Historical school of economics

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The historical school of economics was an approach to academic economics and to public administration that emerged in the 19th century in Germany, and held sway there until well into the 20th century. The professors involved compiled massive economic histories of Germany and Europe. Numerous Americans were their students. [1] The school was opposed by theoretical economists. Prominent leaders included Gustav von Schmoller (1838–1917), and Max Weber (1864–1920) in Germany, and Joseph Schumpeter (1883–1950) in Austria and the United States. [2]

Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles underlying economic reasoning. In contemporary English, 'methodology' may reference theoretical or systematic aspects of a method. Philosophy and economics also takes up methodology at the intersection of the two subjects.

Economics Social science that analyzes the production, distribution, and consumption of goods and services

Economics is the social science that studies the production, distribution, and consumption of goods and services.

Public administration public leadership of public affairs directly responsible for executive action

Public administration is the implementation of government policy and also an academic discipline that studies this implementation and prepares civil servants for working in the public service. As a "field of inquiry with a diverse scope" whose fundamental goal is to "advance management and policies so that government can function". Some of the various definitions which have been offered for the term are: "the management of public programs"; the "translation of politics into the reality that citizens see every day"; and "the study of government decision making, the analysis of the policies themselves, the various inputs that have produced them, and the inputs necessary to produce alternative policies."

Contents

Tenets

The historical school held that history was the key source of knowledge about human actions and economic matters, since economics was culture-specific, and hence not generalizable over space and time. The school rejected the universal validity of economic theorems. They saw economics as resulting from careful empirical and historical analysis instead of from logic and mathematics. The school also preferred reality, historical, political, and social, as well as economic, to mathematical modelling.

History The study of the past as it is described in written documents.

History is the past as it is described in written documents, and the study thereof. Events occurring before written records are considered prehistory. "History" is an umbrella term that relates to past events as well as the memory, discovery, collection, organization, presentation, and interpretation of information about these events. Scholars who write about history are called historians.

Theorem In mathematics, a statement that has been proved

In mathematics, a theorem is a statement that has been proven on the basis of previously established statements, such as other theorems, and generally accepted statements, such as axioms. A theorem is a logical consequence of the axioms. The proof of a mathematical theorem is a logical argument for the theorem statement given in accord with the rules of a deductive system. The proof of a theorem is often interpreted as justification of the truth of the theorem statement. In light of the requirement that theorems be proved, the concept of a theorem is fundamentally deductive, in contrast to the notion of a scientific law, which is experimental.

Reality is the sum or aggregate of all that is real or existent, as opposed to that which is merely imaginary. The term is also used to refer to the ontological status of things, indicating their existence. In physical terms, reality is the totality of the universe, known and unknown. Philosophical questions about the nature of reality or existence or being are considered under the rubric of ontology, which is a major branch of metaphysics in the Western philosophical tradition. Ontological questions also feature in diverse branches of philosophy, including the philosophy of science, philosophy of religion, philosophy of mathematics, and philosophical logic. These include questions about whether only physical objects are real, whether reality is fundamentally immaterial, whether hypothetical unobservable entities posited by scientific theories exist, whether God exists, whether numbers and other abstract objects exist, and whether possible worlds exist.

Most members of the school were also Sozialpolitiker (social policy advocates), i.e. concerned with social reform and improved conditions for the common man during a period of heavy industrialization. They were more disparagingly referred to as Kathedersozialisten, rendered in English as "socialists of the chair" (compare armchair revolutionary), due to their positions as professors (depicted sitting in chairs).

Armchair revolutionary is a description, often pejorative, of a speaker or writer who professes radical aims without taking any action to realize them, as if pontificating "from the comfort of the armchair".

The historical school can be divided into three tendencies: [3]

Karl Knies German economist and author

Karl Gustav Adolf Knies was a German economist of the historical school of economics, best known as the author of Political Economy from the Standpoint of the Historical Method (1853). Knies taught at the University of Heidelberg for over 30 years, and was perhaps the most theoretically-oriented economist of the older historical school.

Bruno Hildebrand German economist

Bruno Hildebrand was a German economist representing the "older" historical school of economics. His economic thinking was highly critical of classical economists, especially of David Ricardo. His magnum opus was Economics of the Present and the Future (1848). The basic aim of this work was to establish laws of economic development. Hildebrand also stated that economic development was linear not cyclical. He supported socialist theory on the basis of religion, basic morals, and his beliefs of the negative effect of property on economic behavior.

Gustav von Schmoller German economist

Gustav FriedrichSchmoller was the leader of the "younger" German historical school of economics.

Predecessors included Friedrich List. [4]

The historical school largely controlled appointments to chairs of economics in German universities, as many of the advisors of Friedrich Althoff, head of the university department in the Prussian Ministry of Education 1882–1907, had studied under members of the school. Moreover, Prussia was the intellectual powerhouse of Germany, so dominated academia, not only in central Europe, but also in the United States until about 1900, because the American economics profession was led by holders of German PhDs. The historical school was involved in the Methodenstreit ("strife over method") with the Austrian school, whose orientation was more theoretical and aprioristic. [ citation needed ]

Prussia state in Central Europe between 1525–1947

Prussia was a historically prominent German state that originated in 1525 with a duchy centred on the region of Prussia on the southeast coast of the Baltic Sea. It was de facto dissolved by an emergency decree transferring powers of the Prussian government to German Chancellor Franz von Papen in 1932 and de jure by an Allied decree in 1947. For centuries, the House of Hohenzollern ruled Prussia, successfully expanding its size by way of an unusually well-organised and effective army. Prussia, with its capital first in Königsberg and then, in 1701, in Berlin, decisively shaped the history of Germany.

United States Federal republic in North America

The United States of America (USA), commonly known as the United States or America, is a country comprising 50 states, a federal district, five major self-governing territories, and various possessions. At 3.8 million square miles, the United States is the world's third or fourth largest country by total area and is slightly smaller than the entire continent of Europe. With a population of over 327 million people, the U.S. is the third most populous country. The capital is Washington, D.C., and the most populous city is New York City. Most of the country is located contiguously in North America between Canada and Mexico.

Methodenstreit, in intellectual history beyond German-language discourse, was an economics controversy commenced in the 1880s and persisting for more than a decade, between that field's Austrian School and the (German) Historical School. The debate concerned the place of general theory in social science and the use of history in explaining the dynamics of human action. It also touched on policy and political issues, including the roles of the individual and state. Nevertheless, methodological concerns were uppermost and some early members of the Austrian School also defended a form of welfare state, as prominently advocated by the Historical School.

Influence in Britain and the United States

The historical school had a significant impact on Britain, 1860s–1930s. Thorold Rogers (1823–1890) was the Tooke Professor of Statistics and Economic Science at King's College London, from 1859 until his death. He is best known for compiling the monumental A History of Agriculture and Prices in England from 1259 to 1793 (7 vol. 1866–1902), which is still useful to scholars. [5] [6] William Ashley (1860–1927) introduced British scholars to the historical school as developed in Germany. In the United States the school influenced the institutional economists, such as Thorstein Veblen (1857–1929) and especially the Wisconsin school of labor history led by John R. Commons (1862–1945). More importantly, numerous aspiring economists undertook graduate studies at German universities, including John Bates Clark, Richard T. Ely, Jeremiah Jenks, Simon Patten, and Frank William Taussig.

Canadian scholars influenced by the school were led by Harold Innis (1894–1952) at Toronto. His staples thesis holds that Canada's culture, political history and economy have been decisively influenced by the exploitation and export of a series of "staples" such as fur, fishing, lumber, wheat, mined metals and coal. The staple thesis dominated economic history in Canada 1930s–1960s, and is still used by some. [7]

After 1930 the historical school declined or disappeared in most economics departments. It lingered in history departments and business schools. The major influence in the 1930s and 1940s was Joseph Schumpeter with his dynamic, change-oriented, and innovation-based economics. Although his writings could be critical of the school, Schumpeter's work on the role of innovation and entrepreneurship can be seen as a continuation of ideas originated by the historical school, especially the work of von Schmoller and Sombart. Alfred D. Chandler, Jr. (1918–2007), had a major impact on approaching business issues through historical studies. [8]

Members of the school

English school

Although not nearly as famous as its German counterpart, there was also an English historical school, whose figures included Francis Bacon and Herbert Spencer. This school heavily critiqued the deductive approach of the classical economists, especially the writings of David Ricardo. This school revered the inductive process and called for the merging of historical fact with those of the present period. Included in this school are: William Whewell, Richard Jones, Walter Bagehot, Thorold Rogers, Arnold Toynbee, and William Cunningham, to name a few.

See also

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References

  1. Herbst, Jurgen (1965) [1935]. The German Historical School in American Scholarship: A Study in the Transfer of Culture. Ithaca: Cornell University Press.
  2. Yuichi Shionoya (2005). The Soul of the German Historical School: Methodological Essays on Schmoller, Weber and Schumpeter. Springer.
  3. Shionoya, Yuichi. (2005). The Soul of the German Historical School. Springer, p. 1.
  4. Fonseca Gl. Friedrich List, 1789–1846 Archived 2009-01-04 at the Wayback Machine . New School.
  5. W. J. Ashley, "James E. Thorold Rogers" Political Science Quarterly (1889) pp. 381–407. in JSTOR
  6. Alon Kadish, Historians, Economists, and Economic History (2012) pp. 3–35 excerpt
  7. W.T. Easterbrook and M. H. Watkins, eds. "The Staple Approach" in Approaches to Canadian Economic History. (Carleton University Press, 1984) pp. 1–98.
  8. Richard R. John, "Elaborations, Revisions, Dissents: Alfred D. Chandler, Jr.'s, The Visible Hand After Twenty Years." Business History Review 71:2 (1997): 151–200.
  9. Jun Kobayashi, "Karl Knies’s conception of political economy." in Yuichi Shionoya (2002). The German Historical School: The Historical and Ethical Approach to Economics. p. 54ff.
  10. Harald Hagemann, "Wilhelm Roscher’s crises theory." in Crises and Cycles in Economic Dictionaries and Encyclopaedias 130 (2013): 197.
  11. Toews, JE. Becoming Historical: Cultural Reformation and Public Memory in Early Nineteenth-Century Berlin. CUP (2004). p. 420.
  12. Rudolf Richter, "Bridging Old and New Institutional Economics: Gustav Schmoller, Leader of the Younger German Historical School, Seen with Neoinstitutionalists’ Eyes." in Essays on New Institutional Economics (Springer International Publishing, 2015) pp: 135-160.
  13. Manfred Prisching, "Understanding inescapable modernization: Werner Sombart and Joseph Schumpeter." Journal of Evolutionary Economics 25.1 (2015): 185+
  14. Manfred Prisching, "Understanding inescapable modernization: Werner Sombart and Joseph Schumpeter." Journal of Evolutionary Economics 25.1 (2015): 185+

Further reading