The Younger or More Positive Group

The Younger or More Positive Group

In the course of a few years, another group of thinkers appeared, however, and determined to apply the historical method, as they conceived it, in a thoroughgoing way to concrete studies. They even refused to recognize a difference between the purposes and methods of economic theory and economic history. Chief of these was Gustav Schmoller, at the end of the nineteenth cen­tury one of Germany's leading economists. In 1895 Schmoller wrote: "The older historical political economy has repeatedly desired to turn too quickly to account the lessons of universal history; we are now aware that laborious inquiries into the details of economic history can alone supply the right basis for the study of history in its economic and socio-political aspect, and for the satisfactory empirical establishment of national economic theory." In these words, the difference between the two groups is suggested, and also, perhaps, a cer­tain degree of impatience with the older group for not following the inductive method to such lengths as the members of the younger group in their various ways desired.

To get the setting for Schmoller's work it is necessary to turn aside for a moment to note a new development in German economic thought.

Beginning about 1863, Germany was powerfully shaken by a social agitation which brought out the younger group and gave the whole historical movement a new prominence. In 1872 the now famous Verein fiir Socialpolitik was founded. This society was based upon the recognition of a social problem, and stood for participation in political activity for social reform. It gave rise to much controversy, and brought new life and purpose to the historical economists. At this time, however, they became confused with those advocates of social reform — sometimes called "socialists of the chair." The movement was thus a broad one, embracing most of those in revolt against the Classical School. In it were those who advocated the induc­tive method, those who emphasized ethical factors, and the ad­herents of realism. Among these different phases of the move­ment, however closely associated they may be, the idea of the historical method, as such, must be kept distinct.

Schmoller, now deceased, was born in 1838, became professor at the University of Berlin, and was active in the Verein. He saw in economic history and statistics the means for establishing a methodologically complete empiricism. By this means alone could the foundation for a concrete theory of political economy be derived. The deductive method was not entirely excluded by Schmoller, — though at first he gave it a very small place, — but was rejected only in so far as it is connected with abstraction. As his thought matured, Schmoller came to hold that the proper method is a combination of induction from historical and statis­tical observation with deduction from the known properties of human nature. Natural environment, ethnology, and psychol­ogy were all appealed to; and in his last and most important work, Grundriss der Allgemeinen Volkswirtschaftslehre (1901-1904), these factors play an even larger part than purely his­torical observation. All these things are the factors which deter­mine the industrial situation at any given time. Psychology, for instance, must be introduced in order to explain motives; while the facts of climate and geological structure place limita­tions.

Certainly Schmoller's later writings show slight evidence of Hegelianism, his idea of evolution being more nearly like Darwin's.

Meanwhile Bucher in his Entstehung der Volkswirtschaft (1893) has taken a point of view similar to Bagehot's in England, holding that while the historical method leads to a theory of the laws of economic evolution, the deductive methods of the Classical School are valid for developing the laws of a modern economy. Like Bagehot he would stress the modernness of economics, saying it is a thing of the present complex money-and-division-of-labor economy. Here abstraction and deduction may be necessary.

Schafne (1831-1904), although he perhaps belongs in the older group, may also be mentioned as an important recent economist who had affinities with the school. A notorious characteristic of his is an overextension of the analogy between the body politic and a physical organism.2 He stands for a large amount of government intervention, and is rather sympathetic toward Socialism. Nor among the later adherents of the school should Brentano and Held be forgotten; while Conrad, Mia-skowski, Nasse, Schanz, and Schonberg are among those who combine the historical method with a considerable use of deduction.

Schmoller in Germany, however, and Ashley in England, are the clearest representatives of the younger group, and Emile de Laveleye may be considered as a French representative; the others are mentioned not as forming a compact or closely re­lated group, but as displaying similar tendencies in method.