The German Historical School and European Economic Thought

José Luís Cardoso, Michalis Psalidopoulos, José Luís Cardoso, Michalis Psalidopoulos

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317378792
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The financial crisis of 2008 has revived interest in economic scholarship from a historical perspective. The most in depth studies of the relationship between economics and history can be found in the work of the so-called German Historical School (GHS). The influence of the GHS in the USA and Britain has been well documented, but far less has been written on the rest of Europe.

This volume studies the interconnection between economic thought and economic policy from the mid-nineteenth century to the interwar period. It examines how the School's ideas spread and was interpreted in different European countries between 1850 and 1930, analysing its legacies in these countries. In doing so, the book is able to trace the interconnection between economic thought and economic policy, adding new voices to the debate on the diffusion of ideas and flow of knowledge. This book identifies issues related to topics such as nationalism and cosmopolitanism in the history of ideas and clarifies themes in policy making that are still currently debated. These include monetary policy and benefits of free trade for all parties involved in international exchanges.

This book will be of a great interest to those who study history of economic thought, economic theory and political economy.

1 The impact of the German Historical School on the evolution of economic thought in Austria

Günther Chaloupek

DOI: 10.4324/9781315674315-1

Economic and state sciences in Austria in the first half of the nineteenth century

Economic and state sciences had a promising start in Austria in the seventeenth and eighteenth centuries. Being the largest and most powerful territorial state of the German Reich, the Habsburg monarchy was an attractive workplace for mercantilist economists from other parts of the Reich (Becher, Schröder, Hörnigk, Justi). In 1763 Joseph von Sonnenfels, author of the textbook Grundsätze der Polizey, Handlung und Finanz (3 vols., 1765–1776), was appointed to the newly established chair for administrative and cameral sciences at the University of Vienna. With strict state control over university teaching before 1848, reception of classical economics was delayed considerably, so that Austrian participation in the lively development of economics in Germany ¹ in the first half of the nineteenth century was rather weak and belated.

Austria took a route different from Germany in the human sciences, not only in economics but also in philosophy and history. Whereas for many decades during the nineteenth century, German philosophy was dominated by Hegel’s idealism and historicism, and later by the anti-Hegelian reaction, in Austria Catholicism, realism and logical positivism were the prevailing currents of thought. In the same vein, Austria lacked anything comparable to the broad-based movement of Historismus that dominated human sciences in Germany in general (law – Savigny, history – Niebuhr, Ranke, Droysen) from the early 1800s. ²

If the origins of the German Historical School (GHS) date back to the middle of the century, at that time in Austria the state of economics was clearly under-developed. The universities’ teaching staff consisted mostly of rather obscure scholars, except for Lorenz von Stein, who had been appointed to the chair at the University of Vienna (previously held by Sonnenfels and Josef Kudler) in 1855. Hence, there is no parallel movement to the older, so-called first-generation historical school (Roscher, Knies, Hildebrand) in Austria. After the appointment of Albert Schäffle (1868) and of Carl Menger (1871) at the University of Vienna, the historical school (HS) had a late start in Austria in 1868 with the call of Theodor Inama von Sternegg to the University of Innsbruck. Thereafter, the HS established itself and gained strength in the academic as well as in the political sphere under the influence of two leading figures: Karl Theodor von Inama-Sternegg and Carl Grünberg.

The leading scholars: Inama-Sternegg and Grünberg

Inama-Sternegg ³

In 1868, Karl Theodor von Inama-Sternegg was appointed to the chair of state science at the University of Innsbruck. Born 1843 in Augsburg, Bavaria, he had studied law and state sciences at the University of Munich, where he was habilitated in 1868. Descended from an old South Tyrolian family, he followed the call from his home country. At the University of Innsbruck the preferred subject of Inama’s economic studies was history of the medieval economy. His studies on the formation of manorial estates and its system of administration in the early Middle Ages (Inama-Sternegg 1872, 1878) were widely quoted and discussed in the economic history literature. ⁴ Of Inama’s most encompassing work, Deutsche Wirtschaftsgeschichte, which covers the economic development of Germany during the Middle Ages, only the first volume was completed when he left Innsbruck; Volumes 2 and 3 were published in 1891 and 1901, respectively. He is credited for having coined the term Wirtschaftsgeschichte. From Innsbruck Inama moved to the more prestigious University of Prague in 1880. In 1881, Inama-Sternegg left his academic post and became director of the Bureau for Administrative Statistics. In 1884 he was elevated to the prestigious position of president of the Austrian Central Statistical Commission. At the same time he was honorary professor and director of statistical studies at the University of Vienna. In addition, he lectured on administrative sciences (Verwaltungslehre) after Lorenz von Stein’s retirement (1885). Without establishing a “school” of his own, Inama trained his students primarily for service in the statistical office, from which many advanced to important positions in the administration and in the universities. Inama retired from his post as president of the Statistical Commission in 1905 and died in 1908, just after having completed a revision of Volume 1 of his Deutsche Wirtschaftsgeschichte.

As economist and statistician Inama represented the kind of unity of theory and practice which was so important to the German “socialists of the chair” (Kathedersozialisten). He acquired considerable reputation as the organizer of a modern statistical system in Austria. He was equally concerned with issues of social policy and engaged himself actively in the organization of poor relief by serving as president of an association against poverty and begging. ⁵ Inama became an active politician when he was appointed member of the upper chamber of the Austrian parliament by the emperor in 1891, where he supported social reforms and the introduction of general franchise (for men) in 1907.

For his general approach, Inama aimed at a synthesis between historical-empirical investigation and classical – that is the Smithian type of economic theory. He followed Lorenz von Stein ⁶ in his high appreciation of Adam Smith’s achievements in the “investigation of the fundamental relationships in the world of goods (Güterwelt)” as a lasting contribution to economics as a social science. Like Stein, Inama accepted “self-interest as the guide for the best use of labour and capital.” However, Smith’s view of the economy suffered from a principal deficiency. If there are general economic laws rooted in the “immutable relationship between man and nature”, their effects vary according to changing social, institutional, legal and political circumstances. In his Wealth of Nations, Smith pays insufficient attention to the changeability of conditions under which goods production takes place. More importantly, he does not provide a viable starting point for analyzing what can be attributed to the nature of man or to human nature’s concrete manifestations under specific historically given conditions (Inama-Sternegg 1876: 13ff.). The HS deserves credit for correcting this onesidedness of classical economic theory.

Inama is in agreement with Schmoller, who rightly demonstrates “the aberrations of the individualistic economic theory” – that is the Austrian Schools paradigm, which Schumpeter called “methodological individualism” (Inama-Sternegg 1908: 107). As “collective phenomena” economic facts and processes have a logic of their own, they are not “mere aggregates of individual actions” (ibidem_ 97). Yet, in Inama’s view Schmoller goes too far in his attempt to demonstrate the social determinedness of man’s economic actions. In his endeavour to trace economic behaviour to varying psychological, biological, racial, ethnical, geographical and educational conditions, Schmoller puts too great a strain on economics, with the unsatisfactory result that he produces “only fragments of a general theory of society which are often superficial explanations of an immature sociology”, which tend to spoil the achievements of Schmoller’s Grundrisse (ibidem_ 109). Instead, Inama pleads for sticking to the existing specialization among the social sciences. Whereas for Schmoller progress of economic knowledge is the product of detailed historical studies of concrete subjects, Inama points to the merits of the “method of isolation” – that is the formulation of abstract hypotheses, which has a major share in the achievements of economics as a social science (Inama-Sternegg 1876: 28). If, therefore, Inama’s understanding of economic method is different from Schmoller’s extreme inductivism, his views somehow anticipate the modification which Sombart and the members of the third generation of the GHS considered necessary for an appropriate application of the historical method.

But with these qualifications, Inama thought that sound economic knowledge must be based on detailed historical research and the gathering of statistical data, in order to support hypothetical judgments based on scattered observations. In addition, “descriptive economics” is an important source of knowledge where representation in quantitative terms is impossible (Inama-Sternegg 1908: 105). As president of Austria’s statistical office, Inama emphasized that working with original historical data should meet the same technical and professional standards which apply to current statistics (Inama-Sternegg 1903: 275). As far as capacities permitted, he supported such efforts from members of the staff who published a large number of historical statistics in the official media of the Central Commission as well as in personal publications.

Inama had only limited ambitions in economic theorizing. As a consequence of his interest in the “Social Question” and his favourable attitude towards social policies, his main interest lay in the theory of rent formation. ⁷ On the basis of the theoretical approaches of Ricardo and Schmoller, he extended the concept of rent beyond land to goods production, national and international trade and even to national economies, which he saw as collective economic entities competing with each other. He was also interested in monopoly theory and in the organization of markets, and in tendencies and determinants of long-term economic development. He used rather simple analytical concepts taken from classical economics, without being interested in subjecting them to critical discussion. Inama published two volumes of collected essays at the end of his career. He did not write a general tract containing his theoretical views in a systematized form.

Inama’s duties as president of the statistical office did not permit him to write longer studies in economic history apart from the time-consuming completion of his work on the German economy during the Middle Ages. His statistical publications include studies on the possession of real property and on wages of workers in agriculture.

Carl Grünberg ⁸

By his date of birth Grünberg belongs to the age group of the authors of the third generation of the GHS. Born 1861 in a Jewish family in Focsany, Rumania, Grünberg moved to Austria. After having completed the gymnasium in Czernowitz, he studied law and state sciences under Lorenz von Stein and Anton Menger at the University of Vienna. Under the influence of Anton Menger Grünberg had come to sympathize with socialist ideas. While working in a private law firm, Grünberg started with extensive studies in agricultural history at the University of Strasbourg under the tutorship of G. F. Knapp. He was habilitated in Strasbourg in 1893. His appointment to extraordinary professor at the University of Vienna in 1899 was supported by Eugen von Philipovich, one of the few Kathedersozialisten among the Austrian School. A joint motion of Philipovich, Friedrich Wieser and Heinrich Lammasch to promote Grünberg to ordinary professor was turned down twice by the majority of the law faculty, but was finally accepted in 1909. Thus, Grünberg was the first avowed Marxist who obtained a full professorship at a university in Austria and Germany.

Similar to Inama’s, Grünberg’s first subject of research was in agricultural history. In the tradition of the GHS, in particular of Knapp’s work on peasant emancipation and land reform in Prussia, he wrote a voluminous study on peasant emancipation and the dissolution of hereditary subjection in the Austrian crownlands Bohemia, Moravia and Silesia (Grünberg 1894). Grünberg’s continued interest in the process of peasant emancipation resulted in a variety of publications (see especially Grünberg 1899, 1922) in which he carefully described and analyzed the different forms of land tenure and the successive legislative steps that gave peasants full ownership of their property and changed their status from personal subjection to citizenship.

Going beyond Menger’s “lawyers’ socialism” (“Juristensozialismus”) he created a distinctive version of Marxian historical materialism which, in its methodological orientation, adopts a teleological view of history, like the younger GHS. Grünberg defined himself as “Marxist”, yet he did not accept the truth of Marxist economic and social doctrines for deductive reasons, but emphasized the necessity of subjecting them to empirical validation. He was r...

Table of contents

• Cover
• Half Title Page
• series
• Title Page
• Copyright Page
• Contents
• List of contributors
• Introduction
• 1 The impact of the German Historical School on the evolution of economic thought in Austria
• 2 The reception of the German Historical Schools among French economists (1857–1900)
• 3 Economics, statistics and history: The legacy of the German Historical School in Belgium
• 4 On the surface things seemed quiet: The reception of the German Historical School in the Netherlands
• 5 The German Historical School of economics in the Italian debate (1870–1890)
• 6 The German Historical School in Spain: From the fringes to mainstream (1870–1936)
• 7 The influence of the German Historical School in Portugal
• 9 A hundred years of German connection in Turkish economic thought: Historismus and otherwise
• 10 Sweden and the historical school: Eight scholars going to Germany, 1874–1908
• 11 The influence of the German Historical School on economic theory and economic thought in Russia
• 12 The evolution of the German Historical School in Bulgaria (1878–1944)
• Concluding remarks
• Name index