The Older Historical School, History Of Old School

The Older Historical School, History Of Old School

The important writers of the older historical school are Friedrich List (1789-1846), Wilhelm Roscher (1817-1894), Bruno Hildebrand (1812-1878), and Karl Knies (1821-1898). They contended that classical economic theory did not apply to all times and cultures and that the conclusions of Smith, Ricardo, and J. S. Mill, though valid for an industrializing economy such as England's, did not apply to agricultural Germany. There was a great deal of nationalistic feeling in the economic analysis of these writers. Furthermore, they asserted that econom­ics and the social sciences must use a historically based methodology and that classical theory, particularly in the hands of Ricardo and his followers, was mistaken in attempting to- ape the methodology of the physical sciences. Some of the more moderate members of the school acknowledged that theoretical-deductive methods and historical-inductive methods were compatible; but others, particularly Knies, objected to any use of abstract theory.

The GHS was formed in Germany in the second half of the nineteenth century and stemmed as a reaction against both the Classical School of Political Economy and Marxian Economics. It lasted until the devastations of the Nazi period and World War II and went through several phases of development.

The School had its roots in German economic Romanticism, on the one hand, and in Friedrich List’s ideas (List, 1856), on the other. From the former it took the negative position to abstract theoretical analysis; from the latter a method of economic study based on historical research; from both the opposition to the Classical views of individualism and economic liberalism.

The GHS is usually differentiated into the ‘Older’, the ‘Younger’ and the ‘Youngest’. To the ‘Older’ Historical School belong mainly three writers: Bruno Hildebrand (1812– 78), Wilhelm Roscher (1817–94) and Karl Knies (1821–98).

The GHS applied an ‘evolutionary’ approach to the study of the formation of social structure. The economists of the GHS concentrated on the importance of the historical study of the economy. Therefore, they conducted studies based on primary material, focusing on changing institutions. In this way, the School claimed that it managed to study all forces behind an economic phenomenon.

Wilhelm Georg Friedrich Roscher (1817–1894), German economist, was a descendant of an old Hanoverian family of officials and judges. He studied history and political science at Göttingen and Berlin. In 1840 he became a lecturer in both these subjects at the University of Göttingen, where in 1843 he rose to the rank of professor-extraordinary (comparable to associate professor), and the following year to full professor. In 1848 he was called to the University of Leipzig, where he remained until his death.

Roscher is commonly considered, with Karl Knies and Bruno Hildebrand, to be one of the founders of the “older historical school” of German economics. In his small book Grundriss zu Vorles-ungen tiber die Staatsurithschaft nach geschicht-licher Methode (1843) he based the study of political economy on the principles of historical investigation. He was one of the first economists other than Friedrich List to have done so; although in France Auguste Comte had argued in his Cours de philosophie positive, 1830–1842, that the historical method should be applied to all the social sciences, he had himself concentrated on sociology.

The Grundriss was the basis for Roscher’s widely read System der Volkswirtschaft, a work of five volumes published between 1854 and 1894 and described in its subtitle as a handbook and reader for businessmen and students. It became the most influential textbook of political economy in Germany in the second half of the nineteenth century. Roscher also wrote some purely historical and philosophical books and articles in his early years, some political treatises, and many studies in the history of economic literature. His only work of lasting significance, however, is his Geschichte der National-oekonomik in Deutschland (1874).

Roscher called his method “historical” or “historico-physiological,” in contrast to the “philosophical” or “idealistic” method. He contended that the object of political economy is not to establish the best possible state of things, but to describe the actual state at which the economy has arrived through continual development. Of the two crucial questions, “What is?” (positive economics) and “What ought to be?” (normative economics), Roscher wanted to answer only the former; the latter question, in his view, could not be studied scientifically because it depends on constantly changing opinions and individual choices. While a science could never be based on the German idealistic philosophy, the study of what actually occurred could provide a “firm island of scientific truth which may be accepted in the same manner as the adherents of different systems of medicine all admit the teaching of mathematical physics.” ([1854–1894] 1901–1922, vol. 1, p. 80).

Compared to the “younger historical school,” led by Gustav Schmoller, Roscher was much closer to the classical theory of economics. In contrast to List, whose focus was on the productive forces of every nation and who was therefore interested only in the dynamics of development, Roscher accepted the value theory of the classical school for the analysis of any given stage of the economy and conceived of a process of organic development taking place between statically conceived stages. He thought that the life of nations, like the vegetable and animal world, has four such stages of development: childhood, youth, manhood, and old age. Thus, development is in both an ascending and a descending direction (in contrast to List’s theory that evolution is exclusively ascending).

Roscher believed that development could best be studied by inquiring into the history of ancient nations like Greece and Rome, because that history has been terminated. Three factors of production govern the evolution of every nation: land, labor, and capital. Of these, one is always predominant in each successive stage of life. A close, and especially a statistical, knowledge of economic facts, according to the “objectivist” spirit of Leopold von Ranke, would permit, in Roscher’s view, the solution of conflicts of interest between the factors of production. Roscher was much more skilled in collecting obscure details and understanding particular events and theories than in formulating a theory of his own. Lacking any systematic theory, he was not forced to come to terms with the historical facts he collected or to recognize the futility of his search for “laws of nature” or “laws of evolution.”

Roscher could not fulfill the declared aim of his historical approach: to achieve for political economy what the historical approach of F. K. von Savigny and Karl F. Eichhorn had already achieved for the field of law and legislation. However, his Geschichte der National-oekonomik in Deutschland remains an outstanding work that must be consulted by everyone who does research in that field. Roscher was interested not only in the history of economic analysis but also in the personality of every economist and in the character of every economic work. His book is, therefore, a compendium, perhaps even an encyclopedia, of the history of German economists and of German economic and economic-political literature up to 1874.

Bruno Hildebrand (1812–1878), economist and one of the founders of the German historical school, was born in Naumburg (Thuringia), the son of a civil servant. He entered the University of Leipzig as a student of theology but soon shifted to history. He very early joined the liberal-nationalist student movement, and since this affiliation made him the object of police attention, he fied to Breslau to escape harassment; however, he was imprisoned there before being allowed to continue his studies. In 1836 the University of Breslau awarded him his doctorate and shortly afterward the rights of Dozent. In 1839 he was promoted to acting professor of history. But Hildebrand’s restless and intensely political nature found the scope of historical study too confining; increasingly his interests and his lectures focused on political philosophy and economics.

The most productive decade of Hildebrand’s academic career began with his appointment, in 1841, to the chair of Staatswissenschaften (government) at the University of Marburg. Here, once again, he clashed with the authorities, especially when as university rector he championed the liberties of students and staff; in 1845 he was relieved of his administrative position, and in 1846 he was charged with lese-majeste and dismissed from his teaching post. Hildebrand was eventually acquitted, but he was not reinstated in his professorship until the 1848 revolution had swept a liberal government into office.

Hildebrand was elected deputy of the Frankfurt National Assembly, where he distinguished himself as an uncompromising protagonist of constitutional government and as an indefatigable member of the parliamentary commission on economic and social affairs. With the triumph of absolutism, however, his cause was doomed. The Diet was abolished, and Hildebrand, as one of the outspoken liberals, was charged with high treason and forced to flee into Switzerland where, in 1851, he was appointed to a chair at the University of Zurich. Hildebrand spent five years in Zurich, active not only as a professor but also as a company director promoting and building a railway. He then moved to the University of Bern and helped establish the first Swiss statistical office at Bern.

In 1861 Hildebrand accepted an invitation extended by the University of Jena and returned to his native Thuringia. In 1863 he started the Jahr-bücher für Nationalökonomie und Statistik. In the following year he was instrumental in founding the statistical office of the Thuringian states. As its first director, he planned the work of the new bureau in such a way as to link it closely with the research and teaching activities of the university program in economics.

Although Hildebrand was neither a fluent nor an exciting lecturer, good students found him an inspiring teacher, and some of the better economists of the German historical school were products of his “Jena seminar.” Because of this impact, Hildebrand’s position in the history of German economic thought cannot be assessed in terms of his writings alone.

One of Hildebrand’s earliest works, Die National ökonomie der Gegenwart und Zukunft (1848), is also his most important; it is clearly the work of a youthful homme engagé. The first chapter is devoted to an evaluation of Adam Smith. Acknowledging the greatness of the Scotsman’s contribution, Hildebrand proceeded to criticize the philosophy of natural law and the instinct of self-interest underlying Smith’s reasoning. Hildebrand denied the universality that Smith claimed for his theory and asserted that Smith’s basic assumptions were ahistorical; inasmuch as they derived from the English scene, they were irrelevant to an understanding of the problems in other eras and other lands. Above all, Hildebrand felt that the premises did not fit the peculiarities of German conditions.

Hildebrand admitted that his view of classical economics had been influenced by Adam Müller. Yet he added that he could accept neither the feudal and medieval notions of the German romantic school nor its reactionary conclusions. Even Friedrich List, though allowed some credit for his insights and for his contributions to the important public debate on international trade policy, was given short shrift by Hildebrand.

Significantly, Hildebrand devoted the largest part of Die Nationalökonomie der Gegenwart und Zukunft to a review of socialist literature, in particular to an examination of the recently published Condition of the Working Class in England by the then unknown Friedrich Engels. He saw the socialist writers as “up-to-date,” with a historical perspective and above all a focus on the predicament of the proletariat in industrial society. At the same time, Hildebrand rejected all socialist values, warning that the socialist society would be the “grave of individualism and civilization,” and his stage theory of economic progress was surely intended as a polemic against Marxist socialism. According to Arthur Sommer, Hildebrand’s vision of society as advancing from barter to monetary exchange before reaching its highest synthesis in a credit economy was meant as an anticommunist manifesto. In this scheme the fully developed credit economy would give the propertyless wage earner access to capital and thereby resolve one of modern society’s most pressing problems without recourse to socialism.

In the last 15 years of his life, Hildebrand turned away from theoretical issues and concentrated on directing statistical studies bearing upon important social problems. He thus anticipated the program of the Verein für Sozialpolitik, which he joined as a charter member in 1873. (He was the only one of the founders of the German historical school to do so.)

Hildebrand failed to develop a coherent system of economics. The source of his failure lies (see Eisermann 1956) in his petty bourgeois parochialism, with all its fears and prejudices regarding the rapidly industrializing world. This was the cause of his fuzzy thinking and of his pathetic efforts to reconcile basically irreconcilable points of view. Fighting, as it were, a two-front battle against the feudal aristocracy on the one hand and the emerging proletariat on the other—while simultaneously concerned about the precariousness of its own economic status—the German middle class was doomed to political impotence. Its intellectual leaders, including Hildebrand, reacted to their conflict by abandoning clarification of the social process in favor of politically innocuous empirical research and social engineering.

The economist Karl Knies (1821–1898), one of the founders of the German historical school, was born in Marburg (Lahn), the son of a police official. He read history, philosophy, and theology at the University of Marburg and in 1846 was awarded a doctorate and the rights of a decent in history and government.

Caught up in the political ferment of the mid-18408, Knies increasingly turned his attention to current social issues, including problems of political economy. By doing so he was following in the footsteps of his mentor, Bruno Hildebrand, then professor of government at Marburg. As a champion of the liberal cause and as the scholar who later wrote the programmatic Die National-ökonomie der Gegenwart und Zukunft (1848), Hildebrand exerted an influence upon Knies that appears to have been profound.

In 1848 the liberal German government that had been swept into office by the revolution appointed Knies to a professorship at the technical college in Kassel and entrusted him with the reorganization of that institution. His appointment ended, of course, with the triumph of absolutism; moreover, when Knies refused to sign a loyalty oath, the reactionary government removed him from the teaching post he still held at Marburg.

Politically suspect to the authorities and without means of support, Knies went into exile in Switzerland, accepting a teaching post in the technical college at Schaffhausen. Continuing his research activities despite difficulties, he remained abroad for about three years. Eventually, in 1855, he was able to return to Germany when the University of Freiburg (Breisgau) offered him the chair of political science (Staatswissenschaften).

In this new environment Knies was to prove him-self not only as a teacher and scholar but also as a popular public figure. Although he was a “foreigner” and a Protestant, in 1861 Baden’s Catholic population elected him a deputy to the second chamber. There he distinguished himself as a foe both of clericalism and of the still existing feudal laws which hampered freedom of economic activity. During the next year he was chosen prorector of the university and, at the same time, appointed by the ducal authorities to the directorship of the newly created board of education. In the latter capacity Knies was assigned the reorganization of Baden’s entire educational system. He proposed that secular control replace much of clerical super-vision, but in spite of support by large sections of the population and by the majority of the teaching profession, Knies was unable to implement his re-forms. He soon became the victim of political intrigue.and was relieved of his directorship. Dis-appointed by these experiences, Knies gladly accepted a chair in government at the University of Heidelberg. He remained in Heidelberg for the rest of his life. Throughout the next thirty years, from 1865 to 1896, Knies’s seminar was one of the principal centers for the study of political science in Germany.

Despite his political activities and personal hard-ships, Knies produced many and varied academic works. During the 1850s his studies ranged from a comparison of modern statistics and old-fashioned political arithmetic (1850) to monographs about the impact of the railways (1853a) and the tele-graph system (1857) on the world at large and the German states in particular. These latter two studies demonstrate the thoroughness of research and the willingness to approach a problem from several vantage points so typical of Knies’s work. At the same time, they betray Knies’s somewhat limited vision; he saw the entire world in relation to the issue of German unity.

The force of mid-nineteenth century nationalism is inseparable from the genesis of the historical method in German political economy. When in 1853 Knies published Die politische Öokonomie vom Standpunkte der geschichtlichen Methode, his dis-taste as a patriot for the cosmopolitanism of the classical school is obvious. In the same spirit, Knies deprecated the dominant role of individual self-interest in the classical system, not only for being one-sided but also for being “subversive” with respect to his conception of a social order—an organically evolving community, which at each stage of its development requires a particular form of economic analysis.

Knies noted inconsistencies in the work of List, Roscher, and even Hildebrand, but he shared their basic ideals and assumptions regarding the social process: he wanted to develop an economic approach and, by implication, an economic policy which would reconcile the peculiarities of German society with the requirements of economic progress. Knies and many of his contemporaries harbored all kinds of petty bourgeois fears that liberal capitalism on the rampage would inevitably lead to a socialist nightmare. Given the power constellation of imperial Germany, it is not surprising that Knies’s methodology and viewpoint became official doctrine in most German institutions of higher learning.

Anyone who reads Knies’s voluminous writings on capital, money, and credit is bound to be impressed by his scholarship, theoretic ability, and pedagogical skills. Yet when he tackled specific economic problems he was unable to live up to the methodology prescribed by the historical school. As Henry Sidgwick put it in his presidential address to Section F of the British Association:

When Knies, for instance, is discussing the nature and functions of capital, money and credit … the lenders and borrowers, whose operations are contem-plated, exhibit throughout the familiar features of the old economic man … we find everywhere the old economic motives assumed and the old method un-hesitatingly applied. The proof of the pudding … is in the eating; but our historical friends make no at-tempt to set before us the new economic pudding which their large phrases seemed to promise. It is only the old pudding with a little more ethical sauce and a little more garnish of historical illustrations. (Sidg-wick [1885] 1962, p. 88)

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