Evolution of the Social Market Economy

The work on the theory of economic systems and on the resulting policy in Germany as well as its outcome can only be fully understood by considering the situation of economics and economic policy at the beginning of the 1930s and during the following decade. In economics, the influence of the ‘Historical School’ and the accompanying neglect of theoretical thinking had passed its peak by the end of the 1920s.2 A number of German economists—only a few to begin with—had recognised that the economist cannot do justice to his task without sufficient theoretical training. Walter Eucken, Wilhelm Röpke, Alexander Rüstow and others searched for a new approach to economic problems. They were also encouraged to undertake this search by the discontent with German economic policy, which was at that time being pursued without any clear idea or sufficient analysis of underlying forces.