Eucken's ‘Social Market Economy’ and Its Test in Post‐War West Germany
Abstract. Walter Eucken's paradigm of a “social market economy” and “Ordnung” provides a framework for a functional free‐market mechanism, which not only accommodates development and change, but which also assures human dignity and freedom, as cornerstones of the Kantian moral universe. Eucken places special emphasis on the integration of economics with “order” and “Justice,” in a synthesis of negative liberty and positive freedom and of Rawls' and Nozick's theories of justice. Adam Smith's laissez faire economy does not assure a competitive economy, he holds, and will evolve into monopolistic practices, interventionism, and distortions of price relationships; but “structural” and “regulating” principles will facilitate a functionally competitive economy with a compatible social policy, characterized by a flexible price mechanism and stable policies. This “social market economy” would provide goods and services efficiently and also eliminate poverty and the maldistribution of income and resources.