples of such action would be partici- 
pation in any capacity in a war fought by a state, or a motion which is 
passed by the members at the behest of its executive committee, or a 
contract entered into by the person in authority, the validity of which is 
imposed ,m all members and for which they are held responsible (cf. 
section 11). Further, all administration of justice and administrative 
procedure belongs in this category (cf. section 14). 

An organization may He (a) autonomous or heteronomous, (b) auto- 
sphiilous cr heterocephalous. Autonomy means that the order governing 



J O BASIC SOCIOLOGICAL TERMS [ Ch, I 

the organization has been established by its own members on their own 
authority, regardless of how this has taken place in other respects. In the 
case of heteronomy, it has been imposed by an outside agency. Auto- 
cephaly means that the chief and his staff are selected according to the 
autonomous order of the organization itself, not, as in the case of hetero- 
cephaly, that they are appointed by outsiders. Again, this is regardless 
of any other aspects of the relationship. 

A case of heterocephaly is the appointment of the governors of the 
Canadian provinces by the central government of the Dominion. It is 
possible for a heterocephalous group to be autonomous and an auto- 
cephalous group to be heteronomous. It is also possible in both respects 
for an organization to have both characters at the same time in different ' 
spheres. The member-states of the German Empire, a federal state, were 
autocephalous. But in spite of this, within the sphere of authority of the 
Reich, they were heteronomous; whereas, within their own sphere, in 
such matters as religion and education, they were autonomous. Alsace- 
Lorraine was, under German jurisdiction, in a limited degree autono- 
mous, but at the same time heterocephalous in that the governor was 
appointed by the Kaiser. All those elements may be present in the same 
situation to some degree. An organization which is at the same time 
completely heteronomous and completely heterocephalous is usually 
best treated as a "part" of the more extensive group, as would ordinarily 
be done with a "regiment" as part of an army. But whether this is the 
case depends on the actual extent of independence in the orientation 
of action in the particular case. For terminological purposes, it is entirely 
a question of convenience. 



1 3 , Consensual and Imposed Order in Organizations 

An association's enacted order may be established in one of two ways: 
by voluntary agreement, or by being imposed and acquiesced in. The 
leadership in an organization may claim a legitimate right to impose new 
rules. The "constitution" of an organization is the empirically existing 
porbability, varying in extent, kind and conditions, that rules imposed 
by the leadership will be acceded to. The existing rules may specify that 
certain groups or sections of the members must consent, or at least have 
been heard. Besides this, there may be any number of other conditions. 

An organization's order may be imposed not only on its members hut 
also on certain non-members. This is especially true of persons who are 
linked to a given territorial area by virtue of residence, birth, or the per- 
formance of certain actions. In this case the order possesses "territorial 
validity" (Gebietsgeltung). An organization which imposes its order in 
principle on a territory will be called a "territorial organization" (Gebiets- 



13 ] Consensual and Imposed Order in Organizations 5 1 

verband). This usage will be employed regardless of how fat the claim 
to the validity of its order over its own members is also confined to 
matters pertaining to the area. (Such a limitation is possible 28 and indeed 
occurs to some extent.) 

1. In our terminology, an order is always "imposed" to the extent 
that it does not originate fromta voluntary personal agreement of all the 
individuals concerned. The concept of imposition hence includes "ma- 
jority rule," in that the minority must submit. For that reason there 
have been long periods when the legitimacy of majority rule has either 
not been recognized at all, or been held doubtful. This was true in the 
case of the Estates of the Middle Ages, and in very recent times, in 
the Russian obshchina. (This will he further discussed in the Sociology 
of Law and of Domination.) 

2. Even in cases where there is formally voluntary agreement, it is 
very common, as is generally known, for .there to be a large measure of 
imposition. (This is true of the obshchina.') In that case, it is he actual 
state of affairs which is decisive for sociological purposes. 

3. The concept of constitution made use of here is that also used by 
Lassalle. It is not the same as what is meant by a "written" constitution, 
or indeed by "constitution" in any sort of legal meaning. 29 The only 
relevant question for sociological purposes is when, for what purposes, 
and within what limits, or possibly under what special conditions (such 
as the approval of gods or priests or the consent of electors), the mem- 
bers of the organization will submit to the leadership. Furthermore, 
under what circumstances the administrative staff and the organized 
actions of the group will be at the leadership's disposal when it issues 
orders, in particular, new rules. 

4. The major cases of the territorial imposition of an order are 
criminal law and various other legal rules the applicability of which 
depends on whether the actor was resident, born, performed or com- 
pleted the action within the area controlled by a political organization. 
(Compare the concept of the "territorial corporate organization" — 
Gebietskorpersckaft — as used by Gierke and Preuss.) 30 



1 4 . Administrative and Regulative Order 

Rules which govern organized action constitute an administrative 
order (Verwaltungsordnung). Rules which govern other kinds of social 
action and thereby protect the actors' enjoyment of the resulting benefits 
will be called a regulative order (.Regulierungsordnung). So far as an 
organization is solely oriented to the first type, it will be called an ad- 
ministrative organization; so far as it is oriented to the second type, a 
regulative organization. 



5 1 BASIC SOCIOLOGICAL TERMS [ Ck. I 

i. It goes without saying that the majority of actual organizations 
partake of both characteristics. An example of a merely regulative or- 
ganization would be a theoretically conceivable state based purely on 
the upholding of public order (Rechtsstaat) and committed to absolute 
laissez-faire. (This would imply that even the control of the monetary 
system was left to private enterprise.) 

2. On the concept of organized action see above, sec. 12:3, Under 
the concept of administrative order would be included, all the rules 
which govern not only the action of the administrative'staff, but also 
that of the members in their direct relation to the organization; hence 
these rules pertain to those goals the pursuit of which the administrative 
order seeks to facilitate through prescribed and coordinated action on 
the part of the administrative staff and the members. In a completely 
communist economy almost all social action would be of this character. 
In an absolute laissez-faire state (Rechtsstaai) only the functions of 
judges, police authorities, jurors and soldiers, and activity as legislator 
and voter would be included. The distinction between administrative 
and regulative order coincides in its broad lines, though not always in 
detail, with the distinction between public and private law. (AH further 
details are treated in the Sociology of Law.) 



15. Enterprise, Formal Organization, Voluntary and 
Compulsory Association 

Continuous rational activity of a specified kind will be called an 
enter-prise; an association with a continuously and rationally operating 
staff will be called a formal organization. 

An organization which claims authority only over voluntary members 
will be called a voluntary association (Verein); an organization which 
imposes, within a specifiable sphere of operations, its order (with relative 
success) on all action conforming with certain criteria will be called a 
compulsory organization or association QAnstalt). 

1. The concept of the enterprise covers business conducted by 
political and ecclesiastic organizations as well as by voluntary associa- 
tions insofar as it has rational continuity. 

2. Voluntary as well as compulsory associations are organizations 
with rationally established rules. More correctly, insofar as an organiza- 
tion has rational)- established rules, it is either a voluntary or a com- 
pulsory association. Compulsory organizations are, above all, the state 
with its subsidiary heterocephalous organizations, and the church insofar 
as its order is rationally established. The order governing a compulsory 
association claims to be binding on all persons to whom the particular 
relevant criteria apply — such as birth, residence, or the use of certain 
facilities. It makes no difference whether the individual joined volun- 



15 ] _ Enterprise, Formal Organization, Association 5 3 

tarily; nor does it matter whether he has taken any part in establishing 
the order. It is thus a case of imposed order in the most definite sense. 
Compulsory associations are frequently territorial organizations. 

3. The distinction between voluntary and compulsory associations is 
relative in its empirical application. The rules of a voluntary association 
may affect the interests of non-members, and recognition of the validity 
of these rules may be imposed upon them by usurpation and the exer- 
cize of naked power, but also by legal regulation, as in the case of the 
law governing corporate securities. 

4. It is hardly necessary to emphasize that the concepts of voluntary 
and compulsory associations are by no means exhaustive of all conceiv- 
able types of organizations. Furthermore, they are to be thought of as 
polar types, as are sect and church in the religious sphere. 



1 6 . Power and Domination 

A. "Power" (Macfet) is the probability that one actor within a social 
relationship will be in a position to carry out his own will despite resist- 
ance, regardless of the basis on which this probability rests. 

B. "Domination" (Herrscfcaft)" is the probability that a command 
with a given specific content will be obeyed by a given group of persons. 
"Discipline" is the probability that by virtue of habituation a command 
will receive prompt and automatic obedience in stereotyped Forms, on 
the part of a given group of persons." 

1. The concept of power is sociologically amorphous. All conceiv- 
able qualities of a person and all conceivable combinations of circum- 
stances may put him in a position to impose his will in a given situa- 
tion. The sociological concept of domination must hence be more precise 
and can only mean the probability that a command will be obeyed. 

2, The concept of discipline includes the habituation characteristic 
of uncritical and unresisting mass obedience. 

C. The existence of domination turns only on the actual presence 
of one person successfully issuing orders to others; it does not necessarily 
imply either the existence of an administrative staff or, for that matter, 
of an organization. It is, however, uncommon to find it unrelated to at 
least one of these. A "ruling organization" (Herrschaftsverband') exists 
insofar as its members are subject "to domination by virtue of the estab- 
lished order. 

1. The* head of a household rules without an administrative staff. A 
Bedouin chief, who levies contributions from the caravans, persons and 
shipments which pass his stronghold, controls this group of changing 
individuals, who do not belong to the same organization, as soon and as 



5 4 BASIC SOCIOLOGICAL TERMS [ Ck. I 

long as they face the same situation; but to do this, he needs a follow- 
ing which, on the appropriate occasions, serves as his administrative staff 
in exercising the necessary compulsion. (However, it is theoretically 
conceivable that th'S type of control is exercised by a single individual.) 
2. If it possesses an administrative staff, an organization is always to 
some degree based on domination. But the concept is relative. In gen- 
eral, an effectively ruling organization is also an administrative one. The 
character of the organization is determined by a variety of factors: the 
mode in which tli^ administration is carried out, the character of the 
personnel, the objects over which it exercises control, and the extent of 
effective jurisdiction. The first two factors in particular are dependent in 
the highest degree on the way in which domination is legitimized (see 
ch. III). 



ly. Political and Hierocratic Organizations 

A "ruling organization" will be called "political" insofar as its exist* 
ence and order is continuously safeguarded within a given territorial area 
by the threat and application of physical force on the part of the adminis- 
trative staff. A compulsory political organization with continuous opera- 
tions (politischer Anstaltsbetrieb') will be called a "state" insofar as its 
administrative staff successfully upholds the claim to the monopoly of 
the legitimate use of physical force in the enforcement of its order. Social 
action, especially organized action, will be spoken of as "politically 
oriented" if it aims at exerting influence on the government of a political 
organization; especially at the appropriation, expropriation, redistribution 
or allocation of the powers of government. 

A "hierocratic organization" is an organization which enforces its 
order through psychic coercion by distributing or denying religious 
benefits ("hierocratic coercion"). A compulsory hierocratic organization 
will be called a "church" insofar as its administrative staff claims a 
monopoly of the legitimate use of hierocratic coercion. 

i. It goes without saying that the use of physical force CGewaltsam- 
fceit) is neither the sole, nor even the most usual, method of administra- 
tion of political organizations. On the contrary, their heads have em- 
ployed all conceivable means to bring about their ends. But, at the same 
time, the threat of force, and in the case of need its actual use, is the 
method which is specific to political organizations and is always the last 
resort when others have failed. Conversely, physical force is by no means 
limited to political groups even as a legitimate method of enforcement. 
It has been freely used by kinship groups, household groups, consocia- 
tions and, in the Middle Ages, under certain circumstances by all those 
entitled to bear arms. In addition to the fact that it uses, among other 



ij ] Political and Hierocratic Organizations 5 5 

means, physical force to enforce its system of order, the political organiza- 
tion is further characterized by the fact that the authority of its adminis- 
trative staff is claimed as binding within a territorial area and this claim 
is upheld by force. Whenever organizations which make use of force 
are also characterized by the claim to territorial jurisdiction, such as 
village communities or even some household groups, federations of 
guilds or of workers' associations ("soviets"), they are by definition to 
that extent political organizations. 

2. It is not possible to define a political organization, including the 
state, in terms of the end to which its action is devoted. All the way 
from provision for subsistence to the patronage of art, there is no con- 
ceivable end which some political association has not at some time pur- 
sued. And from the protection of personal security to the administration 
of justice, there is none which all have recognized. Thus it is possible 
to define the "political" character of an organization only in terms of the 
means peculiar to it, the use of force. This means is, however, in the 
above sense specific, and is indispensable to its character. It is even, 
under certain circumstances, elevated into an end in itself. 

This usage does not Exactly conform to everyday speech. But the lat- 
* ter is too inconsistent to be used for technical purposes. We speak of the 
foreign currency policy" of a central bank, the financial policy of an 
association, or the educational ■policy of a local authority, and mean the 
systematic treatment and conduct of particular affairs. It comes consid- 
erably closer to the present meaning when we distinguish the "political" 
aspect or implication of a question. Thus there is the "political" official, 
the "political" newspaper, the "political" revolution, the "political" 
club, the "political" party, and the "political" consequences of an 
action, as distinguished from others such as the economic, cultural, or 
religious aspect of the persons, affairs or processes in question. In this 
usage we generally mean by "political," things that have to do with 
relations of authority within what is, in the present terminology, a 
political organization, the state. The reference is to things which are 
likelyto uphold, to change or overthrow, to hinder or promote, these 
authority relations as distinguished from persons, things, and processes 
which have nothing to do with it. This usage thus seeks to bring out 
the common features of domination, the way it is exercised by the state, 
irrespective of the ends involved. Hence it is legitimate to claim that the 
definition put forward here is only a more precise formulation of what 
is meant in everyday usage in that it gives sharp emphasis to what is 
most characteristic of this -means: the actual or threatened use of force. 
It is, of course, true that everyday usage applies the term "political," 
not only to groups which are the direct agents of the legitimate use of 
force itself, but also to other, often wholly peaceful groups, which at- 
tempt to influence the activities of the political organization. It seems 
best for present purposes to distinguish this type of social action, "politi- 
cally oriented" action, from political action as such, the actual organized 
action of political groups. 



5 6 BASIC SOCIOLOGICAL TERMS [ Ch. 1 

3. Since the concept of the state has only in modern times reached 
its full development, it is best to define it in terms appropriate to the 
modern type of state, but at the same time, in terms which abstract from 
the values of the present day, since these are particularly subject to 
change. The primary formal characteristics of the modern state are as 
follows: It possesses an administrative and legal order subject to change 
by legislation, to which the organized activities of the administrative 
staff, which are also controlled by regulations, are oriented. This sys- 
tem of order claims binding authority, not only over the members of 
the state, the citizens, most of whom have obtained membership by 
birth, but also to a very large extent over all action taking place in the 
area of its jurisdiction. It is thus a compulsory organization with a ter- 
ritorial basis. Furthermore, today, the use of force is regarded as legiti- 
mate only so far as it is either permitted by the state or prescribed by it. 
Thus the right of a father t<? discipline his children is recognized — a 
survival of the former independent authority of the head of a household, 
which in the right to use force has sometimes extended to a power of 
life and death over children and slaves. The clsim of the modern state 
to monopolize the use of force is as essential to it as its character of 
compulsory jurisdiction and of continuous operation, 

4. In formulating the concept of a hierocratic organization, it is not 
possible to use the character of the religious benefits it offers, whether 
worldly or other-worldly, material or spiritual, as the decisive criterion. 
What is important is rather the fact that its control over these values can 
form the basis of a system of spiritual domination over human beings. 
What is most characteristic of the church, even in the common usage 
of the term, is the fact that it is a rational, compulsory association with 
continuous operation and that it claims a monopolistic authority. It is 
normal for a church to strive for complete control on a territorial basis 
and to attempt to set up the corresponding territorial or parochial or- 
ganization. So far as this takes place, the means by which this claim to 
monopoly is upheld will vary From case to case. But historically, its 
control over territorial areas has not been nearly so essential to the 
church as to political associations; and this is particularly true today. It 
is its character as a compulsory association, particularly the fact that one 
beomes a member of the church by birth, which distinguishes the 
church from a "sect." It is characteristic of the latter that it is a volun- 
tary association and admits onlv persons with specific religious qualifi- 
cations. (This subject will be further discussed in the Sociology of Reli- 
gion.) 



NOTES 

Unless otherwise noted, all notes in this chapter are by Talcott Parsons. 
For Parsons' exposition and critique of Weber's methodology, see his introduction 
to The Theory of Social and Economic Organization and his Structure of Social 
Action. 



Notes 5 7 

i. "Uber einige Kategoiien der verstehenden Soziologie," originally in 
Logos, IV, 1 91 3, 253ft; reprinted in GAzW, 427-74. However, the reader should 
be aware from the very beginning that Part Two below, the older and major body of 
the manuscript, follows the terminology of this essay. For some of the relevant ter- 
minology, see Appendix I. CR) 

2. It has not seemed advisable to attempt a rigorous use of a single English 
term whenever Weber employs Verstehen. "Understanding" has been most com- 
monly used. Other expressions such as "subjectively understandable," "interpreta- 
tion in subjective terms," "comprehension," etc., have been used from time to 
time as the context seemed to demand. 

3. In this series of definitions Weber employs several important terms which 
need discussion. In addition to Verstehen, which has already been commented 
upon, there ore four important ones: Dettten, Sinn, Handeln, and Verhalten. 
Deuten has generally been translated as "interpret." As used by Weber in this 
context it refers to the interpretation of subjective states of mind and the meanings 
which can be imputed as intended by an actor. Any other meaning of the word 
"interpretation" is irrelevant to Weber's discussion. The term Sinn has generally 
been translated as "meaning"; and its variations, particularly the corresponding 
adjectives, sinnhaft, sinnvoll, smnfremd, have been dealt with by appropriately 
modifying the term meaning. The reference here again is always to features of 
the content of subjective states of mind or of symbolic systems which are ulti- 
mately referable to such states of mind. 

The terms Handeln and Verhalten are directly related. Verhalten is the 
broader term referring to any mode of behavior of human individuals, regardless 
of the frame of reference in terms of which it is analysed. "Behavior" has seemed 
to be the most appropriate English equivalent. Handeln, on the other hand refers 
to the concrete phenomenon of human behavior only insofar as it is capable of 
"understanding." in Weber's technical sense, in terms of subjective categories. 
The most appropriate English equivalent has seemed to he "action." This corre- 
sponds to [Parsons'] usage in The Structure of Social Action and would seem 
to be fairly well established. "Conduct" is also similar and has sometimes been 
used. Deuten, Verstehen, and Sinn are thus applicable to human behavior only 
insofar as it constitutes action or conduct in this specific sense. 

4. Weber's text in Part One is organized in a manner frequently found in the 
German academic literature of his day, in that he first lays down certain funda- 
mental definitions and then proceeds to comment on them. These comments, which 
apparently were not intended to be "read" in the ordinary sense, but rather serve 
as reference material for the clarification and systematization of the theoretical 
concepts and their implications, are in the German edition printed in a smaller 
type; a convention which we have followed in the rest of Part One. However, while 
in most cases the comments are relatively brief, under the definitions of "sociology" 
and "social action" Weber wrote what are essentially methodological essays (sec. 
1 :a-b), which because of their length we have printed in the ordinary type. (R) 

5. Weber means by "pure type" what he himself generally called and what 
has come to be known in the literature about his methodology as the "ideal type." 
The reader may be referred for general orientation to Weber's own essay (to 
which he himself refers below), "Die 'Objektivitat* soziahvissenschaftlicher Er- 
kenntnis" (" 'Objectivity' in Social Science and Social Policy," in Max Weber: 
The Methodology of the Social Sciences. Edward Shils and Henry Finch, trans, 
and eds. (Glencoe: The Free Press, 1949), 50-113; originally published in 
AfS, vol. 19, 1904, reprinted in GAzW, 146-214); to two works of Alexander von 
Schelting, "Die logische Theorie der historischen Kultunvissenschaften von Max 



5 8 BASIC SOCIOLOGICAL TERMS [ Ck. I 

Weber," AfS, vol. 49, 1922, 623s and Max Webers Wissenschaftslehre, 1934; 
Talcott Parsons, The Structure of Social Action (New York: McGraw-Hill, 
i937)r ch. 16; Theodore Abel, Systematic Sociology in Germany, (New York: 
Columbia University Press, 1929). [See now also Raymond Aron, German Soci- 
ology, trans, by M. and T. Bottomore (New York: The Free Press of Glencoe, 
1964), based on 2nd French ed. of 1950.] 

6. This is an imperfect rendering of the German term Evidenz, for which, 
unfortunately, there is no good English equivalent. It has hence been rendered in 
a number of different ways, varying with the particular context in which it 
occurs. The primary meaning refers to the basis on which a scientist or thinker 
becomes satisfied of the certainty or acceptability o£ a proposition. As Weber him- 
self points out, there are two primary aspects of this. On the one hand a conclu- 
sion can be "seen" to follow from given premises by virtue of logical, mathemat- 
ical, or possibly other modes of meaningful relation. In this sense one "sees" the 
solution of an arithmetical problem or the correctness of the proof of a geometrical 
theorem. The other aspect is concerned with empirical observation. If an act of 
observation is competently performed, in a similar sense one "sees" the truth of 
the relevant descriptive proposition. The term Evidenz does not refer to the process 
of observing, but to the quality of its result, by virtue of which the observer feels 
justified in affirming a given statement. Hence "certainty" has seemed a suitable 
translation in some contexts, "clarity" in others, "accuracy" in still others. The 
term "intuition" is not usable because it refers to the process rather than to he 
result. 

7. Weber here uses the term aktuelles Verstehen, which he contrasts with 
erklarendes Verstehen. The latter he also refers to as motivationsmdssig. "Aktu- 
ell" in this context has been translated as "observational." It is clear from Weber's 
discussion that the primary criterion is the possibility of deriving the meaning of 
an act or symbolic expression from immediate observation without reference to any 
broader context. In erklarendes Verstehen, on the other hand, the particular act 
must be placed in a broader context of meaning involving facts which cannot be 
derived from immediate observation of a particular act or expression. , 

8. The German term is Sinnzusammenhang. It refers to aplurality of ele- 
ments which form a coherent whole on the level of meaning. There are several 
possible modes of meaningful relation between such elements, such as logical con- 
sistency, the esthetic harmony of a style, or the appropriateness of means to an 
end. In any case, however, a Sinnzusammenhang must fc» distinguished from a 
system of elements which are causally interdependent. There seems to be no sin- 
gle English term or phrase which is always adequate. According to variations in 
context, "context of meaning," "complex of meaning," and sometimes "meaning- 
ful system" have been employed. 

9. The German is gemcinter Sinn. Weber departs from ordinary usage not 
only in broadening the meaning of this conception. As he states at the end of the 
present methodological discussion, he does not restrict the use of this concept to 
cases where a clear self-conscious awareness of such meaning can be reasonably 
attributed to every individual actor. Essentially, what Weber is doing is to formu- 
late an operational concept. The question is not whether in a sense obvious to the 
ordinary person such an intended meaning "really exists," but whether the con- 
cept is capable of providing a logical framework within which scientifically impor- 
tant observations can be made. The test of validity of the observations is not 
whether their object is immediately clear to common sense, but whether the results 
of these technical observations can be satisfactorily organized and related to those 
of others in a systematic body of knowledge. 



Notes 5 9 

io. The above pa Mage is an exceedingly compact statement of Weber's theory 
of the logical condition* of proof of causal relationship. He developed this most 
fully in bis ewy on " 'Objectivity' in Social Science . . . ," op. tit. It is also dis- 
cussed in Other p*rt* of GAzW. The best and fullest secondary discussion is to 
be found in Scbelting'* book. Max Wehers Wissenschaftsiehre. There is a briefer 
discussion in Parsons Structure of Social Action, cb. 16. 

ii. See Eduard Meyer, Geschichte des Altertums, i<- si, vol. Ill, 420, 444fF, 
and Weber's essay on "Critical Studies in the Logic of the Cultural Sciences," in 
Shils and Finch, eds., op. tit., 1 1 3-188; also in GAzW, 21 5-90. (R) 

1 2. The expression sinnhafte AdSquanz is one of the most difficult of Weber's 
technical terms to translate. In most places the cumbrous phrase "adequacy on the 
level of meaning" has had to be employed. It should be clear from the progress of 
the discussion that what Weber refers to is a satisfying level of knowledge for the 

Particular purposes of the subjective state of mind of the actor or actors. He is, 
owever, careful to point out that causal adequacy involves in addition to this a 
satisfactory correspondence between the results of observations from the subjec- 
tive point of view and from the objective; that is, observations of the overt course 
of action which can be described without reference to the state of mind of the 
actor. For a discussion of the methodological problem involved here, see Structure 
of Social Action, chaps. II and V. 

r3. This is the first occurrence in Weber's text of the term Chance which he 
uses very frequently. It is here translated by "probability," because he uses it as 
interchangeable with Wahrschein1ichke.it. As the term "probability" is used in a 
technical mathematical and statistical sense, however, it implies the possibility of 
numerical statement. In most of the cases where Weber uses Chance this is out of 
the question. It is, however, possible to speak in terms of higher and lower de- 
grees of probability. To avoid confusion with the technical mathematical concept, 
the term "likelihood" will often be used in the translation. It is by means of this 
concept that Weber, in a biddy ingenious way, has bridged the gap between the 
interpretation of meaning and the inevitably more complex facts of overt action. 

14. The term "reincation" as used by Professor Morris Cohen in his book, 
Reason and Nature, seems to fit Weber's meaning exactly. A concept or system of 
concepts, which critical analysis can show to be abstract, is "reified" when it is 
used naively as though it provided an adequate total description of the concrete 
phenomenon in question. The fallacy of ' reification" is virtually another name 
tor what Professor Whitehead has called "the fallacy of misplaced concreteness.'' 
See his Science and the Modern World. 

15. See August Weismann, Die AUmacht der Naturzuchtung (Jena: Fischer, 
1893); his opponent was probably Alexander Gotte 0840-1922), author of 
Lekrbuch der Zoologie (Leipzig: Engelmann, 1902) and of Tierkunde (Stras- 
bourg: Trttbner, 1904). (R) 

16. In the above classification as well as in some of those which follow, 
the terminology is not standardized either in German or in English. Hence, 
just as there is a certain arbitrariness in Weber's definitions, the same is true of 
any corresponding set of definitions in English. It should be kept in mind that 
all of them are modes of orientation of action to patterns which contain a 
normative element. "Usage" has seemed to be the most appropriate translation 
of Branch since, according to Weber's own definition, the principal criterion is 
that "it is done to conform with the pattern." There would also seem to be 
good precedent for the translation of Sitte by "custom." The contrast with 
fashion, which Weber takes up in his first comment, is essentially the same in 
both languages. The term Interessenlage presents greater difficulty. It involves 



6 O BASIC SOCIOLOGICAL TERMS { Ch. 1 

two components: the motivation in terms of self-interest and orientation to the 
opportunities presented by the situation. It has not seemed possible to use any 
single term to convey this meaning in English and hence, a more roundabout 
expression has had to be resorted to. 

17. The term "convention" in Weber's usage is narrower than Branch. The 
difference consists in the fact that a normative pattern to which action is 
oriented is conventional only insofar as it is regarded as part of a legitimate 
order, whereas the question of moral obligation to conformity which legitimacy 
implies is not involved in "usage." The distinction is closely related to that of 
W. G. Sumner between "mores" and "folkways." It has seemed best to retain 
the English term closest to Weber's own. 

18. It is, in a sense, the empirical reference of this statement which consti- 
tutes the central theme of Weber's series of studies in the Sociology of Religion. 
Insofar as he finds it possible to attribute importance to "ideas" in the determina- - 
tion of action, the most important differences between systems of ideas are not 
so much those in the degree of ration a iiza tion as in the direction which the 
process of rationalization in each case has taken. This series of studies was left 
uncompleted at his death, but all the material which was in a condition fit for 
publication has been assembled in the three volumes of the Gesammelte 
Aufsatze zur Religionssoziologie CGAzRS}. 

19. It has'not been possible to identify this reference of Weber's. It refers 
most probably to a projected conclusion which was never written, 

20. The reader may readily become confused as to the basis of the following 
classification, as compared with that presented in sec. 7. The first classification 
is one of motives for maintaining a legitimate order in force, whereas the second 
is one of motives for attributing legitimacy to the order. This explains the in- 
clusion of self-interested motives in the 6rst classification, but not in the second. 
It is quite possible, for instance, for irreligious persons to support the doctrine 
of the divine right of kings, because they fee! that the breakdown of an order 
which depends on this would have undesirable consequences. This is not, how- 
ever, a possible motive on which to base a direct" sense of pcisona! mora! obliga- 
tion to conform with the order. < 

21. Rheinstein's emendation, see his edition, op. cii., 7. (R) 

22. In 1745, Maurice de Saxc defeated the British under the Duke of 
Cumberland even though he sustained heavy losses in the one-sided opening 
round, (R) 

23. A cautionary note is in order here: The definitions of conflict or struggle 
(K<wnpf) and of power (section 16) have often been wrenched out of context 
in discussions of Weber as a "power politician." The present section, however, 
defines the varieties of con flic t, from the extreme case of violent, unlimited 3nd 
unregulated struggle to peaceful and regulated competition. In fact, mere con- 
flict and power are not Weber's major concern, which is rather with variously 
regulated and legitimated actions and their group context. (R) 

24. As Weber goes- on to explain, he uses Vergemeinschaftung and Ver«c- 
selhchaftung in 3 continuous rather than a dichotomous sense, and thus main- 
tains his critical distance from Tonnies' paired contrast of Gemeinschuft and 
Geselhchaft. Similarly, Weber rejected Gierke's invidious contrast between 
"cold-blooded" Roman law and "communal" Germanic law, even though he 
started his career as a Germanist rather than a Romanist (R) 

25. This is a reference to the Betriehsrcite which were formed in German 
industrial plants during the Revolution of 1918-19 and were recognized in the 
Weimar Constitution as entitled to representation in the Federal Economic 



Notes 6 i 

Council. The standard work in English is W. C. Guillebaud, The Works 
Council. A German Experiment in Industrial Democracy (Cambridge University 
Press, 1928), 

26. Weber's term here is Nahrungsspielraum. The concept refets to the 
scope of economic resources and opportunities on which the standard of living 
of an individual or a group is dependent.. By contrast with this, Erwerbxfielrttum 
is a similar scope of resources and economic opportunities seen from the point 
of view of their possible role as sources of profit. The basic distinction implied in 
this contrast is of central importance to Weber's analysis later on (see chapter 
II, sec. 1 off.). 

27. The term "corporate group" for Verband, as used by Parsons, is. open 
to misunderstandings on both the common-sense and the historical level since 
Weber's term includes more than cither economic groups or self-governing, often 
professional bodies. Parsons' alternative term, "organized group," has been re- 
tained. The term "organization" should be understood literally in the sense of a 
group with an "organ," but not necessarily of a rationalized kind* the latter would 
make it an "enterprise" or a "formal organization" (see sec. 15). — For Weber's 
older definition of Verband and Verbandshandeln see Appendix I. (R) 

28. The concept "objective possibility" (ofc/eJttive Moglichkeit) plays an 
important technical role in Weber's methodological studies. According to bis 
usage, a thing is "objectively possible" if it "makes sense" to conceive it as an 
empirically existing entity. It is a question of conforming with the formal, 
logical conditions. The question whether a phenomenon which is in this sense 
"objectively possible" will actually be found with any significant degree of 
probability or approximation, is a logically distinct question. 

29. See Ferdinand I.assallc, "Ober Verfassungswesen" (1862), in Gesam- 
melte Beden und Schriften, Eduard Bernstein, ed. (Berlin: Cassirer, 19:9), 7-62. 

00 

30. See Otto Gierke, Geschichte des deutschen Korperschaftsbegriffs (Berlin-. 
Weidmann, 1873), 829; Hugo Preuss, Gemeinde, Staat, Reich ah Gcbii tshorper- 
schaft (1889). Preuss, one of Gierke's pupils, exerted decisive influence on the 
making of the Weimar constitution, to which Weber also contributed at about 
the same time that he worked intermittently on these definitions. ( W and R) 

. 31. In his translation Parsons pointed out that "the term Herrschaft has no 
satisfactory English equivalent. The term "imperative control," however, as used 
by N. S. Timashcff in his Introduction to the Sociology of Law is close to 
Weber's meaning" (Parsons, ed., of. cit., 152). Therefore, he borrowed 1 this term 
"for the most general purposes." At a later time. Parsons indicated that he now 
preferred the term "leadership," For more specific purposes, however, he used the 
, term "authority." In objecting to "domination" (as used by Bendix and Rhein- 
stein/Shils) Parsons noted: "It is true to be sure that the term Herrschaft, which 
in its most general meaning I should now translate as "leadership," implies that 
a leader has power over his followers. But "domination" suggests that this fact, 
rather than the integration of the collectivity, in the interest of effective func- 
tioning (especially the integration of the crucial Verband or corporate group), is 
the critical factor from Weber's point of view. I do not believe that the former 
interpretation represents the main trend of Weber's thought, although he wis in 
certain respects a "realist" m the analysis of power. The preferable inttrpietation, 
as I see it, is represented especially by his tremendous emphasis on the importance 
of legitimation. I should therefore wish to stick to my own decision to translate 
legitime Herrschaft, which for Weber was overwhelmingly the most significant 
case for general structural analysis, as authority.'" . Si'C T Parsons' review article 



6 2 BASIC SOCIOLOGICAL TERMS [ Ch. I 

of Reinhard Bendix, Max Weben An baeP^ctttci Portrait, in American Soda- 
logical "Review, 15:5, i960, 752.) 

I prefer the term domination in this section because Weber stresses die fact 
of mem compliance with a command, which may be due to habit, a belief in 
legitimacy, or to considerations of expediency. However, Weber emphasizes here 
as later that, in addition to the willingness of subjects to comply with a command, 
there is usually a staff, which again may act on the basis or habit, legitimacy or 
self-interest. Sociologically, a Herrschaft is a structure of superordination and 
subordination, of leaders and led, rulers and ruled; it is based on a variety of 
motives and of means of enforcement. In ch. Ill, Weber presents a typology of 
legitimate Hemchaft where the term "authority" is indeed feasible. However, in 
ch. X, he deals extensively with both faces of Herrschaft- legitimacy and force. It 
should he clear to the reader that both "domination'' and "authority" are "cor- 
rect'* although each stresses a different component of Hemcfutft Moreover, in 
Part Two a HetTscJwft is quite specifically the medieval setgnewie or manor or simi- 
lar structures in patrimonial regimes. This is also the historical derivation of the 
term. For a major, and sociologically valuable, study see Otto Brunnej, Land und 
Herrsckaft: Grundfragen der temUmalen Verfassvngsgnckichu Ottmreichs hn 
MitteUdier (Vienna, 1950). (R) .' ■' 

31. For the earlier discussion of discipline, see Part Two, ch. XrV:«ii:i, "The 
Meaningof Discipline." / 

33. The German is DevisenpoUtik, Translation in this context is made more 
difficult by the fact that the German language does not distinguish between 
"politics" and "policy," Politik having both meanings. The remarks which Weber 
makes about various kinds of policy would have been unnecessary, had he written 
originally in English. . 



CHAPTER XI 

SOCIOLOGICAL CATEGORIES 
OF ECONOMIC ACTION 



Prefatory Note 

' What foBoWtis not intended in any sense to be "economic theory." 
Rather, it consistt&nly in an attempt to define certain concepts which 
are frequently used and to analyze certain of the simplest sociological 
relationships in the economic sphere. As in the first chapter, the procedure 
here has-been determined entirely by consideratkMB of convenience. It 
has proved possible entirely to avoid the controversial concept of "value." 1 
The usage here, in the relevant sections on the division of labor [see sec. 
isff.], has deviated from the tctminclogy of Karl Bucher only so far as 
seemed necessary for the purposes of me present undertaking. For the 
present all questions of dynamic process will be left out of account. 

r. The Concept of Economic* Action 

Action will be said to be "economicaHy oriented" so far as, according 
to its subjective meaning, it is concerned with the satisfaction of a desire 
, for "utilities" (JNutdetsttmgen), "Economic action" QVirtschaften) is 
any peaceful exercise of an. actor's control over resources which is in its 
main impulse oriented towards economic ends. "Rational economic ac- 
tion" requires instrumental rationality in this orientation, that is, deliber- 
ate planning. We will call autocephalous economic action an "economy" 
(Wirtschaft), and an organized system of continuous economic action 
an "economic establishment" ( Wirtschaftsbetrieb^. 

i. It was pointed out above (ch. I, sec. i:b) that economic ac- 
tion as such need not be social action. 

[6 3 1 



64 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II 

Xy The definition of economic action must be as general as possible 
and must bring out the fact that a! I "economic" processes and objects are 
characterized as such entirely by the meaning they have for human ac- 
tion in such roles as ends, means, obstacles, and by-products. It is not, 
however, permissible to express this by saying, as is sometimes done, that 
economic action is a "psychic" phenomenon. The production of goods, 
prices, or even the "subjective valuation" of goods, if they are empirical 
processes, are far from being merely psychic phenomena. But underlying 
this misleading phrase is a correct insight. It is a fact that these phenom- 
ena have a peculiar type of subjective meaning. This alone defines the 
unity of the corresponding processes, and this alone makes them accessi- 
ble to subjective interpretation. 

The definition of "economic action" must, furthermore, be formu- 
lated in such a way as to include the operation of a modem business en- 
terprise fun for profit. Hence the definition cannot be based directly on 
"consumption needs" and the "satisfaction" of these needs, but must, 
rather, start out on the one hand from the fact that there is a desire (de- 
mand) for utilities (which is true even in the case of orientation to 
purely monetary gains), and on the other hand from the fact that •pro- 
vision is being made to furnish the supplies to meet this demand (which 
is true even in the most primitive economy merely "satisfying needs," 
and regardless of how primitive and frozen in tradition the methods of 
this provision are). 

3. As distinguished from "economic action" as such, the term "eco- 
nomically oriented action" will be applied to two types: (a) every action 
which, though primarily oriented to other ends, takes account, in the 
pursuit of them, of economic considerations; that is, of the consciously 
recognized necessity for economic prudence. Or (b) that which, though 
primarily oriented to economic ends, makes use of physical force as a^ 
means. It thus includes all primarily non-economic action and all non- 
peaceful action which is influenced by economic considerations. "Eco- 
nomic action", thus is a conscious, primary orientation to economic con- 
siderations. It must he conscious, for what matters is not the objective 
necessity of making economic provision, but the belief that is is neces- 
sary. Robert Liefmann has rightly laid emphasis on the subjective un- 
derstandable orientation of action which makes it economic action. He 
is not, however, correct in attributing the contrary view to al! other au- 
thors. 2 

4. Every type of action, including the use of violence, may he eco- 
nomically oriented. This is true, for instance, of war-h'ke action, such as 
marauding expeditions and trade wars. Franz Oppenheimer, in particu- 
lar, has rightly distinguished "economic" means from "political" means. 3 
It is essential to distinguish the latter from economic action. The use of 
force is unquestionablv very strongly opposed to the spirit of economic ac- 
quisition in the usual sense. Hence the term "economic action" will not 
be applied to the direct appropriation of goods by force and the direct 
coercion of the other party by threats of force. It goes without saying, at 



i ] _ The Concept of Economic Action 6 5 

the same time, that exchange is not the only economic means, though it 
is one of the most important. Furthermore, the formally peaceful provi- 
sion for the means and the success of a projected exercise of force, as in 
the case of armament production and economic organization for war, is 
just as much economic action as any other. 

Every rational course of political action is economically oriented with 
respect to provision for the necessary means, and it is always possible for 
political action to serve the interest of economic ends. Similarly, though 
it is not necessarily true of every economic system, certainly the modem 
economic order under modern conditions could not continue if its con- 
trol of resources were not upheld by the legal compulsion of the state; 
that is, if its formally "legal" rights were not upheld by the threat of 
force. But the fact that an economic system is thus dependent on protec- 
tion by force, does not mean that it is itself an example of the use of 
force. 

How entirely untenable it is to maintain that the economy, however 
defined, is only a means, by contrast, for instance, with the state, be- 
comes evident from the fact that it is possible to define the state itself 
.only in terms of the means which it today monopolizes, namely, the use 
of force. If anything, the most essential aspect of economic action for 

Ectical purposes is the prudent choice between ends. This choice is, 
vever, oriented to the scarcity of the means which are available or 
could be procured for these various ends. 

5. Not every type of action which is rational in its choice of means 
will be called "rational economic action," or even "economic action" in 
any sense; in particular, the term "economy" will be distinguished from 
that of "technology."* The "technique" of an action refers to the means 
employed as opposed to the meaning or end to which the action is, in 
the last analysis, oriented. "Rational" technique is a choice of means 
which is consciously and systematically oriented to the experience and 
reflection of the actor, which consists, at the highest level of rationality, 
in scientific knowledge. What is concretely to be treated as a "techni- 
nique" is thus variable. The ultimate meaning of a concrete act may, 
seen in the total context of action, be of a "technical" order; that is, it 
, may be significant only as a means in this broader context. Then the 
"meaning" of the concrete act (viewed from the larger context) lies in 
its technical function; and,- conversely, the means which are applied in 
order to accomplish this are its "techniques." In this sense there are 
techniques of every conceivable type of action, techniques of prayer, of 
asceticism, of thought and research, of memorizing, of education, of ex- 
ercising political or hierocratic domination, of administration, of making 
love, of making war, of musical performances, of sculpture and painting, 
of arriving at legal decisions. AH these are capable of the widest varia- 
tion in degree of rationality. The presence of a "technical question" al- 
ways means that there is some doubt over the choice of the most rational 
means to an end. Among others, the standard of rationality for a tech- 
nique may be the famous principle of "least effort," the achievement of 



66 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

an optimum in. the relation between the result and the means to be ex- 
pended on it (and not the attainment of a result with the absolute min- 
imum of means). Seemingly the same principle, of course, applies to 
economic action — or to any type of rational action. But there it has a 
different meaning. As long as the action is purely "technical" in the pres- 
ent sense, it is oriented only to the selection of the means which, with 
equal quality, certainty, and permanence of the result, are comparatively 
most "economical" of effort in the attainment of a given end; compara- 
tively, that is, insofar as there are at all directly comparable expenditures 
of means in different methods of achieving the end. The end itself is 
accepted as beyond question, and a purely technical consideration ig- 
nores other wants. Thus, in a question of whether to make a technically 
necessary part of a machine out of iron or platinum, a decision on tech- 
nical grounds alone would, so long as the requisite quantities of both 
metals for their particular purpose were available, consider only which 
of the two would in this case best bring about the given result and 
would at the same time minimize the other comparable expenditure of 
resources, such as labor. But once consideration is extended to take ac- 
count of the relative scarcity of iron and platinum in relation to their 
potential uses, as today every technician is accustomed to do even in the 
chemical laboratory, the action is ho longer in the present sense purely 
technical, but also economic. From the economic point of view, "techni- 
cal" questions always involve the consideration of "costs." This is a 
question of crucial importance for economic purposes and in this con- 
text always takes the form of asking what would be the effect on the 
satisfaction of other wants if this particular means were not used for 
satisfaction of one given want. The "other wants" may be qualitatively 
different present wants or qualitatively identical future wants, (A simi- - 
Iar position is taken by Friedrich von Gottl-Ottlilienfeld in Grundriss 
der SoziaUfkonomik, Part II, 2; an extensive and very good discussion of 
this issue in R. Liefmann, Grundsatze der VolkswirtschaftslehTe, vol. I 
(3rd ed.), p. 3iiff. Any attempt to reduce all means to "ultimate ex- 
penditures of labor" is erroneous.) 

For the answer to the question, what is, in comparative terms, the 
"cost" of using various means for a given technical end, depends in the 
last analysts on their potential usefulness as means to other ends. This is 
particularly true of labor. A technical problem in the present sense is, 
for instance, that of what equipment is necessary in order to move loads 
of a particular kind or in order to raise mineral products from a given 
depth in a mine, and which of the alternatives is the most "suited," that 
is, among other things, which achieves a given degree of success with 
the least expenditure of effort. It is, on the other hand, an economic 
problem whether, on the assumption of a market economy, these expen- 
ditures will pay off in terms of money obtained through the sale of the 
goods; or, -on the assumption of a planned economy, whether the nec- 
essary labor and other means of production can be provided without 
damage to the satisfaction of other wants held to be more urgent. In 
both cases, it is a problem of the comparison of ends. Economic action 



] The Concept of Economic Action 6 7 

is primarily oriented to the problem of choosing the end to which a 
thing shall be applied; technology, to the problem, given the end, of 
choosing the appropriate means. For purposes of the theoretical (not, of 
course, the practical) definition of technical rationality it is wholly in- 
different whether the product of a technical process is in any sense use- 
ful. In the present terminology we can conceive of a rational technique 
for achieving ends which no one desires. It would, for instance, be possi- 
ble, as a kind of technical amusement, to apply all the most modern 
methods to the production of atmospheric air. And no one could take 
the slightest exception to the purely technical rationality of the action. 
Economically, on the other hand, the procedure would under normal 
circumstances be clearly irrational because there would be no demand 
for the product. (On all this, compare v. Gottl-OttHHenfeld, op. cit.) 

The fact that what is called the technological development of mod- 
em times has been so largely oriented economically to profit-making is 
one of the fundamental facts of the history of technology. But however 
fundamental it has been, this economic orientation has by no means 
stood alone in shaping the development of technology. In addition, a 
part has been played by the games and cogitations of impractical ideolo- i 

gists, a part by otherworldly interests and all sorts of fantasies, a part by 
preoccupation with artistic problems, and by various other non.-economic 
motives. None the less, the main emphasis at all times, and especially 
the present, has lain in the economic determination of technological 
development. Had not rational calculation formed the basis of economic 
activity, had there not been certain very particular conditions in its 
economic background, rational technology could never haw come into 
existence. 

The fact that the aspects of economic orientation which distinguish 
it from technology were not explicitly brought into the initial definition, 
is a consequence of the sociological starting point. From a sociological 
point of view, the weighing of alternative ends in relation to each other 
and to costs is a consequence of "continuity." This is true at least so far 
as costs mean something other than altogether giving up one end in ■■... 

favor of more urgent ones. An economic, theory, on the other hand, vZ 

would do well to emphasize this criterion from the start. 

6. It is essential to include the criterion of power of control and dis- 
posal (Verfugungsgewatt)* in the sociological concept of economic ac- 
tion, if for no other reason than that at least a modern market economy 
CErwerbswirtschaft) essentially consists in a complete network of ex- . 
change contracts, that is, in deliberate planned acquisitions of powers of 
control and disposal. This, in such an economy, Is the principal source 
of the relation of economic action to the law. But any other type of or- 
ganization of economic activities would involve some kind of de facte 
distribution of powers of control and disposal, however different its un- «. 
derlying principles might be from those of the modem private enterprise 
economy with its legal protection of such powers held by autonomous 
and autocephalous economic units. Either the central authority, as in the 
case of socialism, or the subsidiary parts, as m anarchism, must be able 



6 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11 

to count on having some kind of control over the necessary services of 
labor and of the means of production. It is possible to obscure this fact 
by verbal devices, but it cannot be interpreted out of existence. For pur- 
poses of definition it is a matter of indifference in what way this control 
is guaranteed; whether by convention or by law, or whether it does riot 
even enjoy the protection of any external sanctions at all, but its security 
rests only on actual expectations in terms of custom or self-interest. 
These possibilities must be taken into account, however essential legal 
compulsion may be for the modem economic order. The indispensability 
of powers of control for the concept of social action in its economic 
aspects thus does not imply that legal order is part of that concept by 
definition, however important it may be held to be on empirical 
grounds. 

7. The concept of powers of control and disposal will here be taken 
to include the possibility of control over the actor's own labor power, 
whether this is in some way enforced or merely exists in fact. That this 
is not to be taken for granted is shown by its absence in the case of 
slaves. 

8. It is necessary for the purposes of a sociological theory of eco- 
nomic action to introduce the concept of "goods" at an early stage, as is 
done in sec. 1. For this theory is concerned with a type of action which 
is given its specific meaning by the results of the actors' deliberations, 
which themselves can be isolated only in theory [but cannot be observed 
empirically]. Economic theory, the theoretical insights of which provide 
the basis for the sociology of economic action, might (perhaps) be able 
to proceed differently; the latter may find it necessary to create its own 
theoretical constructs. 



2. The Concept of Utility 

By "utilities" (Nutzleisttmgen) will always be meant the specific and 
concrete, real or imagined, advantages CChancen) of opportunities for 
present or future use as they are estimated and made an object of specific 
provision by one or more economically acting individuals. The action of 
these individuals is oriented to the estimated importance of such utilities 
as means for the ends of their economic action. 

Utilities may be the services of non-human or inanimate objects or 
of human beings. Non-human objects which are the sources of potential 
utilities of whatever sort will be called "goods." Utilities derived from a 
human source, so far as this source consists in active conduct, will be 
called "services'* (Leistwtgcn). Social relationships which are valued as 
a potential source of present or future disposal over utilities are, however, 
also objects of economic provision. The opportunities of economic ad- 
vantage, which are made available by custom, by the constellation of 



2 ] The Concept of Utility 6 9 * 

interest, or by a conventional or legal order for the purposes of an eco- 
nomic unit, will be called "economic advantages." 

On the following comments, compare E. von Bohm-Bawerk, Rechte 
und Verhaltnisse vom Standfunkt der volkswirtschaftlichen Giiterlehre 
(Innsbruck 1881). 

1. The categories of goods and services do not exhaust those aspects 
of the environment which may be important to an individual for eco- 
nomic purposes and which may hence be an object of economic con- 
cern. Such things as "good will," or the tolerance of economic measures 
on the part of individuals in a position to interfere with them, and nu- 
merous other forms of behavior, may have the same kind of economic 
importance and may be the object of economic provision and, for in- , 

. stance, of contracts. It would, however, result in a Confusion of con- 
cepts to try to bring such things under either of these two categories. 
This choice of concepts is thus entirely determined by consideration of 
convenience. 

2. As Bohm-Bawerk has correctly pointed out, it would be equally 
imprecise if all concrete objects of life and of everyday speech were 

v without distinction designated as "goods," and the concept of a good 
were then equated to that of a material utility. In the strict sense of 
utility, it is not a "horse" or a "bar of iron" which is an economic "good," 
but the specific ways in which they can be put to desirable and practical 
uses; for instance the power to haul loads or to carry weights, or some- 
thing of the sort. Nor can we, in the present terminology, call goods ' 
such potential future advantages (Chancen') which appear as objects of 
exchange in economic transactions, as "good will," "mortgage," "prop- 
erty." Instead, for simplicity's sake, we shall call the services of such 
potential powers of control and disposal over the utilities of goods and 
services, promised or guaranteed by the traditional or legal order, "eco- 
nomic advantages" (CfeoMceM) or simply "advantages" wherever this is 
not likely to be misunderstood. 

3. The fact that only active conduct, and not mere acquiescence, 
permission, or omission, are treated as "services" is a matter of conven- 
ience. But it must be remembered that it follows from this that goods 
and services do not constitute an exhaustive classification of all econom- 
ically significant utilities. 

On the concept of 'labor," see below, sec. 15. 



3 . Modes of the Economic Orientation of Action 

Economic orientation may be a matter of tradition or of goal-oriented 
rationality. Even in cases where there is a high degree of rationalization 
of action, the element of traditional orientation remains considerable. 
For the most part, rational orientation is primarily significant for "mana- 
gerial" action, no matter under what form of organization. (See below, 



7 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II 

sec. 15.) The development of rational economic action from the instinc- 
tively reactive search for food or traditional acceptance of inherited 
techniques and customary social relationships has been to a large extent 
determined by non-economic events and actions, including those outside 
everyday routine," and also by the pressure of necessity in cases of in- 
creasing absolute or relative limitations on subsistence. 

1. Naturally there cannot in principle be any scientific standard for 
any such concept as that of an "original economic state." It would be 
possible to agree arbitrarily to take die economic state on a given tech- 
nological level, as, for instance, that characterized by the lowest devel- 
opment of tools and equipment known to us, and to treat it and analyze 
it as the most primitive. But; there is no scientific justification for con- 
cluding from observations of living primitive peoples on a low techno- 
logical level that the economic organization of all peoples of the past 
with similar technological standing has been the same as, for instance, 
that of the Vedda or of certain tribes of the Amazon region. For, from 
a purely economic point of view, this level of technology has been just 
as compatible with large-scale organization of labor as with extreme 
dispersal in small groups (see below, sec. r6). It is impossible to infer 
from the economic aspects of the natural environment alone, which of 
these, would be more nearly approached. Various non-economic factors, 
for instance, military, could make a substantial difference. 

2. War and migration are not in themselves economic processes, 
though particularly in early times they have been largely oriented to 
economic considerations. At all times, nowewt, indeed up to the pres- 
ent, they have often been responsible for radical changes in the eco- 
nomic system. In cases where, through such factors as cOmatic changes, 
inroads of sand, or deforestation, there has been an absolute decrease in , 
the means of subsistence, human groups have adapted themselves in 
widely differing ways, depending on the structure of interests and on 
the manner in which non-economic factors have played a role.* The typ- 
ical reactions, however, have been s fall in the standard of living and 
an absolute decrease i population. Similarly, in cases of relative impov- 
erishment in means of subsistence, as determined by a given standard of 
living and of the distribution of chances of acquisition, there have also 
been wide variations. But on the whole, this type of situation has, more 
frequently than the other, been met by the increasing rationalization of 
economic activities. Even in this case, however, it is not possible to make 
general statements. So far as the "statistical" information can be relied 
upon, there was a tremendous increase of population In China after the 
beginning of the eighteenth century, but it had exacdy the opposite 
effect from the similar phenomenon of about the same time in Europe. 

It is, however, possible to say at least something about the reasons for 
this (see below, sec, n.). The chronic scarcity of the means of subsist- 
ence in the Arabian desert has only at certain times resulted in a change 
in the economic and political structure, and these changes have been 



3 ] Modes of Economic Orientation of Action 7 1 

most prominent when non-economic Creligious) developments have 
played a part. 

3. A high degree of traditionalism in habits of life, such as charac- 
terized the laboring classes in early modem times, has not prevented a 
great increase in the rationalization of economic enterprise under capi- 
talistic direction. But it was also compatible with, for instance, the ration- 
alization of public finances in Egypt on a state-socialistic model. Nev- 
ertheless, this traditionalistic attitude had to be at least partly overcome 
in the Western World before the further development to the specifically 
modem type of rational capitalistic economy could take place. 



4. Tyfical Measures of Rational Economic Action 

The following are typical measures of rational economic action: 

(1) The systematic Allocation as between present and future of util- 
ities, on the control of which the actor for whatever reason feels able to 
count. (These are the essential features of saving.) 

(2) The systematic allocation of available utilities to various potential 
uses in the order of their estimated relative urgency, ranked according to 
the principle of marginal utility. 

These two cases, the most definitely "static," have been most highly 
developed in times of peace. Today, for the most part, they take the form 
of the allocation of money incomes. 

■ (3) The systematic procurement* through production or transporta- 
tion of such utilities for which all the necessary means of production are 
controlled by the actor himself. Where action is rational, this type of 
action will take place so far as, according to the actor's estimate, the 
urgency of his demand for the expected result of the action exceeds the 
necessary expenditure, which may consist in (a) the irksomeness of the 
requisite labor services, and (b) the other potential uses to which the 
requisite goods could be put; including, that is, the utility of the potential 
alternative products and'their uses. This is "production" in the broader 
sense, which includes transportation. 

(4) The systematic acquisition, by agreement (VergeseUschaftung) 
with the present possessors or with competing bidders, of assured powers 
of control and disposal over utilities. The powers of control may or may 
not be shared with others. The occasion may lie in the fact that utilities 
themselves are in the control of others, that their means of procurement 
are in such control, OX that third persons desire to acquire them in such 
a way as to endangeflfhe actor's own supply. 

The relevant rational association (Vergeselhckaftung) with the 
present possessor of a power of .control or disposal may consist in (a) the 



7 2 SOCIOLOGICAL- CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

establishment of an organization with, an order to which the procurement 
and use of utilities is to be oriented, or (b) in exchange. In the first case 
the purpose of the organization may be to ration the procurement, use, or 
consumption, in order to limit competition of procuring actors. Then it 
is a "regulative organization." Or, secondly, its purpose may be to set 
up a unified authority for the systematic administration of the utilities 
which had hitherto been subject to a dispersed control. In this case there 
is an "administrative organization." 

"Exchange" is a compromise of interests on the part of the parties in 
the course of which goods or other advantages are passed as reciprocal 
compensation. The exchange may be traditional or conventional, 8 and 
hence, especially in the latter case, not economically rational. Or, sec- 
ondly, it may be economically rational both in intention and in result. 
Every case of a rationally oriented exchange is the resolution of a pre- 
viously open or latent conflict of interests by means of a compromise. The 
opposition of interests which is resolved in the compromise involves the 
actor potentially in two different conflicts. On the one hand, there is the 
conflict over the price to be agreed upon with the partner in exchange; 
the typical method is bargaining. On the other hand, there may also he 
competition with actual or potential rivals, either in the present or in the 
future, who are competitors in the same market. Here, the typical method 
is competitive bidding and offering. 

i. Utilities, and the goods or labor which are their sources, are un- 
der the control (Eigenverfugung) of an economically acting individual 
if he is in a position to be able in fact to make use of them at his con- 
venience Cat least, up to a point) without interference from other per- 
sons, regardless of whether this ability rests on the Bfcal order, on con- 
vention, on custom or on a complex of interests. It is by no means true 
that only the legal assurance of powers of disposal is decisive, either for 
the concept or in fact. It is, however, today empirically an indispensable 
basis for economic activitiy with the material means of production. 

2. The fact that goods are not as yet consumable may be a result of 
the fact that while they are, as such, finished, they are not yet in a suit- 
able place for consumption; hence the transportation of goods, which 
is naturally to be distinguished from trade, a change in the control over 
the goods, may here be treated as part of the process of production. 

3. When there is a lack of control (Eigenverfugung) over desired 
utilities, it is in principle indifferent whether the individual is typically 
prevented from forcibly interferir^j|with the control of others by a legal 
order, convention, custom, his own 1 self-interest, or his consciously-held 
moral standards. 

4. Competition in procurement may exist under the most various 
conditions. It is particularly important when supplies are obtained by 
seizure, .as in hunting, fishing, lumbering, pasturage, and clearing new 



4 I Typical Measures of Rational Economic Action 7 3 

land. It may also, and most frequently does, exist within an organization 
which is closed to outsiders. An order which seeks to restrain such 
competition then always consists in the rationing of supplies, usually 
combined with the appropriation of the procurement possibilities thus 
guaranteed for the benefit of a limited number of individuals or, more 
often, households. AH medieval Mark- and fishing associations, the reg- 
ulation of forest clearing, pasturage and wood gathering rights in the 
common fields and wastes, the grazing rights on Alpine meadows, and 
so on, have this character. Various types of hereditary property-rights in 
land owe their development to this type of regulation, 

5. Anything which may in any way be transferred from the control 
of one person to that of another and for which another is willing to give 
compensation, may be an object of exchange. It is not restricted to goods 
and services, but includes all kinds of potential ecpnomic advantages; for 
instance., "good will," which exists only by custom or self-interest and 
cannot be enforced; in particular, however, it includes all manner of ad- 
vantages, claims to which are enforceable under some kind of order. 
Thus objects of exchange are not* necessarily presently existing utilities. 

For present purposes, by "exchange" in the broadest sense will be 
meant every case of a formally voluntary agreement involving the offer 
of any sort of present, continuing, or future utility in exchange for util- 
ities of any sort offered in return. Thus it includes the turning over of 
the utility of goods or money in exchange for the future return of the 
same kind of goods. It also includes any sort of permission for, or toler- 
ance of, the use of an object in return for "rent" or "hire," or the hiring 
of any kind of services forNvages or salary. The fact that the last exam- 
ple today involves, from a sociological point of view, the subjection of 
the "worker," as defined in sec. 15 below, under a form of domination 
will, for preliminary purposes, be neglected, as will the distinction be- 
tween loan and purchase. 

6. The conditions of exchange may be traditional, partly traditional 
though enforced by convention, or rational. Examples of conventional 
exchanges are exchanges of gifts between friends, heroes, chiefs, princes; 
as, for instance, the exchange of armor between Diomedes and Glaucos. 
It is not uncommon for these to be rationally oriented and controlled 
to a high degree, as can be seen in the Tell-el-Amarna documents. 
Rational exchange is only possible when both parties expect to profit 
from it, or when one is under compulsion because of his own need or 
the other's economic power. Exchange may serve either purposes of 
consumption or of acquisition (see below, sec. 1 1). It may thus be ori- 
ented to provision for the personal use of the actor or to opportunities 
for profit. In the first case, its conditions are to a large extent differenti- 
ated from case to case, and it is in this sense irrational. Thus, for in- 
stance, household surpluses will be valued according to the individual 
marginal utilities of the particular household economy and may on oc- 
casion be sold very cheaply, and the fortuitous desires of the moment 
may establish the marginal utility of goods which are sought in ex- 



7 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

change at a very high level. Thus the exchange ratios, as determined by 
marginal utility, wul fluctuate widely. Rational competition develops 
only in the case o£ "marketable goods" Csee sec. 8) and, to the highest 
degree, when goods are used and sold in a profit system Csee sec. 1 0. 

7. The modes of intervention of a regulatory system mentioned above 
under point (4) are not the only possible ones, but merely those which 
are relevant here because they are the most immediate consequences of 
a tightening of the supply basis. The regulation of marketing processes 
will be discussed below. 



5. Types of Economic Organizations 

According to its relation to the economic system, an economically 
oriented organization may be: (a) an "economically active organization" 
Cwirtschaftender Verhand) if the primarily non-economic organized ac- 
tion oriented to its order includes economic action; (b) an "economic 
organization" (WirtsckaftsverbaneO if its organized action, as governed 
by the order, is ■pn-marily autocephalous economic action of a given kind; 
(c) an "economically regulative organization" (yrirtschaftsreguHerender 
VerbancT) if the autocephalous economic activity of the members is 
directly oriented to the order governing the group; that is, if economic 
action is heteronomous in that respect; (d) an "organization enforcing 
a formal order" (Ordnungsverband)* if its order merely guarantees, by 
means of formal rules, the autocephalous and autonomous economic 
activities of its members and the corresponding economic advantages thus 
acquired. 

1. The state, except for the socialistic or communist type, and all 
other organizations like churches and voluntary associations are econom- 
ically active groups if they manage their own financial affairs. This is 
also true of educational institutions and all other organizations which 
are not primarily economic. 

2. In the category of "economic organizations" in the present sense 
are included not only business corporations, co-operative associations, 
cartels, partnerships, and so on, but all permanent economic establish- 
ments (Brtrfefee) which involve the activities of a plurality of persons, all 
the way from a workshop run by two artisans to ft conceivable commu- 
nistic organization of the whole world. 

3. "Economically regulative organizations" are the following: medi- 
eval village associations, guilds, trade unions, employers' associations, 
cartels, and all other groups, the directing authorities of which carry 
on an "economic policy" which seeks tf regulate both the ends and the 
procedures of economic activity. It thus includes the villages and towns 
of the Middle Ages, just as much as a modem state which follows such 
apolky. 



5 ] Types of Economic Organizations 7 5 

4. An example of a group confined to the "enforcement of a formal 
order" is the pure laissez-faire state, which would leave the economic 
activity of individual households and enterprises entirely free and con- 
fine its regulation to the formal function of settling disputes connected 
with the fulfillment of free contractual obligations. 

5. The existence of organizations "regulating economic activity" or 
merely "enforcing a formal order" presupposes in principle a certain 
amount of autonomy in the field of economic activity. Thus there is in 
principle a sphere of free disposal over economic resources, though it 
may he limited in varying degrees by means of rules to which the ac- 
tors are oriented. This implies, further, the Cat least relative) appropri- 
ation of economic advantages, over which the actors then have autono- 
mous control; The purest type of a group "enforcing a formal order" is 
thus present when all human action is autonomous with respect to 
content, and oriented to regulation only with respect to form, and when 
all non-human sources of utility are completely appropriated so that in- 
dividuals can have free disposal of them, in particular by exchange, as 
is the case in a modem property system. Any other kind of limitation on 
appropriation and autonomy implies "regulation of economic activity," 
because it restricts the orientation of human activities. 

6. The dividing line between "regulation of economic activity" and 
mere "enforcement of a formal order" is vague. For, naturally, the type 
of "formal" order not only may, but must, in some way also exert a 
material influence on action; in some cases, a fundamental influence. 
Numerous modem legal ordinances, which claim to do no more than 
set up formal rules, are so drawn up that they actually exert a material 
influence (see "Soc. of Law," Part Two; ch. VIII). Indeed, a really 
s,trict limitation to purely formal rules is possible only in theory. Many 
of the recognized "overriding" principles of law, of a kind which cannot 
he dispensed with, imply to an appreciable degree important limitations 
on the content of economic activity. Especially "enabling provisions" 
can under certain circumstances, as in corporation law, involve quite 
appreciable limitations on economic autonomy. 

7. The limits of the material regulation of economic activity may 
■ he reached when it results in (a) the abandonment of certain kinds of 

economic activity, as when a tax on turnover leads to the cultivation of 
land only for consumption; or 00 in evasion, in such cases as smug 
gling, boodegging, etc. 



6. Media of Exchange, Means of Payment, Money 

A material object offered in exchange will be called a "medium of 
exchange" so far as it is typically accepted primarily by virtue of the fact 
that the recipients estimate that they will, within the relevant time hori- 
zon, be able to utilize it in another exchange to procure other goods at an 
acceptable exchange ratio, regardless of whether it is exchangable for 



76 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II 

all other goods or only for certain specific goods, The probability that the 
medium of exchange will be accepted at a given rate for specific other 
goods will be called its "substantive val; lity" (materiale Gehung) in rela- 
tion to these. The use itself will be cahed the "formal validity" {formate 
Geltung}. 

An object will be called a "means of payment" so far as its acceptance 
in payment of specific agreed or imposed obligations is guaranteed by 
convention or by law. This is the "formal validity" of the means of pay- 
ment, which may also signify its formal validity as a means of exchange. 
Means of exchange or of payment will be called "cbartal" Qchartaiy" 
when they are artifacts which, by virtue of their specific form, enjoy a - 
definite quantum, conventional or legal, agreed or imposed, of formal 
. validity within the membership of a group of persons or within a ter- 
ritorial area; and when (b) they are divisible in such a way that they 
represent a particular unit of nominal value or a multiple or a fraction 
of it, so that it is possible to use diem in arithmetical calculations. 

"Money" we call a chartal means of payment which is also a means 
of exchange. 

An organization will be called a "means of exchange," "means of 
payment," or "money" group insofar as it effectively imposes within the 
sphere of authority of its orders the conventional or legal (tormol) 
validity of a means of exchange, of payment, or money; these will be 
termed "internal", means of exchange, etc. Means used in transactions 
with non-members will be called "external" means of exchange. 

Means of exchange or of payment which are not chartal are "natural", 
means. They may be differentiated (a) in technical terms, according to 
their physical characteristic— they may be ornaments, clothing, useful 
objects of various sorts — or according to whether their utilization occurs 
in terms of weight or not. They may also (b) be distinguished economi- 
cally according to whether they are used primarily as means of exchange 
or for purposes of social prestige, the prestige of possession. They may 
also be distinguished according to whether they are used as means of ex- 
change and payment in internal or in external transactions. 

Money, means of exchange or of payment are "tokens" so far as they 
do not or no longer possess a value independent of their use as means of 
exchange and of payment. They are, on the other hand, "material" means 
so far as their value as such is influenced by their possible use for other 
purposes, or may be so influenced. 

Money may consist either of coined or of note (document) money. 
Notes are usually adapted to a system of coinage or have a name which is 
historically derived from it. 

(1) Coined money will be called "free" money or "market" money 
so far as the monetary metal will be coined by the mint on thelnitiative 



6 ] Media of Exchange, Means of Payment, Money 7 7 

of any possessor of it without limit of amount. This means that in effect 
the amount issued is determined hy the demand of parties to market 
transactions. 

(2) It will be called "limited" money or "administrative" money if 
the transformation of the metal into its chartal form (coinage) is subject 
to the formally quite arbitrary decisions of the governing authority of an 
organization and is in effect primarily oriented to its fiscal needs, 

(3) It will be called "regulated" money if, though its issue is limited, 
the kind and amount of coinage is effectively subject to rules. 

The term "means of circulation" will be applied to a document which 
functions as "note" money, if it is accepted in normal transactions as "pro- 
visional" money with the expectation that it can, at any time, be con- 
verted into "definitive" money, that is into coins, or a given weight of 
monetary metal. It is a "certificate" if this is assured by regulations which 
require maintenance of stocks providing full coverage in coin or bullion. 

We call "conversion scales" the conventional or legally imposed ex- 
change ratios valid within an organization for the different "natural" 
nieans of exchange or payment. 

"Currency money" is the money which by the effective arrangements 
within an organization has validity as a means of payment without limi- 
tation on the amount that need he accepted. ''Monetary material" is the 
material from which money is made; "monetary metal" is this material 
in the case of market money. "Monetary value scale" we call the relative 
valuation of the various subdivisions and denominations, consisting of 
different material substances, of "note" or "administrative" money; the 
same ratios in the case of types of market money made of different mc-uls 
we call "exchange ratios." 

"International" means of payment are those means of payment which 
serve to balance accounts between different monetary systems, that is, so 
far as payments are not postponed bv funding operations. 

Every reform of the monetary system by an organization must neces- 
sarily take account of the fact that certain means of payment have 
previously been used for the liquidation of debts. It must cither accept as 
legal their continued use as a means of payment, or impose new uiies. In 
the latter case an exchange ratio must be established bctwcvii the old 
units, whether natural, by weight, or chartal, and the new ones. This is 
the principle of the so-called "historical" definition of money as a means 
of payment. It is impossible here to discuss how far this reacts upon the 
exchange relation between money as a means of exchange and goods. 

It should be strongly emphasized that the present discussion is not 
an essay in monetary theory, but only an attempt to work out the sim- 
plest possible formulations of a set of concepts which will have to be 



7 8 .SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. 11 

frequently employed later on. In addition, this discussion is concerned 
primarily- with certain very elementary sodohffcal consequences of the 
use of money. The formulation of monetary theory, which has been 
most acceptable to the author, is that of von Mises." The Stootlfcfee 
Theorie des Geides by G. F. Knapp" is the most imposing work in the 
field and in its way solves the formal problem brilliantly. It is, how- 
ever, as will be seen below, incomplete for substantive monetary prob- 
lems. Its able and valuable attempt to systematize terminology and con- 
cepts will be left out of account at this point 

i. Means of exchange and means of payment very often, though by 
no means always, coincide empirically. They are, however, particularly 
likely not to do so in primitive conditions. The means of payment for 
dowries, tribute, obligatory gifts, fines, wergild, etc., are often specified 
in convention or by law without regard to any relation to the means of 
exchange actually in circulation. It is only when the economic affairs of 
the organization are administered in money terms that von Mises* con- 
tention that even the state seeks means of payment only as a means of 
exchange becomes tenable. This has not been true of cases where the 
possession of certain means of payment has been primarily significant as 
a mark of social status. (See Heinrich Schurtz, Grundriss einer Entsteh- 
ungsgeschichte des Geides, 1898). With die introduction of regulation 
of money by the state, means of payment becomes the legal concept and 
means of exchange die economic concept. 

a. There seems at first sight to be an indistinct line between a 
"good" which is purchased solely with a view to its future resale and a 
medium of exchange. In fact, however, even under conditions which 
are otherwise primitive there is a strong tendency for particular objects 
to monopolize the function of medium of exchange so completely that 
there is no doubt about their status. Wheat futures are traded in terms 
which imply that there will be a final buyer. Therefore they cannot be 
treated as means of payment or medium of exchange, let alone money, 

3. So long as there is no officially sanctioned money, what is used as 
means of exchange is primarily determined by the customs, interests, 
and conventions to which the agreements between the partie* to trans- 
actions are oriented. The reasons why specific things have become ac- 
cepted as means of exchange cannot be gone into here. They have, 
however, been exceedingly various and tend to he determined by the 
type of exchange which has been of the greatest importance. By no 
means every medium of exchange, even within the social group where 
it has been employed, has been universally acceptable for every type of 
exchange. Far instance, cowry shells, though used for other things, have 
not been acceptable in payment for wives or cattle. 

4. Sometimes means of payment which were not the usual means of 
exchange have played an important part in the development of money 
to its special status. As G F. Knapp has pointed out, the fact that vari- 
ous types of debt have existed, such as obligations stemming from trib- 
utes, dowries, payments for bride purchase, conventional gifts to kings 



6 ] Media of Exc&mge, Means 'of Payment,. Money , 7 9 

or by king? to each other, wergild, etc., and the fact that these have 
often been payable in certain specific media, has created for these media, 
by convention or by law, a special position. Very often they have been ' 
specific types of artifacts. 

5. Money in the meaning of the present terminology may have been 
the one-fifth shekel pieces bearing the stamp of merchant firms which 
are mentioned in the Babylonian records, on the assumption, that i«. 
that they were actually used as means of exchange. On the other hand, 
bars of bullion which were not coined, but weighed, will here not be 
treated as money, but only as means of payment and exchange. The 
fact, however, that they were weighed has been enormously important 
for the development of the habit of economic calculations. There are, 
naturally, many transitional forms, such as the acceptance of coins by 
weight rather than by denomination. 

6. "Chartal" is a term introduced by Knapp in his Staatliche Theo- 
rie des Geldes. All types of money which have been stamped or coined, 
endowed with validity by law or by agreement, belong in this category, 
whether they were metal or not. It does not, however;, seem reasonable 
to confine the concept to regulations by the state and not to include 
cases where acceptance is made compulsory by convention or by some 
agreement. There seems, furthermore, to be no reason why actual mint- 
fog by the state or under the control of the political authorities should 
he a decisive criterion. For long periods this did not exist in China at all 
and was very much limited in the European Middle Ages. As Knapp 
would agree, it is only the existence of norms regulating the monetary 
form which is decisive. As will be noted below, validity as a means of 
payment'and formal acceptability as means of exchange in private trans- 
actions may be made compulsory by law within the jurisdiction of the 
political authority. 

7. Natural means of exchange and of payment may sometimes be 
used more for internal transactions, sometimes more for external. The 
details need not be considered here. The question of the substantive 
validity of money will be taken up later. 

8. This is, furthermore, not the place to take up the substantive 
theory of money in its relation to prices so fat as this subject belongs in 
the field of economic sociology at all. For present purposes it will suffice 

■ to state the fact that money, in its most important forms, is used, and 
then to pf8ceed"'to develop some of the most general sociological con- 
sequences of this fact, which is merely a formal matter when seen from 
an economic point of view. It must, howevet, be emphasized that money 
can never be merely a harmless "voucher" or a purely nominal unit of 
accounting so long as it is money. Its valuation is always in very complex 
ways dependent also on its scarcity or, in case of inflation, on its over- 
abundance. This has been particularly evident in recent times, but is 
equally true for all times. 

A socialistic regime might issue vouchers, in payment for a given 
quantity of socially useful 'labor," valid for the purchase of certain 



8o SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. JI 

types of goods. These might be saved or used in exchange, but their 
behavior would follow the rules of barter exchange, not of money, 
though the exchange might be indirect. 

9. Perhaps the most instructive case of the Far-reaching economic 
consequences of the relations between the monetary and non-monetary 
uses of a monetary metal is that of Chinese monetary history, because 
copper money, with high costs of production and wide fluctuations in 
output of the monetary meta!, permits an especially clear view of the 
phenomena involved. 



7. The Primary Consequences of the Use of Money. 
Credit 

The primary consequences of the widespread use of money are; 

( 1 ) The so-called "indirect exchange" as a means of satisfying con- 
sumers' wants. The use of money makes it possible to obtain goods which 
are separated from those offered in exchange for them in space, in time, 
in respect to the persons involved, and, what is very important, in respect 
to the quantity on each side of the transaction. This results in a tremen- 
dous extension of the area of possible exchange relationships. 

(2.) The valuation in terms of money of delayed obligations, espe- 
cially of compensatory obligations arising out of an exchange Cshat is, 
debts). This is, of course, closely related to the first point. 

(3) The so-called "storage of value"; that is, the accumulation of 
money in specie or in the form of claims to payment collectable at any 
time as a means of insuring future control over opportunities of advanta- 
geous economic exchange. 

(4) The increasing transformation of all economic advantages into 
the ability to control sums of money. 

(5) The qualitative individuation of consumption and, indirectly, its 
expansion for those who have control of money, of claims to money pay- 
ment, or of opportunities to acquire money. This means the ability to 
offer money as a means of obtaining goods and services of all kinds. 

(6) The orientation of the procurement of utilities, as it has become 
widespread today, to their bearing on the marginal utility of the sums of 
money which the directing authorities of an economic unit expect to he 
able tc£ontrol in the relevant future. 

(7) With this goes the orientation of acquisitive activities to all the 
opportunities which are made available by the extension of the area of 
possible exchanges, in time, in place, and with respect to personal agents, 
as noted above. 



7 ] Primary Consequences of the Use of Money. Credit 8 i 

(8) AH of these consequences are dependent on what is, in princi- 
ple, the most important fact of all, the possibility of monetary calculation; 
that is, the possibility of assigning money values to all goods and services 
which in any way might enter into transactions of purchase and sale. 

In substantive as distinguished from formal terms, monetary calcula- 
tion means that goods are not evaluated merely in terms of their im- 
mediate importance as utilities at the given time and place and for the 
given person only. Rather, goods are more or less systematically com- 
pared, whether for consumption or for production, with all potential 
future opportunities of utilization or of gaining a return, including their 
possible utility to an indefinite number of other persons who can be 
brought into the comparison insofar as they are potential buyers of the 
powers of control and disposal of the present owner. Where money cal- 
culations have become typical, this defines the "market situation" of the 
good in question. (The above statement formulates only the simplest and 
best-known elements of any discussion of "money" and does not need 
to be further commented upon. The sociology of the "market" will not 
yet be developed here. On the formal concepts, see sees. 8 and io.) 

The term "credit" in the most general sense will be used to designate 
any exchange of goods presently possessed against the promise of a future 
transfer of disposal over utilities, no matter what they may be. The grant- 
ing of credit means in the first instance that action is oriented to the 
probability that this future transfer of disposal will actually take place. 
In this sense the primary significance of credit lies in the fact that it 
makes it possible for an economic unit to exchange an expected future 
surplus of control over goods or money against the present control of 
some other unit over goods which the latter does not now intend to use- 
Where the action is rational, both parties expect an improvement in their 
position, regardless of what it consists in, over what it would be under 
the present distribution of resources without the exchange. 

i. It is by no means necessary for the advantages in question to be 
. economic. Credit may be granted and accepted for all conceivable pur- 
poses, for instance, charitable and military. 

2. Credit may be granted and accepted in kind or in money, and in 
both cases the promises may be of concrete goods or services or of 
money payments. Carrying out credit transactions in terms of money, 
however, means that they become the subject of monetary calculations 
with all the attendant consequences, which will be discussed below. 

3. This definition (of credit) for the most part corresponds to the 
usual one. It is clear that credit relationships may exist between organi- 
zations of all sorts, especially socialist or communist organizations. If 
theft* exist side by side several such groups, which are not economically 
autarkic, credit relationships are unavoidable. When the use of money 



/ 



8 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11 

is completely absent, 18 there is a difficult problem of finding a rational 
basis of calculation. For die mere fact of the possibility of transactions 
involving compensation in the future does not tell us anything about 
the degree of rationality with which the parties agree on the conditions, 
especially in the case of long-term credit. Such parties would be in some- 
what the same situation as the household economic units (oifeos) of an- 
cient times which exchanged their surpluses for things they had need 
of. But there is this difference, that in the present situation die interests 
of huge masses on a long-term basis would be at stake; and for rhe great 
masses of the low-income groups, the marginal utility of present con- 
sumption is particularly high. Thus there would be a probability that 
goods urgently needed could only be obtained on unfavorable terms. 

4. Credit may be obtained and used for the purpose of satisfying 
. present consumption needs which are inadequately provided for. Even 

in that case it will, so far as the action is economically rational, only be 
granted in exchange for advantages. This is not, however, historically 
usual for the earliest type of consumption credit and especially for 
p emergency credit, the motives for which more frequently stemmed from 
an appeal to ethical obligations. This will be discussed in Part Two, chap. 
111:2. , 

5, What is the most common basis of credit, in money or in kind, 
when it is granted for profit, is very obvious. It is the fact that, because 
the lender is usually in a better economic situation, the marginal utility 
of future expectations, as compared with present ones, is higher than it 
is for the borrower. It should, however, be noted that what constitutes 
a "better" situation is highly relative. 



8. The Market 

By the "market situation" (.Marktlage) for any object of exchange is 
meant all the opportunities of exchanging it for money which are known 
to the participants in exchange relationships and aid their orientation in 
the competitive price struggle. 

"Marketability" (MarktgangigkeiO is the degree of regularity with 
which an object tends to be an object of exchange on the market. 

"Market freedom" is the degree of autonomy enjoyed by the parties 
to market relationships in the price struggle and in competition. 

"Regulation o