From the Perspective of the New Institutional Economics* by

Abstract: German “Ordnungstheorie ” ( ~ system theory, ordo theory) relates essentially to Walter Eucken (Freiburg) who attempted to strike a balance between the economics of the German His-toric School, still relevant in Germany of the 1930s, and its opposing neoclassical analysis. The paper starts, therefore, with a brief description of Eucken’s morphological approach, his “isolated abstraction, ” as an analytic method that is focusing on a precise description of the institutional framework of the analysed economy with only vague assumptions on human wants, behaviour, behavioural constraints etc. Its considerations may be loosely compared with the strategic reason-ing of lawmakers who are primarily interested in the general consequences of their draft bills and not in (theoretically or econometrically established) predictions of their effective functioning. Marginal analysis is abandoned and replaced by general behavioural assumptions such as “…all normal men everywhere and at all times act in accordance with the economic principle. ” Target of Eucken’s Ordnungspolitik (ordo policy) is to minimize (measurable market) power instead of striving for (immeasurable) Pareto efficiency. Eucken’s morphology, his ideal typical description and ordering of institutional frameworks by way of “isolating abstraction, ” may be seen as a predecessor of Williamson’s formation and use of “efficient governance structures. ” Eucken’