Economic Thought and History

An unresolved relationship

Monika Poettinger, Gianfranco Tusset

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317326717
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Economic Thought and History looks at the relationship between facts and thought in historical economic research, viewing it in the context of periods of economic crisis and providing detailed analyses of methods used in determining the bond between economic history and economic theory.

This interdisciplinary collection brings together international researchers in the history of economic thought and economic history in order to confront varying approaches to the study of economic facts and ideas, rethinking boundaries, methodologies and the object of their disciplines. The chapters explore the relationship between economic thought and economic theory from a variety of perspectives, exploring the relationship between history and economics, and the boundaries defining the history of economic thought, in terms of both single authors and schools of thought. The book offers particular insights on the Italian tradition of thought.

The uniquely interdisciplinary and analytical approach presented here bridges the methodological gap between these disciplines, unearthing a fertile common ground of research. This book is intended for Postgraduate students conducting further research into the field, or for professors and academics of economic history and history of economic thought.

Part I Economic thought

History and values

DOI: 10.4324/9781315656991-2

1 History of economic thought and economic history

Who will bring the past to life? ¹

Bertram Schefold

DOI: 10.4324/9781315656991-2

1 Introduction

History of economic thought and economic history, as disciplines pertaining both to economics and to history, seem like rivalling brothers. Both claim the birthright, but who was the firstborn? I shall present my view as to how they should relate to each other on the basis of my research and teaching of the matter over forty years (Schefold, 2002b; 2009a) and on the basis of two projects to be mentioned below. I thus hope also to contribute to an ongoing debate about the genesis of modern capitalism which involves both disciplines.

The relationship between the history of economic thought and economic theory once seemed to me to be easy. I still think that this simple view holds truth; it is best illustrated by an analogy: History of economic thought is to economic history as the literary sources about a culture are to the archaeological remains. If we compare excavations of a Polis in Greece of the classical period with excavations of American-Indian cultures in, say, Guatemala, the buildings of the former will be interpreted on the basis of what we know from ancient Greek poetry, history, novels and drama. Indeed, we know fairly well what meaning was attached to religious buildings, administrative buildings and assembly places, because of a tradition, which involves knowledge about ancient Greek philosophy, religion and law. We excavate the Agora in Athens and we imagine Socrates standing there and looking for pupils. In the case of Mesoamerican excavations, the lack of texts, which we could read, often compels us to interpret the architectural structures found exclusively on the basis of additional material remains, such as household equipment, instruments of handicraft and weapons. There may be mythological representations. But the intellectual world once associated with this material culture is difficult to reconstruct; it will explicitly or implicitly depend on what we know from living cultures or texts left by other cultural traditions. Stones will speak differently not only when inscriptions on them can be deciphered, but also – no, principally – if they relate to texts handed down to us by scribes, by monks and humanists. How would you interpret the statue of Laokoon, if you did not know the myth of the destruction of Troy?

The history of economic thought helps to give meaning to the facts uncovered by economic history. Mercantilism may serve as an example. The mercantilists expressed their trust in the market by asserting that exports would pay for imports, preferably with a surplus of precious metals, which could be used to facilitate domestic monetary circulation. It is true that they recommended measures to foster exports. They would protect the domestic industry by means of customs duties and they would help exporting industries by granting privileges and easing the labour supply, but they did not intervene in foreign trade in order to secure specific imports to nourish the population. This, however, had been the concern of many earlier and even contemporary empires (Vidal-Naquet and Austin, 1977). The Athenians in the classical period required exporting ships to show contracts for the import of corn, since the agricultural production of Attica was not sufficient to feed the population. The Ottomans, down to the eighteenth century, wanted internal trade to prosper, but the aim of foreign trade was to secure necessary imports (Ermis, 2013). This attitude has been called provisionism, and it is amply documented in reports by government officials, ambassadors and in the writing of philosophers. An account merely of material facts of economic history might not suffice to establish the difference between mercantilism and provisionism. It was a matter of economic policy, based on a certain vision of how the economy within the state worked. The difference between mercantilism and provisionism, therefore, reflects differences in the history of economic thinking, documented in texts, such as economic historians will use to explain differences in economic development. Provisionism became an obstacle to economic development in the Eastern Mediterranean, when the Western part was carried away by the autonomous dynamics of mercantilism. The cooperation between economic historians and historians of economic thought may be quite easy and peaceful in this case, in that economic historians might explain economic policies and developments using the same sources as historians of economic thoughts, whose aim would be to demonstrate the existence of a coherent body of doctrines. Provisionism would be based on the interpretation of the state as a community with mutual obligations. The sultan would express his paternalism and his concern that the order of a stratified society be maintained. The minister of finance in a Western monarchy in the period of mercantilism had a more dynamic view. Colbert wanted France to be rich in order to be powerful, and he wanted power in order to let it accumulate riches. France should be independent, but everybody else should need France and depend on its supplies (Wolters, 1922).

In other cases, the views of economic historians and historians of economic thought may tend to diverge considerably. This will typically be the case if the economic historians interpret economic history by means of neoclassical theory, which, as a theory, is historically invariant, while historians of economic thought borrow from historical sociology to emphasise the differences of the intellectual worlds of different cultures, often using time-dependent theories, and they interpret economic facts and policies in this light. A famous example is the controversy between primitivists and modernists in the interpretation of ancient history, a debate which began in Germany with the publications of Karl Bücher, a leading figure of the German Historical School, who had a background as a classical scholar, but had become an economist (Schefold, 1988; 2014). He confronted the modernism of colleagues in ancient history, in particular Eduard Meyer. Meyer saw a close parallel between the evolution of the economy in Greece from archaic and classical down to Hellenistic and Roman times with the later development in northern Europe from the early Middle Ages down to mercantilism, in that the stages of economic growth were similar; they went in antiquity from the pre-monetary economy with aristocratic rule to an extended market system spanning the Mediterranean. Bücher objected and tried to identify specific traits of the economy of antiquity. According to him, the Polis economies remained centred around the household, from the royal courts described in Homer down to the family of the Athenian citizen. Where Meyer wrote of export-oriented industries, Bücher saw craftsmanship and personal networks of gift-giving; the goods designated as exports did not result from large-scale enterprise seeking foreign markets but were luxury items produced by migrating artisans. Moses Finley was inclined to justify this primitivism in his well-known book on the ancient economy (Finley, 1973). His influence diminished later, and modernism has gained ground in ancient history in recent years (Schefold, 2013). Bücher and Meyer had in common that they analysed developments in terms of stages. Meyer was interested in material development and the growth of trade and communication. With his primitivist conceptions, Bücher groped towards an integrated view of economy, society and culture, but the analysis of different economic styles and systems came only later.

Max Weber, one generation younger than Bücher, used his ideal types to characterise different economic forms, primarily on the basis of the prevailing rationality. There had always been greed, but profit-seeking merchants are only one capitalist element; they do not constitute capitalism as a system. For Weber, the capitalism of antiquity was largely political (Schefold, 1992a). The institutional and intellectual means for an efficient administration of private firms did not yet exist. Indeed, household and firms had not yet separated. Hence there was a tension between the aim of leading a good life, as the ancients put it, and pursuing material gain. There was not, as in modern life, the separation of roles pursued in one’s professional occupation and in the family. Slavery rendered a rational allocation of labour difficult, and the main opportunities to make large profits were associated with the political system. But von Mises, as a leading Austrian economist, would not accept Weber’s historical distinctions based on the assumption of changing rationalities. The rationality of action would always be the same, Mises thought, but the means changed. If a seafaring merchant sacrificed a ram in order to cross the Mediterranean and to trade with distant peoples, Weber would see this as evidence of a traditional rationality, while von Mises asserted that the rationality was the same as in modern times: the merchant wanted to make sure that his ship travelled safely, only he was superstitious and therefore wrong in choosing the means (Schefold, 2009c). In this manner, the Austrian form of a historical neoclassical theory was used to criticise Weber’s proposal of different forms of rationality underlying economic action.

Historians of economic thought tend to see an evolution of ideas from antiquity and the Middle Ages to mercantilism and beyond, in which economic insights grow and are assembled in more and more coherent representations of the functioning of the economy, until the system of liberalism is born and modern capitalism develops on the basis of a quasi-mechanical understanding of how the economy works. The early ethical rules, which impose cooperation, which demand mutual love, have to be modified and the advantages of letting self-interest dominate at least in the public sphere must be recognised. The main step was taken, once it was recognised by the late scholastics that lucrum cessans legitimises the taking of the interest (Lessius, 1999; Schefold, 1999a). Attention is focused on the Occident, special, it was claimed, in its striving for a coherent description of the autonomous functioning of interrelated markets by those mercantilists who prepared the ground for the liberals, such as Serra, who wrote about the advantages of scale and of agglomeration, comparing Naples with Venice (Serra, 2011 [1613]; Schefold, 1994). This representation of the historical process seems to imply that the growth towards a modern world economy is based on unique material and spiritual constellations in the West; modern capitalism then spread to other parts of the globe under the influence of an extension of the European system, by means of colonisation, trade and intellectual influence.

Some economic historians have begun to challenge this view of an exceptional economic development in the West by arguing that high cultures elsewhere reached similar levels of development by the eighteenth century, and that certain provinces in China or Japan and even in other countries attained a level of production such that an industrial revolution could have started; and Britain could be first in the creation of the industrial revolution because of a number of coincidences, such as the availability of coal and iron, an infrastructure provided by navigable rivers and natural ports and by a growth of technical knowledge made possible by an association of theoretical and practical intellectual work in institutions, such as the Royal Society. The California School (Goldstone, 2000; Pomeranz, 2000; Frank, 1998; and, with a similar tendency, Maddison, 2007) hold that capitalism has prevailed most of the time, even if it was contained by feudal and patriarchal rule. The more developed provinces in China and Japan were not so different from, for example, the Netherlands in the seventeenth century or even the Roman Empire. Given the emphasis on material facts and, first of all, the standard of life, and given the reduced importance ascribed to differences of economic systems, the differences in economic thought also lose importance. Max Weber had complemented his theory of the growth of modern capitalism as favoured by the growth of Protestantism by analysing the world religions and showing that the economic ethics in India and China prevented the spontaneous emergence of modern capitalism (Weber, 1921, pp. 19–21). But the California School, having negated big material differences, also try to show that the business ethics and the business practices in the East were not so different after all.

A consensus as to who is right will not easily be reached. My present contribution is limited. I only want to help to distinguish between different ways of doing history of economic thought, the different conceptions being linked to the different views about economic history and the relationship between the disciplines. I distinguish three conceptions of the history of economic thought, using my own terminology: the positivist, relativist and political. The main results are summarised in Table 1.1. We begin with a first survey.

Table 1.1Approaches to the history of economic thought

Type	Preferred designation/authors	Epochs	Characteristics of the history of economic theory	Perceptions of economic history	Associated periodisation of economic history	Conceptual framework	Value judgements
Pos...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• List of contributors
• Introduction
• Part I Economic thought: history and values
• Part II Theories meet facts
• Part III History in the Italian tradition of economic thought
• Index