But after achieving impressive partial victories against statism, the classical liberals began to lose their radicalism, their dogged insistence on carrying the battle against conservative statism to the point of final victory. Instead of using partial victories as a stepping-stone for evermore pressure, the classical liberals began to lose their fervor for change and for purity of principle.

The Austrian School of economics arose in opposition to the German Historical School; and Carl Menger developed his methodological views in combat with the rival group. I thus wish first to discuss the philosophical doctrines of the Historical School, since this will deepen our comprehension of the contrasting Austrian position.

The German Historical School included among others, Adolf Wagner, Karl Knies, and Gustav Schmoller. Although most people think of the group as confined to the nineteenth century, it lasted substantially longer. Werner Sombart, the most important member of the younger Historical School, died in 1939. Sombart, incidentally, was an acquaintance of Mises and the teacher of Ludwig Lachmann. Another economist, Othmar Spann, who was quite sympathetic to the Historical School, lived until 1951.

The Austrian School stood diametrically opposed to the German Historical School. 7  In view of the vast divergence of the two schools in economics, one might expect substantial differences in philosophical background. This is indeed what one does find. The leading philosopher who influenced Carl Menger was Franz Brentano.

Menger applied the concept of intentionality to economic value. He did not take value to be a feeling of pleasure or pain that comes into one’s mind automatically when one perceives an object. Quite the contrary, a preference in Menger’s system is a judgment: I like X (or I dislike X). The judgment in question is an act of preference: as the intentionality of thought grasps an object, so does a judgment of preference “move” toward an end.

Another Aristotelian theme exercised great influence on the Austrians; and this one, fortunately, is easier to document. The characteristic method of Austrian economics, carried to its culmination in Mises, is deduction. One starts with a self-evident axiom (”man acts”) and with the aid of a few subsidiary postulates, deduces the entire science of human action.

My discussion of the economic doctrines of the German Historical School relies mainly on two works by Ludwig von Mises: The Historical Setting of the Austrian School of Economics (Auburn: Ludwig von Mises Institute, 1984), and Omnipotent Government (New Haven: Yale University Press, 1944). Erich Streissler contends that Mises’s strictures on the German Historical School apply only to the later Historical School.

The relationship of the Weberian verstehende Methode (interpretive or empathetic method) endorsed by Lachmann to the praxeological method propounded by Mises has been analyzed at length by the contemporary Austrian economist Israel M. Kirzner.

The member of the Austrian School who has produced the most subtle and detailed critique of the notion that the social sciences should ape the methods of the physical sciences—an idea he calls “scientism”—is F.A. Hayek.