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The Historicity of Economics: Continuities and Discontinuities of Historical Thought in 19th and 20th Century Economics

Author(s):Nau, Heino H.
Schefold, Bertram
Reviewer(s):Romani, Roberto

Published by EH.NET (April 2004)


Heino H. Nau and Bertram Schefold, editors, The Historicity of Economics: Continuities and Discontinuities of Historical Thought in 19th and 20th Century Economics. Berlin and Heidelberg: Springer, 2002. vii + 245 pp. $79.95 or ?54 (hardcover), ISBN: 3-540-42765-1.

Reviewed for EH.NET by Roberto Romani, Faculty of Political Sciences, University of Teramo, Italy.

This book deals with the legacies that historical political economies since Schmoller have left behind them. As Bertram Schefold writes, this collection of six conference papers addresses “the causes and consequences of adopting a historical perspective in economics.” The underlying assumption is that the historical perspective “is like looking through a kaleidoscope”: a slight turn and the image begins to change, a larger turn and a new image arises, “but some principle of symmetry persists” (p. vii). The book combines chapters placing historical economics in historical context with chapters pointing to the validity of historical concepts and viewpoints for the economists of today. At least one extensive commentary is appended to each contribution. As regards the editors’ institutional affiliations, Schefold is a full professor of economics at the Goethe University in Frankfurt am Main, Germany, and Heino Heinrich Nau works at the same university as an assistant professor.

Nau’s introduction establishes a link between the nineteenth-century Historical School of Economics and New Institutional Economics, on the grounds of a common concern with institutions and path dependency. Nau’s intention is to show that “major research interests of Historical Economics are once more relevant in modern economics” (p.3). Nau’s twofold goal is to provide a fresher image of Schmoller’s Historical School, on the one hand, and to add to the store of critical arguments against the neoclassical paradigm, on the other. Nau uses a broad brush to articulate his view of the Historical School as a forerunner of new institutional economics. Some major new institutionalists’ themes are surveyed but precise references to historical economists’ texts are scanty.

Of the two chapters concerning the German Historical School neither is completely original. Heath Pearson rehearses his view that there was no such thing as a “German Historical School.”[1] Pearson puts in its place a group of economists — ranging from Roscher and Schmoller to Sch?ffle, Wagner, and Sombart — who attempted to fulfil the promise of a “comparative” (that is empirical and fact-based) psychology as the core of comparative economics. Knut Borchardt, for whom “a strong or well defined connection between psychology and economics” did not exist (p. 48), rejects Pearson’s hypothesis. Karl H?user defends the use of the label “German Historical School,” especially because of the differences existing between the German and the non-German unorthodox political economies in the final decades of the nineteenth century. The former was shaped by “a special emanation of economics in the tradition of historism” (p. 55).

The following essay by David Lindenfeld is an outline of part of his book on the institutional framework within which nineteenth-century German political economy functioned.[2] In Lindenfeld’s view, “the emergence of economics in Germany as a research program was shaped to a great extent by the pedagogical environment in which it grew” (p. 57). History and economics, Lindenfeld argues, were linked in many ways in German curricula, and often individuals taught both. In his commentary, Erik Grimmer-Solem points to the need to explore not only continuities in the Staatswissenschaften tradition but also changes. Among these, he notes the consequences of the generation gap between, say, Schmoller and Roscher, and of the move of the Staatswissenschaften from the law to the philosophical faculty. A further commentary by Pearson questions the idea, which he ascribes to Lindenfeld, that interdisciplinary cross-fertilization was peculiar to Germany before the “breakthrough” in disciplinary specialization occurring at the turn of the century.

Like Pearson and Lindenfeld, Geoffrey Hodgson summarizes arguments exposed by him in greater detail elsewhere. His contribution surveys “historical specificity” in the writings of “old” American institutionalists. “Historical specificity” is the idea that “different socio-economic phenomena require theories that are in some respects different from each other” (p. 93). Hodgson clearly supports the view that “with diverse, complex phenomena, there are limits to explanatory unification” (p. 93), but no further details are given about the role and importance of “historical specificity.” In commenting on the chapter, Helge Peukert points to this deficiency. Hodgson considers various issues related to “historical specificity,” like habits and knowledge in economic life, Darwinian evolution, instinct psychology, ideal type theories, the role of customs and incentives, and economic stages. As a result his contribution lacks a recognizable focus.

Almost incidentally, Peukert reminds the reader that old institutionalism “was engaged in the political battles of its time” (p. 128) — as were the European historical schools. This is a platitude perhaps, but one which is often forgotten by critics of mainstream economics writing in the historical and institutional traditions. They fail to take into account the well established connection between those traditions and social and political reform. One wonders whether not only institutions and history matter, as the authors of this book keep repeating, but also political orientations do. It is a fact that, besides the universal validity of its laws, value neutrality is the most effective guarantee of the scientific character of neoclassical economics. Historical and institutional economics, on the other hand, are value laden, at least in origin, and the model of scientificity they intended to attain was somehow different. Peter Koslowski does not ignore this question, since his chapter is unequivocal about the necessity of a “normative” political economy. He argues in favor of a “theory of ethical economy as a cultural, ethical, and historical economics,” basing his proposal chiefly on Schmoller. However, Koslowski criticizes Schmoller’s “ethical relativism.” Matthias Lutz-Bachmann comments on the difficulties involved in any “integration” of the normative with the empirical approach.

The title of Richard Swedberg’s paper is “What Can New Economic Sociology Learn from the Historical School, Especially Max Weber?” Drawing on previous writings of his, Swedberg proposes to replace Granovetter’s “embeddedness” with Weber’s concept of social action centered on the element of “orientation to others.” Swedberg puts to use Weber’s conceptual precision to seek a fresh perspective on new economic sociology. In particular, Weber was way ahead of new economic sociology, Swedberg contends, with reference to the conceptualization of capitalism, the subjective method of analysis (Verstehen), the role of power structures in the economy, and the application of counterfactuals. Philippe Steiner’s commentary emphasizes the potential usefulness of Weber’s “historicity” to economic sociology.

The collection concludes with an essay by Rainer Klump on the place and role of “culturally determined parameters” in utility functions, both individual and collective. Vitantonio Gioia questions Klump’s view that classical political economy had rejected the intrusion of culture into economics in the same way as marginalism did. According to Gioia, Smith and J. S. Mill effectively addressed the problem of how culture affects the behavior of economic man, so that a proper break occurred only with the marginalistic revolution. Neoclassical maximizers entail a “removal of socio-cultural conditionings” (p. 233). This is why, continues Gioia, “the possibility of producing eclectic syntheses between theories grounded on different visions of the economic agent is very limited” (p. 235).

1. See H. Pearson, “Was There Really a German Historical School of Economics?” History of Political Economy, 31 (1999), pp. 547-62. 2. See D. Lindenfeld, The Practical Imagination: The German Sciences of State in the Nineteenth Century, Chicago: University of Chicago Press, 1997.

Roberto Romani works as a researcher at the University of Teramo, Italy. He is the author of National Character and Public Spirit in Britain and France, 1750-1914, Cambridge, Cambridge University Press, 2002. He also authored, with E. Grimmer-Solem, “In Search of Full Empirical Reality: Historical Political Economy, 1870-1900,” European Journal of the History of Economic Thought, 6 (1999), pp. 333-64, and “The Historical School, 1870-1900: A Cross-National Reassessment,” History of European Ideas, 24 (1998), pp. 267-99.


Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII