What is Historicism

What is Historicism

Historicism Theory

Figuratively speaking, the kind of criticism surveyed to this point put chinks in the armor of classical economics without seriously wounding the corpus of economic theory. To some extent nineteenth-century economics was a victory of reason over sentiment, although it should be pointed out that in the end, legitimate criticism tends to modify economic doctrine, even if the path to modification is long and labyrinthian. One form of methodological criticism did make significant inroads into economics, however—the historical movement that gathered steam and influence during the second half of the nineteenth cen­tury.

There were two nineteenth-century variants of historicism that impacted on economics. The German variant was prior to its English counterpart and to some extent had a different influence. German historicism constituted a milder form of criticism in the nineteenth century than Marxian economics; therefore it appears in this chapter as a backdrop to Marx's singular performance in the social sciences. The British variant of historicism was not unrelated to its German strain, but its impact was more forcefully felt on neoclassical British economics and on American institutionalism. Consequently, a more thorough discussion of British historicism is reserved for a later chapter. Among other issues, the historicists raised the question of whether econom­ics could be studied apart from the political, historical, and social milieu, an issue that is still debated among certain social scientists. Both William S. Jevons and Alfred Marshall made important concessions to the historicist point of view. Moreover, a number of the orga­nizers of the American Economic Association (founded in 1886), in particular Richard T. Ely, its first secretary, were educated in Germany under the aegis of the historicists. The significance of the movement, therefore, should not be taken lightly, even if the major methodological issues raised by the historicists (regarding induction and deduction) were sometimes based on a misunder­standing of logical processes.

The German Historical School

The German historical school is often divided into two groups of writers: the "older" and less extreme school, and the "younger" school, whose views on method were more extreme and uncompromising. The older group of writers is traditionally represented by Wilhelm Roscher, its founder, Karl Knies, and Bruno Hildebrand; the younger group is dominated by the tenacious Gustav Schmoller.

Dating the origin of ideas is always a difficult (if not impossible) business, and the case of economic historicism is clearly no exception. While writers who combined an interest in economic subjects with historical research may be found throughout the history of ideas, it is clear that a coterie of them were grouping intellectually from the beginning of the fourth decade of the nine­teenth century in Germany (Roscher began his historical research as early as 1842).

Several reasons exist for the subsequent supremacy of the historicist move­ment in Germany. First, a more favorable environment allowed historical eco­nomics to embed itself. Theoretical economics had never become firmly en­trenched in Germany. As Professor Schumpeter remarked, theory in that country was an alien plant that had been transplanted by hands that were by no means especially skillful.

Second, continental, and particularly German, philosophy had always stressed an "organic" approach, as contrasted to an individualistic approach, to philosophical and social problems. Thus men of the caliber of Roscher, Knies, and Hildebrand, spurred partly by the philosophy of Hegel and by the organic jurisprudence of Frederick Karl von Savigny, were drawn into the search for a broad omnibus of economic and cultural laws that would explain the world aound them. A strained interpretation of Roscher, for example, is not required in order to find Hegelian ideas on history, which Hegel viewed as a continuous unfolding of self-revealed purpose in phenomena external to in­dividuals. Hegel's stress upon evolving ideas as the motive force for changes in social organization is implicit in most of the German radical literature, in­cluding the historicist movement. It figures centrally in Friedrich List's doc­trine of the succession of states, for example, which was developed as early as 1845. Indeed, Hegelian philosophy permeated practically all aspects of German social thought in the nineteenth century, including that of Marx and the romantics.