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]

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.

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.

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

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 ]

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