The German Historical School

The German Historical School

During the middle years of the nineteenth century there arose in Germany an almost violent reaction against the dom­inant economics of Smith and Ricardo. This reaction found its chief expression in criticism of the philosophy and the methods of the earlier economists. It came about somewhat in this way.

Circumstances Giving Rise to Historicism

Important de­velopments had recently taken place in the world of thought outside of economics. Among the more remote of these was the philosophy of Hegel. Hegelianism as a social theory re­gards the course of culture as an unfolding of the human spirit, as a sort of inherent self-development moving in an innately determined cycle. It contains a remarkable idea of evolution, — though not of evolution in the Darwinian sense, — and its in­fluence is apparent, as will be seen, in the thought of at least one of the Historical School.

The economist and political scientist, Lorenz von Stein (1815-1890), was influential in applying Hegelian ideas to economics. A professor at Vienna from 1855 to 1888, Stein was a stimulating teacher and writer who combined a knowledge of French Socialism, and a realization of the interrelation of philosophy, economics, and law, with a considerable touch of the historical idea. He may be regarded as transitional from German Classicism to a more advanced historical and social point of view. He was a pioneer in the development of the concept of society as distinct from the state.

Of more immediate importance were developments in juris­prudence and philology. In the former science, the work of Eichorn and Savigny was of notable effect. These men taught that juristic systems are of relative validity only; that they are the product of the social conditions in which they arise; and that what is just and proper at one stage may be the reverse at another. And at the same time, in the domain of the lan­guages, the laws of comparative philology were being formu­lated, so that in the evolution of words and the methods of tracing that evolution there were suggestions for a comparative method of studying economics.

Bases for the new movement were also laid in the social and political developments of contemporary Germany. The Zoll-verein had been established in 1833, and German nationalism was on the rise. New and complicated industrial problems had come, especially the labor problem, and these clamored for a solution which the Classical School did not afford. Meanwhile, the Socialists were criticizing the existing social order and insist­ing upon the relativity of the institutions of property and in­heritance. A confusion of conflicting ideas prevailed, Avhile the old leaders, as Hildebrand said, were silent.

Miiller and List had already expressed nationalistic ideas, and had made a limited use of historical comparison; but they were partisans, and their historical knowledge was imperfect. Already the characteristic tendency of several German econ­omists to emphasize nationality, moral forces, and the place of governmental activity, has been observed. What the members of the Historical School did was to take all these tendencies, and, acting under the stimuli just mentioned, to formulate them in a broad, scientific way, while concentrating attention upon the problem of method.