Schools Of Thought

Schools of Thought, Economic Thought in Germany

Some seven distinct tendencies may be distinguished in German economic thought since 1870. These are not all of equal importance and are not mutually exclusive, but to refer to them will help toward an understanding of the period.

(1) There was a group of men who followed the Classical theory, pushing its conclusions to extremes, and omitting the limitations and qualifications found in the writings of the masters — Epigonen, as the Germans called them. Such names as Prince-Smith, Michaelis, J. Faucher, O. Hiibner, Schulze-Delitzsch, Treitschke, K. Braun, Max Wirth, 0. Wolff, Bohmert, Emminghaus, and A. Meyer may by common consent be placed here. The first two were in a sense the founders of the so-called German Manchester School. The Vierteljahrsschrift fur Volkswirtschaft und Kulturgeschichte was the organ of this group.

(2) Following List, a small group was notable as standing in opposition to the preceding, and advocating protection: Hermann, Duhring, — following Carey, — and L. Stein. Later F. Lenz followed List and developed a strongly nationalistic theory.
(3) The Historical School. — This school has been made the subject of a chapter, to which the reader is referred. Schmoller was its most prominent representative, and its chief publication is known as "Schmoller's Jahrbuch" (originally Jahrbuch fur Gesetzgebung, Verwaltung und Volkswirtschaft im deutschen Reich) — Spiethoff became editor — together with the Zeitschrift fur Sozial- und Wirtschafts Geschichte. This school included not only Werner Sombart (d. 1941), F. K


leinwachter, and G. Ruhland, but also such writers as R. Eberstadt, Grabski, J. Plenge, and Stephinger.

(4) The Subjective School. — Most of the members of this school standAfor deduction and more or less criticism of the Historical School. Needless to say, the members of the Austrian School are included, and not only Philippovich, Mises, and H. Mayer, but also Wieser and Bohm-Bawerk, continued to do notable work in the first quarter of the twentieth century. Following in their footsteps have come F. A. Hayek, G. Haber-ler, 0. Morgenstern, and F. Machlup. The latter three have made places for themselves in the United States making refinements and applications of the Austrian theory. R. Strigl (d. 1944) should be mentioned as a Neo-Austrian who not only developed the theory of saving and investment, following Hayek's analysis, but took in monopolistic competition theory. The Czech, K. Englis, is important.

Here, too, come most of the mathematical economists above referred to, and Zuckerkandl, Schumpeter, Leifmann, and perhaps Dietzel. (The latter has opposed the Austrian School).
Robert Liefmann, in his Grundsatze der Volkswirtschaftslehre (1917-1919), developed a psychological theory which appears to represent a highly subjective idealism. He does not accept marginal utility as the sole determinant of value, but makes valuations depend upon a balance between psychic income and costs.


In some respects related to the Austrian School, stand a number of "Liberal" Neo-Classical type economists who oppose Machttheorie (authoritarianism), favor competition where it can work, and make a place for marginal utility. Here may be placed W. Ropke and L. v. Wiese. And perhaps the outstanding thinker, W. Eucken, may be classed here, though he makes his own place. He accepts economic law and equilibrium value theory (criticizing Historicism), but makes them depend somewhat upon the institutional framework.

The three remaining groups were in their various ways inclined toward Socialistic reforms: —
(5) Socialism Pure and Simple. — The founders, Rodbertus, Lassalle, and Marx, having passed away, Bebel (1840-1913) and Liebknecht (1871-1919) may be mentioned as the later-day representatives. Samter, too, showed leanings in this direction. J. Platter accepted straight Marxianism; while R. Wilbrandt attempted to combine it with the theory of marginal utility. The outstanding Socialist authors are Karl Kautsky (1854-1938) and R. Hilferding. The works of the Russian Marxists, P. Masslow and W. Gelesnoff, have been translated and attracted considerable attention.


(6) The Professorial Socialists, or Katheder Socialisten, as they were dubbed. These stood for social reform. The Verein fur Socialpolitik was the organization which embraced most of this group, and through the Schriften of this union they spoke.

The famous Eisenach assembly leading to the formation of the Verein was held in 1872, with the cooperation of the following notable economists: Brentano, Cohn, Conrad, Engel, Held, Hildebrand, Knapp, Knies, Meitzen, Nasse, Neumann, Roscher, von Scheel, Schonberg, Schmoller, and Wagner. The Verein was first led by Nasse, then by Schmoller. Held, Schaffle, Schmoller, and Wagner may be named as its chief representatives.

These men came together, not as the result of Socialistic agitation, but to.discuss causes of and remedies for the obvious evils that go to make up the labor problem. They believed that a greater proportion of humanity should partake of the culture and well-being of the time. They infused a considerable element of ethics. Without confusing science and art, they believed that it is the proper duty of science to observe the results of measures and to judge by rational standards.

Schmoller well summed up the beliefs of the "Socialists of the Chair" concerning the ends and methods of social reform. Reform must be gradual; the state rests on existing laws, and to change these at one stroke would expose society to lawlessness. It should be based upon a reform in the character of those participating; it must not be merely external. The demands of the state must be general and equal, appearing as a just sacrifice for the common good. And, wherever possible, the state should not take directly, but should work indirectly for a different future distribution of income.

It was charged that by the end of the nineteenth century the economic thought of Germany had come to be so dominated by the Socialists of the Chair as to threaten its progressive and scientific development. This group appears to have gained control over the chief universities and by its acceptance of rather fixed ethical and political ideals threatened to subordinate the science to the policies of the state. Whether so sweeping a charge is justified or not, there can be little doubt that on the whole German economists had so allowed their energies to be absorbed by historical, statistical, and practical work, as to retard the development of economic science.

Though Adolf Wagner (1835-1917) was one of those who united to form the Verein, he gradually took up a somewhat different position after 1877, holding to a more thoroughgoing advocacy of government activity for social reform. Indeed, he recognized the influence of Rodbertus and Schaffle, — chiefly the former — to whom, with yon Mohl, he ascribed some mastership, and it may be said that he went farther toward adopting the principles of Socialism than any distinguished economist had yet gone. From 1878 to 1888 Wagner (and Schaffle) edited the Tubinger Zeitschrift fur die gesamte Staatsurissenschaft. He entered economics as a specialist in statistics and finance. Then, at the request of Rau's family, he undertook to revise Rau's book, but finding his views diverging more and more from that writer's, only the first part was issued in this way. His great Lehr- und Handbuch der Politischen Oekonomie is his chief work, and the first volume on Grundlagen der Volkswirtschaft (2d ed., 1879; 3d ed., 1892) contains his fundamental economic ideas. He became more and more interested in the general principles of economics, in treating which he emphasized the significance of juristic forces and the state.


The thought of all these "professorial socialists" is similar to the " Institutionalism " of recent American thought. In this connection, Karl Diehl is to be mentioned. In his Theoretische Nationalokonomie (1927), while he made room for value theory, he treated socio-legal factors as controlling. R. Stolz-man's emphasis of social ethics warrants a reference in this connection.
(7) Finally, the groups which, for want of a better name, were called Christian Socialists are to be noted. Perhaps "religious Socialists " would be better. These men were conservative. They were idealistic. They believed that a theological basis would be best for society. Ketteler, Moufang, and Jorg belong to the Catholic branch; Todt and Stocker to the Protestant. More recently, H. Pesch may be classed as a "Christian Socialist." In the days of the German Empire, there was some tendency for the state to support these movements as an antidote for Communism.