List, Friedrich (1789–1846)

Friedrich List was a proponent of trade protectionism and railroads and an early empirical critic of the classical school of economics. His strategy for “freedom and national unity” shaped the German customs union, Otto von Bismarck's (1815–1898) unification of Germany, and, indirectly, European unification, which List repeatedly proposed.

List's insights and method qualified him as a noteworthy pioneer of historical jurisprudence, law and economics, and institutional and development economics. List stated, for instance, “Every law, every public regulation has a strengthening or weakening effect on production or on consumption or on the productive forces” (1841: 307). List was educated as a lawyer, and he worked in the legal system until he became a full-time propagandist for improved infrastructure, including legal and administrative reform.

One can understand the roots of List's approach to economics and his opposition to the school of Adam Smith (1723–1790) only within the tradition of German idealism or neohumanism. German idealists had remained loyal to their Renaissance roots and, therefore, differed fundamentally from most Anglo-French economic traditionalists, who emphasized the materialistic Enlightenment and its hedonism and skepticism. The practical outcome of these two opposed traditions was dramatically different.

List's goal was global moral refinement by promoting political and religious freedom, welfare, security, stability, and a balanced business life. He argued that urbanization produced tolerance, liberty, justice, democracy, innovation, entrepreneurship, and industrialization [Page 958]which in turn promoted intelligence, accuracy, diligence, and wealth. “Liberty and civilization have everywhere and at all times emanated from towns” (List 1841: 204).

List's comparative-historical method focused on the immaterial and institutional (often legal) foundations of economics and civilization. Adam Smith confused causes and effects and overlooked long-term effects and the role of institutions such as the nationstate. Smith's materialist generalizations concealed crucial differences that made distinct legal and regulatory interventions necessary. One should therefore consider monetary versus nonmonetary factors of production, material versus immaterial factors, private (often merchant) interests versus public interests, commodities versus refined goods, and different stages of national development.

List's primary practical tool was reform of the legal and administrative system, during which incentives for a moral and efficient economic system would be invoked, and, therefore, he focused on investment in education, science, communication, transport, administration, manufacturing, and agriculture. Justice would serve efficiency, and vice versa. Injustice, such as slavery, was a major reason for existing economic problems and inefficiency. To restrict the undemocratic arbitrariness and excesses of the bureaucracy, law should have precedence over regulation, and the jury system, “one jewel out of the treasure house of freedom,” should have precedence over judges. A federation of nations would allow decisions of law invoked in place of military force; this would be particularly beneficial for smaller nations. Similarly, a world trade congress would tame the arrogance of stronger nations. “The highest aim of rational politics [is] the uniting of all nations under a common law of right” (List 1841: 410).

List agreed with Smith on the desirability of global free trade, but immediate free trade would lead to a monopoly by the strongest nations. Less developed nations had to lift themselves up to provide real competition and global efficiency, gradually correcting global market imperfections. Agricultural nations would benefit from free trade, developing nations from limited protection, and industrial nations from free trade, whereas similar nations would benefit most from mutual trade. During the protective stage, domestic goods might be more expensive than imports, but nations would have to sacrifice some present advantages to ensure to themselves some future ones.

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