Nardinelli & Meiners.schmoller, The Methodenstreit

7/26/2019 Nardinelli & Meiners.schmoller, The Methodenstreit

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The original controversy started with MENGER(1883],

SCHMOLLBR

11883], and

MENon [1884]. The quarrel continued for several years thereafter, though it was carried

on rnostly by other writers. Many historians of economic thought have discussed tbe

controversy. See, especially, GIDE and RlsT [1948], pp. 383-409; SCHUMPETER [1954a),

pp. 800-824. (1954b). pp. 152-201;

PIlISRA >

[1983], pp. 219-224; and

BosTAPH

(1978].

Over one hundred years have passed since Gustav Schmoller and Carl.

Menger engaged in their famous ethodenstreitthe battle over methods. The

original controversy is remembered as much for its bitterness as for its content.

Tlie bitterness arose partly because of the substantial differences between

Schmoller and Menger. The subsequent and continuing appearance of smaller

ethodenstreite

implies that the issues that sparked the quarrel went well

beyond the differences that separated Schmoller and Menger.

The origins of the controversy can be traced to the reaction in Germany to

what was considered to be the excessive abstraetion of the English classieal

economists. The work of David Ricardo, in particular, was regarded as flawed

by its exclusive reliance on pure theory. Tbe older historical school (represented

byWilhelm Roscher, Bruno Hildebrand, and Karl Knies) advocated the use of

bistorieal evidence in the construction of economic theory, The members ofthe

older bistorieal school did not oppose the use of theory; they opposed the

Ricardians use of deductive theory without regard to bistorieal and social

conditions

The younger bistorical school, lea by Gustav Schmoller, went beyond the

older school and argued that the abstract, deductive theories of the English

classical eeonomists liad no place in economics. To Schmoller, scientifie eco

nomics consisted of generalizations from historical monographs. General eco

nomic propositions would emerge from the detailed historical studies that were

to be the main aetivity of economists.

Schmoller s disdain for theoretieal economics did not represent the viewpoint

of an isolated, neglected scholar. He was the dominant figure in Germn

academic economies and used bis influence to keep theoretical economics out

of German

universities

His students and followers produced a series of detailed

by

CLARK NARDlNELLI and ROGIlR E. MElNERS

Schmoller, the Methodenstreit, and the Development

of Economic History

Journal of lr\S tiluliona1 and Thcomical Ec onomics (JllE ) 144 (1988). S43-SSt

Zeitschrift fU r i se mte S~l wisscn. lChaft


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2 Such viewsare lo

e

foundin GlDEand RIST1948],

p

400; SCHIJMI Bml1954a].

p.

814 ;

nd

SEL IOMAN[1962],

p.

274 .

Por a different

view,

see

HAY EK 1934].

s Abstraet theory has, however, developed in ways quite differeut from the models of

Menger.

historieal and industrial studies. The historical generalizaticns from these stud

ies appeared in SCHMOLLERS1900-1904] outline of general

economics.

M enger,

the founder of the Austrian school of

economcs,

initiated the

Methodenstreit because bis theoretical work was ignored in Germany. He

attacked the methods of the historicaJ school, cJaiming that history without

theory eould not lead to progress in economics MENGER1883 ] . SCHMOLLER S

[1883 ] unfavorable review and MENGERS1884 ] bitter reply constituted the

original Methodenstreit Furtber exehanges did Iittle more than draw the line

more sharply between the two schools. The Austrian school defended theory,

abstracton, and deduction. The bistorical school defended history, realism,

and induction. The

differences

n methods n turn stemmed

Irom

fundamental

differences in world views, with the cosmopolitan, individualist outlook of the

Austrians standing in sharp contrast to the nationahstic, collectivist outlook of

the bistoricaJ school.

Historians of economie thought have mostly concJuded that the

Methoden-

streit was inconclusive or a pointless waste o time.Some scholars regret that

Menger devoted sueh a large part o his scholarly Jifeto the controversy. Others

believe that his work on method contributed as mueh to the development of

economics as bis work in pure theory

HAYEK

[1934],

BoSTAPH

[1978]). Al

though the debate itself proved

in conclusiv e,

in the long

run

the

influence

of

Menger vastly exceeded the influence o Schmoller. Abstraet theory, not bisto

ry, formed

the

basis for economics in the twentieth century. lnstitutionalists

and others influenced by the historical school achieved some prominence early

n tbe twentietb century. but were eventuaJly swept away by the theorists.

Moreover, when empirical economics did arise, it took the form of economet

ries based on mathematical statisties. Contemporary econometrics has far more

in common with contemporary theory than witb tbe detailed empirical studies

of the bistorical school,

Tbe failure o f tbe historical school to influence the development o economies

has led many historians of thought to dismiss it as having had no lasting effect,

That was not the case. The German historicaJ school bad great influence on the

development of economie history. As economic history emerged as a seprate

discipline n England, America, and France the historical method predominat

ed. The dominance of

the

bistorical metbod cannol be attributed solely to the

German historical school; England, for example, had its own historical school

of economies. The German school

nevertheless

greatly influenced the develop

ment of economic history. The detailed bistorical studies advocated by

Schmoller appeared n England and America, as well as in Germany. In Eng

land, separa te departments of economie bistory emerged, dominated by the

J J I I I I l E

lark Nardineli and Roger E Meiners

44


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h isto rica l m eth o d HARTE1971 ), pp. x i-x xx ix ), A lth ou gh Iro m time te time an

e c o n o m i st

or historian made a plea for tbe interaction of economic

h isto ry an d

theory, the general attitude of economic historians might best b e typified as a

desire te be left alone by theorists and theory,

In America, e c o n o m i c history a lso developed as a sep rate discipline al

though it remained within departments o f economics. T h e German h istor i c a l

school e s pe e i a lly influenced American institutionalism, w hic h to o k the hi s t ori

cal approacb as its basic method. Tbe strengtb of institutionalism led to the

creation of departments in which history and theory represented the two basic

approaches te the study of econornics. The historical and theoretical approach

es coexisted, with some scholars specializing in history and others in tbeory.

Although important cr os so v er s o cc ur re d, a division of labor emerged in Amer

ican

e c o n o m i c e .

DilTerent

a p p ro a c h e s

to

m eth o d

accompanied the

divisi n o f

labor. The theorists took physics as their model; the historians took seientific

h isto ry -

induction

fro rn fa cts - a s

their model.

T h e first

task of the

e co n o m i st,

then, was te amass large collections of fa cts, The work eCAmerican institu

tionalists such as Wesley Clair Mitchell and John R ., C o m m o n s were re m a rk

able

Io r

tbe

v o lu m e o f

factual material tbey

represen te d .

Tbe institutienalist influence reached its peak in the first quarter of the

twentieth century, Thereafter, the historical rnethod came increasingly te be

restricted le wo rk s in ec o n o m ic h isto ry . The study o f econemic events as part

of larger social developments became .the province of economic hlstorans

A m ric a a n d

England. However,

E n g lish e c o n o m ic histo ria n s re ta i ne d

closer

ties te theory, and produced works that were not se defiantly non-theoretical

as those of their American and German counterparts HARTE

1971D .

T h e

split between

e c o n o m i c

theory and

ec o n om ic h isto ry

widened .aCterthe

second world war. The study of macroeconomics was transfermed by John

M a y n a r d KEYNES1936 ] a n d his th e o re tical sy ste m . Where the study o f b u sin e s s

cycles had been tbe province of historical economists and a place where theo

rists took their lead frorn historians, tbe Keynesian Revolution firmly estab

lished a th eoretical model at tbe ce n te r o f m a c ro e c o n om ic s. The o ld studies o f

the history ofbusiness cycles and the economic historians who did them) were

made obsolete by the Keynesian theories. Moreover, when the Keynesian

theories themselves declined, it was in favor of other theories, not a return te

histerical studies. Contemporary macroeconemics remains remarkably given

its subject matter) ahistorical.

The rises of mathemalical economics and econometrics also helped bring

about the decline of economic history. As econometrics and mathematics grew

in importance, courses in those subjects began le push courses in economic

history out of the economics curriculum. Econometrics replaced history as one

of tbe twin pillars of gradate training in economics. Today, most American

economists receive no. training in economic history,

The development of matbematical economics and econometrics benefitted

tbeory in another important way: it made theory scientific. In tbe nineteenth

chmolle r and t ethodenstreit

4 4/3 1988)


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The history of cliometrics has been the subject of many articles. For a sample, see

Fooa.

1966),

MCCLOSK6Y

1978), and

MElNERS

and

NARDlNEW

1986).

h

new economic history also managed to generate its own Mcthodenstreit. See

N E NO 1970).

century, members o the historical school were the scientists . The historical

method used facts and induetion from facts, The abstraer and subjective nature

o theory especially Austrian) looked unscientific to nineteenth century schol

ars. The development ofmathematical economics and econometrics, however,

made economic theory look like physics, Theory now became scientific, while

history was relegated to the inferior status of unscientific. The importance of

mathematics in elevating theory to its present predominant position as scientific

economics should not be underrated. should also be noted, however, that the

reduction in the scientific status of economic history was helped along by the

perceived poor quality of the work in that

field

Much of it - espeeially in

America - was simply bad economcs combined with bad history,

The break between economic history and ecooomics was never complete.

Many scholars continued lo work

in

both fields. The most important develop

ment in maintaining a link between the two was the growth of the new econom

ie history, or cliometrics. The new economic history can be described as the

application of economie theory and methods to the study of economic history.

In effect, the new economie history turned the methodological doctrine ofthe

historical school on its head. s Aocording to the historical school, detailed

historical study was how to do economics. According to the cliometricians,

economie theory and econometrics were how to do history. The work of new

eeonomie historians is often indistinguishable from that of economists prop r

The new economic history arose in the 1950s and quickly grew. Although

there was much grumbling among the adherents to the older methodology, by

the 1960s R. W. FOGEL[1965] eouId announce the reunification of economic

history and economie theory. The results of the reunification were a revitaliza

tion of economic history as well as important new results in such areas as the

economics ofslavery, the role ofrailroads ineconomie development, historical

trends in the distribution of income, and a host of others.

The success of eliometrics in producing significant new scholarship has,

however, been accompanied by sorne notable failures. One such failure is that

economie history has not regained its place as a basie field in the training of

economists. Indeed, economie history has not even held its ground, as eourses

inmathematics, statistics, and now computer science continu to erowd history

out of the currieulum. If new eeonomic historians have succeeded in dernon

strating the sophistication of their work to their colleagues in economics, they

have nOI convinced Ihose colleagues that studying economie history should

form part of the initial or eontinuing education of the adult economist,

The failure to regain lost influence among economists stems partly from the

nature of the neweconomie history. The most influential works of neweconom-

J l l 1 l l E

lark NardiMIfi and Roger E in rs

6


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ic historian s can be described as econometric history (MElNERSnd NARDINELLI

(1986. Econometric history involves explicit, often mathematical theorizing

combined with econometric testing of hypotbeses. The haJlmark of much of this

work is the application of techniques and Iheories developed in economies to

the study of historlcal problems. To economists, the achievements of economet

rie history provide further demonstration of the power and scientific methodol

ogy of economies. However, note that the tlow is entirely from economies lo

economic history, Nothing in econometrlc history convinces the economist of

the value of economie history. In the Methodenstreit fought over the correet

method in economic history, the theorsts have won yet another battle, Having

driven history out of economics they now threaten to drive history out of

history.

We no doubt exaggerate the econometric eharaeter of eontemporary histor

ieal econom ic s Much of the besi work in econometric history embodies both

the historieal and theoretical approaches. We also note that many new eco

nomie historians have been calling for a reorieutation of economie history.

Douglass NORTH[1981,1986) has argued for a new institutional economies that

will re-emphasze the bistorical approach, Other economiehistorians (and some

economists) stress the importance of the missing historical perspective of con

temporary economics (PA R K E R [J 986). particular, stress is laid upon the faet

that constraints - institutions - ehange over time and that these changes affect

the choices made by individuals and societies. The German historieal school, of

course, made the same point.

Many distinguished economists and econornie historians believe that eco

nomie history should regain its place as part of the standard equipment of the

economist (P

RK R

(1986). Yet, such a change does not appear Iikely. The

Jatest generation of economists knows mueh lesshistory than the last: it is a safe

predietion that the next generation will know stiU less The separation and

decreasing contact between economics and econornie history is an accom

plished faet. The question to which wenow turn iswhat role did Schmoller and

the etho enstreu play in that separation. In order to assess that role, it is

necessary to diseuss two explanations for why economie theory and economie

history have parted company.

One explanation is that the separation was an inevitable outcome of the

progress of econornic science. Modern scholarship is dominated by speeialists:

economists since Adam Smith have emphasized the gains in efficiency from

specialization. As the generaJists of the nineteenth century gave way to the

specialists of the twentieth century, it was inevitable that economics ano eco

nomic history should split aparto The ethodenstreitthen, was merely a sign

of things to come. Aceording to the view that specialization and the division of

labor had to occur, Schmoller could have had no effect on the ultimate devel

opment of twentieth century econornics. That developmentfollowed a path set

by the nature of economics. The corree methodology (mathematical and statis

tical) emerged as part of the disciplines progress toward objective truth.

5 7chmoller and the ethodenstrelt

44/3 (1988)


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An alternative explanation for the break between economic history and

theory is based on the belief that the current state of a discipline is indeed

dependent upon its past. IC such be the case, then events in the history of

economics led to the break. Under dfferent circumstances, then, history rnight

have remained an integral part ofeconomics. We will atternpt lo assess the

influence of Schmoller and the

Methodenstreit

on the assumptions that the

development of economics

not a movement along a fore-ordained path lo

truth, and that particular scholars and movements have significantly altered the

methods and content of contemporary economics.

No single individual can be credited or blamed) fOI the

rise

of the historical

approach in economics. In Germany itself the older historical school and other

members of the younger school had great influence. France had its own tradi

tion of positivism and the historical approach. In England, the development of

the historical approach owed more to the English historical school Iban the

Germn KOOT 1980)).With these qualifications in mind, we would argue that

Schmoller himself significantly increased the useand influence ofthe historical

method in economics and economic history.

Schmoller exercised his influence both directly and indirectly. His direct

influence stemmed from his many students and disciples in Germany. Through

bis influence members of the younger historical school carne to domina te

academic economics in Germany, holding a majority of the professorships,

Frederick

LANE

1966] identified Werner Sombart, Arthur Spiethoff, Walter

Eucken, and the Austrian Joseph Schumpeter as the heirs o f Schmoller. Promi

nent students and disciples from outside Germany included William

J.

Ashley,

Edwin F. Gay, W. A. S. Hewins, George Unwin, and WilIiam H. Cunningham.

The indirect influence of Schmoller stemmed from the enormous prestige of

German social science.

As

a major figure within Germany, bis ideas naturally

filtered out to foreign scholars affected by German thought, The Germn

influence is particularly apparent in much of the economics and economic

history published in the United States in the late nineteenth and early twentieth

century. Thousands of Americans studied at German universities during the

era. In a 1908survey of 116 American economists, 59 had engaged in graduate

study in Germany SEUGMAN1962], p. 615). The influence of Schmoller and

the historical school, then, kept the historical approach alive in American

economics. Indeed, one might argue that the break between economics and

economic history would have come earlier but for the influence ofthe historicaJ

school, The traditional place of historical studies in the currculum in econom

ics could be a legacy of Ibat influence.

another way, however, Schmoller s influence probably hurt the cause of

economic history. His insistence that the historical method was the only way

to conduct economic research contributed to the decline of German economics

and economic history. lo the long ron, pertinacity in matters of method may

have damaged American economic history as well. American institutionalism

- first cousin to economic history - declined and virtually disappeared because

tark Nardirtelliand Roge Meiners

8


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it failed to develop a th eoretical focus (NoR1lI 986, p. 235).That same lack

of theoreticalfocus contributed

the decline of the old economic history. In

botb England and fue United States, economic history and economic theory

lived under conditions of peaceful coexistence, sharing the task of educating

future scholars but in other ways not interacting. As the theorists refined and

improved their product, the historical method fell into disrepute as a way of

doing economics. Although scholars madc occasional picas for history in eco

nomic lheory or theory in economic history, the two fields drifted apart. The

drift may in part be attributed to Schmoller, for two reasons.

First, the extreme bitterness ofthe

eth odenstreit

may have caused scholars

be wary of methodological conflict in general. Although an occasional

Jlare-up occurred, theorists and historians mostly kepl

Ihemselves. Second,

the tradition that economic history dealt with facts, nOItheory, led lo Ihe failure

to make important theoretical contributions. If economic historians had been

enthusiastic consumers of economic theory, tbey might have become producers

as well. Using economc theory lo answer historieal questions might have

forced them io confront the inadequacies of completely ahistorical economic

theory.

What ultimately was missing, then, was a dialogue between economics and

economic history. Such a dialogue would have increased the theoretical content

of econornc history and the historical content of economic theory, As Clapham

said, it is at the overlapping margins of disciplines and sciences that the most

important discoveries are iusually rnade (CWHAM [1953), p.420). When

the cliometricians re-introduccd economic theory into economic history,

Claphams insight was vindicated many times overoWhen new economic histo

rians, however, attempted

re-introduce the historical method into econom

ics, they met with no success. Indeed, the cliometric revolution appeared to

justify the economic theorist s beliefin the power oftheory. Economic history

was viewed as merely a field in applied economics, not an equal partner with

theory. As Parker has pur it, the fields of economic history and economic

institutions ha ve themselves been partially transformed or distorted into play

grounds for the imagination ofthe theorist

P RKER

[1986 , p. 7 . The interac-

tion between history and theory, tben. is not a conversation; it is a lecture.

We therefore view the

eth odenstreit

primarily as a lost opportunity.

Schmoller and Menger might have begun a conversation between the theoret

ical and historical schools, a conversation that could have served as a model for

other times and other places. Moreover, Schmoller must bear the greater part

of the blame. Menger, the admirer of WiJliam Roscher, did not deny the

importance of the historical approach; the treatment of his work by the histor

ical school led him to the controversy.

No single scholar determines the course of a discipline. Yet, the influence of

Schmoller may well have affected in sorne way the course of the discipline of

economic history. The emphasis upon the institutional aspects of economic life

and upon the need for historical study are difficult lo fault. The products of

549

chmoller and the ethoenstrett44/3 1988


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ANDIlEM


9/9

Profuso lark Nodinelli

Professor Roger E Meiners

Department of Economics and

Center for

Poticy

Studies

Clemso Universlty

Clemson SC 29634

U s

S c H u M P 1 I T E R J. A. [1954a. History of Economic Analysis New York.

-- [19S4b Econom tc

Doctrine

and

Me/hod

New York.

SEUGMAN

B. B.[1962

Main Cwrents in Motkrn Economics

New York.

551chmoller and the Methodenstret44/3 1988

Nardinelli & Meiners.schmoller, The Methodenstreit

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