Max Weber's bureaucratic theory or model is sometimes also known as the "rational-legal" model. The model tries to explain bureaucracy from a rational point of view via nine main characteristics or principles; these are as follows:
Max Weber's bureaucratic model (rational-legal model)
Weber wrote that the modern bureaucracy in both the public and private sector relies on the following principles.
"First, it is based on the general principle of precisely defined and organized across-the-board competencies of the various offices. These competencies are underpinned by rules, laws, or administrative regulations." For Weber, this means
A rigid division of labor is established that clearly identifies regular tasks and duties of the particular bureaucratic system.
Regulations describe firmly established chains of command and the duties and capacity to coerce others to comply.
Hiring people with particular, certified qualifications supports regular and continuous execution of the assigned duties.
Weber notes that these three aspects "...constitute the essence of bureaucratic administration...in the public sector. In the private sector, these three aspects constitute the essence of a bureaucratic management of a private company."
Main principles (characteristics):
Recruitment based on merit (e.g., tested through open competition)
Uniform principles of placement, promotion, and transfer in an administrative system
Careerism with systematic salary structure
Hierarchy, responsibility and accountability
Subjection of official conduct to strict rules of discipline and control
Supremacy of abstract rules
Impersonal authority (e.g., office bearer does not bring the office with him)
Merits: As Weber noted, real bureaucracy is less optimal and effective than his ideal-type model. Each of Weber's principles can degenerate—and more so, when they are used to analyze the individual level in an organization. But, when implemented in a group setting in an organization, some form of efficiency and effectiveness can be achieved, especially with regard to better output. This is especially true when the Bureaucratic model emphasizes qualification (merits), specialization of job-scope (labour), hierarchy of power, rules and discipline.
Demerits: However, competencies, efficiency and effectiveness can be unclear and contradictory, especially when dealing with oversimplified matters. In a dehumanized bureaucracy, inflexible in distributing the job-scope, with every worker having to specialize from day one without rotating tasks for fear of decreasing output, tasks are often routine and can contribute to boredom. Thus, employees can sometimes feel that they are not part of the organization's work vision and missions. Consequently, they do not have any sense of belonging in the long term. Furthermore, this type of organization tends to invite exploitation and underestimate the potential of the employees, as creativity of the workers is brushed aside in favour of strict adherence to rules, regulations and procedures.
Weber's thinking was strongly influenced by German idealism, and particularly by neo-Kantianism, which he had been exposed to through Heinrich Rickert, his professorial colleague at the University of Freiburg. Especially important to Weber's work is the neo-Kantian belief that reality is essentially chaotic and incomprehensible, with all rational order deriving from the way the human mind focuses attention on certain aspects of reality and organises the resulting perceptions. Weber's opinions regarding the methodology of the social sciences show parallels with the work of contemporary neo-Kantian philosopher and pioneering sociologist Georg Simmel.
Weber was also influenced by Kantian ethics, which he nonetheless came to think of as obsolete in a modern age lacking in religious certainties. In this last respect, the influence of Friedrich Nietzsche's philosophy is evident. According to the Stanford Encyclopedia of Philosophy, the "deep tension between the Kantian moral imperatives and a Nietzschean diagnosis of the modern cultural world is apparently what gives such a darkly tragic and agnostic shade to Weber's ethical worldview". Another major influence in Weber's life was the writings of Karl Marx and the workings of socialist thought in academia and active politics. While Weber shares some of Marx's consternation with bureaucratic systems and maligns them as being capable of advancing their own logic to the detriment of human freedom and autonomy, Weber views conflict as perpetual and inevitable and does not host the spirit of a materially available utopia. Though the influence of his mother's Calvinist religiosity is evident throughout Weber's life and work, and though he maintained a deep, lifelong interest in the study of religions, Weber was open about the fact that he was personally irreligious.
New research suggests that some of Weber's theories, including his interest in the sociology of Far Eastern religion and elements of his theory of disenchantment, were actually shaped by Weber's interaction with contemporary German occult figures. He is known to have visited the Ordo Templi Orientis at Monte Verità shortly before articulating his idea of disenchantment.:269-70 He is known to have met the German poet and occultist Stefan George and developed some elements of his theory of charisma after observing George. However, Weber disagreed with many of George's views and never formally joined George's occult circle.:290-3 Weber may have also had his first exposure to Taoism, albeit in a Westernized form, through Gustav Gräser at Monte Verità.:275-6 Research on Weber's engagement with the occult has led some German and American scholars to re-interpret his theories of disenchantment.
Unlike some other classical figures (Comte, Durkheim) Weber did not attempt, consciously, to create any specific set of rules governing social sciences in general, or sociology in particular. In comparison with Durkheim and Marx, Weber was more focused on individuals and culture and this is clear in his methodology. Whereas Durkheim focused on the society, Weber concentrated on the individuals and their actions (see structure and action discussion) and whereas Marx argued for the primacy of the material world over the world of ideas, Weber valued ideas as motivating actions of individuals, at least in the big picture.
Sociology, for Max Weber, is:
... a science which attempts the interpretive understanding of social action in order thereby to arrive at a causal explanation of its course and effects.
Weber was concerned with the question of objectivity and subjectivity. Weber distinguished social action from social behavior, noting that social action must be understood through how individuals subjectively relate to one another. Study of social action through interpretive means (Verstehen) must be based upon understanding the subjective meaning and purpose that individuals attach to their actions. Social actions may have easily identifiable and objective means, but much more subjective ends and the understanding of those ends by a scientist is subject to yet another layer of subjective understanding (that of the scientist). Weber noted that the importance of subjectivity in social sciences makes creation of fool-proof, universal laws much more difficult than in natural sciences and that the amount of objective knowledge that social sciences may achieve is precariously limited. Overall, Weber supported the goal of objective science, but he noted that it is an unreachable goal—although one definitely worth striving for.
There is no absolutely "objective" scientific analysis of culture.... All knowledge of cultural reality ... is always knowledge from particular points of view.... an "objective" analysis of cultural events, which proceeds according to the thesis that the ideal of science is the reduction of empirical reality to "laws", is meaningless ... [because] ... the knowledge of social laws is not knowledge of social reality but is rather one of the various aids used by our minds for attaining this end.
— Max Weber, "Objectivity" in Social Science, 1904
The principle of methodological individualism, which holds that social scientists should seek to understand collectivities (such as nations, cultures, governments, churches, corporations, etc.) solely as the result and the context of the actions of individual persons, can be traced to Weber, particularly to the first chapter of Economy and Society, in which he argues that only individuals "can be treated as agents in a course of subjectively understandable action". In other words, Weber argued that social phenomena can be understood scientifically only to the extent that they are captured by models of the behaviour of purposeful individuals—models that Weber called "ideal types"—from which actual historical events necessarily deviate due to accidental and irrational factors. The analytical constructs of an ideal type never exist in reality, but provide objective benchmarks against which real-life constructs can be measured.
Weber's methodology was developed in the context of a wider debate about methodology of social sciences, the Methodenstreit. Weber's position was close to historicism, as he understood social actions as being heavily tied to particular historical contexts and its analysis required the understanding of subjective motivations of individuals (social actors). Thus Weber's methodology emphasises the use of comparative historical analysis. Therefore, Weber was more interested in explaining how a certain outcome was the result of various historical processes rather than predicting an outcome of those processes in the future.
Many scholars have described rationalisation and the question of individual freedom in an increasingly rational society, as the main theme of Weber's work. This theme was situated in the larger context of the relationship between psychological motivations, cultural values and beliefs (primarily, religion) and the structure of the society (usually determined by the economy).
By rationalisation, Weber understood first, the individual cost-benefit calculation, second, the wider bureaucratic organisation of the organisations and finally, in the more general sense as the opposite of understanding the reality through mystery and magic (disenchantment).
The fate of our times is characterised by rationalisation and intellectualisation and, above all, by the "disenchantment of the world"
Weber began his studies of the subject in The Protestant Ethic and the Spirit of Capitalism, in which he argued that the redefinition of the connection between work and piety in Protestantism and especially in asceticProtestantdenominations, particularly Calvinism, shifted human effort towards rational efforts aimed at achieving economic gain. In Protestant religion, Christian piety towards God was expressed through one's secular vocation (secularisation of calling). The rational roots of this doctrine, he argued, soon grew incompatible with and larger than the religious and so the latter were eventually discarded.
Weber continued his investigation into this matter in later works, notably in his studies on bureaucracy and on the classification of legitimate authority into three types—rational-legal, traditional and charismatic—of which the rational-legal (through bureaucracy) is the dominant one in the modern world. In these works Weber described what he saw as society's movement towards rationalisation. Similarly, rationalisation could be seen in the economy, with the development of highly rational and calculating capitalism. Weber also saw rationalisation as one of the main factors setting the European West apart from the rest of the world. Rationalisation relied on deep changes in ethics, religion, psychology and culture; changes that first took place in the Western civilisation.
What Weber depicted was not only the secularisation of Western culture, but also and especially the development of modern societies from the viewpoint of rationalisation. The new structures of society were marked by the differentiation of the two functionally intermeshing systems that had taken shape around the organisational cores of the capitalist enterprise and the bureaucratic state apparatus. Weber understood this process as the institutionalisation of purposive-rational economic and administrative action. To the degree that everyday life was affected by this cultural and societal rationalisation, traditional forms of life—which in the early modern period were differentiated primarily according to one's trade—were dissolved.
Features of rationalisation include increasing knowledge, growing impersonality and enhanced control of social and material life. Weber was ambivalent towards rationalisation; while admitting it was responsible for many advances, in particular, freeing humans from traditional, restrictive and illogical social guidelines, he also criticised it for dehumanising individuals as "cogs in the machine" and curtailing their freedom, trapping them in the bureaucratic iron cage of rationality and bureaucracy. Related to rationalisation is the process of disenchantment, in which the world is becoming more explained and less mystical, moving from polytheistic religions to monotheistic ones and finally to the Godless science of modernity. However, another interpretation of Weber's theory of disenchantment, advanced by historian of religion Jason Josephson-Storm, claims that Weber does not envision a binary between rationisation and magical thinking, and that Weber actually referred to the sequestering and professionalisation of magic when he described disenchantment, not to the disappearances of magic.:299-300 Regardless, for Weber the processes of rationalisation affect all of society, removing "sublime values... from public life" and making art less creative.
In a dystopian critique of rationalisation, Weber notes that modern society is a product of an individualistic drive of the Reformation, yet at the same time, the society created in this process is less and less welcoming of individualism.
How is it at all possible to salvage any remnants of "individual" freedom of movement in any sense given this all-powerful trend?
Weber saw religion as one of the core forces in society. His goal was to find reasons for the different development paths of the cultures of the Occident and the Orient, although without judging or valuing them, like some of the contemporary thinkers who followed the social Darwinist paradigm; Weber wanted primarily to explain the distinctive elements of the Western civilisation. He maintained that Calvinist (and more widely, Protestant) religious ideas had a major impact on the social innovation and development of the economic system of the West, but noted that they were not the only factors in this development. Other notable factors mentioned by Weber included the rationalism of scientific pursuit, merging observation with mathematics, science of scholarship and jurisprudence, rational systematisation and bureaucratisation of government administration and economic enterprise. In the end, the study of the sociology of religion, according to Weber, focused on one distinguishing part of the Western culture, the decline of beliefs in magic, or what he referred to as "disenchantment of the world".
Weber also proposed a socioevolutionary model of religious change, showing that in general, societies have moved from magic to polytheism, then to pantheism, monotheism and finally, ethical monotheism. According to Weber, this evolution occurred as the growing economic stability allowed professionalisation and the evolution of ever more sophisticated priesthood. As societies grew more complex and encompassed different groups, a hierarchy of gods developed and as power in the society became more centralised, the concept of a single, universal God became more popular and desirable.
Weber's essay The Protestant Ethic and the Spirit of Capitalism is his most famous work. It is argued[by whom?] that this work should not be viewed as a detailed study of Protestantism, but rather as an introduction into Weber's later works, especially his studies of interaction between various religious ideas and economic behaviour as part of the rationalisation of the economic system. In The Protestant Ethic and the Spirit of Capitalism, Weber put forward the thesis that Calvinist ethic and ideas influenced the development of capitalism. He noted the post-Reformation shift of Europe's economic centre away from Catholic countries such as France, Spain and Italy, and toward Protestant countries such as the Netherlands, England, Scotland and Germany. Weber also noted that societies having more Protestants were those with a more highly developed capitalist economy. Similarly, in societies with different religions, most successful business leaders were Protestant. Weber thus argued that Roman Catholicism impeded the development of the capitalist economy in the West, as did other religions such as Confucianism and Buddhism elsewhere in the world.
The development of the concept of the calling quickly gave to the modern entrepreneur a fabulously clear conscience—and also industrious workers; he gave to his employees as the wages of their ascetic devotion to the calling and of co-operation in his ruthless exploitation of them through capitalism the prospect of eternal salvation.
Christian religious devotion had historically been accompanied by rejection of mundane affairs, including economic pursuit. Weber showed that certain types of Protestantism—notably Calvinism—were supportive of rational pursuit of economic gain and worldly activities dedicated to it, seeing them as endowed with moral and spiritual significance. Weber argued that there were many reasons to look for the origins of modern capitalism in the religious ideas of the Reformation. In particular, the Protestant ethic (or more specifically, Calvinist ethic) motivated the believers to work hard, be successful in business and reinvest their profits in further development rather than frivolous pleasures. The notion of calling meant that each individual had to take action as an indication of their salvation; just being a member of the Church was not enough.Predestination also reduced agonising over economic inequality and further, it meant that a material wealth could be taken as a sign of salvation in the afterlife. The believers thus justified pursuit of profit with religion, as instead of being fuelled by morally suspect greed or ambition, their actions were motivated by a highly moral and respected philosophy. This Weber called the "spirit of capitalism": it was the Protestant religious ideology that was behind—and inevitably led to—the capitalist economic system. This theory is often viewed as a reversal of Marx's thesis that the economic "base" of society determines all other aspects of it.
Weber abandoned research into Protestantism because his colleague Ernst Troeltsch, a professional theologian, had begun work on the book The Social Teachings of the Christian Churches and Sects. Another reason for Weber's decision was that Troeltsch's work already achieved what he desired in that area: laying the groundwork for a comparative analysis of religion and society.
The phrase "work ethic" used in modern commentary is a derivative of the "Protestant ethic" discussed by Weber. It was adopted when the idea of the Protestant ethic was generalised to apply to the Japanese people, Jews and other non-Christians and thus lost its religious connotations.
The Religion of China: Confucianism and Taoism was Weber's second major work on the sociology of religion. Hans H. Gerth edited and translated this text into English, with an introduction by C. K. Wang. Weber focused on those aspects of Chinese society that were different from those of Western Europe, especially those aspects that contrasted with Puritanism. His work also questioned why capitalism did not develop in China. He focused on the issues of Chinese urban development, Chinese patrimonialism and officialdom and Chinese religion and philosophy (primarily, Confucianism and Taoism), as the areas in which Chinese development differed most distinctively from the European route.
According to Weber, Confucianism and Puritanism are mutually exclusive types of rational thought, each attempting to prescribe a way of life based on religious dogma. Notably, they both valued self-control and restraint and did not oppose accumulation of wealth. However, to both those qualities were just means to the final goal and here they were divided by a key difference. Confucianism's goal was "a cultured status position", while Puritanism's goal was to create individuals who are "tools of God". The intensity of belief and enthusiasm for action were rare in Confucianism, but common in Protestantism. Actively working for wealth was unbecoming a proper Confucian. Therefore, Weber states that it was this difference in social attitudes and mentality, shaped by the respective, dominant religions, that contributed to the development of capitalism in the West and the absence of it in China.
The Religion of India: The Sociology of Hinduism and Buddhism
The Religion of India: The Sociology of Hinduism and Buddhism was Weber's third major work on the sociology of religion. In this work he deals with the structure of Indian society, with the orthodox doctrines of Hinduism and the heterodox doctrines of Buddhism, with modifications brought by the influence of popular religiosity and finally with the impact of religious beliefs on the secular ethic of Indian society. In Weber's view, Hinduism in India, like Confucianism in China, was a barrier for capitalism. The Indian caste system made it very difficult for individuals to advance in the society beyond their caste. Activity, including economic activity, was seen as unimportant in the context of the advancement of the soul.
Weber ended his research of society and religion in India by bringing in insights from his previous work on China to discuss similarities of the Asian belief systems. He notes that the beliefs saw the meaning of life as otherworldly mystical experience. The social world is fundamentally divided between the educated elite, following the guidance of a prophet or wise man and the uneducated masses whose beliefs are centered on magic. In Asia, there was no Messianic prophecy to give plan and meaning to the everyday life of educated and uneducated alike. Weber juxtaposed such Messianic prophecies (also called ethical prophecies), notably from the Near East region to the exemplary prophecies found on the Asiatic mainland, focused more on reaching to the educated elites and enlightening them on the proper ways to live one's life, usually with little emphasis on hard work and the material world. It was those differences that prevented the countries of the Occident from following the paths of the earlier Chinese and Indian civilisations. His next work, Ancient Judaism was an attempt to prove this theory.
In Ancient Judaism, his fourth major work on the sociology of religion, Weber attempted to explain the factors that resulted in the early differences between Oriental and Occidentalreligiosity. He contrasted the innerworldly asceticism developed by Western Christianity with mystical contemplation of the kind developed in India. Weber noted that some aspects of Christianity sought to conquer and change the world, rather than withdraw from its imperfections. This fundamental characteristic of Christianity (when compared to Far Eastern religions) stems originally from ancient Jewish prophecy.
Weber claimed that Judaism not only fathered Christianity and Islam, but was crucial to the rise of the modern Occidental state; Judaism's influence was as important as Hellenistic and Roman cultures.
Weber's premature death in 1920 prevented him from following his planned analysis of Psalms, the Book of Job, Talmudic Jewry, early Christianity and Islam.
Weber's magnum opus Economy and Society is a collection of his essays that he was working on at the time of his death in 1920. After his death, the final organization and editing of the book fell to his widow Marianne Weber. The final German form published in 1921 reflected very much Marianne Weber's work and intellectual commitment. Beginning in 1956, the German jurist
Johannes Wincklemann began editing and organizing the German edition of Economy and Society based on his study of the papers that Weber left at his death.
English versions of Economy and Society were published as a collected volume in 1968 as edited by Gunther Roth and Claus Wittich. As a result of the various editions in German and English, there are differences between the organization of the different volumes.
Economy and Society includes a wide range of essays dealing with Weber's views regarding Sociology, Social Philosophy, Politics, Social Stratification, World Religion, Diplomacy, and other subjects. The book is typically published in a two volume set in both German and English, and is more than 1000 pages long.
Theodicy of fortune and misfortune
The theodicy of fortune and misfortune within sociology is the theory, as Weber suggested, of how "members of different social classes adopt different belief systems, or theodices, to explain their social situation".
The concept of theodicy was expanded mainly with the thought of Weber and his addition of ethical considerations to the subject of religion. There is this ethical part of religion, including, "...(1) soteriology and (2) theodicy. These mean, respectively, how people understand themselves to be capable of a correct relationship with supernatural powers, and how to explain evil—or why bad things seem to happen to those who seem to be good people." There is a separation of different theodicies with regard to class. "Theodicies of misfortune tend to the belief that wealth and other manifestations of privilege are indications or signs of evil.... In contrast, theodicies of fortune emphasise the notion that privileges are a blessing and are deserved." Weber also writes that, "The affluent embrace good fortune theodicies, which emphasise that prosperity is a blessing of God...[while] theodices of misfortune emphasise that affluence is a sign of evil and that suffering in this world will be rewarded in the next." Thus these two distinctions can be applied not only to class structure within society but denomination and racial segregation within religion.
Weber defines the importance of societal class within religion by examining the difference between the two theodicies and to what class structures they apply. The concept of "work ethic" is attached to the theodicy of fortune; thus, because of the Protestant "work ethic", there was a contribution of higher class outcomes and more education among Protestants. Those without the work ethic clung to the theodicy of misfortune, believing wealth and happiness were granted in the afterlife. Another example of how this belief of religious theodicy influences class, is that those of lower status, the poor, cling to deep religiousness and faith as a way to comfort themselves and provide hope for a more prosperous future, while those of higher status cling to the sacraments or actions that prove their right of possessing greater wealth.
These two theodicies can be found in the denominational segregation within the religious community. The main division can be seen between the mainline Protestant and evangelical denominations and their relation to the class into which their particular theodicy pertains. For example, mainline churches, with their upper class congregations, "...promote[d] order, stability, and conservatism, and in so doing proved to be a powerful source of legitimation of the status quo and of existing disparities in the distribution of wealth and power," because much of the wealth of the church comes from the congregation. In contrast, Pentecostal churches adopted the theodicy of misfortune. They instead "advocated change intended to advance the cause of justice and fairness". Thus the learned and upper class religious churches who preach the theodicy of fortune, ultimately support capitalism and corporation, while the churches who adopted the theodicy of misfortune, instead preached equality and fairness.
In political sociology, one of Weber's most influential contributions is his "Politics as a Vocation" (Politik als Beruf) essay. Therein, Weber unveils the definition of the state as that entity that possesses a monopoly on the legitimate use of physical force. Weber wrote that politics is the sharing of state's power between various groups, and political leaders are those who wield this power. A politician must not be a man of the "true Christian ethic", understood by Weber as being the ethic of the Sermon on the Mount, that is to say, the injunction to turn the other cheek. An adherent of such an ethic ought rather to be understood as a saint, for it is only saints, according to Weber, that can appropriately follow it. The political realm is no realm for saints; a politician ought to marry the ethic of attitude and the ethic of responsibility ("Verantwortungsethik vs Gesinnungsethik") and must possess both a passion for his vocation and the capacity to distance himself from the subject of his exertions (the governed).
Weber distinguished three ideal types of political leadership (alternatively referred to as three types of domination, legitimisation or authority):
In his view, every historical relation between rulers and ruled contained such elements and they can be analysed on the basis of this tripartite distinction. He notes that the instability of charismatic authority forces it to "routinise" into a more structured form of authority. In a pure type of traditional rule, sufficient resistance to a ruler can lead to a "traditional revolution". The move towards a rational-legal structure of authority, utilising a bureaucratic structure, is inevitable in the end. Thus this theory can be sometimes viewed as part of the social evolutionism theory. This ties to his broader concept of rationalisation by suggesting the inevitability of a move in this direction.
Bureaucratic administration means fundamentally domination through knowledge.
Weber described many ideal types of public administration and government in his masterpiece Economy and Society (1922). His critical study of the bureaucratisation of society became one of the most enduring parts of his work. It was Weber who began the studies of bureaucracy and whose works led to the popularisation of this term. Many aspects of modern public administration go back to him and a classic, hierarchically organised civil service of the Continental type is called "Weberian civil service". As the most efficient and rational way of organising, bureaucratisation for Weber was the key part of the rational-legal authority and furthermore, he saw it as the key process in the ongoing rationalisation of the Western society.
Weber listed several preconditions for the emergence of the bureaucracy: The growth in space and population being administered, the growth in complexity of the administrative tasks being carried out and the existence of a monetary economy—these resulted in a need for a more efficient administrative system. Development of communication and transportation technologies made more efficient administration possible (and popularly requested) and democratisation and rationalisation of culture resulted in demands that the new system treat everybody equally.
Weber's ideal bureaucracy is characterised by hierarchical organisation, by delineated lines of authority in a fixed area of activity, by action taken (and recorded) on the basis of written rules, by bureaucratic officials needing expert training, by rules being implemented neutrally and by career advancement depending on technical qualifications judged by organisations, not by individuals.
The decisive reason for the advance of the bureaucratic organisation has always been its purely technical superiority over any other form of organisation.
While recognising bureaucracy as the most efficient form of organisation and even indispensable for the modern state, Weber also saw it as a threat to individual freedoms and the ongoing bureaucratisation as leading to a "polar night of icy darkness", in which increasing rationalisation of human life traps individuals in the aforementioned "iron cage" of bureaucratic, rule-based, rational control. To counteract bureaucrats, the system needs entrepreneurs and politicians.
Weber also formulated a three-component theory of stratification, with social class, social status and political party as conceptually distinct elements. The three-component theory of stratification is in contrast to Karl Marx simpler theory of social class that ties all social stratification to what people own. In Weber's theory, issues of honour and prestige are important. This distinction is most clearly described in Weber's essay Classes, Staende, Parties, which was first published in his book Economy and Society. The three components of Weber's theory are:
Social Class based on economically determined relationship to the market (owner, renter, employee, etc.)
Status (or in German Stand), which is based on non-economic qualities like honour, prestige and religion
Party, which refers to affiliations in the political domain
All three dimensions have consequences for what Weber called "life chances" (opportunities to improve one's life).
Weber scholars maintain a sharp distinction between the terms status and class, even though, in casual use, people tend to use them interchangeably.
Study of the city
As part of his overarching effort to understand the unique development of the Western world, Weber produced a detailed general study of the city as the characteristic locus of the social and economic relations, political arrangements, and ideas that eventually came to define the West. This resulted in a monograph, The City, which he probably compiled from research he conducted in 1911–13. It was published posthumously in 1921, and 1924, was incorporated into the second part of his Economy and Society, as chapter XVI, "The City (Non-legitimate Domination)".
According to Weber, the city as a politically autonomous organisation of people living in close proximity, employed in a variety of specialised trades, and physically separated from the surrounding countryside, only fully developed in the West and to a great extent shaped its cultural evolution:
The origin of a rational and inner-worldly ethic is associated in the Occident with the appearance of thinkers and prophets [...] who developed in a social context that was alien to the Asiatic cultures. This context consisted of the political problems engendered by the bourgeois status-group of the city, without which neither Judaism, nor Christianity, nor the development of Hellenistic thinking are conceivable.
Weber argued that Judaism, early Christianity, theology, and later the political party and modern science, were only possible in the urban context that reached a full development in the West alone. He also saw in the history of medieval European cities the rise of a unique form of "non-legitimate domination" that successfully challenged the existing forms of legitimate domination (traditional, charismatic, and rational-legal) that had prevailed until then in the Medieval world. This new domination was based on the great economic and military power wielded by the organised community of city-dwellers ("citizens").
Weber regarded himself primarily as a "political economist", and all of his professorial appointments were in economics, though today his contributions in that field are largely overshadowed by his role as a founder of modern sociology. As an economist, Weber belonged to the "youngest" German historical school of economics. The great differences between that school's interests and methods on the one hand and those of the neoclassical school (from which modern mainstream economics largely derives) on the other, explain why Weber's influence on economics today is hard to discern.
Though his research interests were always in line with those of the German historicists, with a strong emphasis on interpreting economic history, Weber's defence of "methodological individualism" in the social sciences represented an important break with that school and an embracing of many of the arguments that had been made against the historicists by Carl Menger, the founder of the Austrian School of economics, in the context of the academic Methodenstreit ("debate over methods") of the late 19th century. The phrase methodological individualism, which has come into common usage in modern debates about the connection between microeconomics and macroeconomics, was coined by the Austrian-American economist Joseph Schumpeter in 1908 as a way of referring to the views of Weber. According to Weber's theses, social research cannot be fully inductive or descriptive, because understanding some phenomenon implies that the researcher must go beyond mere description and interpret it; interpretation requires classification according to abstract "ideal (pure) types". This, together with his antipositivistic argumentation (see Verstehen), can be taken as a methodological justification for the model of the "rational economic man" (homo economicus), which is at the heart of modern mainstream economics.
Marginalism and psychophysics
Unlike other historicists, Weber also accepted the marginal theory of value (also called "marginalism") and taught it to his students. In 1908, Weber published an article in which he drew a sharp methodological distinction between psychology and economics and attacked the claims that the marginal theory of value in economics reflected the form of the psychological response to stimuli as described by the Weber-Fechner law. Max Weber's article has been cited as a definitive refutation of the dependence of the economic theory of value on the laws of psychophysics by Lionel Robbins, George Stigler, and Friedrich Hayek, though the broader issue of the relation between economics and psychology has come back into the academic debate with the development of "behavioral economics".
Although today Weber is primarily read by sociologists and social philosophers, Weber's work did have a significant influence on Frank Knight, one of the founders of the neoclassical Chicago school of economics, who translated Weber's General Economic History into English in 1927. Knight also wrote in 1956 that Max Weber was the only economist who dealt with the problem of understanding the emergence of modern capitalism "...from the angle which alone can yield an answer to such questions, that is, the angle of comparative history in the broad sense."
Weber, like his colleague Werner Sombart, regarded economic calculation and especially the double-entry bookkeeping method of business accounting, as one of the most important forms of rationalisation associated with the development of modern capitalism. Weber's preoccupation with the importance of economic calculation led him to critique socialism as a system that lacked a mechanism for allocating resources efficiently to satisfy human needs. Socialist intellectuals like Otto Neurath had realised that in a completely socialised economy, prices would not exist and central planners would have to resort to in-kind (rather than monetary) economic calculation. According to Weber, this type of coordination would be inefficient, especially because it would be incapable of solving the problem of imputation (i.e. of accurately determining the relative values of capital goods). Weber wrote that, under full socialism,
In order to make possible a rational utilisation of the means of production, a system of in-kind accounting would have to determine "value"—indicators of some kind for the individual capital goods which could take over the role of the "prices" used in book valuation in modern business accounting. But it is not at all clear how such indicators could be established and in particular, verified; whether, for instance, they should vary from one production unit to the next (on the basis of economic location), or whether they should be uniform for the entire economy, on the basis of "social utility", that is, of (present and future) consumption requirements [...] Nothing is gained by assuming that, if only the problem of a non-monetary economy were seriously enough attacked, a suitable accounting method would be discovered or invented. The problem is fundamental to any kind of complete socialisation. We cannot speak of a rational "planned economy" so long as in this decisive respect we have no instrument for elaborating a rational "plan".
This argument against socialism was made independently, at about the same time, by Ludwig von Mises. Weber himself had a significant influence on Mises, whom he had befriended when they were both at the University of Vienna in the spring of 1918, and, through Mises, on several other economists associated with the Austrian School in the 20th century.Friedrich Hayek in particular elaborated the arguments of Weber and Mises about economic calculation into a central part of free market economics's intellectual assault on socialism, as well as into a model for the spontaneous coordination of "dispersed knowledge" in markets.