Historical school of economics

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The historical school of economics, also known as the "Prussian Historical School", was an approach to academic economics and to public administration that emerged in the 19th century in Germany, and held sway there until well into the 20th century. In the time of the Hohenzollerns, members of the School saw themselves as the "intellectual bodyguard of the House of Hohenzollern".[1] Among the central tenets of this School was that "from her origins, it had been Prussia's historical mission to unite Germany".[2] The School had a significant following among the bourgeois historians of the time, and focused on "reconstructing Prussia's military and bureaucratic achievements."[3]


The historical school held that history was the key source of knowledge about human actions and economic matters, since economics was culture-specific, and hence not generalizable over space and time. The school rejected the universal validity of economic theorems. They saw economics as resulting from careful empirical and historical analysis instead of from logic and mathematics. The school also preferred reality, historical, political, and social, as well as economic, to mathematical modelling.

Most members of the school were also Sozialpolitiker (social policy advocats), i.e. concerned with social reform and improved conditions for the common man during a period of heavy industrialization. They were more disparagingly referred to as Kathedersozialisten, rendered in English as "socialists of the chair" (compare armchair revolutionary), due to their positions as professors (depicted sitting in chairs).

The historical school can be divided into three tendencies:[4]

Predecessors included Friedrich List.[5]

The historical school largely controlled appointments to chairs of economics in German universities, as many of the advisors of Friedrich Althoff, head of the university department in the Prussian Ministry of Education 1882-1907, had studied under members of the school. Moreover, Prussia was the intellectual powerhouse of Germany, so dominated academia, not only in central Europe, but also in the United States until about 1900, because the American economics profession was led by holders of German PhDs. The historical school was involved in the Methodenstreit ("strife over method") with the Austrian school, whose orientation was more theoretical and aprioristic.

Influence in the Anglosphere

In the Anglosphere (English speaking countries), the historical school is perhaps the least known and least understood approach to the study of economics, because it differs radically from the now-dominant Anglo-American analytical point of view. Yet, the historical school forms the basis—both in theory and in practice—of the social market economy,[citation needed] for many decades the dominant economic paradigm in most countries of continental Europe.

The historical school is also a source of Joseph Schumpeter's dynamic, change-oriented, and innovation-based economics. Although his writings could be critical of the school, Schumpeter's work on the role of innovation and entrepreneurship can be seen as a continuation of ideas originated by the historical school, especially the work of von Schmoller and Sombart.

Members of the School

English school

Although not nearly as famous as its German counterpart, there was also an English historical school, whose figures included Francis Bacon and Herbert Spencer. This school heavily critiqued the deductive approach of the classical economists, especially the writings of David Ricardo. This school revered the inductive process and called for the merging of historical fact with those of the present period. Included in this school are: William Whewell, Richard Jones, Walter Bagehot, Thorold Rogers, Arnold Toynbee, and William Cunningham, to name a few.

See also


  1. Mises, L von. _Human Action_. Auburn, AL: Ludwig von Mises Institute. (1998). Kindle location 745
  2. Gat, Azar. _A History of Military Thought: From the Enlightenment to the Cold War_ OUP (2001). p56
  3. Gawthrop, RL. _Pietism and the Making of Eighteenth-Century Prussia_ CUP (2006). p6
  4. Shionoya, Yuichi. (2005). The Soul of the German Historical School Springer, p 1.
  5. Fonseca Gl. Friedrich List, 1789-1846. New School.
  6. Gat, Azar. _A History of Military Thought: From the Enlightenment to the Cold War_ OUP (2001). p56
  7. Boyd, K. (1999) _Encyclopedia of Historians and Historical Writing, Volume 1_ p536, entry for Hitnze, Otto.
  8. Miller, PN. _Momigliano and Antiquarianism: Foundations of the Modern Cultural Sciences_ Toronto: U Toronto Press (2007) p 359
  9. Toews, JE. _Becoming Historical: Cultural Reformation and Public Memory in Early Nineteenth-Century Berlin_ CUP (2004). p 420
  10. Mises, L von. _The Historical Setting of the Austrian School of Economics_ Ludwig von Mises Institute (1984). p17
  11. Boyd, K. (1999) _Encyclopedia of Historians and Historical Writing, Volume 1_ p536, entry for Hitnze, Otto.

Further reading

  • Bücher, Karl (1927). Industrial Evolution. 6th ed. New York, NY: Holt.
  • Backhaus, Jürgen G. (1994), ed. Gustav Schmoller and the Problems of Today = History of Economic Ideas, vol.s I/1993/3, II/1994/1.
  • Backhaus, Jürgen G. (1997), ed. Essays in Social Security and Taxation. Gustav von Schmoller and Adolph Wagner Reconsidered. Marburg: Metropolis.
  • Backhaus, Jürgen G. (2000), ed. Karl Bücher: Theory - History - Anthropology - Non Market Economies. Marburg: Metropolis.
  • Balabkins, Nicholas W. (1988). Not by theory alone...: The Economics of Gustav von Schmoller and Its Legacy to America. Berlin: Duncker & Humblot.
  • Chang, Ha-Joon (2002). Kicking Away the Ladder. Development Strategy in Historical Perspective. London: Anthem.
  • Grimmer-Solem, Erik (2003). The Rise of Historical Economics and Social Reform in Germany, 1864-1894. Oxford - New York: Oxford University Press.
  • Hodgson, Geoffrey M. (2001). How economics forgot history. The problem of historical specificity in social science. London – New York: Routledge.
  • Reinert, Erik (2007). How Rich Countries Got Rich ... and Why Poor Countries Stay Poor. New York: Carroll & Graf Publishers.
  • Roscher, Wilhelm (1878). Principles of Political Economy. 2 vols. From the 13th (1877) German edition. Chicago: Callaghan.
  • Schumpeter, J. A. (1984). "History of Economic Analysis". London: Routledge.
  • Seligman, Edwin A. (1925). Essays in Economics. New York: Macmillan.
  • Shionoya, Yuichi (2001), ed. The German Historical School: The Historical and Ethical Approach to Economics. London etc.: Routledge.
  • Shionoya, Yuichi (2005), The Soul of the German Historical School. Springer.
  • Tribe, Keith (1988) Governing Economy. The Reformation of German Economic Discourse (Cambridge: Cambridge University Press).
  • Tribe, Keith (1995) Strategies of Economic Order. German Economic Discourse 1750-1950 (Cambridge: Cambridge University Press) (Republished 2006)

External links