The University as an Economic Institution: The Political Economy of the Althoff System

Friedrich Althoff (1839-1908), who created the “Althoff system”, has had a singularly important influence on shaping academic institutions in Germany for almost a generation. As a close collaborator of leading German scholars his influence lasted almost throughout the second empire (1882-1907). He has been described as brilliant by some and disastrous by others. Recent advances in the new institutional economics and the economic analysis of the organization of inquiry, as well as better access to the archival materials, have created the possibility of arriving at a clearer picture of the Althoff system. Is a first attempt at an economic analysis of the Althoff system; therefore should be viewed as an exploratory essay. In particular, addresses three questions: What precisely was the Althoff system? How can we go about analysing the system? How did the system function and perform? The essay has five substantive parts: first, offers a brief introduction to science research as it is currently practised in economics; second, introduces the historical record and the main criticism levelled against the system and offers a stylized description of the Althoff system in terms of emphasizing key features; third, subjects the stylized features of the system to economic analysis, relying heavily on the property rights theory of the firm and treating the university as an economic institution; fourth, takes a slightly different approach by applying Gordon Tullock's analysis of the organization of inquiry to the Althoff system; fifth, offers a summary of the findings and an economic definition of the Althoff system.