Prof. Dr. Dres. h.c. Wolfgang Streeck
- Report to the 2014 Meeting of the Advisory Board of the Max Planck Institute for the Study of Societies, Cologne, May 27, 2014
- The Economy as a Subject of Study at the Max Planck Institute for the Study of Societies
Report to the 2014 Meeting of the
Advisory Board of the Max Planck Institute for the Study of
This is the last time for me to appear before this Board. At the end of
October this year I will be retired - I am consciously saying
this in passive voice because even if I wanted to continue, I
will then have reached the age limit for a Max Planck director,
having exhausted all possibilities of extension. Your judgment
on my performance in the past two years will therefore be of no
consequence for me: it will affect neither my salary nor my
future research budget. This being so, I allow myself to use my
allotted time for a few broader reflections on my years at this
Institute and on the work I have done here.
Cologne, May 27, 2014
I arrived in Cologne 19 years and one month ago, coming from the University of Wisconsin-Madison. There I had an appointment in sociology and, for one quarter of my time, at the old and venerable Industrial Relations Research Institute (IRRI), one of the academic support bases of New Deal reformism in the 1940s and 1950s. By the mid-1990s, however, industrial relations as an academic discipline, in the United States just as in Britain, was beginning to wither away to be replaced with "Human Resource Management" and similar subjects - in delayed response to the withering away of trade unions and collective bargaining. When Clinton was elected in 1992, it seemed for a short moment that this might be reversed, and the first two years of the new administration were a time when new efforts seemed to get under way to strengthen worker representation and even trade unions. My colleague Joel Rogers and I were asked by the so-called Dunlop Commission, early on appointed by Clinton and his labor secretary, Robert Reich, to gather information on works councils in Europe, as a possible model for legislation in the US. But while we were doing our research, the mid-term elections of 1994 returned a Republican majority in both Houses, which once and for all put an end to whatever progressive reform projects there may have been. In 1995, roughly at the time of my move to Germany, Joel and I saw our book on works councils come out at University of Chicago Press  - the only result of several years of hard work.
How did someone like me fit into the MPIfG? I had for a long time studied collective group representation and self-government in contemporary democratic societies, starting out, but by no means ending, with collective bargaining. The operative concept was corporatism, or more precisely democratic, liberal or neo-corporatism, which for a while seemed to offer itself as a workable solution to the crisis of governability in postwar democracies since the late 1960s. My special concern was with the inclusion of labor and its organizations in public policy; but the model seemed applicable enough to other groups and policy areas. That my work on interest intermediation, intermediary institutions, and the sharing of public power with organized social groups was welcome in Cologne had to do with how the Institute's research perspective developed in the roughly one decade of its existence at the time. Its initial concern had been with adapting the instrumental capacities of public policy-making and policy implementation to the challenges of governing an advanced industrial society. But what had set out as a branch of what was then called administrative science soon broadened as it became clear that governments, in dealing with different policy areas or sectors, had to take into account their internal dynamics, their self-organization or Eigendynamik. This held true even in sectors "close to the state", like health care or the management of large technological systems that were at the center of the Institute's research effort. What emerged from this was a general conclusion that government had to be conceived as less unilateral, statist, or top-down, and more like negotiation between public and private agencies, or actors. To move what was called in German Steuerungstheorie in this direction, insights in the functioning of organized interests and how they might be productively incorporated in what now came to be called "governance" - as distinguished from government - must have seemed to be of use. Of course, a negotiated social order could be regarded as a promising solution to the governability problem only up until corporatism became buried under the avalanche of liberalization in the 1990s, with the associated advance of markets as the principal institutions for the making of collectively binding decisions.
As far as I was concerned, by the time of my move to Cologne I had for some time been interested in the relationship between a country's labor relations and the nature of the products and the product markets on which national producers specialized. The result had been an emerging idea of different national systems, or modes, of production. Following up on earlier work distinguishing mass production and "diversified quality production", now the concern became one with different "varieties of capitalism", especially with unorthodox, labor-inclusive capitalism of the German and, to some extent, the Japanese kind, which at the time seemed to be outcompeting Anglo-American "liberal" capitalism. This work, some of it done together with Colin Crouch, helped lay the foundations of what was to become the "Varieties of Capitalism" literature in which more and more institutional spheres were included and considered in terms of their possible complementary contribution to a country’s economic performance in a competitive global economy.
As can easily be seen with hindsight, the comparative capitalism perspective of the 1990s prefigured the Institute's later concern with political economy in general. Three aspects of this stood out early on. The first was that we approached comparative capitalism through the study of institutions, that is, in the context of the general issue of the creation and maintenance of social order; this was clearly a legacy of the industrial relations and corporatist tradition and fitted in nicely with the MPIfG's initial Steuerungstheorie orientation. Secondly, coming from labor relations, a merely performance-oriented, efficiency-theoretical perspective would not do: not only had there to be space for conflict and contradiction, but in the 1990s the very national systems of unorthodox, "nonliberal" capitalism whose superior performance had appeared so intriguing began to decline, and Anglo-American capitalism seemed again to be ascending - something that someone like Michel Albert had long seen coming. Thirdly, all of this militated against a functionalist explanation of perceived "complementarity" in national capitalisms, and instead suggested a historical approach, with respect to both the rise and decline of national versions of capitalism and their "fit" with their - continuously changing - task environment.
In my own work, two research projects stand out in this period, which extended from the mid-1990s to the early 2000s. One was a collaborative multi-national effort, organized in cooperation with Kozo Yamamura at the University of Washington-Seattle, to understand the differences and commonalities of Japanese and German capitalism. Among its products was a book on the historical origins of the two unorthodox national capitalisms, which appeared in 2001 at Oxford University Press . The other project was a study on the ongoing transformation of German industrial relations, with a research group at the MPIfG that included Anke Hassel and four doctoral students. Among its themes were the migration of concession bargaining from the United States to Germany (where it took a different form) and the impact of the rise of capital markets and the shareholder value doctrine on the institutional triangle of employers, or employer associations, trade unions, and works councils. Two of the students, one of them Martin Hoepner, later went on to their Habilitation and are now outstanding members of the German and international social science community.
From 1997 onwards, after the retirement of Renate Mayntz, the institute was jointly directed by Fritz Scharpf and me, under an updated research program that focused on the advance of markets and the reactions to it of institutions such as the welfare state, collective bargaining, and states and government in general . Moving away from the state and government-centeredness of the first program, our aim was to extend the institute's fields of observation beyond the original concern with "sectors close to the state" and add market governance to corporatist governance as a further theoretical interest. I myself, after a short period of intense and time-consuming involvement in policy-making in the early years of the Schroeder government, began to focus on political-economic change, in a reaction against the increasingly static-functionalist-economistic outlook of what had become the varieties of capitalism mainstream. A turning point, where the search for a more dynamic conceptualization of capitalist political economy became a conscious project for me, was the writing of my 2009 book, Re-Forming Capitalism: Institutional Change in the German Political Economy (watch the hyphen!) , which drew on and pulled together results of research conducted under my guidance at the MPIfG. A crucial preparation for this had been theoretical work on institutional change that has culminated in a widely visible book, Beyond Continuity: Institutional Change in Advanced Political Economies, which I co-edited with Kathleen Thelen.  What made this book a major contribution to the toolkit of what came to be known as historical institutionalism was that it introduced and developed the notion of transformative gradual change, bridging the gap between adaptive-incremental and fundamental-discontinuous change. Not only did this prove particularly suited for understanding the slowly moving but nevertheless fundamental liberalization of capitalist political economies since the 1980s, but it was also useful for the recruitment of young scholars to the cause of a historically grounded theory of social and political institutions and their change.
In parallel to the evolution of my research agenda, I devoted much time to the building of an international community supportive of the emerging political economy research agenda at the MPIfG. From 1999-2000 I was president of SASE, the Society for the Advancement of Socio-Economics, and remained actively involved for many years. Today SASE is one of the most lively scholarly associations in the social sciences, with annual meetings in the United States and Europe, as well as, increasingly, in Asia and Latin America. Many of those who today consider SASE their intellectual home base have been associated with the MPIfG at one point or other, often as doctoral students, postdoctoral fellows, or visitors. For five years, from 2007 to 2011, I also served as chief editor of Socio-Economic Review, SASE's journal which I had helped to found. I can report that during this time, SER climbed up in the rankings to be now among the ten journals, in both sociology and political science, with the highest impact factor. Here, too, the superior resources of the MPIfG were instrumental for the building of an effective scholarly community and the development and refinement of its program.
As to the MPIfG, with Jens Beckert's appointment to succeed Fritz Scharpf, its central subject of research became the economy, conceived as a society and a polity, in opposition to powerful tendencies in the social sciences to conceive of society and polity as an economy. In both the political economy and the economic sociology departments, the distinguishing mark of work on the economy at the MPIfG is that we do not accord privileged status to efficiency-theoretical explanations with their wide-ranging prescriptive-normative-political implications. Instead real-world concerns of economic-political actors with economic efficiency are treated as competing with other, not necessarily inferior concerns, like social justice or social stability, acted upon in social structures where different actors are interested, or not interested, in efficiency for different reasons and with different power resources to back them up. This makes politics central to the economy rather than subservient to it. Our approach, evolved out of decades of research on the governance of contemporary societies, as well as in response to the way these have changed since the 1970s, reaches back to some of the classics of nineteenth and twentieth century social science, in particular before the disciplinary separation of economics from sociology and, later, political science. Prominent in the courses we teach to introduce our students to our theoretical perspective are Adam Smith, Karl Marx, Max Weber, Werner Sombart, Joseph Schumpeter, Karl Polanyi, Friedrich von Hayek and others, not to forget John Maynard Keynes.
Regarding current research at the MPIfG, while Jens Beckert's work may be described as reviving Weberian notions of value and value conflict as a way to understand modern economies as social systems, my research interests in the past decade, especially since 2008, are best characterized by the title of a recent paper, "Taking Capitalism Seriously" . Following the trajectory of earlier work, my objective is to understand the specific dynamism, the peculiar, crisis-prone restlessness of the capitalist political economy - a perspective I share, not just with the Marxist tradition, but also with the Historical School, whose approach I hope to combine with a theory of historical-institutional change. This, of course, is a concern that I share with a growing number of scholars, including some here in this room. The context in which I locate my present work is that of the current rediscovery of capitalism as a subject of both political science and sociology, with the commonalities of capitalism superseding at the frontier of research its national varieties. My own contribution to this up to now is documented in my latest book, Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus  . The English translation, under the title Buying Time: The Delayed Crisis of Democratic Capitalism, is about to be out any day.
Briefly, Gekaufte Zeit accounts for the crisis of 2008 ff. and its aftermath by placing it in three parallel and intertwined historical narratives, all of which start in the 1970s: a crisis sequence that began after the end of postwar growth, moving from inflation to government debt, from there to private debt, and from private to central bank debt; the transformation of the tax state into a debt state, and of the debt state into a consolidation state; and the re-transformation of European integration as an engine of political-economic liberalization. The book focuses on trends rather than events; emphasizes the dynamic-historical nature of the capitalist political economy; and conceives capitalism as a global system, driven by endogenous evolutionary pressures and shaped by complex interdependencies between its local manifestations. Among the puzzles that it addresses is the structured nature of the long-drawn process it describes, notwithstanding political agency and historical contingency, posing the question of how to account for the observed directionality of change without resorting to historical determinism. The book outlines a political-economic crisis theory that draws on concepts derived from authors like Kalecki and Polanyi, as well as on conjectures in the Marxist and fiscal sociology traditions concerning the fiscal crisis of the state in advanced capitalist countries. It also discusses the ongoing re-configuration of the relationship between capitalism and democracy, especially in the transforming state system of Western Europe. The reason why I have dared to touch on so many big questions all at once is that the book is the expanded version of the 2012 Adorno Lectures, an occasion tolerant of and even calling for a synthetic view of trends and developments in contemporary societies and of the theoretical issues they raise. Although, or perhaps because, the book offers more a list of open questions than a theory, it has met with enormous interest, with translations in thirteen languages having already come out or being under way.
Before I conclude with a few remarks on my prospective future, I should like to mention that by the end of my time as director at the MPIfG I will have supervised twenty-five doctoral dissertations. Of these, four have just been completed and students will receive their degrees this summer. Three others will be completed next year - after which I will excuse myself from thesis supervision, as much as I have enjoyed it, to make space for other things. Eleven of my former and current doctoral students at the MPIfG are women, and four came from countries outside Germany. Moreover, I had the pleasure to preside over or be involved in the Habilitationen of nine of our researchers at the MPIfG, among them three women. All of these are now in tenured positions at leading academic institutions, seven as full professors.
For the rest, I am grateful to the Institute and the Max Planck Society for allowing me to remain at the MPIfG as emeritus director, relieved of the organizational duties that I have had to discharge in the past nineteen years. To make good use of my additional spare time, I am planning to work on a number of projects that build on my research of recent years. Soon to appear, in the New Left Review, is a lecture I gave in January at the British Academy, under the title "Has Capitalism Seen its Day?" Currently I am preparing several related pieces, with working titles like "Reflections on the Study of Capitalism Today", "European States and the Regime of Austerity", and "Austerity and the Rise of the Consolidation State". A further paper will explore the economic disparities among the member states of the European Monetary Union and their consequences for the future politics of European integration. I have also promised to write a chapter on comparative historical analysis and its place in the social sciences. And I will have to give my Exaugural Lecture, the working title of which is Gesellschaftssteuerung heute, or in English: Societal Governance Today.
Beyond this the future is open; experience tells me, however, that all-too-radical departures from one’s established path should not even be tried, if only because older commitments will always pull you back. Julia Ott from the New School for Social Research in New York, Ariane Leendertz from the MPIfG and I have a grant from German Research Foundation (DFG) for a German-American conference next year on the "The Economization of the Social since the 1970s". Apart from this I see myself working on a theory of capitalist development conceived as a theory of institutional change, and indeed of social evolution, in an attempt to reconcile structure, agency and contingency, hopefully in a dialogue with like-minded historians. Money and its historical-institutional trajectory has become a new interest for me in this context, and the same holds for consumption, where I will greatly benefit from the superb work done by Jens Beckert and his research group at this institute.
In conclusion, I am convinced that the field that we have helped open up for a social science conscious of its links to the institutionalist tradition in economics, willing to rediscover the historically dynamic nature of its subject world, and taking seriously the fact that the modern economy-and-society is a capitalist one - that this field will richly reward the intellectual investment that it invites. I am confident that, when everything will be said and done, research on political economy of the kind we have promoted at the MPIfG will still have a home here, and not just in the emeritus office of a former director.
 Rogers, Joel and Wolfgang Streeck, eds., 1995: Works Councils: Consultation, Representation, Cooperation in Industrial Relations. Chicago: University of Chicago Press.
 Crouch, Colin and Wolfgang Streeck, eds., 1997: Political Economy of Modern Capitalism: Mapping Convergence and Diversity. London: Sage.
 Streeck, Wolfgang and Kozo Yamamura, eds., 2001: The Origins of Nonliberal Capitalism: Germany and Japan. Ithaca, NY: Cornell University Press.
 Streeck, Wolfgang, ed., 1998: Internationale Wirtschaft, nationale Demokratie: Herausforderungen für die Demokratietheorie. Frankfurt am Main: Campus.
 Streeck, Wolfgang, 2009: Re-Forming Capitalism: Institutional Change in the German Political Economy. Oxford: Oxford University Press.
 Streeck, Wolfgang and Kathleen Thelen, eds., 2005: Beyond Continuity: Institutional Change in Advanced Political Economies. Oxford: Oxford University Press.
 Streeck, Wolfgang, 2011: Taking Capitalism Seriously: Towards an Institutional Approach to Contemporary Political Economy. Socio-Economic Review. Vol. 9, No. 1,
 Streeck, Wolfgang, 2013: Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus. Berlin: Suhrkamp.
The economy is at the center of the MPI’s current research program. But the way it is conceived there differs profoundly from standard economics as institutionalized at today’s economics departments and faculties. This brief note is to sketch out the nature of that difference and show in what sense the study of the economy at the MPIfG, and in particular my own work, represents a distinctive line of inquiry independent from but in debate with contemporary economic theory.
Standard neo-classical economics has for some time been facing mounting doubts and growing discontent, from both external users and internal dissenters. Doubts as to its capacity to inform public policy have been spreading long before the financial crisis of 2008 ff. Especially the rational actor model that is fundamental for modern economics – also referred to as homo oeconomicus – has come under pressure. A new line of research, known as “behavioral economics,” has undertaken to replace the deductively derived rational actor model with an empirically grounded alternative model allowing for emotions and sentiments, including “altruistic” ones, as well as for “realistic” limits on human cognition and computational capacity.
The reasons why behavioral economics has so rapidly become fashionable are not difficult to understand. While we fully share the belief that the homo oeconomicus model is deeply flawed, however, we do not think that a behavioral approach can overcome the fun-damental paradigmatic problems that beset contemporary economics. This is because behavioral economics remains committed to an ahistorical view of the economy and of economic action in which preferences continue to be fixed and action is accounted for in a deterministic-functionalist manner. As deductive modeling is abandoned, its place is taken by a psychological reductionism that, again, assumes universal and timeless principles governing economic and indeed human action – only that these are now naturalized rather than logi-cally derived. Moreover, where behavioral economics aligns itself with what it takes to be Darwinian evolutionism, it reintroduces the rational actor model through the backdoor, by producing adaptationist “survival of the fittest” stories that explain “altruism,” “coopera-tion”, intuitive decision-making and the like by declaring them to be, in whatever way, advantageous for physical reproduction.
Rather than as a manifestation of a biologically hard-wired human nature, research at the MPIfG considers the economy as a social system intertwined with the society of which it is part. Unlike the individualistic-psychological approach ofbehavioral economics, and un-like the individualistic-rational approach associated with homo oeconomicus, we conceptualize economic action as social action, or interaction, oriented to the actions of others and taking place in a context of – historically changing – social relations and collective values and institutions that defines and gives substantive meaning to what is pursued by actors as their individual utility in concrete situations. While we do not deny the importance for human action of general psychological dispositions and capacities, we posit that these can matter only to the extent that they are activated and shaped or, as the case may be, suppressed by the norms and institutions of a society. In particular, we take it to be central for any theory of action, including economic action, that social relations condition actors’ historical aspirations and their historically distinctive ethos; confront them with changing opportunities and constraints that affect the definition of their preferences; provide them with as a structuring infrastructure for their mutual transactions; direct the formation of prices and values in markets; resolve or suspend the uncertainties associated with the “double contingency” of human interactions, by generating trust and enforcing moral commitments; determine where markets as social institutions are appropriate and where other modes of interaction take precedence; and generally demarcate the proper place of “economizing” and the economy in the society at large.
Exactly how social structure interacts with its psychological and biological substructures remains a central issue for any theory of action, including economic action. However that issue may eventually be resolved, what appears indisputable is that a theory of the economy that fails to factor in social structure in a prominent position must be deficient. This implies that wherever the way out of the aporetics of homo oeconomicus may lead, it must pass through sociology and sociological theory, and this is precisely the path we ex-plore at the MPIfG. Sociology as a discipline is, of course, a very mixed bag, and ironically includes a “rational choice” stream that subscribes to the same methodological rationalism, individualism and reductionism as standard economics (from which it has borrowed its the-oretical template). Obviously we do not aspire to membership in this branch of sociology, and specifically we expect nothing from a sociological theory of the economy based on the same model that is increasingly recognized as profoundly flawed by the very discipline that has invented it.
On the other hand, this is not to say that there are no overlaps with economics even in a field as sensitive and central as action theory. For example, Herbert Simon’s heterodox notions of “bounded rationality” and of “satisficing” rather than maximizing behavior provide a good working model of the individual actor. Note, however, that our approach emphasizes not just cognitive limitations and the resulting uncertainties but also the capacity of human actors for pragmatic experimentation and learning, and for the creative modification of institutions and the social order at large (what sociologists call “agency”). This is not in conflict with the centrality of social structure as long as the relationship between structure and action is conceived as interactive. To the extent that it is, macrosociology, as it explores the evolution of the broader social context in which action takes place, becomes an indispensable complement to analyses at the micro level – making social-structural and institutional change a central theme for sociologically informed theories of the economy and social theory in general. Without going too much into detail, what this requires is a theoretical framework for structural analysis that is much more dynamic than that of mainstream economics with its basically static, “Newtonian,” motion-without-change image of the social world.
At present there are two closely related strands of social science research on the economy at the MPIfG. The first is economic sociology, which analyses the economy as a social system, or a system of social action, in an attempt to gain a more empirically ground-ed and theoretically rich image of economic behavior, processes and institutions. Here our institute has become one of the leading centers in a worldwide effort among sociologists to apply the tools of their trade to economic phenomena neglected or only poorly understood by mainstream economists. Central to what is sometimes referred to as “the new economic sociology” are notions like actor networks and the reduction of complexity and uncertainty in and by social relations, norms, and values. Unlike standard economics, actor preferences are “internalized”, in that they are not treated as given – or derivable by deduction – but as generated by and inside historically changing social conditions. One upshot is that markets are considered to be driven, not by “objective” relations of scarcity, but by collective interpretations of “needs” and “value” that may produce scarcity rather than being produced by it. Changing cultural templates of what is to be considered a proper object or mode of economic behavior shape economic action in different ways depending on the social context, while at the same time helping actors solve rationally intractable problems of coordination. Note that the overall agenda of economic sociology as pursued at the MPIfG aims – beyond a better understanding of economic affairs in particular – at a revitalization of sociological theory by reintroducing the economy into its domain, from which it had been eliminated in the 1920s in Germany and in the 1950s in the United States.
The second line of economic inquiry at the MPIfG, referred to as political economy, has contributed to a broad international movement, especially in political science, that has formed around the label of historical institutionalism. Based equally in the United States and Europe, historical institutionalists study institutions – preferably economic ones – from the perspective of both their evolution and their consequences. Historical-institutionalist political economy has in recent years become associated itself with the Society for the Advance-ment of Socio-Economics (SASE), which serves as an important meeting point for economic sociologists as well. The MPIfG has played a prominent role in the consolidation of SASE and in the ascent of its journal, Socio-Economic Review, to one of the world’s leading social science periodicals.
Historical-institutionalist political economy at the MPIfG must not be confused with the neo-institutionalism that has in the last two decades evolved inside standard economics. Economic institutionalism, while sometimes referring to itself as “political economy,” reflects a growing recognition of the problems faced by an economic theory that treats institutions and the social order as non-existent or ephemeral. At the same time, it considers institutions exclusively from an efficiency-theoretical perspective, in terms of the extent to which they happen to reduce transaction costs by facilitating “cooperation” between the owners of complementary productive resources. Underlying this is an economistic vision of society as embarked on a long-term trajectory of progressive rationalization through con-tinuous “economizing” of its structures. Historical institutionalism, by comparison, rejects the functionalist-teleological premises of economic institutionalism, to do justice to the complexity and conflictual nature of really existing societies and economies. For historical institutionalists societies contain, and must observe, more than one value system – they have, for example, a moral economy in addition to an economic economy. As there is no guarantee that the values that coexist in a society will always be compatible, societies are typically characterized by internal conflicts not just over means but also over ends and the interests related to them – conflicts that are essentially impossible to settle by progressing to higher levels of economic efficiency. The upshot is that historical institutionalists, unlike most economists, find theoretical concepts unproductive that suggest the possibility, or even postulate the normalcy, of a stable political and economic equilibrium or of an underlying tendency toward it.  Instead historical institutionalism experiments with models of dynamic institutional change typically driven by distributional conflicts that reflect competing interests and values differently endowed with political power under existing socio-economic conditions.
To repeat, change is central in the historical-institutionalist view of the social world and its economy, which is why institutional change has always been a privileged subject of historical-institutionalist research. Concepts like path dependency and punctuated equilibri-um are prominent in the historical-institutionalist literature, as are notions of self-reinforcing as well as self-undermining institutions, and concepts of gradual and endoge-nous as distinguished from sudden and exogenous change. Moreover, there has recently been a renewed interest in evolutionary models of institutional change and development, raising the possibility of synergies with evolutionary economics, a heterodox school from the perspective of the economics mainstream. Theoretical interests in the historicity of social and economic life has increasingly drawn attention to historical scholarship, especially economic history, in an effort to reconcile the search of social science for general explanatory principles with a systematic appreciation of history as a temporal sequence of unique actions and events. Obviously the kind of economic history that is of interest to historical-institutionalist political economy is not one that uses historical data to demonstrate the timeless applicability of neo-classical standard economics. Nor does historical institutionalism have a need for a teleological account of the course of history as a continuous advancement toward economic efficiency, at the neglect of the normative and political complexities and contradictions and the political openness of really existing socio-economic configurations.
Summing up, the study of the economy at the MPIfG consciously adopts a less general and less universalistic approach than standard economics, which has largely become an essentially prescriptive theory of rational decision-making. Instead our work focuses on the specificities of contemporary capitalism and its institutional variants as a historical, in the triple sense of unique, contingent and temporary, socio-economic order. Rather than a timeless model of “the economy,” we study historically situated “varieties of capitalism” and their evolution, adding to a flourishing line of international scholarship to which our institute has made and is making central empirical and theoretical contributions. Conceptu-ally the core issue here is how to strike the right balance between the different institutionalizations of capitalism in different countries on the one hand, and the commonalities of capitalism as a socio-economic order on the other. As standard economics is of little if any help in this respect, work at the MPIfG has come to rely on traditions in the social sciences that date from a time when economics, political economy and sociology had not yet divided in separate disciplines. Unlike standard economics, that is to say, we consciously refer back to authors such as Smith, Marx, Weber and Schumpeter, and require our students to do so as well. Of growing interest to us in this context is the approach of the German Historische Schule and its numerous American followers in the first half of the twentieth century.  Perhaps it will turn out to be possible to heal the alleged theoretical deficits of this important tradition by combining it with an advanced sociological theory of action (rather than a psychological theory of biologically based action dispositions) as sketched out above.
Is there space for mutually beneficial exchange with mainstream economics? At this point we believe economics as a discipline has more to learn from economic sociology and historical-institutionalist political economy than vice versa. Our line of research should be of interest to those in the economics profession who want to understand how politics and in-stitutions really function in the real world – as opposed to devising adaptive stories showing why they must be efficient the way they are, or decreeing how they should change in order finally to become efficient. We also believe that we have a lot to offer to those economists who doubt the fruitfulness of explaining economic life by reducing it to the emanations of an ahistorical human psyche, as in the behavioral economics escape from the quandaries of homo oeconomicus. Moreover, we suggest that economics should begin to question the usefulness of a general theory of “the economy” that separates it from the society in which it is situated, or alternatively incorporates society by treating it as an economy rather than vice versa. To be in this sense of use to economics as a discipline, historical-institutionalist political economy requires sufficient independence from economic orthodoxy to further develop its distinctive paradigm of an empirically grounded, non-functionalist theory of a socially embedded economy.
 Suffice it to say at this point that a sociological theory of action, as distinguished from homo oeco-nomicus rational choice theories, is not a theory claiming that action is “irrational” as opposed to “rational”, or cultural-conformist and norm-abiding rather than interest-pursuing. Sociology as-pires, however, to explain with reference to social structures where and to what extent action is or can be the one or the other
 Socio-economics might be an appropriate general concept for the work done at the MPIfG on economic subjects. We refrain from using it mostly because of attempts, primarily in the United States, to establish socio-economics as a new discipline, apart from economics and sociology and political science.
 The same holds for concepts that treat politics, either descriptively or normatively, as the authori-tative installment of an ideal, i.e., maximally efficient, socio-economic order – rather than as typi-cally improvised and temporary management of inevitably conflicting and often dilemmatic objec-tives. .
 This, incidentally, is something else we share with evolutionary economics.