Investigations into the Method of the Social Sciences

The Historical Point of View in Theoretical Economics

§1. The development of economic phenomena

Nature of the development.—The development of the individual phenomena.—The two kinds of development of economic phenomena must be distinguished.—The development of empirical forms has a greater significance for social research than (the development of the species!) for the natural sciences.

It is a feature of numerous phenomena that they enter reality in a certain undeveloped form, gradually develop, follow a descending line after they have reached a certain peak, and finally give up their peculiar character, and in this sense perish. To the phenomena, in the nature of which the above process is really inherent, belong first and foremost natural organisms. But also in the case of numerous phenomena of social life in general and of economy in particular we can make a similar observation. Every single worker as such, every concrete economic enterprise, every measure aimed at elevating economy, every social connection of economic humans is a phenomenon of this type, a phenomenon which, by itself or in its effects, gradually develops and thus is subject to constant change.

Beside the above changes of concrete phenomena in time, experience makes us acquainted with developments of still another type. These, as we will at once see, are of no less importance for the theoretical sciences in general and political economy in particular than those just described. I mean those developments which come to light not in individual concrete phenomena, but in empirical forms. For we can observe in numerous groups of phenomena which recur typically that their empirical forms let us perceive a gradual movement. They do this in such a way, to be sure, that the concrete phenomena of a particular type occurring later in the succession, as opposed to the earlier phenomena of the same type, show a difference, a development, which we will call the general development, the development of empirical forms (in the natural sciences: the development of the species!) to distinguish it from that previously mentioned, the individual development.

Every single economic enterprise, every single economic institution, etc., exhibits for example an individual development which can easily be verified by observing it from its beginning to its point of decay. At the same time we can also perceive that the above phenomena are not always the same in their recurrence, but—just think, for example, of money—in the course of centuries have assumed different empirical forms.

The development of empirical forms, particularly those in the realm of organic life, and the significance of this fact for the natural sciences, have been stressed most emphatically by modern research in nature. But these are of far greater significance in the realm of social phenomena and particularly of economy. Natural organisms exhibit unmistakably the phenomenon of individual development. The development of empirical forms, however, proceeds only quite gradually, scarcely perceptibly. But in the ethical world a movement which clearly strikes the attention is perceptible in the latter respect, too. Those changes in the empirical forms of the organic world which as a result of well-established hypotheses are said to have been completed in the course of thousands of years, usually in prehistoric times, actually are completed in the realm of social phenomena in general and in particular in that of economy in a most intense manner, and, indeed, in historical times, right before our eyes, as it were. The phenomena of private property, of barter, of money, of credit are phenomena of human economy which have been manifesting themselves repeatedly in the course of human development, to some extent for millennia. They are typical phenomena. How different, nevertheless, is their present empirical form from that of previous epochs. In the beginnings of civilization want and plenty were equalized by way of more or less voluntary presents on the part of the one with plenty to those suffering want. In the course of the development of civilization crude forms of natural barter take place, and in higher civilization the equalization I refer to comes about predominantly through purchase and sale, that is, by means of money. And within the above phases of development numerous gradations of more or less developed forms of traffic in goods are to be observed. If all this is so, then we certainly have before our eyes a striking example of the development characterized above. When we perceive how with some of the most important civilized nations money first appeared in the form of domestic animals, later of base and noble metals in uncoined state, then as coins, only to pass over finally into still more involved forms (combinations of money and money tokens!), it would be difficult to fail to see here the striking development of the empirical form of money. In both cases it is the same economic phenomenon which assumes such different forms in the course of the development of civilization. In the first case it is the equalization of want and plenty; in the second, the means of barter. But what a difference of empirical forms which we, after all, have characterized here only in their most striking phases! And we meet such developments of empirical forms in the realms of social phenomena not only by way of exception; on the contrary, they form the rule.

The phenomena of human economy are thus not of strictly typical nature in time; rather, they exhibit at the same time (disregarding qualitative differences in their simultaneous appearance!) the spectacle of a double development, an individual one and one of empirical form. Concrete phenomena of economy do not resemble other simultaneous phenomena of the same kind. The ‘“same” concrete phenomenon of economy is not infrequently a different one in the single phases of its individual existence. But economic phenomena of the “same” kind are different even in the totality of their appearance as a result of the development of the empirical forms.

§2. The influence which the development of economic phenomena exerts on the nature and problems of the realistic-empirical orientation of theoretical research

That the development of economic phenomena cannot be without influence on theoretical economics in general and on the realistic-empirical orientation of theoretical research in the field of economy in particular.—Double problem of this orientation of research.—The influence which the above fact exerts on the desire to determine the real types and the empirical laws of economic phenomena.—How the problem of keeping the historical point of view in the realistic-empirical orientation of theoretical research is to be solved.—Limits of the significance of the historical point of view for the above orientation of research.

One thing must be clear immediately to anyone who has any understanding at all of the nature and the problems of theoretical research in general and of its realistic orientation in particular. It must be clear to him that the just noted fact of the development of economic phenomena cannot remain without influence on a theory of that development;1 nor can it fail to influence the outcome of the realistic perspective in theoretical research in this field.

The realistic orientation of theoretical research has the double problem of investigating the types and the typical relationships (the general nature and the general connection) of real phenomena. It is supposed to make us aware of the empirical forms (the types) and the repeated relationships (the empirical laws) of real phenomena. How, in the solution of this problem, could it remain uninfluenced by the fact that those phenomena are variable whose general nature and whose general connection it has to determine?

A theoretical science, whose field of research would comprise phenomena that exhibit no changes in any phase of their existence, would fulfill its tasks by simply presenting to us their general nature and general relationships, i.e., at some point in time, since anyone who might have recognized the nature and laws of such phenomena at a definite moment would have recognized them in general. And a theory which would present the phenomena to us in respect to a definite point of time would solve its general pertinent problem.

But the position and correspondingly the problem of the realistic orientation of theoretical research are rather different. A theoretical science would solve the first part of the problem designated above only very imperfectly if it presented to us the general nature of the real phenomena of economy only in respect to a definite point of time, or, what is the same thing, only in respect to a definite stage of its existence. For anyone who knows the nature of these phenomena only in a certain phase of their existence has really not become acquainted with their nature at all.

The general nature of the economic phenomenon which we call a “commercial crisis” is not, for example, exhausted by our making ourselves aware of its nature at a definite stage, but only of its entire course. If we want to get the real concept of “worker” we must consider him not merely at the height of his development, but also in his period of development and in the period of the decline of his abilities. The real concept of an “enterprise” comprises the period of its establishment, of its development, and of its decline. Indeed, even the general nature of an apparently so slightly variable economic phenomenon as the coin shows a development from the moment when it leaves the mint up to the moment when it is worn out with use or taken out of circulation since it has been rendered obsolete by the advances of technology. Its general nature is not a static one.

Up to now we have looked only at cases of the individual development of economic phenomena and emphasized the effect of the fact under discussion on the determination of the general nature of the phenomena concerned. We can, however, make an analogous observation with respect to that development of economic phenomena which we have designated as one of empirical forms. The forms in which human needs, the possession of wealth, private property, barter, money, credit, taxes, and a thousand other institutions of human economy make a real appearance, as we have seen above, have by no means remained unchanged in all epochs of history in respect to their totality, if we disregard the possible individual developments of these phenomena. Their general nature would thus be comprehended only imperfectly if we were to overlook this significant fact and confuse the nature of the phenomena discussed here in the present or in any period of their development with their general nature in an absolute sense, and if we were to confuse the conception of them with respect to the present with the conception of them in the most general sense. On the contrary, it is clear that the most general conception is not a static one, but the conceptual image of these phenomena in the totality of their development.

We have met the determination of the real, typical relationships, of the empirical laws of economic phenomena, as the second problem of the realistic orientation of theoretical research in the field of economy. Now if these phenomena exhibit developments in the two previously mentioned respects, it is immediately clear that the empirical laws established in respect to a certain stage of their development do not necessarily remain valid for all the remaining stages of their development. The typical relationships which would be observed between phenomena which show no change would be independent of temporal conditions. The matter is different where it is a question of phenomena which are placed in the stream of time. Here it is clear that the empirical laws which were determined for definite stages of the existence of the pertinent phenomena do not necessarily retain validity for all phases of their development. To cite obvious examples, the physiological laws of developed organisms do not necessarily apply to the same organisms in the embryonic or in the descending stage of development. The empirical laws of the coexistence and the succession of the phenomena of the state of classical antiquity do not necessarily apply to those of the feudal state or a modern state, etc. The empirical laws of wages which apply to the worker at the peak of his development do not necessarily apply to the beginner or to the worker whose strength has already declined. The laws of the circulation of money, as we have observed them in a highly developed economy, do not necessarily apply to the periods of the beginnings of civilization. The laws by which the phenomena of credit are regulated in our day will not necessarily apply to the credit phenomena of the future.

If we summarize the statements made here, we arrive at the following result: the real phenomena of human economy exhibit a development which is presented on the one hand as one of individual phenomena, on the other as one of empirical forms. This circumstance has an undeniable influence on the results of the realistic orientation of theoretical research in the realm of the empirical world discussed here. This influence makes itself felt both in the determination of the general nature (of the real concepts) of economic phenomena and in that of their general connection (of the empirical laws): the real concepts, the types of economic phenomena are only then truly adequate if we make ourselves aware of the nature of the pertinent phenomena not merely at a definite moment, but in the totality of their individual development or of the development of their empirical forms; and the empirical laws of the phenomena discussed here, insofar as they only correspond to a definite stage of their development, do not necessarily retain their validity for other stages of the development of the above phenomena.

The development of economic phenomena characterized in greater detail above thus has a significance not to be overlooked for the realistic orientation of theoretical research in the field of economy.

What remains for us now to do at this point is briefly to characterize the way by which the above “historical thought” can most usefully be realized in the realistic orientation of research in the field of economy.

The development of economic phenomena and the necessity of taking this fact into account in the realistic theory of economic phenomena are beyond all doubt. No one to any extent familiar with theoretical investigations will, however, claim that we are to strive for the solution of the above problem, for instance, by creating just as many economic theories as there are developmental stages of economic phenomena or as there are different spatial relationships of nations at the same developmental stage. Such an effort would not be feasible simply for reasons of presentation and of scientific technique in general. The road which the theoreticians in the field of economy have to take to solve the above problem can, on the contrary, properly be one which is admissible only in light of the customary technique of scientific presentation and in light of the present need, which, indeed, is also asserting its rights in the science. This is especially the case when the road was already taken with satisfactory results in other fields of research which have a similar problem to solve. It can only consist in our taking as the basis of our presentation a specific state of the economy, especially significant with respect to time and place,2 and merely pointing out the modifications which result for the realistic theory from differently constituted developmental stages of economic phenomena and from different spatial conditions. In the same way, for instance, a German or French anatomist or physiologist takes the well-developed bodies of the Indo-Europeans as a basis for his presentation, but also takes into consideration the developmental phases of the human body significant for anatomy and physiology, and also racial variations, for instance, those of the Negroes, the Malayans, etc. A realistic theory of economy in this sense is not a phantom, but a goal of research which can be attained with the usual means of science. At the same time, however, it is one which does proper justice to the factor of development in economy and to difference of spatial conditions without thereby sacrificing the theoretical character of economics. This would in truth be a realistic theory of economy with consideration of the point of view of development or of the historical point of view, if one wants to keep a more usual, if not quite apt, expression.

The more unreservedly we acknowledge this and the greater the right with which we can claim to have presented the influence of the above fact on the theory of economy more exhaustively and comprehensively than any of our predecessors, the more we nevertheless feel obligated to stress certain things. We must emphasize that in the acknowledgment of the frequently mentioned fact of the development of economic phenomena, in the recognition of the above-stated logical consequences of it for the solution of the specifically theoretical problems of our science, and in the endeavor to realize the above methodological thoughts is to be found the sum of everything which one is justified in designating as the “historical point of view” in the realistic orientation of theoretical research in the field of economy, in contrast to the unhistorical orientation of research. (If one wishes to be more correct, one may speak of “the consideration of the fact of development of economic phenomena” rather than of the “historical point of view.”) Every postulate going beyond this, especially the effort of the historical school of German economists to transform political economy into a historical science or into a philosophy of economic history and the like comes, it must be emphasized, from a failure to recognize the most elementary bases of the theory of science, from a confusion of theory and history or of theory of economy and single special orientations of the theoretical aspiration for knowledge in the economic field.

§3. That the charge of too thorough a generalization of the theoretical knowledge of economy is by no means completely removed by the so-called historical method

Not every change of phenomena signifies a development thereof.—Those changes of phenomena in time which are not presented to us as developments are also of methodological importance for theoretical research, and only by taking them into consideration could the charge of “perpetualism” in the theory of economy be fully met.—The like is true of those differences of homogeneous social phenomena which are not of international or interlocal nature, but appear in the same place and at the same time.—These, too, are of methodological importance for the theory of economy.—Taking them into consideration would be necessary, too, if the charge of excessive generalization of theoretical knowledge in the field of economy were to be fully met.—The charge of “perpetualism” and of “cosmopolitism” in the meaning given by our historical economists thus includes only a part of the doubts about an all-too-excessive generalization of theoretical knowledge of economy.—The complete removal of these doubts is nevertheless not attainable for theoretical reasons.—A theory obtained from the point of view of empirical realism necessarily suffers from those weaknesses which the historical school thinks it removes by its method.

There is not a phenomenon of the real world which does not offer us the spectacle of constant change. All real things are located in the stream of time, the phenomena of social life just as well as those of organic nature, and the phenomena of the inorganic world no less than these. The historical point of view in the realistic orientation of theoretical research—the basic principle that the development of phenomena is not to be neglected—must, accordingly, either be adequate for all realms of the empirical world, or else something different from the mere fact of this change in time must be understood by “development of phenomena.”

Now the so-called “development” of things constitutes in fact only a small portion of their changes in time, for we usually understand by “development” only those changes which result from the characteristic nature of the things, and in the case of which, accordingly, a particular individuality remains preserved in spite of change in time. We therefore do not speak of “developments” of those things which exhibit no characteristic individuality. Nor do we do so in those cases where a thing, of whatever type it be, undergoes a change merely through external or chance circumstances.

From what has just been said the following consequences result for the methodology of our science. It is above all an error when it is assumed that all difficulties of whatever nature resulting for theoretical research from the change of social phenomena in time would be removed by considering the development of social phenomena in the social sciences in general and in political economy in particular. It is an error to assume that a theory which considers this development thereby avoids the mistake of “perpetualism.” On the contrary, it is clear that the charge of perpetualism could be completely avoided in theory only by taking into consideration in theoretical research those changes of phenomena which do not fall under the concept of “development.”

A similar statement is true of the charge of “cosmopolitism.” Simultaneous phenomena belonging to the same empirical form exhibit not only international or interlocal differences, but also differences in the same place and at the same time. This is a circumstance which, as scarcely needs to be noted, likewise cannot remain without influences on the more or less universal validity of theoretical knowledge. If anyone declares general economic laws inadmissible because economic phenomena exhibit interlocal differences, if he considers a modification of them necessary according to spatial conditions, he cannot at any rate help coming to similar conclusions in respect to the local differences of homogeneous economic phenomena. Also with the mere effort to avoid the charge of “cosmopolitism” in economic theory the mistake of excessive generalization of the theory is by no means removed.

The conception of so-called “perpetualism” and “cosmopolitism” which the historical school of German economists has had is thus inadequate. For the scholar who ever so carefully avoided the two errors so characterized would nonetheless not escape the fundamental weakness of an excessive generalization of theoretical knowledge, i.e., a generalization not adequate for real conditions. And only the consideration of all variations of the empirical forms of economic life stressed by us here would bestow upon the realistic theory of economy that rigor which the above school thinks it attains merely by the removal of “cosmopolitism” and “perpetualism” in the theory of economy.

Now we have already represented that the realization of the above scientific postulates is unattainable in full strictness, as far as the postulates refer to the difficulties resulting from the spatial variations of social phenomena and those resulting from their development in time. In the realistic orientation of theoretical research the desire for knowledge will always have to be satisfied with a merely approximate consideration of the facts touched on here and with that form of them, the basic lines of which we have previously determined. And however far the human mind is competent to advance in the perfection of a realistic theory of social phenomena, it will always be frustrated by the problems characterized here. The carrying out of the above postulates in research in their full strictness will always prove to be a phantom just for theoretical reasons. An approximate consideration of them will always be the only attainable goal of the realistic orientation of theoretical research in the realm of social phenomena. The form of the realization of the notions expressed here will, however, be analogous to the one we characterized further above.

The historical school of German economists has succumbed to a double error in consideration of the theoretical problems now treated. It has, on the one hand, conceived of them too narrowly. It has overlooked the fact that still other divergences of social phenomena not considered by it are entitled to the same significance for the methodology of our science as those to which it has turned its attention exclusively. Its representatives have, on the other hand, yielded to the erroneous idea that the difficulties for economic theory arising from the development of social phenomena and from their interlocal divergences can be completely removed by the historical method.

The “historical method” promises less than it should with respect to the goals it has set up, but even what it promises is unattainable in its full strictness. Every realistic theory of economy necessarily suffers, rather, to a certain extent from those weaknesses which the historical school thinks it is removing completely by its “method.”

§4. The influence which the development of economic phenomena exerts on the nature and the problems of the exact orientation of theoretical research

Lesser significance of the above fact for the exact orientation of theoretical research.—Explanation of this circumstance through the nature and problems of this orientation of research.—What can constitute the historical point of view in this orientation.—That the exact orientation of theoretical research neither denies nor refuses to consider the development of economic phenomena.

Up to now we have dealt only with the influence which the development of economic phenomena exerts on the realistic orientation of theoretical research and on the nature of its results. There remains for us now to examine the influence of the fact of development on exact research. But here we can be so much the briefer as the influence on exact research is, indeed, of lesser significance.

At another point we have already stressed that the difficulties resulting from the atypical character of phenomena for the realistic orientation of theoretical research do not exist for its exact orientation, as a result of the peculiar conception of theoretical problems that prevail in the latter. Exact research reduces real phenomena to their simplest elements, thought of as strictly typical, and attempts to determine their strictly typical relationships, their “laws of nature.” The empirical forms with which it operates are nonetheless thought of as strictly typical not only in respect to spatial conditions, but also to temporal ones. The development of real phenomena, accordingly, exerts no influence on the way in which exact research undertakes to solve the theoretical problem. Only the greater or lesser strictness of the realistic results of theoretical research is influenced by the change of phenomena and their interlocal divergences; that of the exact results is not. Accordingly, only the realistic orientation of theoretical research in the field of economy, and not the exact, has the task of testing the influence which the fact discussed here exerts on the nature of its results. It must look for ways and means to meet the above difficulty. The extensive investigations of our historical economists on the questions of “cosmopolitism” and of “perpetualism” in economic theory, in the form in which they have appeared up to now, truly concern only the realistic results of theoretical research in the field of economy, not the exact ones.

This is surely not to say that the exact orientation of theoretical research does not at all consider, or even denies, the development of economic phenomena. Exact theories are supposed to reveal to us the simplest and strictly typically conceived constitutive factors (susceptible of exact inquiry) of phenomena and the laws according to which complicated phenomena are built up out of the simplest factors. However, they fulfill this task completely only by providing us with this understanding in respect to each phase in the development of phenomena. Or, in other words, they do so by teaching us how phenomena are presented at each step of their development as the result of a regular genetic process. The exact sciences therefore ignore the development of phenomena just as little as they do the postulate of every theory to follow in all its phases the alternation of the phenomena which it is to make us understand. Every new empirical form which life produces, every new phase of development of phenomena offers a new problem for the exact orientation of theoretical research. Thus it considers in fact the change of phenomena—only in an essentially different way than is the case in the realistic orientation of theoretical research. The development influences the nature of the results of realistic research, its greater or lesser strictness. The same fact leaves untouched the formal character of the results of exact research. However, it modifies and expands the sphere of the objects, the understanding of which is to be revealed to us by the exact sciences. It modifies the aims of research.

As far as the exact orientation of theoretical research in the field of economy is especially concerned, the remark is scarcely needed for anyone to any extent familiar with its results and its history that its representatives, too, always endeavored to follow the development of economy. They endeavored to take into the sphere of their consideration every new empirical form in its field, indeed, every new phase in the development of economic phenomena. Exact research in the field of our science has never negated the development of social phenomena; it has never neglected it even in principle. However, it has, as is obvious, considered it in a way appropriate to its nature and problems.

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3 Knies correctly stresses (Pol. Oek., p. 35) that keeping the historical point of view in economic policy frequently enough goes hand in hand with a thoroughly unhistorical treatment of theoretical economics. He writes (op. cit.), “With most writers admissions in favor of basic principles concerning the historical development of political economy and claims against the absolute validity of economic theories refer only to the basic principles of economic policy and not to economics, i.e., they do not, therefore, refer to the general theoretical part of political economy.”

4 The state of the economy which in the concrete case must be selected as the basis for presenting theoretical economics is, of course, not necessarily the same for all times and nations. The selection is not a question of research, but one of suitable presentation, and thus conditioned by temporal and spatial conditions. Dahlmann very correctly has already remarked (Politik [Leipzig, 1847], I, p. 9): “Because humanity in each age produces new conditions, no state form can be presented fundamentally except in terms of means available and conditions prevailing in some era, unless it is bound to the relationships of some immediate present. Therefore all treatment of state matters in life and in theory presses on toward history and through it to a present, and, because no new form of life can be neglected, on to our present, our part of the world, our nation.”

• 1Knies correctly stresses (Pol. Oek., p. 35) that keeping the historical point of view in economic policy frequently enough goes hand in hand with a thoroughly unhistorical treatment of theoretical economics. He writes (op. cit.), “With most writers admissions in favor of basic principles concerning the historical development of political economy and claims against the absolute validity of economic theories refer only to the basic principles of economic policy and not to economics, i.e., they do not, therefore, refer to the general theoretical part of political economy.”
• 2The state of the economy which in the concrete case must be selected as the basis for presenting theoretical economics is, of course, not necessarily the same for all times and nations. The selection is not a question of research, but one of suitable presentation, and thus conditioned by temporal and spatial conditions. Dahlmann very correctly has already remarked (Politik [Leipzig, 1847], I, p. 9): “Because humanity in each age produces new conditions, no state form can be presented fundamentally except in terms of means available and conditions prevailing in some era, unless it is bound to the relationships of some immediate present. Therefore all treatment of state matters in life and in theory presses on toward history and through it to a present, and, because no new form of life can be neglected, on to our present, our part of the world, our nation.”
• 3One thing must be clear immediately to anyone who has any understanding at all of the nature and the problems of theoretical research in general and of its realistic orientation in particular. It must be clear to him that the just noted fact of the development of economic phenomena cannot remain without influence on a theory of that development; nor can it fail to influence the outcome of the realistic perspective in theoretical research in this field.
• 4The development of economic phenomena and the necessity of taking this fact into account in the realistic theory of economic phenomena are beyond all doubt. No one to any extent familiar with theoretical investigations will, however, claim that we are to strive for the solution of the above problem, for instance, by creating just as many economic theories as there are developmental stages of economic phenomena or as there are different spatial relationships of nations at the same developmental stage. Such an effort would not be feasible simply for reasons of presentation and of scientific technique in general. The road which the theoreticians in the field of economy have to take to solve the above problem can, on the contrary, properly be one which is admissible only in light of the customary technique of scientific presentation and in light of the present need, which, indeed, is also asserting its rights in the science. This is especially the case when the road was already taken with satisfactory results in other fields of research which have a similar problem to solve. It can only consist in our taking as the basis of our presentation a specific state of the economy, especially significant with respect to time and place, and merely pointing out the modifications which result for the realistic theory from differently constituted developmental stages of economic phenomena and from different spatial conditions. In the same way, for instance, a German or French anatomist or physiologist takes the well-developed bodies of the Indo-Europeans as a basis for his presentation, but also takes into consideration the developmental phases of the human body significant for anatomy and physiology, and also racial variations, for instance, those of the Negroes, the Malayans, etc. A realistic theory of economy in this sense is not a phantom, but a goal of research which can be attained with the usual means of science. At the same time, however, it is one which does proper justice to the factor of development in economy and to difference of spatial conditions without thereby sacrificing the theoretical character of economics. This would in truth be a realistic theory of economy with consideration of the point of view of development or of the historical point of view, if one wants to keep a more usual, if not quite apt, expression.