The Older Historical School, History Of Old School

The important writers of the older historical school are Friedrich List (1789-1846), Wilhelm Roscher (1817-1894), Bruno Hildebrand (1812-1878), and Karl Knies (1821-1898). They contended that classical economic theory did not apply to all times and cultures and that the conclusions of Smith, Ricardo, and J. S. Mill, though valid for an industrializing economy such as England's, did not apply to agricultural Germany. There was a great deal of nationalistic feeling in the economic analysis of these writers. Furthermore, they asserted that econom­ics and the social sciences must use a historically based methodology and that classical theory, particularly in the hands of Ricardo and his followers, was mistaken in attempting to- ape the methodology of the physical sciences. Some of the more moderate members of the school acknowledged that theoretical-deductive methods and historical-inductive methods were compatible; but others, particularly Knies, objected to any use of abstract theory.

List expressed particularly strong nationalist views and refused to admit that the conclusions of classical theory regarding laissez faire were applicable to countries less developed than England. While classical theory held that national well-being would result from the pursuit of individual self-interest in an envi­ronment of laissez faire, List argued that state guidance was necessary, particu­larly for Germany and the United States. He contended that whereas free trade would be beneficial to England, given the advanced state of its industry, tariffs and protection were necessary for Germany and the United States. He spent five years in the United States, from 1825 to 1830, and some ten years later published The National System of Political Economy (1841), which drew on his experience here. His protectionist views were so warmly received in the United States that he is often called the father of American protectionism.

What was the historical method advocated by these writers? Their works reflect a belief that the chief task of economics is to discover the laws governing the stages of economic growth and development. For example, List stated that economies in the temperate zone will go through five stages: nomadic life; pastoral life; agriculture; agriculture and manufacturing; and manufacturing, agriculture, and commerce. Hildebrand asserted that the key to understanding the stages of economic growth was to be found in the conditions of exchange; thus, he posited three economic stages based on barter, money, and credit. These descriptions of growth by stages obviously contain a certain amount of theory, and they are highly abstract. However, the writers did collect large quantities of historical and statistical information to support their analyses of economic development. In more recent times, W W Rostow (1916- ) has advanced a theory of economic development by stages that is in the tradition of the older historical school. As might be expected, his book has been much better accepted by those in other social sciences than by economists themselves.