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This is a commentary in a symposium on Gabor Biro's book on Polanyi's economics in the thirties, which discusses the social theory aspects of his thought, his Third Way thinking, and its evolution.
Stephen Turner
Gábor Bíró’s valuable book is devoted to “economics,” but as he makes clear, for Michael Polanyi econom-
ics was a broad topic. It was not limited to economic theory, represented for him by Lionel Robbins writings
of the 1930s, which distinguished the purely economic domain in which laws held from the actual world of
economic life, in which many other causes determined outcomes. It was concerned with policy, especially
in his case policy related to the employment crisis of the 1930s. And to deal with this Polanyi added a great
deal, and also dealt with the great ideological divide between liberalism (and especially free-trade) and the
vision of a Communist future presented vividly in the Webbs’ notorious Panglossian book on the Soviet
Union, Soviet Communism: A New Civilization? (1935). In writing on these topics, Polanyi was compelled
to wrap his economic commentary with comments about social theory topics, though the comments at this
point were very thin. e question these comments present is this: do they represent the elements of a coher-
ent social theory, and was this theory consistent over his career and the topics he eventually wrote on? And
this question raises another, more plainly historical one: how did Polanyi come to his views?
Because the main topic he wrote on was science, and because these writings were “liberal,” we are
faced with an immediate problem: the kind of personal autonomy he takes to be essential for pure science
and inimical to its “planning” is more closely akin to the kind of economic libertarianism, which, as Bíró
suggests, he rejects or qualies in his economic writings of the 1930s and 40s. In the economic writings,
Bíró says, he seeks a “third way” between ideological extremes, involving government intervention but not
the complete suppression of individual initiative. In the writings on science, he seems to argue that the
social control scientists informally exercise on one another as members of a community suces as a means
of organizing this community, that it is optimal for the growth of pure science as an intellectual enterprise,
and that state interference should be minimal and would be detrimental. ere seems to be no “third way”
for science.
ere is, however, a connecting thread, which Bíró identies. In the 1930s Polanyi called for social
consciousness of a kind not part of the purely liberal or libertarian image of society. Presumably it is this
social consciousness that would motivate economic policies that governments would then enact. And we
have a parallel in science: funds need to be distributed and decisions about who is deserving need to be
made. ese get made by people (senior scientists acting like Plato’s Guardians, in his writing in the 1940s)
or systems of peer-review. Both are presumably motivated by a shared concern for the growth of science or
scientic merit. In each case, economic policy or scientic choice, there is a hand that is visible, but light,
because it is not felt as the exercise of authority but as the right thing to do, in accordance with a shared
social consciousness in the case of economics, or in the case of science because of a shared sense of scientic
truth. In the immediate post-war period he holds out science as a model for society generally:
e world needs science to-day above all as an example of the good life. Spread out over the
planet scientists form even to-day, though submerged by disaster, the body of a great and
good society (Polanyi 1946, 289).
Tradition & Discovery: The Journal of the Polanyi Society 47:1
© 2021 by the Polanyi Society
We scientists are pledged to a higher obligation, to values more a precious than material
welfare; to a service far more urgent than that of material welfare. Europe can be saved only
by the spirit. Our duty is to keep faith with the spirit in science (Polanyi 1946, 289).
Stirring language, and quite clear on the necessity for “spirit”: but what did it mean to Polanyi, and how
does it relate his thinking of the 30s to that of the 50s, when he was a warrior for the Congress for Cultural
In a sense this is the question that the major biographical works on Polanyi have attempted to answer:
what formed his political and social thought, what were the continuities, and what produced the changes?
e answers have diered, in some respects, and complicated the picture. e older, simpler view was that
he was intrigued by the Communist experiment in Russia, went there, was appalled by Bukharins view of
science, saw that the much vaunted “planning” was not planning at all, but a concealed bidding system. In
this interpretation, the scales fell from his eyes and he embraced market economics, or at least became an
anti-Communist. He underwent the same reaction to the Social Relations of Science movement, coming
rst to a defense of pure science and then to a fully articulated vision of the scientic community as an arena
of spontaneous coordination analogous to the free-market itself. e biographies show a more complicated
story—but still a muddled one, with many matters open to interpretation. Bíró’s book is a contribution that
deepens the discussion.
Bíró’s News
e great merit of Bíró’s book is in his analysis of the epistolary Polanyi—the letters he received and
wrote in the 1930s, when he was thinking about the problem of economics and came to the view that
economic education was necessary to create the right kind of social consciousness to serve as the basis of the
right kind of interventions. A word about this astonishing era and his correspondents (whom Bíró identies
but does not spend much time contextualizing) might help here. In Britain especially (but dierently in the
United States), the period after the Great War was one of agonizing doubt—over progress, religion, good-
ness, and the future. e Great Depression and the inability of the parliamentary system to produce either
consensus or basic decisions, together with the apparent economic successes of the “planned” dictatorial
states, produced a vast intellectual response. e Webbs were only one example: Catholic sociologists called
for the revival of just price theory; R. H. Tawney extolled the high middle ages as prosperous and egalitar-
ian (1926; 1930; 1931); Mannheim argued for a new era of planned social life, including the “planning” of
values (1943); the Moot debated the possibility of a revived and renovated Christianity and the revival of
European Christendom; movements such as Moral Rearmament advocated and indeed practiced on a grand
scale the idea of moral regeneration as a solution to the world’s problems; and so forth.
Polanyi’s correspondents in the 30s comprise a fascinating soupçon from this teeming ideological caul-
dron. ey ranged from people like Lancelot Hogben to central European liberals who had emigrated both
to Britain and the US; his family, including his brother Karl (and one of his older brothers, Adolph—
the other, Otto, had been excommunicated from the family for his enthusiastic, though later withdrawn,
support of Mussolini); and various utopian and ideological novelists.
e correspondents leaned Left. Patrick Blackett was later described in print by Edward Shils as a
Stalinist apologist (Nye 2004, 13); Hogben was an anti-economist and “social biologist” and a man of the
Left. Robert Merton’s review of his edited book Political Arithmetic praised him: “In a typically vigorous
introduction, Professor HOGBEN announces his intolerance of economic mysticism and scarcity dialectics
and presents a case for factual social studies rather than home-spun verbalistics” (1939, 556). G. D. H.
Cole, of guild socialism fame, makes an appearance, and one can detect traces of the guild idea in Polanyi’s
own depiction of science. ere were also various Leftist and Communist scientists and science writers of
the social relations of science movement, such as J. G. Crowther, who had been inuenced by Bukharin
and promoted the idea of the “frustration of science” by capitalism (which Robert Merton endorsed in a
notorious footnote on Communism in his “norms” paper [1942, 123]), and the inuential Leftist journalist
and historian of French thought Kingsley Martin, who feuded with Orwell over a review of a book by Franz
Borkenau, yet another correspondent.
Even the relatively obscure correspondents were well-connected. Toni Stolper, whose husband (who
contributes comments) was the witness to Max Weber’s famous comment after the war that “I have no
political plans except to concentrate all my intellectual strength on one problem, how to get once more for
Germany a Great General Sta” (G. Stolper 1942, 318n). Franz Oppenheimer was a physician and land
reformer of the Henry George stripe, who was the rst to hold a Sociology Chair in Germany. Ludwig
Lachmann, a student of Sombart who emigrated to and then from South Africa, was a rigorous critic of both
Keynes and Hayek. He thought they had both, in dierent ways, stopped short of fullling the promise
of subjectivism. eir work substituted abstractions in the face of the problem of knowledge, specically
in modelling the economic subject faced with uncertainty (1986, 98-100). is reected the fact that the
problem of knowledge was a hot-topic in the economics of the 1930s, one which was never satisfactorily
e list also leans heavily toward Central Europeans, especially Hungarians and Viennese. And their
common experience, which shines through the quotations from letters from Toni Stolper, was with
encountering the actual, habitual and unarticulated, non-ideological form of functioning liberal democ-
racy—something they could not experience in central Europe, where liberalism was an academic idea and
the political allegiance of only a tiny fragment of the population. It fascinated and sometimes horried
them, especially for the apparent lack of theoretical grounding. Polanyi of course shared in this fascination,
with seeing how English political conicts were never pushed to their logical conclusion, for example. ey
felt compelled to provide this system with the ideological or ideal interpretation that the participants could
not and did not articulate. Hayek, another correspondent, turned this compulsion into a deep engagement
with the ideological opposition to liberalism, and to the construction of an explicit defense of liberalism. In
part, this reected their desire to protect it from their more ideologically powerful opponents: Nazism and
Communism. But in part it was an intellectual puzzle forced on them by the shock of experience, which
they felt compelled to theorize about and share their thoughts with others in the same situation.
One aspect of this coming to terms that Bíró does not explain is the intellectual world specic to the
Polanyi family. is is the focus of the chapter on the Polanyi family in Peter Drucker’s autobiography
(1978). Drucker, who knew all the Polanyis but was closest to Karl, observed that
All of them, beginning with the father in Victorian days and ending with Karl and his
brother Michael in the 1960’s, enlisted in the same cause: to overcome the nineteenth
century and to nd a new society that would be free and yet not “bourgeois” or “liberal”;
prosperous and yet not dominated by economics; communal and yet not a Marxist collec-
tivism (1978, 126-7).
is accorded with a specic view of economic theory: that “Liberals of the nineteenth century
Manchester School were wrong in their assertion that the market is the only alternative to serfdom” (Drucker
1978, 138). is is what Michael brought to his encounter with economics, so it is not surprising that he
wished for a middle way.
The Puzzle of Polanyi’s Economics
It would be a massive task to fully trace Polanyi’s interactions and the ways in which each correspon-
dent contributed to his thought. Bírós goal is much narrower. He tries to construct an account of Polanyi’s
response to the economic side of these issues, but it is one that spills over into social theory in a variety of
ways. In many ways it is a puzzling picture, though, which raises more questions than it can answer. Bíró’s
mantra is this: Polanyi wanted to replace the conception of homo economicus with a vision of humans as
knowers who combine “three aspects: understanding, believing and belonging.” Bíró thinks that this concep-
tion oers new opportunities for the interpretation of economics (142), even a postmodern economics.
Bíró emphasizes the lm that Polanyi produced which promoted a degree of Keynesian intervention
into the economy for the creation of full employment—the great problem of the time. And this produces a
kind of contradiction, because Keynes, and the lm, assume a more or less standard economic agent. ere
is a sense in which Keynes departs from this model, inasmuch as scal stimulus is designed to have more
than direct eects on spending by creating a kind of illusion of well-being that encourages people to spend
and extend their time horizon for decisions, and do things like borrowing against future expectations. But
this is a small departure, and a peculiar one, as Lachmann points out (1986, 97-100), because it was an
abstraction from a constantly changing reality. People don’t have time horizons: they just make decisions of
various kinds for various reasons based on various beliefs that are abstracted into a number representing the
aggregation of these decisions, and one that can only be inferred retrospectively.
Keynes’ point involves uncertainty, the uncertainty of the future that leads people to hold money, prefer
liquidity, hoard rather than invest or spend, and the way in which entrepreneurs make decisions to invest
in long term productive goods. None of this replaces economic man, but it does extend the model. In a
sense it involves knowledge, but not in the way Polanyi thought of it in Bíró’s interpretation: it was rather
the surprising result that “opinion,” and specically the diversity of opinion about future interest rates, was
essential to stability, because otherwise there would be mass movements into cash, or hoarding (Keynes
[1936] 1973, 172). Lachmanns point was that Keynes didn’t follow these insights to their natural, and
radical, conclusions about economic man: namely, that these opinions couldn’t be made into a term in an
equation in a predictive model, and that a properly (and fully) subjectivist economics would be historical
rather than pretend to be predictive. But neither did Polanyi provide such an alternative.
The Later Polanyi
What changed for Polanyi? And how did his later thought develop from this period? e early writings
that Bíró deals with were critiques of the ideologies of purist economic liberalism and planning, ideologies
he considered destructive. ey were not about society itself. But his appeal to the idea of social conscience
was the germ of a social theory: an idea of what the good society should have, but not an account of actual
social life. In his characterizations of science during the forties we see the beginning of a shift to claims about
how societies—in this case the society of scientists—really work. ere is continuity in the sense that the
spiritual element of science is important to his account. But there is an important change as well: to thinking
of the community of science as governed by unarticulated commitments, or tradition.
In the end, these were the elements of his view of society as well: rooted in tradition, which supplied or
contained the necessary spiritual element, the element that went beyond getting and spending. But for him,
there were multiple traditions governing dierent areas of life. What they had in common was the power to
allow for freedom, conviviality, individual achievement and recognition, and a dependence on tacit knowl-
edge. ey were threatened by a misunderstanding of their character and of the basis of social life itself,
misunderstandings which were congealed into the ideologies of the age, as well as its academic doctrines,
such as positivism and rationalism.
is was a hopeful vision, but also a conservative one in the sense that it was directed at the conserva-
tion of liberal society—and in this sense the vision did exactly what the Polanyi family tradition resisted:
celebrate bourgeois society. e concept of spontaneous order won out. He was even willing to defend the
de facto rule of free societies by what he frankly called an oligarchy (M, 204-5). But this was acceptable
because the oligarchs ruled not by plan or subjection to the state, but by spontaneous order created by their
independent decisions—as scientists, judges, and economic agents. His fear was that the moral conditions
for a free society would be undermined by ideologies that amounted to nihilism—as they had been under
Communism in Eastern Europe.
Drucker says of the Polanyi family that, “Each achieved greatly—but not the one thing they had aimed
at. ey all believed in salvation by society, then came to give up on society and despair of it” (1978, 140).
Michael, he thought, had
looked to science to provide a way out between a bourgeois capitalism that denied commu-
nity and a Marxist socialism that denied freedom. But very soon he gave up on society
and became instead a humanist philosopher…. Beyond Nihilism is one of his best known
papers, and it sums up both his concerns and answer. Michael Polanyi became a modern
Stoic (Drucker 1978, 131-2).
“Stoic” is perhaps harsh, but it captures something important: his sense of the fragility of the liberal
order and its dependence on a morality whose continuation it could not guarantee. But in a sense science
did provide the “way out.” It gave him a model of the kinds of spontaneous orders dependent on traditions
that a society could be composed of. e model, however, came with the pessimistic implication that science
itself depended on a spiritual endowment of tradition that was not automatically self-perpetuating. And one
can perhaps see the germ of these ideas in his encounters of the 1930s, which we should be grateful to Bíró
for revealing.
Drucker, Peter. 1978. Adventures of a Bystander. New York: Harper & Row Publishers.
Keynes, John Maynard. [1936] 1973. e Collected Writings of John Maynard Keynes, Vol. III: e General eory of Employment
Interest and Money. London: e Macmillan Press.
Lachmann, Ludwig. 1986. e Market as an Economic Process. New York: Basil Blackwell.
Mannheim, Karl. 1943. “e Crisis in Valuation.” In Diagnosis of Our Time: Wartime Essays of a Sociologist. London: Routledge
& Kegan Paul, pp. 12-30.
Merton, Robert. 1939. Review of Lancelot Hogben, ed., Political Arithmetic. Isis, 30: 555-557.
_____. 1942. “A Note on Science and Democracy.Journal of Legal and Political Sociology I: 115-126.
Nye, Mary Jo. 2004. Blackett: Physics War, and Politics in the Twentieth Century. Cambridge, MA: Harvard University Press.
Polanyi, Michael. 1946. “e Social Message of Pure Science.e Advancement of Science, III (12): 288-290.
_____. 1975. Meaning, ed. Harry Prosch. Chicago: e University of Chicago Press.
Stolper, Gustav. 1942. is Age of Fable: e Political and Economic World We Live In. New York: Reynal & Hitchcock.
Tawney, R. H. 1920. e Acquisitive Society. New York: Harcourt, Brace and Howe.
_____. 1926. Religion and the Rise of Capitalism. New York: Harcourt, Brace & Company.
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This book was originally published by Macmillan in 1936. It was voted the top Academic Book that Shaped Modern Britain by Academic Book Week (UK) in 2017, and in 2011 was placed on Time Magazine's top 100 non-fiction books written in English since 1923. Reissued with a fresh Introduction by the Nobel-prize winner Paul Krugman and a new Afterword by Keynes’ biographer Robert Skidelsky, this important work is made available to a new generation. The General Theory of Employment, Interest and Money transformed economics and changed the face of modern macroeconomics. Keynes’ argument is based on the idea that the level of employment is not determined by the price of labour, but by the spending of money. It gave way to an entirely new approach where employment, inflation and the market economy are concerned. Highly provocative at its time of publication, this book and Keynes’ theories continue to remain the subject of much support and praise, criticism and debate. Economists at any stage in their career will enjoy revisiting this treatise and observing the relevance of Keynes’ work in today’s contemporary climate.
The Crisis in Valuation
  • Karl Mannheim
Mannheim, Karl. 1943. "The Crisis in Valuation." In Diagnosis of Our Time: Wartime Essays of a Sociologist. London: Routledge & Kegan Paul, pp. 12-30.
The Social Message of Pure Science
  • Michael Polanyi
Polanyi, Michael. 1946. "The Social Message of Pure Science." The Advancement of Science, III (12): 288-290.
This Age of Fable: The Political and Economic World We Live In
  • Gustav Stolper
Stolper, Gustav. 1942. This Age of Fable: The Political and Economic World We Live In. New York: Reynal & Hitchcock.
The Acquisitive Society
  • R H Tawney
Tawney, R. H. 1920. The Acquisitive Society. New York: Harcourt, Brace and Howe.