Karl Polanyi's and Karl William Kapp's Substantive Economics: Important Insights from the Kapp–Polanyi Correspondence

Abstract

Based on the unpublished Kapp-Polanyi correspondence, the paper analyzes the relationship between the two economists, as well as the meaning and origin of substantive economics, i.e. one of the key concepts of institutional economics with distinctly European roots. The correspondence shows how both economists influenced each other in their similar understanding of the substantive economy, and reveals that these similarities and the mutual influence date back to the ‘planning debate’ of the 1920s and 1930s. The documents also evidence the importance of Carl Menger's definition of substantive economics in the posthumous and untranslated second edition of the Grundsätze der Volkswirtschaftslehre (Principles of Economics) (1923). As a result, Kapp's political economy, i.e. his social minima approach appears in new light. The latter actualizes the full potential of substantive economics for a modern political economy by integrating insights from Polanyi's substantive economics, Menger's differentiation of human needs according to their urgency, and Max Weber's substantive rationality.

Keywords:

• K. William Kapp
• Karl Polanyi
• substantive economics
• social costs
• social minima

Notes

The Kapp–Polanyi correspondence remained unknown to the Polanyi Archive until 2006 and has not yet been fully published, although parts have been published in Heidenreich (1994). This paper works with yet unpublished material found in the Kapp Archive.

A good discussion in the English Language of Kapp's German dissertation can be found in Cangiani 2006.

Among them was Adolph Lowe whose work on political economics Kapp sees to be in line with his attempt to reconstruct a modern political economy. See: Berger and Forstater (2007). Kapp also became close friends with Pollock, exchanging letters on Lowe's political economics amongst other issues (Kapp–Pollock Correspondence, Kapp Archive). In addition, Kapp cites the work of members of the Frankfurt School, such as Adorno, Fromm, Habermas, and Horkheimer throughout his work.

Especially Veblen's Theory of Business Enterprise (1904) made for Kapp's specific institutionalist approach to the problem of social costs. In the introduction of the revised and enlarged 1963 edition of The Social Costs of Business Enterprise Kapp explains that the change of the title is in reference to Veblen.

Kapp's close friends called him Ted.

Menger uses the German word ‘unmittellbar,’ which directly translates into ‘immediate.’