Institutional Economics Research Papers - Academia.edu (original) (raw)

This dissertation is a systematised and thematic study of Friedrich List’s economic approach, showing: 1) The fundamental importance of immaterial production factors, and 2) How ‘mental capital’ binds a multitude of issues together into... more

This dissertation is a systematised and thematic study of Friedrich List’s economic approach, showing:

1. The fundamental importance of immaterial production factors, and
2. How ‘mental capital’ binds a multitude of issues together into a coherent system.
   List’s system is simple in principle: ‘Spirit creates wealth’, and yet it is complex; the human spirit creates culture which creates wealth:
   Mental capital creates innovation, constitutes and reshapes collaboration, which constitutes and reshapes nations and (defines and) creates wealth. Using List’s terminology:
3. The task of political economy is to contribute to individual and social progress: The goal is elevation of global civilisation by moral and material improvement.
4. Mental capital, individual and collective, is the prime source of wealth and constitutes the essence of;
5. The Confederation of Labour, which both constitutes and continuously reshapes the nation, both its civic institutions and the State.
6. The nation is the main vehicle for the individual person’s quest for freedom, happiness and wealth.
7. The ultimate confederation of Labour lies in global free trade, making the selfish colonial system as well as navies obsolete.
   Ad 2) ‘Mental capital’ is the founding stone of List’s system. It alone can utilise the resources given by nature. List’s inspiration lies in contemporary German Idealism, and in a tradition with roots in Cameralist- and Renaissance statecraft, and the ancient Greeks.
   Ad 3) Mental capital is the essence of the intergenerational ‘Confederation of Labour’: Knowledge, innovation, education, morality, trust, credit, social networks, traditions and institutions. Mental capital is fragile and needs to be wisely nurtured and protected against the gusts of the world markets, payment imbalance and economic crises. Physical capital move and perish less easily. According to List, this Confederation of Labour constitutes the nation as a market and as a national system of innovation and production, which reaches its furthermost potential in an urban-industrial civilisation or as List termed it: The Industrial System.
   Ad 4) The Nation delivers collective services that an individual cannot – such as traditions, arts, freedom, security, and major investments. The nation resembles a large company, constituted by the Confederation of Labour.
   It can only develop well through a carefully balanced development of all vital sections of agriculture, trade, and industry, and furthermore their efficient interconnection through state of the art institutions, standards, communications, and communication hubs: towns.
   According to List, Adam Smith’s materialism led him to gross and fatal generalisations and to misunderstand the nature of capital. List claims that because intangible capital largely was ignored by the English Classical School, it therefore focused on increased division of labour through free trade; on increased accumulation of material capital through austerity and saving; and on curtailing population growth. Smith and the English Classical School largely ignored immaterial factors and therefore the roles of stability; - social cohesion; -co-operation; -civil society; - institutions; (such as the nation); and - economic regulation. Ironically, England was the nation that more than any had used every trick in the book of government intervention to promote industrialisation, and then prevent other nations from doing the same.