Schools of Thought in Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
During the second half of the nineteenth century, as “political economy” gave way to a new academically shaped “economics”, the argument was made that the development of economic thought should have a historical basis. The argument was most consistently made in Germany, and since the German university and its scholars enjoyed international pre-eminence across many fields, the “German Historical School” became central to this idea of a “historical economics”. As university systems were developed around the world, “German Historical Economics” carried a powerful resonance, but it was only in Great Britain that this reputation linked into existing historical studies. This entry examines the origins and early development of this attempt to construct a “historical economics”, first outlining German developments, then English, without however exploring more recent writings which largely recycle the reputation, rather than the substance, of these arguments about history and economics. Political economy first emerged in early nineteenth-century Britain and France as a discourse concerned less with the general progress of nations, and more with abstract doctrines concerning the relationships of wages, rents and profits, and the relationship of price to value. By mid-century, arguments had gelled into a more or less settled doctrine, notoriously represented by John Stuart Mill’s declaration that there was, happily, “nothing in the laws of Value which remains for the present or any future writer to clear up; the theory of the subject is complete: the only difficulty to be overcome is that of so stating it as to solve by anticipation the chief perplexities which occur in applying it” (1848 : 456). The second half of the century saw the eclipse of this presumption: not only did a new subjectivist approach develop which shifted attention from the properties of a good to the decisions made by an economic agent, the precursor to twentieth-century developments; the older model also became increasingly criticised from the standpoint of logic, politics and history. Quite soon a new story developed around this last perspective: that political economy’s abstract, universalist approach divorced it from the real history of nations, seeking explanation of the fluctuations of prices, wages, rents and interest in a causal mechanics, rather than in the diverse institutions whose particular configurations and interactions shaped these movements. Historians, it was said, eschewed theory in favour of an approach akin to that of biology, “the detailed description and historical explanation of the constitution and economic life of every nation”.
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