Max Weber

But Weber was also an economist. To him, the distinctive feature of advanced capitalism, as in his pre-World War I Germany, was the extensive division of labor and a hierarchical administration that resembled the political bureaucracy. The two features together had created a new middle class whose position depended on neither physical capital nor labor, but on their human capital. Even in advanced capitalism, though, Weber thought the major source of progress to be risk taking by businessmen and entrepreneurs.

Weber accepted Ludwig von Mises's criticism of socialist economic planning and added his own argument. He believed that under socialism workers would still work in a hierarchy, but that now the hierarchy would be fused with government. Instead of dictatorship of the worker, he foresaw dictatorship of the official.

Weber, like David Hume before him, believed in the possibility of value-free social science. By that he meant that one could not draw conclusions about the way the world should be simply from studying the way the world is. Weber did not rule out normative analysis as being feasible or worthwhile—he believed in rational discussion of values. He simply wanted economists to distinguish between facts and values.

Born in Germany, Weber studied law and went on to do graduate work with a dissertation on medieval trading companies in Italy and Spain. He was appointed to a chair in political economy at Freiburg in 1894, and to another chair in political economy at Heidelberg in 1896. He suffered a nervous breakdown in 1898 and did not continue his scholarly work until 1904. From 1904 on he was a private scholar, mostly in Heidelberg.