Abstract
The tradition of the Historical School of Economics reaches back to the end of the 30 Years’ War which was fought between 1618 and 1648 mainly on the territory of today’s Germany. It left the country in a state of devastation and had considerably depleted its productive resources. The task of the German public administration was thus one of reconstruction and directed towards a gradual catch-up with the German states’ wealthier neighbours – a theme that also motivated much of the later writings by members of the Historical School and made them a genuine part of the development literature, albeit one from the perspective of a backward nation.
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Notes
- 1.
In some areas, the war and war-related famines had cost the lives of up to 70% of the civilian population. The Swedish armies alone destroyed 2,000 castles, 18,000 villages and 1,500 towns in the German states, representing one-third of all German urban areas (Trueman 2008).
- 2.
One frequently encounters in early historical writings the idea of Germany as a verspätete Nation (a laggard nation) compared to the rest of Europe (Reinert 2005).
- 3.
The contributions by Roscher and members of the early Historical School were again foreshadowed by cameralistic science (Cameralwissenschaft) which had its origin in the German cameralistic system: From the end of the middle ages, most German countries kept an institution called the Council (Kammer) which was concerned with the administration of justice and the regulation of private enterprises. The knowledge necessary for these council officials, which found no place in the lectures on law, was treated in a special discipline, the cameralistic science. It was Frederick William I., himself a clever cameralist, and author of the masterly financial system of Prussia, who took the important step of founding in 1,727 special chairs of economy and cameralistic science at Halle and Frankfurt/Oder. The later chairs in political economy in Germany were formed out of these schools of cameralists, while in England, Scotland and Italy, political economy had its origin mainly in the study of questions of finance and foreign commerce (Roscher 1878, p. 96f).
- 4.
For recent discussions of the Historical School, see Backhaus (2005), Reinert (2005) and Shionoya (2001).
- 5.
Elsewhere (Schmoller 1923a, p. 77), Schmoller breaks down and extends these three tasks of the economist (observation, classification and explanation) into seven criteria that any economic inquiry has to satisfy: (1) to describe and define economic phenomena; (2) to draw up an appropriate picture of them with the aid of scientific notions and concepts; (3) to comprehend the phenomena both as a coherent whole as well as a part of the entire social life; (4) to explain particular elements from their causes; (5) to recognise the historical course of economic developments; (6) to predict the future where possible; and (7) to give policy recommendations that will help to shape future developments in an desirable manner (cf. also Backhaus 1989, p. 39 ff).
- 6.
In the German original, this quote reads as follows: “Die Beobachtung soll objektive Gültigkeit, erschöpfende Genauigkeit [und] extensive Vollständigkeit besitzen”.
- 7.
In the German original, this quote reads as follows: “Das Allgemeinste bleibt als das Komplizierteste stets das Unsicherste, vom Einzelnen ausgehend dringen wir vor”.
- 8.
The Methodenstreit emerged when Schmoller wrote in his Jahrbuch a highly critical review of Carl Menger’s Untersuchungen über die Methode der Sozialwissenschaften und der Politischen Ökonomie insbesondere, a book on economic methodology that was published in 1883. Menger replied in a pamphlet entitled Die Irrtümer des Historismus in der Deutschen Nationalökonomie (The Errors of Historicism in the German Political Economy) in 1884. A series of further papers followed which brought some clarification of logical backgrounds but, as Schumpeter put it, constituted a “history of wasted energies, which could have been put to better use” (Schumpeter 1954, p. 814).
- 9.
Compare Sect. 7.2.
- 10.
In the German original, this quote reads as follows: “Die an sich berechtigte Vorschrift, einen zu untersuchenden Vorgang in seine kleinsten Teile aufzulösen, jeden für sich zu beobachten und aus diesen Beobachtungen erst in Gesamtergebnis zusammenzusetzen, ist nur unter besonders günstigen Umständen restlos durchzuführen”.
- 11.
Hennis (1987), for instance, found extensive evidence for the deep roots of Max Weber’s economic sociology in the work of the German Historical School.
- 12.
The following discussion is based on Altmann (1999).
- 13.
Jevons’ Theory of Political Economy and Menger’s Grundsätze der Volkswirschaftslehre both appeared in 1871. Walras began to publish his contributions to marginal utility theory in 1874 in his Elements of Pure Economics.
- 14.
This change in approach towards marginal utility theory as a subjective science came at the expense of a loss in objective, predictive content, however. The failed realisation of this should later result in much confusion when it came to the practical application of marginal utility theory on policy issues such as the restoration of optimal equilibrium conditions though non-market decision-making in response to “market failures” (Buchanan 1969).
- 15.
The central features of the subjectivist methodology are laid down by Ludwig von Mises in his Grundprobleme der Nationalökonomik (Jena: Gustav Fischer Verlag 1933), and in Hayek (1937).
- 16.
Hayek (1937) further notes that, supposed there was such a social equilibrium, this would be stable only as long as all individual actors were in their individual behavioural equilibrium. The preservation of the latter in turn required every single individual’s subjective knowledge to be the “correct” one for achieving his personal plan.
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Altmann, M.P. (2011). German Historical Economics as Development Economics. In: Contextual Development Economics. The European Heritage in Economics and the Social Sciences, vol 8. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-7231-6_11
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