German Historical School of Economics

In this paper, I will briefly defend two claims that, I believe, put the “experimental turn” in economics into the broader historical and philosophical perspective. First, I argue that the adoption of experimental method should be seen as part of the general tendency of recent economics to become more empirical. It helped decisively to recognize the context-dependence of economic agency and economic rationality. This tendency invites us to rethink current economics in view of the famous Methodenstreit and to ask anew how it can be not just a social, but a cultural and an historical science. Thus, apart from marking a turn in the intellectual history of economics, experiments demonstrate the ways economics itself may turn (in)to history.
Second, and related issue, concerns the relevance of experimental economics for policy. Here, I suggest that it is instructive to look at the current debates in view of a classical agency-structure dualism familiar from social theory. It is this dualism—implying both tension between and attempts to reconcile agency and structure— that is invoked when discussing policy prospects of experimental (and behavioral) research. In particular, what exactly should be changed as a result of a given policy (be it in view of promoting the welfare or increasing efficiency, or similar concerns economists address)? Answering this question by referring to the interplay between agency and structure may additionally illuminate important methodological aspects of experimental economic research.

Το ζήτημα των απαρχών ή της γένεσης του καπιταλισμού που απασχόλησε τους συγγραφείς της Ιστορικής Σχολής και οδήγησε στις διαμάχες μεταξύ τους κατά τις τρεις πρώτες δεκαετίες του 20ού αιώνα είχε ως «φόντο» τη Μαρξική θεωρία του καπιταλισμού και της γέννησής του, η οποία είχε ήδη αποκτήσει σημαντική επιρροή στις γερμανόφωνες χώρες, και απέναντι στην οποία οι υπό εξέταση συγγραφείς επιχείρησαν να διατυπώσουν μια εναλλακτική ιστορική ανάλυση και θεωρία. 
Στο παρόν κείμενο θα ξεκινήσω παραθέτοντας τις βασικές θέσεις που διατύπωσε ο Μαρξ αναφορικά με τη γέννηση του καπιταλισμού στα ώριμα «οικονομικά» του έργα. Στη συνέχεια, αφού παρουσιάσω ένα περίγραμμα των θεωρητικών διαμαχών μεταξύ των εκπροσώπων της Ιστορικής Σχολής σχετικά με τις απαρχές του καπιταλισμού, θα επικεντρωθώ στην έννοια «πνεύμα του καπιταλισμού», η οποία, καίτοι εισήχθη από τον Βέρνερ Ζόμπαρτ, παρέμεινε θεωρητικά ενεργή μόνο στην τροποποιημένη από τον Μαξ Βέμπερ μορφή της.

Developments internal to the study of history have played a significant if overlooked role in the changing status of history within political economy. The paper illustrates this claim by way of a survey of the place of history within the writings of Adam Smith, Karl Marx and Alfred Marshall. It identifies a sea-change in historical thought after the French Revolution, such that Smith’s basic contrast of modern with ancient society was replaced in the thought of both Marx and Marshall by a contrast between the modern and the traditional, where the latter consisted of agrarian societies of one sort or another, distinguished according to their particular form of social bond and land ownership. But the discovery of human prehistory in the second half of the nineteenth century undermined the historical presuppositions shared by Marx and Marshall, leading both to revise not only their earlier historical accounts but also their conceptions of the relationship between the historical and the economic. While the discovery of prehistory can be seen as returning Smith’s ‘primitives’ to the historiographical stage it also played an important part in fostering the twentieth-century separation of economics from history.

This chapter traces the relations between the words 'historicism' and 'positivism' and underlying epistemological ideas associated with them since the 1880s. By retracing the encounters between historicism and positivism specifically in the social sciences, the chapter encourages modern scholars to renew their interest in what modern historicism had to offer as a counterbalance to the persistent pressure of positivism.

This essay addresses the historical and institutional aspects of Schumpeter's thought. It suggests that Schumpeter prepared a pluralist research agenda, formulated in accordance with the conceptual perspective of the German Historical School, as presented by major scholars such as Schmoller, Sombart, Spiethoff and Max Weber. Schumpeter's notion of development, with its emphasis on the correspondence of economic and socio-cultural evolution, is therefore to be viewed in the context of the comprehensive Schmollerian approach. Moreover the ethical-evolutionary components of Schmoller's ideas point at the vital role of the German Historical School in the elaboration of a modern evolutionary economics in Schumpeterian terms. The essay concludes that the Schmollerprogramm is going to inspire further developments in Schumpeterian economics, as the integration of theory and history continuously marks the research agenda of evolutionary approaches to economic development.

The main goal of the study is the explanation of the ‘social' element in the Social Market Economy style of socio-economic order in Germany. To understand what Social Market Economy means exactly, it is necessary to explore its main particular elements – orders. The lack of public awareness regarding its importance leads to the following hypothesis: the contemporary interpretation departed significantly from Social Market Economy sources, and German society does not thoroughly understand its nature and essence. Political parties are using their “brand” to improve their political image and gain electorate, which contributes to the deformation of its origins significantly affecting the shape and direction of change in the socio-economic governance of Germany, social attitudes and social expectations concerning social benefits, and social well-being

Etienne Laspeyres (1834 – 1913) is today best known for the price index named after him, but arguably his main contribution to economic literature is his Geschichte der Volkswirthschaftlichen Anschauungen der Niederländer und ihrer Litteratur zur Zeit der Republik (1863). This sketch sets out to consider whether this work, the contents of which will be very briefly outlined and placed into context, can be considered a Law & Economics classic, in the sense of the biographical part of the Elgar Companion to Law and Economics (1999), as well. While interesting in its own right, the discussion of this question also serves as an inroad into the discussion of exactly what type of combination of law and economics is necessary to be considered part of Law & Economics as a specific mode of scholarly inquiry.

In the second half of the 19th century, German-speaking countries developed a very intense economic debate
about crises. Mikhail Ivanovich Tugan-Baranovskij’s analysis may be considered as the point of transition between
different crisis theories and the development of organic thinking about the business cycle. It was an integral part of the
German debate and had a decisive influence on Arthur Spiethoff’s elaboration – perhaps the most organic analysis of
the cycle developed within the German historical school.
Arthurs Spiethoff’s influence was recognized by important authors such as Friedrich A. von Hayek and Joseph A.
Schumpeter. Both the Austrian economists admitted their debt toward the German scholar in elaborating their business
cycle theories. The present paper aims to illustrate one of the important roots in Spiethoff’s approach, an approach that
in turn became a crucial reference for other important economists.

Fritz L. Redlich (1892–1978), completed his degree in economics in Berlin in 1914 when the historical school still dominated the field in the person of Gustav Schmoller. His PhD research was already dedicated to a business history study: the German tar industry, while his attempt at obtaining a teaching qualification based on a research on the historical and economic significance of advertisement. Redlich himself withdrew his dissertation after the Nazis seized power in 1933 and three years later left Germany for the United States. He taught in several universities and also served in the public administration, all the while writing on the American Steel and banking industries, supported and sponsored by Frank Taussig. A major breakthrough in his career was the call to participate in the work of the Research Center in Entrepreneurial History at Harvard University. There, in continuous confrontation with Schumpeter, Cole and many other researchers in matters of entrepreneurship, Redlich developed an interesting epistemological foundation for the newly-born business history. He distinguished between research on the actor and on the action. Entrepreneurs could be studied as an ideal type, in theory, as a real type, in analytical empirical research, and as simple businessman in case-studies and biographical reconstructions. The action of entrepreneurs could be researched in regard to the goals and meaning of their enterprises, to the economy as a whole and to the community at large. Entrepreneurs could interact with all of the three aforementioned spheres of action, influencing not only the profitability of their ventures but also the development of an economy or the well-being of a community. As such, researching entrepreneurship only from the theoretical point of view would be limitative for Redlich. Business history should also attempt to 'verstehen', becoming part of the social sciences. The paper will analyse the methodological works of Fritz Redlich and his participation to the lively debate on the scientific statute of business history along with A. D. Chandler, but also his researches on aristocratic entrepreneurship, a topic on which he coordinated an international research effort, and his historiographic recounts on the emergence and diffusion of business history in Germany and in the United States.

Link: https://www.youtube.com/watch?v=4F7Q43BGplw.

How Schumpeterian is the Austrian School of Economics?


A presentation by Dr Carmelo Ferlito (CEO of the Center for Market Education) at the International Symposium on Economic Thought organized by RePEcT.


Istanbul, Turkey, 22/5/2021.


Joseph A. Schumpeter (1883-1950) lived and worked in the same period like Ludwig von Mises (1881-1973), the most influential economist of the second generation of the Austrian School of Economics; two of their main books were published very closely (Schumpeter’s Theory of Economic Development in 1911 and Mises’s Theory of Money and Credit in 1912). Although younger, Friedrich A. von Hayek (1899-1992) produced his most important works in economics (on business cycles in particular) just before Schumpeter gave birth to his masterpieces from the Harvard period.
The three economists were all Austrians, but Schumpeter is usually (and properly) not listed among the members of the Austrian School. It has been object of academic debate if – and at which extent – Schumpeter’s theories present elements of “austrianism”, while at the same time his closeness to last generation of the German Historical School (Weber, Spiethoff…) has been deeply analysed.
However, it remains unexplored an alternative – and opposite – perspective: did Schumpeter influence the Austrian economists, and in particular those who came after Mises and Hayek. In this presentation, I will try to highlight theoretical elements that show a sort of Schumpeterian shadow over the Austrian School of Economics, with particular reference to entrepreneurship, the role of history and business cycles.

Hayek’s opposition to the historical approach to political economy was unwavering over the course of his career. Drawing on Menger’s Untersuchungen über die Methoden der Sozialwissenschaften, Hayek regarded the Schmollers and Brentanos as foreign to true economics - a dangerous, but transitionary, hiccup in the progression of economic theory. In spite of Hayek’s antagonistic attitude, this article argues that certain elements of his stance after “Economics and Knowledge” (1936) were raised by historical political economists in the final decades of the nineteenth century. The point is not to suggest a direct influence of historical economists on Hayek, but one mediated by the geographical, linguistic, and cultural proximity of Austria and Germany. As documented in section one, plenty of evidence indicates that the Methodenstreit between Menger and Schmoller did not entail a sharp separation between the two camps.
The paper focuses on the following facets of Hayek’s thought: his concern with realism; the acknowledgement of complexity; the willingness to address policy issues, drawing on a peculiar history of modern thought; his ambivalence about value judgements; his focus on institutions and social rules; and a view of evolution as regulated by group superiority. It is argued that, in contrast to Hayek who advocated “the primacy of the abstract”, Schmoller can be seen as an upholder of the primacy of the concrete.
Looking at Hayek through German lenses has four advantages. First, it widens the historical context of his thought by questioning the supposed gulf between the Austrian and the German schools. Second, it shows that Hayek’s interpretation of the “younger historical school” was severely biased. Third, establishing a link between the historical economists and a now revered author like Hayek may shed a new and favourable light on a group still viewed with disdain. Fourth, there emerges an interpretation of Hayek’s thinking centred on value judgements.

There was a time when the glorious city of Prague was not merely loved for its medieval skyline, crystal wares, and good beer but also mattered in economics. In the Methodenstreit, a Viennese Carl Menger fought with a Berliner Gustav von Schmoller. That is a notorious side of the story, which has a much less known flip side. What about economic thought in the country between Vienna and Berlin, now called Czechia? We know next to nothing about it. Yet, several major economists’ remarks of the first half of the 20th century should take us out of our serenity. Arthur Spiethoff, the cofounder of the business cycle theory, «wrote central scientific works on his best-known research interests, studying the fluctuations of the capitalist economy» while teaching in Prague in the 1910s (Schefold 2010). Two decades later, in Prague, Hans Großmann-Doerth paid the following tribute to Charles University: «Prague is not only the oldest German university, but it is also still one of the greatest German universities today» (Großmann-Doerth 2005, 78). Großmann-Doerth, a co-founder of the Freiburg School, began his path towards ordoliberalism in Prague already (Schubert 2007, 784). Today, we are establishing the discipline of the Czech economic thought, understood in a territorial manner. Antonie Doležalová laid the discipline’s stepping stone by writing her book, A History of Czech Economic Thought.

1933-1951 yılları arasında İstanbul Üniversitesi’nin Edebiyat, Hukuk ve İktisat
Fakültelerinde sosyoloji ve sosyal politika dersleri veren Alman mülteci profesör Gerhard Kessler (1883-1963), Alman tarihçi iktisat geleneği içinde yetişmiş bir bilim adamıdır. Bu da onun Türkiye’de tanıttığı sosyoloji anlayışını anlamak için tarihçi iktisat geleneğini, düşünce sosyolojisinin sunduğu metodolojik çerçeve içinde incelemeyi zorunlu kılmaktadır. Düşünce sosyolojisi, sosyal yapı, entelektüeller, siyaset ve düşüncenin her birinin bir diğerini etkilediği iddiasını taşımaktadır. Bu bağlamda bakıldığında, tarihçi iktisat geleneğinin 1840’lardan 1920’lere kadar Alman topraklarının sosyo-iktisadi süreçlerine bağlı olarak ortaya çıktığı ve aynı zamanda dönüştüğü görülecektir. Tarihçi iktisat geleneğinin dönüşümleri sosyal politika ve sosyoloji alanlarının ortaya çıkmasını sağlamıştır. Gerhard Kessler’in Almanya ve Türkiye’deki çalışmaları dikkatle incelendiğinde, söz konusu dönüşümlerin onun bilim anlayışını da derinden etkilediği görülmektedir. Kessler bu bilim anlayışını aynı zamanda Alman sosyal liberal parti siyaseti ile de desteklemektedir. Kessler’in bu bilim ve siyaset anlayışının Türkiye’de nasıl alımlanacağı ise ayrı bir problematik olarak karşımıza çıkmaktadır. Bu sorunun iyi bir şekilde cevaplanması içinse Türkiye’de 19. yüzyıldan itibaren sosyal bilim anlayışında görülen yeniliklerin incelenmesi gerekecektir. Bu şekilde Kessler öncesinde geçerli bilim anlayışı ile Kessler’in Türkiye’de tanıttığı bilim anlayışını karşılaştırabilmek için bir temel inşa edilmiş olacaktır. Bu tez yukarıda belirtilen noktaları aydınlatma hedefini gütmektedir.

The paper examines the historical and substantive relevance of Weberian philosophy of science to the philosophy of economics. In so doing, we investigate the interconnections between Weber’s thought and that of the principal followers of the German historical school in political economy. The paper encompasses a rich variety of issues, among which: the validity of historical explanations, the conditions of an hermeneutical objectivity in the cultural sciences, the ideal of ideographic knowledge and the concomitant demarcation between natural and cultural sciences, and above all, the Weberian criticism of the German historical school in Economics. Particular emphasis is placed upon the premisses of the so-called sociological turn along with his overtones on rational reconstructions of historical episodes that culminated in his elaboration on the famous Protestant work ethic.

The comparability of economies in time and space was taken for granted by many cataloguers and encyclopaedists in the centuries leading to enlightenment. The dawning thought of a development path of humanity put an end to such ingenuous comparisons. Along with the consciousness of the evolutionary nature of history, Europe developed the hubris of civilisation, condemning the rest of the world to an uncivilised backwardness. Comparisons became impossible, except for societies at the same stage of development. The study of economies suffered the same fate at the hand of all historicists who conceived complex models of growth in stages. Comparisons were allowed only by presuming the permanence of some characteristic of men or the existence of natural laws. While modern economics was funded on such assumptions, historicists became more and more sceptical about the possibility of comparisons over time: every event was unique. This profound difference in philosophical assumptions led to the famous debate between primitivists and modernists in respect to the study of ancient economies. Causality or contextualisation? That was the question. The paper will relate the nineteenth century discussion on the comparability of ancient and modern economies, extending the analysis to some heterodox economists of the twentieth century. Some
conclusions will be drawn on the possibility to construe in kind indexes of wealth, allowing fruitful comparisons of different institutional settings.

12 December 2019: Is Economic Theory Historically Conditioned? Verstehen as a link between theory and history, presentation at the 1st Colloquium on Economics Education: “Issues in Contemporary Economics Education”, organized by the Center for Market Education and the Institute for Democracy and Economic Affairs, 11-12 December 2019, The Saujana Hotel, Shah Alam, Malaysia.

With the progress of formalism, Economic History and History of Economic Thought are gradually disappearing from academic economics curricula. However, up to not so long ago, a good knowledge of economic history and, furthermore, of the evolution of the so-called economic doctrines was considered an important pre-requisite in the formation of an economist.
It has not to be forgotten that Schumpeter (1954), at the end of his career, recognized economic history as his first-choice support tool. More importantly, back to the last quarter of XIX century, the Methodenstreit between Menger and Schmoller – one of the first methodological battles within the discipline – revolved around the possibility for economics to be a science distinct from history.
The methodological debate on the relationship between history and economics moved into the XX century and only in the last few decades it gradually faded, in connection with the diminishing interest for methodological issues within the profession. The position expressed by the German Historical School represented one of the two extreme positions: economics can exist only as economic history, as collection and narration of events from the past. The opposite side of the spectrum claimed that economics can be fully built as an a-priori science, independently from historical observation. While Menger never embraced such extreme apriorism, this position is often attributed to Ludwig von Mises (though scholars such as Lavoie and Storr tried to reinterpret, with success, Mises’s apriorism). An interesting middle-way approach was introduced by the last exponent of the German Historical School, Arthur Spiethoff, friend and mentor to Schumpeter, when he advocated the building of an anschauuliche theorie, based at the same time on historical observation and the isolation of the peculiar features of an economic period, bringing to the identification of real types – as opposed to Weber’s ideal types – and economic styles.
I see the publication of Lachmann (1971) as a breakthrough moment for the evolution of this debate. By calling for a hermenetical turn in economics and the reprise of the Weberian focus on the category of verstehen, Lachmann was the man behind the emergence of economics as a science of meaning. In the way in which Lavoie – and later Storr – tried to reshape Mises’s Euclidean vision, interpretation becomes the bridge between history and theory: economists build theory by interpreting facts constituting the historical evolution of reality.
Embracing the hermeneutical turn advocated by Lachmann, thus, the dichotomy between history and theory can be resolved into a complementarity generated by interpretative processes. Therefore, I argue that the debate in favour of pluralism in economics can be enriched by trying to rebuild economics on hermeneutical foundations. The first benefit to be achieved would be a reconciliation between theory and history.

The European Union has been, and still remains one of the most amazing phenomena that has been witnessed in the 21st century.  It is an epic story of different countries getting past their differences and trying to move forward in order to create a system of one economic currency and having the ability to transact globally with all nations through the world that will not only work for themselves economically and socially, but will also have the ability to usher the Union into the new world order and be recognized in the modern era of Globalization in the eyes of all world governments.  However, past issues that have taken affect with respect to the past 15 years since its founding have plagued the Union making its future questionable to those not only within the Union itself and each other, but also in the eyes of other nations, such as the United States, China, Japan, and England, all of whom are a part of the new Global Economic Movement.  However, in order for one to fully understand the significance of the problems, one must go back to the earlier times of Europe before it became known as the European Union.  In this paper, I will take you through a historical journey that shows you the early origins of the first attempts not only to bring about the European Union, but also to point out the problems then and now that continue to plague it up to its modern existence.

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