Gustav Schmoller and the Problems of Today

Author(s): Terence W. Hutchison

Source: Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte
Staatswissenschaft, Vol. 144, No. 3 (June 1988), pp. 527-531
Published by: Mohr Siebeck GmbH & Co. KG
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 Economics(JITE) 144(1988),527-531
and Theoretical
Journalof Institutional
fürdie gesamteStaatswissenschaft
Zeitschrift

and theProblemsofToday
GustavSchmoller
by
Terence W. Hutchison*

Í.

At leastto thisfarfromwell-informed outsideobserverof thedevelopment of

economicsand politicsin Germanysince 1945, it seemsnow, on the 150th
anniversary of his birth,thattheprestigeand influence of GustavSchmoller,
and of his workand ideas,could hardlydeclinefurther.
How are themightyfallen!
At the startof this century,at the peak of his career,Schmollerwas a
pre-eminent, commanding figurein Germanpoliticaleconomy.His conception
ofthesubjectdominatedtheacademicscenein thedecadesbefore1914,under
theHohenzollern empire.To manyeconomiststodaythissteepthedeclineand
fallof Schmoller'sreputation, and of theinfluenceof theideas forwhichhe
stood,may seemto represent a just verdict.In thefirstplace, however,this
personaldeclineneed not,and shouldnot have been accompaniedby such a
considerableabandonment ofthehistorical method,orapproach,and ofa vital
historicalcomponentin politicaleconomy.Second,thedeclinein influence of
themethodand ideas whichSchmollerstood forseemsto have come about
partlyas a grossover-reaction to hisneglectof theoryand analysis,and partly
to havestemmed fromunderstandable, butultimately irrelevant,politicalatti-
tudesand vicissitudes,muchmorethanfromsolidmethodological or theoret-
ical arguments, or fromtheintellectual needsof the subject.Schmollermay
havecometo be regarded, notunjustifiably, as therepresentativeofmorethan
one kindof distasteful imperialism: firstas the,or an, academicchampionof
theHohenzollernempire;and second,as a muchtoo powerfulacademicem-
pire-builder,who controlledappointments to chairsin thenarrowinterest of
his own historicalapproach,or school.Of thisschoolhe was regardedas the
principaland mostaggressive representative becauseof his leadingrolein the
Methodenstreit. Unfortunately, thisdecline in Schmoller'sreputation was un-
necessarilyaccompaniedby the widespreadrejectionof the approach and
methodsof theGermanhistoricalschool.

♦ The titleof thisnoteis verballythesameas thatof Schumpeter's articleof 1926-

theoutstanding essayon its subject.But thereis, of course,a considerabledifference
betweentheToday' of 1988and Schumpeter's Today' of 1926.

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528 W.Hutchison
Terence «DOTTIE

2.

There can be no doubt as to who firedthe firstshot in the long-lasting,

lamentableAustro-German
intellectually Methodenstreit. It was Carl Menger
withhisbitterand sweepingattackon thehistorical economists intheIntroduc-
tionto his Untersuchungen (1883)- a book whichnevertheless containedmany
penetrating,- (ifnottoo clearlyformulated) - insights.
Incidentally,Menger's
weredirectedmuchmoreat theveteranWilhelmRöscher,thanat
strictures
Schmoller, whowas verylittlementioned in Menger'sbook. As has longbeen
recognized, however,theMethodenstreit was notmainlyconcernedwithmeth-
ods,norevenwithissuesoftheoryversushistory inpoliticaleconomy.Though
differencesin intellectual
tastesand interestsplayedan underlying part,both
antagonistsprofessedto recognizea role for the other's main interest:
Schmollerfor theory,and Mengerfor history.The ferocity of the quarrel
derivedratherfromquestionsof priority and prestige.As Schumpeter put it,
theissuewas one of *Luftraum oderHerrschaft*,thatis ofempire-building and
thecaptureof chairsandjobs. (A dedicatedscholar,however,requiresneither
*
any Luftraum', beyondroomin a library, nor any 'Herrschaft' beyonda fair
hearing for his ideas).

3.

The applicationofa historical methodto politicaleconomybeganin Scotland

inthemiddleoftheeighteenth centuryas partofthehistorical movement which
was suchan impressive featureoftheScottishEnlightenment. The inclusionof
an important historicalcomponentin politicaleconomydated fromthevery
decades whenthe subjecthas usuallybeen regardedas firstemergingas a
separatediscipline.David Hume,inhisowndaymorerenownced as a historian
thanas a philosopher, proudlyproclaimed'thisto be thehistorical age and this
thehistorical nation'(see Bryson[1945],p. 78). It was thebrillianttriumvirate
ofHume(1752),SirJamesSteuart [1767],and AdamSmith[1776],who,from
differingviewpoints, and in workson a verydifferent scale,demonstrated the
vital role in the emergingsubjectof the studyof historyand comparative
institutions.As, however, D. C. Coleman [1987]has recently
Professor shown,
theScottishhistorical or
school, tradition, rapidlydeclinedand decayedin the
earlydecadesof thenineteenth century.The historical-institutionalappraoch,
initiatedbythegreatScottishmasters,in spiteof somesubsequentineffectual
gesturesby J.S. Mill, was largelyextrudedand excludedfromtheorthodox
conceptionofthescopeand methodofpoliticaleconomyas upheldbythelater
Englishclassicals,who followedthenarrow,deductiveabstractions of Senior
and Ricardo.In thefirst halfofthenineteenthcentury thetitleof"thehistorical
nation"passed fromScotlandto Germany,and the protestof the German
historicaleconomists was aimedat restoringto politicaleconomythehistorical

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144/3(1988) Gustav andtheProblems
Schmoller ofToday 529

componentoriginally includedbyHume,Steuart,and Smith,butextrudedand

excludedby theirEnglishclassicalsuccessors.
LaterAlfredMarshall,underGermaninfluence, made a strenuousattempt
to re-graft a historical-institutional
approach on to theneo-classicalabstrac-
tion.Butjustas theScottishhistorical component excludedbytheEnglish
was
classicals,so Marshall'shistoricalaims- (in spiteofmuchlip-service fromhis
disciples)- weretacitly,butimmediately and far-reachinglyabandonedbyhis
leadingCambridgesuccessors,as well,of course,as by otherneo-classicals.
In hiscomments on J.M. Keynes'sScope andMethodofPoliticalEconomy,
the main Cambridgestatementof methodologicalprinciples,Marshallhad
'aimedat bringing itmoreintoharmony withtheviewsofSchmoller'(v. Coase
[1975],pp. 27-28). Marshall'sverdicton theGermanhistoricalschoolis also
of interest:
"It wouldbe difficultto overrate
thevalueoftheworkwhichtheyandtheir fellow
workers inother countries havedoneintracing andexplaining
thehistory
ofeconomic
habitsandinstitutions.It is oneofthegreatachievements
ofourageandan important
addition totherealwealth oftheworld.It hasdonemorethanalmostanything
elseto
broaden ourideas,toincrease ourknowledge ofourselves,
andtohelpustounderstand
thecentral plan,as itwere,oftheDivinegovernment oftheworld"(Marshall [1920,
p. 768]).
4.

The Germanhistoricaleconomists, and themembersof the Verein fürSocial-

politik,haveoftenbeenaccusedofhavingconstituted a mainsourceofsocialist
ideas duringthelastquarterof thenineteenth century.Lionel Robbins[1984,
p. 83], forexample,citingMises,describedtheyounger historicalschoolas "the
spearheadof the attackon international liberalismin the Bismarckianera'.
Therewas sometruthand someexaggeration in suchstatements. What,how-
ever,Mises and his followersunfortunately failedto acknowledgewas that
membersof theGermanhistoricalschoolfirstdevelopedthemodern,funda-
mentalcritiqueof socialisteconomicslong beforethe writingsof Mises.
Schaeffle [1874-8], Brentano [1878] and Nasse [1879] all posed, in the
clearestterms,thefundamental questionas to how resourceswould,or could,
be efficientlyallocated in a centrallydirectedsocialisteconomy,and they
warned,emphatically and repeatedly,ofthedangersto freedom ofgovernmen-
tal economicplanning.The twentieth-century criticismof socialisteconomics
byMises,Hayek,and otherswas, to a largeextentanticipatedbymembersof
theGermanhistoricalschool(v. Hutchison [1953],pp. 293-298).

5.

It was notonlywithregardto thehistoricalprocessesof growthand develop-

mentthattheGermanhistorical schoolmaintained a muchbroaderconception

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530 TerenceW. Hutchison JUME

ofthesubjectthanthelaterclassicalsand mostoftheneo-classicals. Following

Ricardo, the classicalsand neo-classicalsmostlylocked themselvesinto a
smoothlyself-equilibrating model,whichlargelyexcludedtheuncertainty, ig-
norance,and erroneousexpectations whichgiveriseto so manyof themost
important real-worldproblems,notablythatofaggregated fluctuations.
Prob-
lemsof thebusinesscycleand aggregatefluctuations, whichcameto be recog-
nized as of major importancein the twentieth century,weredisregardedby
mostof theleadingclassicalsand neo-classicals. The studyof economicinsta-
bilityand thebusinesscycle,whichmaybe regardedas a, or the,majorsource
or anticipationof twentieth-century macro-economics, was developedin the
nineteenth centuryby the Germanhistoricaleconomistsmore than by any
otherschool.WilhelmRöscher,ErwinNasse, and HeinrichHerkner,among
others,in theirwritings on the subject,closelyexaminedthe ambiguitiesof
Say's Law, whichwas thenbeingtreatedmuchtoo uncritically by orthodox
classicalsand neo-classicals.In Schmoller'sGrundriß,unlikemostof theneo-
classicalbooks of principles, theproblemof aggregatefluctuations founda
significantplace.The most and
important originalcontribution, however, came
fromArthurSpiethoff . It was notuntilthetwentiethcenturywas welladvanced
thatleadingneo-classical writersin EnglandandAustriatookup systematically
theproblemsofaggregate fluctuations- (apartfromone or twoisolatedessays
or chapters).

6.

It might,
inconclusion,be suggested
thattheincreasing numberofeconomists,
ofvarying schoolsofthought,whoenvisageas a, or the,fundamental task,that
ofre-introducing,moresystematically,
a majorhistorical-institutional
compo-
nentintopoliticaleconomy,or intosomeofitsmainbranches,shouldseekto
restoreto theworkofSchmollerand theGermanhistorical schoolsomeofthe
acclaimand attentionwhichhas beenlostsincethebeginning of thiscentury.

References

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Bryson,G. [1945],Man and Society.
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Hutchison,T. W. [1953],A ReviewofEconomicDoctrines,1870-1929 Oxford.
Marshall, A, [1920],Principles 8thed., London.
of Economics,
Nasse, E. [1879],Jahrbuch p. 164.
fürGesetzgebung,
RoBBiNS, L. C. [1984],EssayontheNatureandSignificanceofEconomieScience,3rd.ed.,
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144/3 (1988) and theProblemsof Today
GustavSchmoller 531

Schaeffle,E. [1874-81,Die Quintessenz des Sozialismus.

SCHUMPETER, J.A. [1926],"GustavSchmollerunddie Problemevon heute",Schmollers
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Steuart, Sir James,[1767],Principles

TerenceW. Hutchison
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