Gustav von Schmoller

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Gustav von Schmoller

Gustav von Schmoller (June 24, 1838 – June 27, 1917) was the leader of the "younger" German historical school of economics. It could be claimed that von Schmoller resurrected, from his position at the University of Berlin, German Historicism and ruled the German academic world in the latter part of the nineteenth century. He was also known for attacks on Classical and Neoclassical theory but, most of all and in all probability, his economic thinking, if institutionalized in the USA and EU, would have made the recent “recurrent world economic crises” the relics of the nineteenth century.

Life

Gustav von Schmoller was born on June 24, 1838 in Heilbronn in northern Baden-Württemberg, Germany. His father was a civil servant and he continued the tradition. Young Gustav studied Staatswissenschaften (a combination of economics, law, history, and civil administration) at the University of Tübingen (1857–1861).

In 1861, he obtained an appointment at the Württemberg Statistical Department.

In the early 1860s Schmoller defended the commercial treaty between France and the German Customs Union, negotiated with Prussian leadership. This defense curtailed his career in Württemberg but gained favor for him with Prussian authorities, and he was appointed the official historian of Brandenburg and Prussia in 1887. He became a member of the Prussian state council in 1884 and representative of the University of Berlin in the Prussian upper house in 1889.

During his academic career he held appointments as a professor at the universities of Halle (1864–1872), Strasbourg (1872–1882), and Berlin (1882–1913).

He died at Bad Harzburg on June 27, 1917, aged 79.

Work

As an outspoken leader of the "younger" historical school, Schmoller opposed what he saw as the axiomatic-deductive approach of classical economics and, later, the Austrian school – indeed, Schmoller coined the term to suggest provincialism in an unfavorable review of the 1883 book Investigations into the Method of the Social Sciences with Special Reference to Economics (Untersuchungen über die Methode der Socialwissenschaften und der politischen Oekonomie insbesondere) by Carl Menger, which attacked the methods of the historical school. This led to the controversy known as the Methodenstreit, which today often appears as a waste of energies and one of the main reasons for the later demise of the whole historical school, although – as Joseph Schumpeter once pointed out – this was really a quarrel within that school. Schmoller's primarily inductive approach, requesting careful study, comparative in time and space, of economic performance and phenomena generally, his focus on the evolution of economic processes and institutions, and his insistence on the cultural specificity of economics and the centrality of values in shaping economic exchanges stand in stark contrast to some classical and most neoclassical economists, so that he and his school fell out of the mainstream of economics by the 1930s, being replaced in Germany by the successor Freiburg school.

However, it is often overlooked that Schmoller's primary preoccupation in his lifetime was not with economic method but with economic and social policy to address the challenges posed by rapid industrialization and urbanization. That is, Schmoller was first and foremost a social reformer. As such, Schmoller's influence extended throughout Europe, to the Progressive movement in the United States, and to social reformers in Meiji Japan. His most prominent non-German students and followers included William J. Ashley, W.E.B. Du Bois, Richard T. Ely, Noburu Kanai, Albion W. Small, and E.R.A. Seligman.

Since the 1980s Schmoller's work has been reevaluated and found relevant to some branches of heterodox economics, especially development economics, behavioral economics, evolutionary economics and neo-institutional economics. He has long had an influence within the subfield of economic history and the discipline of sociology.

Socio-Political Work

He was a leading Sozialpolitiker (more derisively, Kathedersozialist – "Socialist of the Chair"), and a founder and long-time chairman of the Verein für Socialpolitik, the German Economic Association, which continues to exist. Schmoller's influence on academic policy, economic, social and fiscal reform, and economics as an academic discipline for the time between 1875 and 1910 can hardly be overrated. He was also an outspoken proponent of the assertion of German naval power and the expansion of German overseas empire. Gustav Schmoller's political involvements were also important: in 1872, he formed the Verein fur Sozialpolitik, ("Society for Social Policy"), a group of largely conservative economists which supported a kind of corporatist state-industry-labour nexus.

In the meantime, actual Socialists and Marxians regarded Schmoller's group as an instrument of government and businesses to control and mollify the working classes. This was virtually confirmed time and time again when the Verein would come up with patchy justifications for the industrial policies of Bismarck. The Verein rarely opposed an economic policy decision by the Imperial German government.

Economic Work

According to Schmoller, concrete historical research must precede the creation of an economic theory, since only a historical approach makes it possible to determine the causal relations between social phenomena. The behaviour of economic entities (individuals and groups) results from the interaction of a variety of factors; therefore, economic science should concern itself with, for example, the intentions of individuals considered as economic units, the level of technological development, the character of existing social institutions, and natural conditions. Schmoller suggested that political economy, as the basic social science, encompasses such disciplines as psychology, sociology, and geography; it is therefore normative and provides a basis upon which to make ethical judgments and practical recommendations. The untranslated texts are now inaccessible to readers without knowledge of German. The translated works are:

• The Mercantile System and Its Historical Significance, New York: Macmillan, 2nd ed. 1910. This is a chapter from Schmoller's much larger work Studien über die wirtschaftliche Politik Friedrichs des Grossen which was published in 1884. The chapter was translated by William J. Ashley and published in 1897 under the English title above.
• "The Idea of Justice in Political Economy." Annals of the American Academy of Political and Social Science 4 (1894): 697–737.
• Grundriss der allgemeinen Volkswirtschaftslehre. Leipzig: Duncker & Humblot, 1900–1904, transl. Abraham and Weingast, 1942.

References

ISBN links support NWE through referral fees

• 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, Jurgen, The University as an Economic Institution, The Political Economy of the Althoff System, J. Econ. Studies, 20, 1993, 8-29
• Balabkins, Nicholas W. (1988). Not by theory alone...: The Economics of Gustav von Schmoller and Its Legacy to America. Berlin: Duncker u. Humblot.
• Clark, David S. Encyclopedia of Law and Society American and Global Perspectives. Minneapolis: Sage Publications, Inc, 2007.
• Encyclopedia of Law and Society: American and Global Perspectives, 3rd ed., “Schmoller, Gustav von.”
• Grimmer-Solem, Erik. The Rise of Historical Economics and Social Reform in Germany, 1864–1894. Oxford: Oxford University Press, 2003.
• Iggers, Georg G. "Historiography in the Twentieth Century: From Scientific Objectivity to the Postmodern Challenge." Middletown, Conn: Wesleyan University Press, 1997.
• Karasek, Mirek. “With Adam Smith Against the Danger of Destruction of Post-Communist Social Systems.” POLYGON 8 (1998): 60-64, Polygon Verlag, Zurich (in Czech).
• Koslowski, Peter, ed. The Theory of Ethical Economy in the Historical School. Wilhelm Roscher, Lorenz v. Stein, Gustav Schmoller, Wilhelm Dilthey and Contemporary Thought. Berlin etc.: Springer.
• O'Brien, John C. "Gustav von Schmoller: Social Economist", International Journal of Social Economics 16 (1989): 17.
• Peukert, Helge. "The Schmoller Renaissance." History of Political Economy 33(1) (Spring 2001): 71-116. Retrieved August 17, 2011.
• Powers, Charles H. "Review: Untitled" American Journal of Economics and Sociology, vol. 54, no. 3 (Jul. 1995): 287–288. http://www.jstor.org.ezproxy1.lib.asu.edu/stable/3487093 (accessed May 1, 2009).
• Reheis, Fritz. "The Just State: Observations on Gustav von Schmoller's Political Theory", International Journal of Social Economics 17(10) (1990): 48–70.
• Scheler, Max. Formalism in Ethics and Non-Formal Ethics of Values, trans. Manfred S. Frings and Richard L. Funk. Evanston, IL: Northwestern University Press, 1973
• Shionoya, Yuichi. "The Soul of The German Historical School: Methodological Essays on Schmoller, Weber and Schumpeter." New York: Springer, 2005.

External links

• A Leftist Criticism of Gustav Schmoller's "On Class Conflict in General" (1915)
• Gustav von Schmoller, 1838-1917.
• The Younger Historical School Schmoller

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