This is the first-ever English translation of an 1891 essay by Carl Menger published in the most important newspaper of the Habsburg Empire, the Neue Freie Presse. Menger writes the piece as a defense of classical political economy in general and of Adam Smith in particular, focusing on misinterpretations of Smith’s work by the Younger Historical School in Germany.
We develop a model of insurrection markets and integrate the youth bulge as measured by the relative youth cohort size. As youth-specific characteristics we define the young person’s attitude toward revolutionary groups and the government, the degree of risk aversion and the relative productivity of young people on the insurrection market as compared to the official labor market.
The paper analyzes the political economy of capitalist transformation in nineteenth century Germany. The emergence of capitalism after 1806 gives an example that economic freedom can precede political freedom, leaving the political power of the “dominant coalition” intact. The paper argues that the German capitalist transformation was instigated by competition among the European states. Primarily it was conducive to the monopolization of the coercive power of the state. As a result competition among the states drove a wedge between the interests of the monarch and his supporting dominant coalition (landed gentry). The increasingly independent public administration in Prussia which was influenced by Adam Smith’s liberal ideas organized a political bargain which established economic freedom in various sectors but took the economic interests of the landed gentry into account. In various aspects the sweeping institutional change was Pareto-superior for groups, which made capitalism also acceptable for the elite group.