Encyclopedia of Law and Economics

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Böhm, Franz

  • Stefan KolevEmail author
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DOI: https://doi.org/10.1007/978-1-4614-7883-6_201-3
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Abstract

The purpose of this entry is to delineate the political economy and legal philosophy of Franz Böhm. To reach this goal, a history of economics approach is harnessed. First, the entry concisely reconstructs Böhm’s life, intellectual evolution, and public impact. Second, it presents the specificities of his theories of market power, of competition as a disempowerment instrument, and of private law society.

Keywords

Legal Philosophy Freiburg School Ordoliberalism Performance-based Competition Eucken 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Biography

Franz Böhm (1895–1977) was a German legal scholar who co-initiated the Freiburg School of ordoliberalism, but also a key political figure during the postwar decades of the Federal Republic in asserting the politico-economic agenda of the Social Market Economy in general and of antitrust legislation in particular. This introduction aims at embedding Böhm in his time and at depicting his role in several contexts in science as well as at the interface between science and society, before subsequently turning to his contributions to political economy and to legal philosophy.

Böhm was born in Konstanz and grew up in the capital of Baden, Karlsruhe, in the family of a high government official and later minister of education. After participation in the war, he studied law at Freiburg and, before finishing his dissertation, left for Berlin in 1925 to join the antitrust section of the Ministry of the Economy. In 1931, Böhm returned to Freiburg to finalize his dissertation and to subsequently start a habilitation project. The dissertation became the cornerstone of his habilitation, “Competition and the Struggle for Monopoly,” submitted in April 1933 and reviewed by the lawyer Hans Großmann-Doerth (1894–1944) and the economist Walter Eucken (1891–1950) (Eucken-Erdsiek 1975, pp. 12–14; Vanberg 2008, pp. 43–44). Both assessed Böhm’s piece as a success: Großmann-Doerth praised Böhm’s attempt to justify the seminal role of “performance-based competition” against the anticompetitive pressure groups within the industry, while Eucken applauded Böhm’s efforts to base his legal case on economic theory (Hansen 2009, pp. 46–48). With the almost immediate start of joint seminars, the three scholars established what later became known as the Freiburg School of Ordoliberalism or as the Freiburg School of Law and Economics (Böhm 1957; Vanberg 1998, 2001; Goldschmidt and Wohlgemuth 2008a). Their cooperation steadily intensified, and the book series “Order of the Economy” initiated in 1936 constituted a milestone – its introduction under the title “Our Mission” became the programmatic manifesto of the incipient ordoliberal understanding of the role of law and economics in science and in society (Böhm et al. 2008; Goldschmidt and Wohlgemuth 2008b). Böhm received a temporary professorship at Jena in 1936, but in 1937 he was suspended from teaching after criticism of National Socialism (Vanberg 2008, pp. 43–44; Hansen 2009, pp. 88–128). Together with Eucken, he participated in the Freiburg Circles, intellectual resistance groups whose interdisciplinary discourse envisioned solutions for the age after National Socialism (Rieter and Schmolz 1993, pp. 95–103; Nicholls 1994, pp. 60–69; Grossekettler 2005, pp. 489–490).

Unlike Eucken, with whom in 1948 he co-founded the “ORDO Yearbook of Economic and Social Order,” Böhm was blessed with a long life, which enabled him to become an essential figure in the politico-economic and legal developments during the early decades of the Federal Republic. Böhm’s career at Freiburg in 1945 was a brief one: in the last months of the war, he received a position in the institute of the late Großmann-Doerth, became vice-rector of the university, but already in October 1945 he left to Frankfurt, the place to become focal for his further development. After a short period as advisor to the American authorities on decartelization and as minister of education, in early 1946 he received a call to the chair of private law, trade and business law at the University of Frankfurt which he would hold until 1962 (Zieschang 2003, pp. 227–228; Vanberg 2008, p. 44). Together with high administrative positions at the university, Böhm was active in Ludwig Erhard’s Frankfurt-based economic administration and simultaneously worked on new proposals for antitrust legislation (Möschel 1992, pp. 62–65; Hansen 2009, pp. 264–272; Glossner 2010, pp. 104–105). From 1953 to 1965, he was member of the Bundestag, dedicating the first years especially to the protracted and tiresome debates with the Federation of German Industry (BDI) on various proposals for antitrust legislation – eventually passed and coming into effect in 1958 as the “Act against Restraints of Competition” (GWB), a fundamental document for the further development of European competition policy (Giocoli 2009). While Böhm’s focus in politics was directed at antitrust law, parallel efforts regarding labor relations and inner-company co-determination are also noteworthy (Biedenkopf 1980). Acting as Chancellor Adenauer’s envoy, Böhm was also a key figure in negotiating the first compensation agreements between the Federal Republic and Israel and remained important for the relations to Israel all his life (Hansen 2009, pp. 425–461).

Power in the Economy as an Enemy to Liberty

In 1928, during his years as an antitrust official in Berlin, Böhm formulated an article that would prove seminal for his further intellectual development. In “The Problem of Private Power: A Contribution to the Monopoly Debate,” he extensively discussed both theoretical and practical notions regarding the power which stems from cartels and monopolies and juxtaposed this type of power with the power and coercion which stem from government, also comparing the respective abilities of private and public law to deal with them (Böhm 2008). Böhm’s analysis of the legal practice of the preceding decades, following the fundamental decision of the Imperial Court of 1897 legalizing cartels and making them legally enforceable (Möschel 1989, pp. 143–145; Nörr 2000, pp. 148–156), led him to the diagnosis that the treatment of monopolies and cartels had been highly inadequate and that therapies to the ensuing problems of power concentration and “re-feudalization of society” (Tumlir 1989, pp. 130–131) were overdue – and it was both the diagnosis and the therapy which he expanded upon in his habilitation and in his contribution to the “Order of the Economy” book series (Böhm 1933, 1937). The core problem he was struggling with was to what extent the “rules of the game” of private law should be indifferent to (or even affirmative of) power concentrations as visible in monopolies and cartels or whether special attention was to be invested in designing rules which counteract such concentrations (Sally 1998, pp. 115–116).

Competition as a Disempowerment Instrument

Böhm’s key early contribution to the incipient political economy of the Freiburg School was the concept of the “economic constitution” (Tumlir 1989, pp. 135–137; Vanberg 2001, pp. 39–42, 2008, pp. 45–46). This concept not only fortified the interdisciplinary character of the scholarly community between lawyers and economists at Freiburg, but – with the semantic proximity between “constitution” and “order” – also provided a cornerstone for the development of the seminal analytical distinction of “economic order” versus “economic process,” a core element of the “Freiburg Imperative” (Rieter and Schmolz 1993, pp. 103–108) which was also at the root of many debates with laissez-faire liberals, most notably Ludwig von Mises (Kolev et al. 2014, pp. 6–7; Kolev 2016).

The search for “rules of the game” of the economic order, which adequately handle the problems of private power on markets, was further augmented by Böhm on another key domain: the ordoliberal notion of competition. Böhm contributed here at least in two respects: on the nature of competition and on the role of competition. On the nature of competition, his conceptual apparatus is based upon the notion of “performance-based competition” (Leistungswettbewerb), a procedural view on the desirable competitive process aimed at superior performance for the customers – which can be seen as a counterweight to “complete competition” (vollständiger Wettbewerb), the end-state view of competition (close to the neoclassical understanding of perfect competition) also present in ordoliberalism (Vanberg 2001, pp. 46–47; Kolev 2013, pp. 63–65; Wohlgemuth 2013, p. 166). On the role of competition, Böhm innovated with his notion of Entmachtungsinstrument, i.e., competition as “the greatest and most ingenious disempowerment instrument in history” (Böhm 1961, p. 21) – a concept which clarifies how opening the doors of markets to competition (and keeping these doors open) creates choice options for the opposite side of the market and thus destroys the detrimental impact of power concentration.

Private Law Society

Later in his career, Böhm presented what Chicago economist Henry Simons called in the 1930s a “positive program,” i.e., a vision of the desirable order as opposed to primarily negative phenomena like the issues of power. Böhm called his positive program “private law society” (Böhm 1966). This system very much resembled Hayek’s legal philosophy as presented in the same period of the 1960s and 1970s, with Hayek referring to Böhm’s notion in Law, Legislation and Liberty (Hayek 1976, p. 158). Böhm’s ideal consists in creating protected domains especially of economic liberty for the individual, including the protection of property rights and enabling private contracts as cooperation of equals – domains which are to be secured by general rules of private (synonymously: civil) law (Streit and Wohlgemuth 2000, pp. 226–227; Sally 1998, pp. 115–117).

Society in Böhm’s analysis is an intermediate entity between the individual and the state, but it is distinctly separate from the state, thus opposing Carl Schmitt’s stance regarding the obsoleteness of the distinction between society and state (Tumlir 1989, pp. 131–132). Society is an indispensable entity: it contains the market as one of its systems, as well as the sets of rules which enable cooperation between the individuals, but also their embeddedness in and subordination to the “rules of the game” (Nörr 2000, pp. 158–160). For Böhm, private law is a historical achievement of paramount importance for a free society to overcome the privilege-based order of feudalism and to establish equality before the law – which is also the reason why he chose this name for his ideal, since he saw the general character of private law rules as the key obstacle to the abovementioned “re-feudalization” of society of his day, i.e., the permanent struggle for power and the successful regaining of privileges (understood as the very opposite of general rules) for individuals or groups in the sense of rent-seeking, in his analysis the greatest threat to the order of a free society of equals (Zieschang 2003, pp. 107–117).

Böhm’s impact and heritage go beyond the realm of ordoliberalism and the Social Market Economy. In addition, he was highly successful in being formative for generations of younger legal scholars, as becomes evident from the contributions in the numerous Festschriften and edited volumes dedicated to him (Mestmäcker 1960; Coing et al. 1965; Sauermann and Mestmäcker 1975; Konrad-Adenauer-Stiftung 1980; Ludwig-Erhard-Stiftung 1995) as well as from a special issue of The European Journal of Law and Economics in 1996 (Backhaus and Stephen 1996).

Cross-References

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Authors and Affiliations

  1. 1.Wilhelm Röpke Institute, Erfurt and University of Applied Sciences ZwickauZwickauGermany