Wilhelm Röpke - Expensivity

Röpke’s Early Life and Education

Wilhelm Röpke (1899–1966) was born Schwarmstedt, Germany, a small town in Lower Saxony some 50 km north of Hanover. His father was a physician.

After serving his country as an infantryman in World War I—and being wounded late in the war—Röpke studied economics at the universities of Göttingen, Tübingen, and Marburg. He obtained his doctorate from the latter institution in 1921.

Röpke’s Career

Following a short stint in government service, in 1924 Röpke was appointed to a temporary position at the University of Jena. He spent the following academic year doing research on agricultural policy in the US on a Rockefeller foundation scholarship.

Back in Europe in 1926, Röpke obtained a temporary position at the University of Graz in Austria. The next year, 1927, he was called back to his alma mater, the University of Marburg, now with the title of full professor. He taught at Marburg for the next six years.

While at Marburg, Röpke worked on his first book, Crises and Cycles, which was a collection of his essays that was first published in 1932.

Röpke was an outspoken critic of the National Socialist German Workers Party (Nazi Party). As a result, he was fired from his position at the University of Marburg soon after Adolf Hitler assumed the chancellorship in 1933.

Röpke was a realist who saw clearly that there was no future for him in a Nazi-dominated Germany. He left the country later in 1933, accepting a teaching position at the University of Istanbul, Turkey, where he taught for the next four years.

While in Istanbul, Röpke wrote what was to be his most-influential book, Die Lehre von Wirtschaft [Economic Theory], translated into English much later as Economics of the Free Society.

The book came out in 1937, and in that same year Röpke left Istanbul for Geneva, Switzerland, where he took up a position with the Graduate Institute for International Affairs (now known as the Graduate Institute of International and Development Studies). He was based for the rest of his life.

After World War II, Röpke became deeply involved in planning for the reconstruction of the West German economy and society on a free-market and democratic basis.

With respect to politics, Röpke was one of the founders of the new Christian Democratic Union of Germany.

With respect to economics, Röpke’s writings and his friendly personal relationship with Ludwig Erhard—the West German Minister of Economic Affairs under the country’s first post-war Chancellor, Konrad Adenauer—were decisive for the direction taken by these political leaders. Later, during the 1960s, Erhard would become Chancellor in his own right.

During the late ‘40s and the ‘50s, Röpke also cooperated closely with the University of Freiburg economist, Walter Eucken, the founder of the “ordoliberalism” movement, along with his colleagues Franz Böhm, Alfred Müller-Armack, and Alexander Rüstow.

The ordoliberals believed that the free market had to be ordered toward the common good through rules embodying moral restraint, whether deriving spontaneously from below or imposed from above.

The movement took its name from the German economics journal run by Eucken, ORDO—Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, known in English as The Ordo Yearbook of Economic and Social Order.

At the theoretical level, Röpke was close to the ordoliberals. However, he ultimately belonged to no economic school and always guarded his intellectual independence. For this very reason, the great Austrian economist Ludwig von Mises—not one to pay compliments lightly—once expressed his admiration for Röpke.

The success of Erhard, under the tutelage of Röpke and the ordoliberals, was nothing less than spectacular. The new Federal Republic of Germany was an outstanding political success, while its economy came roaring back to life.

The phrase “Wirtschaftswunder” [economic miracle] became a byword of the times.

Röpke’s Ideas

Röpke’s basic economic orientation was in favor of the free market. In fact, he once wrote that:

I champion an economic order ruled by free prices and markets … the only economic order compatible with human freedom.

With respect to monetary policy, Röpke also favored the typically free-market policy of a worldwide gold standard, to which all national currencies would be pegged.

However, Röpke did not align himself with the Austrian school and was not what we now call a libertarian thinker.

Rather, Röpke advocated what he and the ordoliberals referred to as “economic humanism,” meaning that non-economic values such as tradition and religious faith are critical to building a lasting and just social and economic order.

Röpke also referred to his combination of free market and traditional values as the “third way”—a phrase that he originated.