Economics · A History of Economic Thought by V Lokanathan
Chapter 15 : THE HISTORICAL SCHOOL
Table of contents24 sections
- 1.THE HISTORICAL SCHOOL
- 2.Introduction
- 3.Key Terms
- 4.📌 Exam Tidbits
- 5.The Social Background of Historical School
- 6.Key Terms
- 7.📌 Exam Tidbits
- 8.The Origin and Development of German Historical School
- 9.The Older Historical School
- 10.Key Terms
- 11.📌 Exam Tidbits
- 12.The Newer Historical School
- 13.Gustav Schmoller (1838-1917)
- 14.Key Terms
- 15.📌 Exam Tidbits
- 16.The Essential Ideas of the Historical School
- 17.Critical Ideas of the School
- 18.The Positive Ideas of the School
- 19.Key Terms
- 20.📌 Exam Tidbits
- 21.Conclusion
- 22.Key Terms
- 23.📌 Exam Tidbits
- 24.Quick-Recall Box
Chapter preview
THE HISTORICAL SCHOOL
Introduction
The Historical School was a major economic school of thought that became dominant in Germany during the second half of the nineteenth century. It emerged as a direct revolt against the method and analysis of classical economics.
- Founder: Wilhelm Roscher (a Professor at Gottingen).
- Divisions: For convenience, the school is divided into two branches:
- The Older Historical School: Included Roscher, Bruno Hildebrand, and Karl Knies.
- The Newer (Younger) Historical School: Led by Gustav Schmoller.
- Note on Friedrich List: Often considered a member of the Historical School due to his methodology, but typically categorized separately as a nationalist due to his overwhelming emphasis on national problems.
Definition of the Historical School
"all those economists who emphasize the relativity of laws and institutions, the inductive method of reasoning from concrete historical data, and the interrelations among human motives and among the social sciences." — Haney
Key Terms
| Concept | Definition |
|---|---|
| Historical School | A German economic school of thought from the late 19th century that rejected classical deductive methods in favor of inductive historical research, emphasizing the relativity of economic laws. |
📌 Exam Tidbits
- Wilhelm Roscher → Founder of the Historical School.
- Gustav Schmoller → Leader of the Newer (Younger) Historical School.
- Haney (Quote) → Defined the school by its emphasis on "relativity of laws", "inductive method", and "interrelations among human motives".
- 2 Divisions → Older Historical School vs Newer Historical School.
The Social Background of Historical School
Germany became the birthplace of the Historical School because its specific social, political, and economic climate in the 19th century made classical economic theory appear irrelevant to German realities.
- Political Fragmentation and Nationalism:
- Following the Napoleonic wars and the subsequent peace treaty, Germany was divided into thirty-nine states.
- Most of these states were monarchical, undemocratic, weak, and undivided.
- Prussia was the exception—it was the largest, richest, and most powerful state.
- The struggle against Napoleon ignited strong feelings of patriotism and nationalism. Germans looked to Prussia to lead the unification of Germany, making nationalism a dominant force.
- Divergent Economic Institutions:
- Germany's economic institutions differed…
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