Investigations into the Method of the Social Sciences

The Relationship of the Practical Sciences of National Economy to Economic Practice and to Theoretical Economics

For anyone in any way experienced in the general theory of knowledge the remark is scarcely needed that the so-called practical sciences (the technologies) in general and those of national economy in particular (economic policy and the science of finance) are themselves capable of practical application and that accordingly a strict distinction must be made between the practical sciences of national economy on the one hand and their practical application on the other. The first teach us the general principles, the maxims by which national economy can be benefited, according to different circumstances, and by which state finances can most suitably be instituted. The practical application of these sciences, on the contrary, appears in the form of concrete legislative acts, administrative measures, etc. The relationship of the theoretical sciences to the practical ones and of both to the practice of national economy is thus the following: Theoretical economics has to describe for us the general nature and the general connection (the laws) of economic phenomena, whereas economic policy and the science of finance teach us the maxims by which, according to the particularity of conditions, national economy can best be advanced and state finances can most suitably be instituted. The practice of national economy, however, consists in the application of the practical sciences of national economy on the part of the public authorities according to the particularity of the conditions of individual countries and nations. The relationship of theoretical economics to economic policy and the science of finance and of both categories of sciences to the practice of the workers in economic policy and of men in finance is thus the same as, for instance, that of theoretical chemistry to chemical technology on the one hand and of both to the activity of the practical chemist on the other. Or it is the same as that of anatomy and physiology to surgery and therapy and of both groups of sciences to the practical activity of scientifically trained physicians.

It is a sign of the slight philosophical sense of the workers in our science that even among the more outstanding economists so much vagueness and conflict of opinion appears concerning the above really most elementary questions of the theory of knowledge. Cf. J. B. Say, Cours complet d’E. P. (Paris, 1852), I, 24 ff., and especially his note on Storch’s Cours (Paris, 1823–24), I, 4. Here Say wants to grant the validity only of a practical application of political economy, but not a practical science of national economy, an opinion which innumerable followers of Say have to a great extent followed. Roscher, too, is inclined to think that political economy breaks down into a general portion and particular portions, but not into a theoretical and a practical portion. Actually political economy breaks down into a theoretical science and a series of practical sciences of national economy. Each one of these sciences, however (both theoretical economics and also each practical economic science) exhibits again a general portion and particular portions in an orderly presentation. (Cf. also A. Wagner’s Allgemeine oder theoretische Nationalökonomie, 1876, Part I, p. xii and passim; H. v. Scheel in G. Schönberg’s Handbuch der Politischen Oekonomie, 1882,1, 57; and F. J. Neumann, ibid., p. 115 ff.).

It is true that theoretical economics appeared as an independent science later than the two practical subdivisions of political economy. However, the assumption is false that it came into being through the circumstance that common elements were taken from the latter two portions and joined together (F. J. Neumann, op. cit.). Theoretical economics arose from the need for a theoretical establishment of the practical sciences of national economy. Discussions of this type—investigations into the general nature and the general connection, the laws of the phenomena of national economy—are found scattered in the oldest writings on the art of government, later in those on economic policy and on finance. They are, however, fundamentally different from the “general” aspect of these sciences, which by its formal nature, as is obvious, is likewise practical. That is, it comprises general practical truths in respect to furthering national economy and the conduct of finance, but it does not comprise theoretical knowledge in national economy. Theoretical national economy came into being as a science when a few German scholars (first Jacob, Hufeland, Soden, et al.) collected, completed, and systematically arranged theoretical discussions scattered in the practical sciences of national economy, and in the general as well as in the special portions thereof. These had already found a broad range with the physiocrats, especially, however, with A. Smith and J. B. Say. The previously mentioned view obviously has as a basis the erroneous presupposition that the general aspect of a science and the theoretical aspect are identical.

A failure to recognize the true relationship of theoretical and practical economics is particularly inherent in the opinion that the former has to develop “the laws of economic life of the nation without consideration of the interference of the public authorities in it,” while the latter, on the contrary, has to consider the principles of this interference. This is a view which frequently comes to light in the economic literature in Germany (cf. Pölitz, Staatswissenschaften im Lichte unserer Zeit, II, 3; Lötz, Handbuch, 1837, I, §6; Rau, Politische Oekonomie, I, §9, etc.). This conception of the nature of theoretical economics is thus incorrect simply because the latter also includes among its problems research into the general nature and laws of the real phenomena of national economy, and thus, at any rate, the phenomena influenced by the state. It is incorrect because an abstraction of economic life of the nation from political influence is really inconceivable, at least in respect to the empirical orientation of theoretical research. Therefore L. H. v. Jacob (Grundsätze, 3rd ed., §5), Rotteck (Vernunftrecht, 1835, IV, B, 23 ff.), and recently Roscher, Knies, Scheel, Wagner, and others justifiably reject this conception of theoretical economics. However, it is a misunderstanding when Wagner (Politische Oekonomie, I, §9) thinks that the division of economics into a theoretical and a practical aspect is ultimately based on the notion that “national economy is to be considered first without the state and only then with it,” for this division has no conceivable relation to the idea discussed here. L. H. v. Jacob (Grundsätze, 3rd ed., §5 ff.) deals entirely correctly with the relationship of the theoretical and practical sciences, and this author justly may claim the merit of having completed the above important separation of the two main fields of political economy.