Historical school of economics

The Historical school of economics was a mainly German school of economic thought which held that a study of history was the key source of knowledge about human actions and economic matters, since economics would be culture-specific and not generalizable over space and time. This was a rejection of the idea that economic theorems could be held as universally valid. They saw economics as being the work of rigorous analysis and not of logical philosophy. Characteristic of the historical school is a concern with reality rather than with self-referential mathematical modelling; most protagonists of the school were also Kathedersozialisten, i.e. concerned with social reform and the improvement of the masses during the times of heavy industrialization.

History

The Historical School can be divided into three sequences:

• the Older, led by Wilhelm Roscher, Karl Knies, and Bruno Hildebrand;
• the Younger, led by Gustav von Schmoller, and also including Etienne Laspeyres, Karl Bücher, and to some extent Lujo Brentano; and
• the Youngest, led by Werner Sombart and including, to a very large extent, Max Weber.

The Historical School was involved in the Methodenstreit (method war) with the Austrian School. The German historical school largely controlled academia in Germany, as many of the advisors of Friedrich Althoff, head of the university department in the Prussian Ministry of Education from 1882 to 1907. Prussia was the intellectual powerhouse of Germany and so dominated academia throughout the German speaking world, but also in the United States until about 1900, where the economics profession was led by men who had studied in Germany.

The Historical School is perhaps the most abused theory in the history of economic thought, because it fits so badly with the now completely-dominating Anglo-American view(s); it is perhaps also the school that is the least known in English-speaking countries. And yet, clearly it is the Historical School which forms the basis - both theoretically and factually - of the social market economy which is dominant in almost all countries of Europe, as well as of all dynamic, change-oriented and especially innovation-based economics (through the transmission of Joseph Schumpeter, who in spite of criticism of the School was, especially in his innovation-focused work, building on von Schmoller and Sombart).

English Historical School

Although not nearly as famous, there was also an English Historical School. This school was highly influenced by the likes of Francis Bacon, Auguste Comte, and Herbert Spencer.It was this school that heavily critiqued the deductive nature of the classical economists, with several of the thinkers associated with this school selecting David Ricardo as the focus of their attack. This school revered the inductive process and called for the merging of historical fact with those of the present period. Included in this school are: William Whewell, Richard Jones, Walter Bagehot, Arnold Toynbee, and William Cunningham just to name a few.

Important books on the HSE in English:

• Bücher, Karl (1927). Industrial Evolution. 6th ed. New York, NY: Holt.
• Backhaus, Jürgen G. (1994), ed. Gustav Schmoller and the Problems of Today = History of Economic Ideas, vol.s I/1993/3, II/1994/1.
• Backhaus, Jürgen G. (1997), ed. Essays in Social Security and Taxation. Gustav von Schmoller and Adolph Wagner Reconsidered. Marburg: Metropolis.
• Backhaus, Jürgen G. (2000), ed. Karl Bücher: Theory - History - Anthropology - Non Market Economies. Marburg: Metropolis.
• Balabkins, Nicholas W. (1988). Not by theory alone...: The Economics of Gustav von Schmoller and Its Legacy to America. Berlin: Duncker & Humblot.
• Chang, Ha-Joon (2002). Kicking Away the Ladder. Development Strategy in Historical Perspective. London: Anthem.
• Hodgson, Geoffrey M. (2001). How economics forgot history. The problem of historical specificity in social science. London – New York: Routledge.
• Roscher, Wilhelm (1878). Principles of Political Economy. 2 vols. From the 13th (1877) German edition. Chicago: Callaghan.
• Seligman, Edwin A. (1925). Essays in Economics. New York: Macmillan.
• Shionoya, Yuichi (2001), ed. The German Historical School: The Historical and Ethical Approach to Economics. London etc.: Routledge.
• Tribe, Keith (1988) "Governing Economy. The Reformation of German Economic Discourse" (Cambridge: Cambridge University Press).
• Tribe, Keith (1995) "Strategies of Economic Order. German Economic Discourse 1750-1950" (Cambridge: Cambridge University Press) (Republished 2006)

External links

• German Historic School
• English Historic School
• French Historic School

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