Germany - Austria Economic History

Economic Thought in Germany and Austrial, From 1870 To World War II

Germany and Austria Economic History

As already stated, Smith's system of economics at first had little effect on German thought, only to be rather closely followed later. Then Rau's Lehrbuch held the field down to about 1870; von Thiinen and Hermann, two of Germany's greatest theorists, had little influence during their own lifetimes.

Scope and Sub-Division of the Science

This sketch — for it can be no more — of the main developments in German thought following 1870 may well lap back to Roscher, whose System appeared in 1854, being notable for its historical tendency and breadth of view. And the first point that demands attention is the German notion of the scope and sub-division of the science. Roscher put first the Grundlagen der National-ökonomie, dealing with general theory and the interrelation of economic phenomena. Then came his treatment of technical branches (such as the .economics of agriculture) and of the economic activity of the state; and finally finance.

Somewhat similar tendencies appeared in later works. Thus Conrad (Grundriss, 1900) divided the field into (1) Naiional-ökomomie, dealing with laws of cause and effect in economic phenomena; (2) Volkswirtschaftspolitik, treating of the functions of state and society; (3) Finance; (4) Statistics. Also Adolf Wagner, after first developing a Grundlegung in which he defined and correlated such fundamentals as economic motives and property, distinguished theoretical national economy from the practical branches; and finance, though it is a part of the latter, was given a separate place. Indeed, Wagner comments upon the fact that there is no fundamental logical basis for any of these divisions; simple expediency warrants it.

Not unnaturally those opposed to the historical method gave historical economics a distinct and less important place. Menger (1883), for example, distinguished three branches: historical, theoretical, and practical, the last to cover state policy and such particular practical subjects as finance. Philip-povich's distinction between systematic and evolutionary-historic economics (Grundriss, 1893) further illustrates the idea.

This relatively sharp separation between theoretical and practical or applied economics, which has been on the whole an admirable characteristic of German thought, is doubtless to be associated with the Kameralistic origin of German economics. To the state policy (Polizei) and finance of the Kameralists, some theoretical system such as Adam Smith's was added. Furthermore, in Germany there was a close relation between state and university, which leads to an emphasis of the practical or political aspects of the science. While this may result in a desirable realism, it has its dangerous side; for the Polizei or Politik may color the Wissenschaft, and the university become the tool of a state which is not the society.

As Cossa remarks, however, the distinction between pure theory (science) and practice (art) must not be confused, as it has been by some writers, with the distinction between the general and the special, although very often the former distinction leads to a treatment of subjects according to the latter.

The prominence given to statistics may well be observed, Conrad and others having pointed out its place as a distinct branch of economics.

In general, in these matters, German thought became not so different as formerly from that of others. German economists came to realize that the sub-divisions they made in their treatises mostly grew out of mere expediency in presentations, while the French- and English-speaking economists often added a separate treatment of finance to their general works.
The broader scope of economics as treated by most German economists, with its inclusion of juristic and ethical elements, is implied in the foregoing distinctions.