Investigations into the Method of the Social Sciences

The Charge of “Atomism” in Theoretical Economics

Nature and significance of so-called “atomism” in the theory of economy.—Origin of the above dogma in the line of argument of the historical school of jurists.—Difference in the deductions drawn from the above dogma at which the historical school of German jurists and that of German economists have arrived.—The standpoint of the historical school of jurists.—The standpoint of the historical school of German economists.—That the charge of “atomism” has its roots in the failure to recognize the true nature of the exact orientation of theoretical research and in the application of methodological points of view of specifically historical research to theoretical economics.—The contrast of national economy and individual economy in the methodological expositions of the historical school of German economists and the significance of the pertinent error for the theoretical problems of our science.

We should like to mention another opinion particularly widespread among German economists which ultimately, like the one previously discussed, has its roots in the mechanical application of certain points of view of historical research to theoretical economics and in a one-sided outlook on the problems of the latter. It can therefore be disposed of at this point. We mean the charge of atomism which is made in modern German literature against economics in the most frivolous way, indeed against everybody who is concerned with the true problems of theoretical economics. It is supposedly based on the fact that economic phenomena theoretically are reduced ultimately to individual economic efforts or to their simplest constituent elements, and are thus explained.

The dogma under discussion here also owes its origin above all to the historical school of jurists, from whose methods it was borrowed mechanically like many another part of the methodology of our historical school of economists. “There is,” says Savigny, “no completely separate and isolated human existence. Rather, whatever can be viewed as separate is, when considered from another side, a member of a larger unit. Thus each separate human is of necessity to be considered at the same time as a member of a family, of a nation, as the continuation and development of all previous time.” Savigny then speaks of the higher nature of a nation as a unit which is constantly growing, constantly developing, of which “higher nation,” indeed, the present age too is but one member, etc.1

No one who compares the pertinent utterances of the historical economists of Germany with the above will fail to recognize their relationship, even if the results to which the two schools, starting with the same basic notion have come, are essentially different.

The historical school of jurists utilizes the above notion to arrive at the thesis that law is something above the arbitrariness of the individual, is even something independent of the arbitrariness of the temporary generation of the national body. They state that it is an “organic” structure which cannot and must not be arbitrarily shaped by individuals or by single generations, that it is a structure which, on the contrary, is opposed as something higher to the arbitrariness of the individual, of the entire age, of human wisdom. From this thesis the above school now further derived consequences which are in part extremely practical. It concluded that the desire for a reform of social and political conditions aroused in all Europe by the French Revolution really meant a failure to recognize the nature of law, state, and society and their “organic origin.” It concluded that the “subconscious wisdom” which is manifested in the political institutions that came about organically stands high above meddlesome human wisdom. It concluded that the pioneers of reform ideas accordingly would do well less to trust their own insight and energy than to leave the reshaping of society to the “historical process of development.” And it espoused other such conservative basic principles highly useful to the ruling interests.

The notion of an analogous conservative orientation in the field of economy was fairly obvious. And a historical school of economists comparable to the historical school of jurists, which would have defended existing economic schools and interests against the exaggerations of reform thought in the field of economy, but especially against socialism, would have fulfilled a certain mission even in Germany and prevented many a later setback.

But nothing was further from the thoughts of the historical school of economists in Germany than the idea of an analogous conservative orientation in the field of economy. For this the historical orientation of German economists was something much too superficial and lacking in depth. On the contrary, its proponents, in a practical respect, lined up even a short time ago almost completely with the liberal policy-makers of progress in the field of economics, until no small part of them most recently offered the rare spectacle of a historical school of economists with socialistic tendencies. This was a scientific curiosity, the further development of which was checked more by external events than by scientific insight. In brief, the organic conception of economy remained for our historians in economics something thoroughly external, a theoretical view. It did not even remotely occur to them to draw from this view practical consequences, for instance, in the sense of the historical school of jurists. Not even the practical logical consequences really justified for economy have been drawn from this view by our historical economists.

The conclusions which our historical economists derived from the above basic view of the nature of economy (as an organic uniform unit) referred, on the other hand, exclusively to questions of scientific technique and thus quite clearly characterize the range of vision of this school.

If national economy was considered as a special unit differing from the singular phenomena of human economy, one could easily draw the consequence that national features should be the exclusive object of scientific treatment in theoretical national economy, and that the singular phenomena of human economy should be excluded therefrom. Not the general nature of the phenomena of human economy, not their general relationships, were henceforth to be the object of research in the field of theoretical economics. Research on the phenomena of national economy seemed to be the sole task of theoretical economics from this point of view. Meanwhile research on the general nature and the general relationships of the singular phenomena of human economy was banned from the field of our science. As amounting to the confusion of a mode of consideration of private economy and consideration of national economy, even as aspiration to reduce the phenomena of national economy to the singular phenomena of human economy, it was characterized as “atomism.”

The error of this doctrine, more immediately occasioned by the confusion of historical and theoretical points of view2 and more ultimately caused by the failure to recognize the real character of “national economy” in its relations to the singular economic phenomena out of which it is constituted—the error of this doctrine is obvious.

The nation as such is not a large subject that has needs, that works, practices economy, and consumes; and what is called “national economy” is therefore not the economy of a nation in the true sense of the word. “National economy” is not a phenomenon analogous to the singular economies in the nation to which also the economy of finance belongs. It is not a large singular economy; just as little is it one opposed to or existing along with the singular economies in the nation. It is in its most general form of phenomena a peculiar complication of singular economies which has been characterized by us more in detail in another place.3

Thus the phenomena of “national economy” are by no means direct expressions of the life of a nation as such or direct results of an “economic nation.” They are, rather, the results of all the innumerable individual economic efforts in the nation, and they therefore are not to be brought within the scope of our theoretical understanding from the point of view of the above fiction. Rather the phenomena of “national economy,” just as they present themselves to us in reality as results of individual economic efforts, must also be theoretically interpreted in this light.

“Scire est per causas scire.” Whoever wants to understand theoretically the phenomena of “national economy,” those complicated human phenomena which we are accustomed to designate with this expression, must for this reason attempt to go back to their true elements, to the singular economies in the nation, and to investigate the laws by which the former are built up from the latter. But whoever takes the opposite road fails to recognize the nature of “national economy.” He moves on the foundation of a fiction, but at the same time he fails to recognize the most important problem of the exact orientation of theoretical research, the problem of reducing complicated phenomena to their elements.

One-sided collectivism in the consideration of the phenomena of economy is simply inadequate for the exact orientation of theoretical research, and the charge of atomism in the above indicated sense of the word is thus a misunderstanding in respect to exact economics. The latter comes in for the charge of atomism along with all other exact sciences, and, indeed, as an exact science.

But even in respect to the realistic orientation of research in the field of economy the charge is not justified. Every theory, of whatever kind it may be and whatever degree of strictness of knowledge it may strive for, has primarily the task of teaching us to understand the concrete phenomena of the real world as exemplifications of a certain regularity in the succession of phenomena, i.e., genetically. Every theory, accordingly, strives first and foremost to make us understand the complicated phenomena of the research field peculiar to it as the result of the coworking of the factors responsible for its origin. This genetic element is inseparable from the idea of theoretical sciences.

The realistic orientation of research in the field of economy, therefore, may still strive for a determination of the empirical laws of the complicated phenomena of human economy. However, it can by no means dismiss the task of reducing the latter to their factors, to the singular phenomena of human economy, to the extent and in a form which is compatible with the idea of realistic research. Thus, to reproach a theoretician because he keeps firmly in mind the genetic factor in theory is really absurd.

Finally, as far as the charge is concerned that “national economy” is confused with “individual economy” by this genetic orientation in the theory of our science, it would have a firm basis in one case. That is, if it were not to acknowledge those complications of the singular phenomena of human economy which we call the phenomena of “national economy” and would have us fail to consider the singular phenomena of human economy as elements of “national economy.” As long, however, as it tries to solve this problem, there can be no rational question of a confusion of individual with national economy.

All this, moreover, is so self-evident that certain writers are not completely able to avoid in the systematic presentation of the theory of economics the reduction of the more complicated phenomena of national economy to the singular phenomena of human economy. These include even the writers who in their methodological discussions express the anti-atomistic view, which fails to recognize the nature of the theoretical sciences. Herewith there arises also that contradiction between the theory and practice of research which is really characteristic for the historical school of German economists.

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4 Fr. C. v. Savigny, Zeitschrift für geschichtliche Rechtswissenschaft (Berlin, 1815), I, p. 3 ff.

5 How very much this doctrine corresponded to the specifically historical approach, adhered to with preference by the German economists of the historical school even in theoretical economics, scarcely needs any further comment after what was said in the preceding section. History comprises human phenomena always from the collective point of view, since it can do justice to its specific task in a universal way only thus, but not by reducing social phenomena to the singular phenomena of human life. Accordingly, the thought of applying the usual historical point of view to theoretical research also was obvious to the predominantly historically trained German economists of the historical orientation. And the above doctrine thus presents itself to us as a special form of that more universal methodological error of the historical school of German economists. It presents itself as one of those mechanical applications of specifically historical points of view to theoretical research which we have frequently mentioned and the combating of which is one of the main tasks of this writing.

6 See Appendix I.

• 1Menger’s sketch of organic theory, sketch though it be, is suggestive in still other directions than those I have indicated. Brief allusion to two I have not referred to thus far may be allowed. At page 152, again in connection with the origin of money, Menger makes the following observation: “The problem which science has to solve here consists in the explanation of a social phenomenon, of a homogeneous way of acting on the part of the members of a community for which public motives are recognizable, but for which in the concrete case individual motives are hard to discern.” Individual motives, on the line of economic self-interest, do not involve envisaging an institution which “serves the common welfare.” Inevitably, the paradox that Mandeville among others had stressed is hereby suggested. Private economic “lusts” or “vices” lead to public “virtues.” In referring to Mandeville’s paradox, Weber had aptly written of “jene Kraft, ‘die stets das Böse will und stets das Gute schafft.’ ” Menger’s individual agents, too, act on economic appetites, but unwittingly create the “good” institution of money. This is another of the matters that it is easy to believe Menger might have treated in detail in the comprehensive treatise he never completed.
• 2How very much this doctrine corresponded to the specifically historical approach, adhered to with preference by the German economists of the historical school even in theoretical economics, scarcely needs any further comment after what was said in the preceding section. History comprises human phenomena always from the collective point of view, since it can do justice to its specific task in a universal way only thus, but not by reducing social phenomena to the singular phenomena of human life. Accordingly, the thought of applying the usual historical point of view to theoretical research also was obvious to the predominantly historically trained German economists of the historical orientation. And the above doctrine thus presents itself to us as a special form of that more universal methodological error of the historical school of German economists. It presents itself as one of those mechanical applications of specifically historical points of view to theoretical research which we have frequently mentioned and the combating of which is one of the main tasks of this writing.
• 3See Appendix I.
• 4Once more, the basic notion involved is not necessarily limited to thought about the specifically economic sphere. Thus, in the course of a discussion of Turgot’s historical views, Manuel writes: “If Providence was a source of goodness, why the long chronicle of wars and devastations, the spectacle of crimes and barbarities perpetrated throughout the ages? The answer is common to most eighteenth-century philosophers of history—in this respect Turgot’s concept is only one offshoot of a general theme. Without the impetus of the aggressive, evil passions, without the ambitions of individuals, the ‘leading strings’ of nature, there would have been no progress in the early stages of history and man would have been doomed to peace and mediocrity.” Frank E. Manuel, The Prophets of Paris (Cambridge: Harvard University Press, 1962), pp. 46–47.
• 5The error of this doctrine, more immediately occasioned by the confusion of historical and theoretical points of view and more ultimately caused by the failure to recognize the real character of “national economy” in its relations to the singular economic phenomena out of which it is constituted—the error of this doctrine is obvious.
• 6The nation as such is not a large subject that has needs, that works, practices economy, and consumes; and what is called “national economy” is therefore not the economy of a nation in the true sense of the word. “National economy” is not a phenomenon analogous to the singular economies in the nation to which also the economy of finance belongs. It is not a large singular economy; just as little is it one opposed to or existing along with the singular economies in the nation. It is in its most general form of phenomena a peculiar complication of singular economies which has been characterized by us more in detail in another place.