Investigations into the Method of the Social Sciences

The Various Aspects of Research in the Field of National Economy

The contrast between the historical and the theoretical sciences in general and in particular between those of economy.—Nature and problems of the historical sciences of economy.—Nature, problems and significance of a theory of economy.—Nature and problems of the practical sciences of economy; their relation to theoretical economics and to the practice of economy.

The world of phenomena can be considered from two essentially different points of view. Either there are concrete phenomena in their position in space and time and in their concrete relationships to one another, or else there are the empirical forms recurring in the variation of these, the knowledge of which forms the object of our scientific interest. The one orientation of research is aimed at cognition of the concrete, or more correctly, of the individual aspect of phenomena; the other is aimed at cognition of their general aspect. Thus, corresponding to these two main orientations of the striving for cognition, two great classes of scientific knowledge confront us, the first of which we will in short call individual, the latter general.1

The interest which the human mind takes in the cognition of concrete phenomena (of what is individual) and the significance of this for practical life is self-evident; so is the formal nature of the results of the striving for cognition aimed at what is individual. Not quite so obvious to general understanding are the nature and significance of general knowledge; and therefore, because of the importance of this subject for the understanding of the nature of the theoretical sciences and their contrast to the historical ones, a few pertinent observations may be in place here.

In spite of the great variety of concrete phenomena, we are able, even with cursory observation, to perceive that not every single phenomenon exhibits a particular empirical form differing from that of all the others. Experience teaches us, rather, that definite phenomena are repeated, now with greater exactitude, now with lesser, and recur in the variation of things. We call these empirical forms types. The same holds true of the relationships among concrete phenomena. These also do not exhibit a thorough individuality in every single case. We are able, rather, to observe without much difficulty certain relationships among them recurring now with greater, now with lesser regularity (e.g., regularities in their succession, in their development, in their coexistence), relationships which we call typical. The phenomena of purchase, of money, of supply and demand, of price, of capital, of rate of interest are examples of typical empirical forms of economy. On the other hand the regular drop in price of a commodity as a result of the increase in supply, the rise in price of a commodity as a result of an increase in currency, the lowering of the rate of interest as a result of considerable accumulation of capital, etc., present themselves to us as typical relationships among economic phenomena. The contrast between what we call general and individual phenomena, or general and individual knowledge of phenomena, respectively, is probably completely clear after what has been said.

The investigation of types and of typical relationships of phenomena is of really immeasurable significance for human life, of no less significance than the cognition of concrete phenomena. Without the knowledge of empirical forms we would not be able to comprehend the myriads of phenomena surrounding us, nor to classify them in our minds; it is the presupposition for a more comprehensive cognition of the real world. Without cognition of the typical relationships we would be deprived not only of a deeper understanding of the real world, as we will show further on, but also, as may be easily seen, of all cognition extending beyond immediate observation, i.e., of any prediction and control of things. All human prediction and, indirectly, all arbitrary shaping of things is conditioned by that knowledge which we previously have called general.

The statements made here are true of all realms of the world of phenomena, and accordingly also of human economy in general and of its social form, “national economy,”2 in particular. The phenomena of the latter we also can consider from the above two so thoroughly different points of view; and in the field of economy, also, we will thus have to differentiate on the one hand between individual (concrete) phenomena and their individual (concrete) relationships in time and space, and on the other between types (empirical forms) and their typical relationships (laws in the broadest sense of the word). Also in the field of economy we encounter individual and general knowledge, and correspondingly sciences of the individual aspect of phenomena and sciences of the general aspect. To the former belong history and the statistics of economy, to the latter theoretical economies; for the first two have the task of investigating the individual 3 economic phenomena, even if from different points of view. The latter have the task of investigating the empirical forms and laws (the general nature and general connection) of economic phenomena.4

The above contrast is not infrequently characterized, even if in a somewhat different sense, by the separation of the sciences into historical and theoretical. History and the statistics of economy are historical sciences in the above sense; economics is a theoretical science.5

Besides the two above large groups of sciences we must bear in mind here still a third one, the nature of which is essentially different from that of the two previously named: we mean the so-called practical sciences or technologies.

The sciences of this type do not make us aware of phenomena, either from the historical point of view or from the theoretical; they do not teach us at all what is. Their problem is rather to determine the basic principles by which, according to the diversity of conditions, efforts of a definite kind can be most suitably pursued. They teach us what the conditions are supposed to be for definite human aims to be achieved. Technologies of this kind in the field of economy are economic policy and the science of finance.

We will accordingly have to distinguish in the field of economy three groups of sciences for our special purposes: first, the historical sciences (history 6) and the statistics 7 of economy, which have the task of investigating and describing the individual nature and the individual connection of economic phenomena; second, theoretical economics, with the task of investigating and describing their general nature and general connection (their laws); finally, third, the practical sciences 8 of national economy, with the task of investigating and describing the basic principles for suitable action (adapted to the variety of conditions) in the field of national economy (economic policy and the science of finance).

By political economy, 9 however, we will understand that totality of the theoretical-practical sciences of national economy of the (theoretical economics, economic policy, and the science of finance) which at present are commonly grouped together under the above designation.10

 

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11 We use the expression “individual” here merely to designate the contrast to what is “general,” the contrast between concrete phenomena and phenomenal forms.12 The expressions “concrete” and “abstract” were avoided by us here intentionally, because they are ambiguous and furthermore do not characterize the above contrast exactly.

13 “Concrete phenomena” and “phenomenal forms” proved the best that could be done with Menger’s language at this point. It is quite literal, for Menger writes concreten Erscheinungen and Erscheinungsformen. Fortunately, the intent of his contrast is plain enough. L.S.

14 See Appendix I: “The Nature of National Economy.”

15 The “individual” is by no means to be confused with the “singular,” or, what is the same thing, individual phenomena are by no means to be confused with singular phenomena. For the opposite of “individual” is “general,” whereas the opposite of a “singular phenomenon” is the “collective phenomenon.” A definite nation, a definite state, a concrete economy, an association, a community, etc., are examples of individual phenomena, but by no means of singular phenomena (but of collective phenomena instead); whereas the phenomenal forms of the commodity, of the use value, of the entrepreneur, etc., are indeed general, but not collective phenomena. The fact that the historical sciences of economy represent the individual phenomena of the latter by no means excludes their making us aware of these from the collective point of view. However, the contrast between the investigation and description of the individual and the general aspect of human phenomena is always what distinguishes the historical social sciences from the theoretical.

16 Theoretical economics has the task of investigating the general nature and the general connection of economic phenomena, not of analyzing economic concepts and of drawing the logical conclusions resulting from this analysis. The phenomena, or certain aspects of them, and not their linguistic image, the concepts, are the object of theoretical research in the field of economy. The analysis of the concepts may in an individual case have a certain significance for the presentation of the theoretical knowledge of economy, but the goal of research in the field of theoretical economics can only be the determination of the general nature and the general connection of economic phenomena. It is a sign of the slight understanding, which individual representatives of the historical school in particular have for the aims of theoretical research, when they see only analyses of concepts in investigations into the nature of the commodity, into the nature of economy, the nature of value, of price and similar things, and when they see “the setting up of a system of concepts and judgments” in the striving for an exact theory of economic phenomena (cf. particularly Roscher’s Thukydides, p. 27). A number of French economists fall into a similar error when, with an erroneous view of the concepts “theory” and “system,” they understand by these terms nothing more than theorems obtained deductively from a priori axioms, or systems of these (cf. particularly J. B. Say, Cours [1852], I, p. 14 ff. Even J. Garnier says “C’est dans le sens de doctrine erronnée qu’on prend le mot ‘système’ en économie politique.” Traité d’Econ. Pol. [1868], p. 648).

17 Cf. below Appendix II: “The Concept of Theoretical Economics and the Nature of Its Laws.”

18 Knies (Pol. Oek. [1853], p. 3 ff.) specifies the problem of economic history in the following way: “It has the task of comprehending and describing not only the historical development of theory of economics, the intentions and the practice of the general state powers for the fulfillment of their needs in material goods and for the furthering of national economic interests, but also the economic conditions and developments in the real life of various nations and times.” To us the problem of scientific economic history seems to be a threefold one: 1. the investigation of the sources of economic history, 2. the external and internal criticism of these sources, 3. the description of the development of those collective phenomena which we call “economy” on the basis of the historical material thus obtained. The more comprehensive the study of the sources, the more careful and methodical the criticism of them, and the greater the art of description, so much the more will the historian succeed in offering us a coherent picture of the economic history of single nations, of certain groups of nations, or else of humanity that does justice to the real conditions. On the other hand, the procedure of those people seems unscientific to us who merely compile from collected works the economic history of nations, without going back to the sources and without exercising the slightest critical check on them. In particular, the procedure of those who offer a more or less externally arranged mass of historical material, but no coherent picture of economic developments, and designate such collections of more or less uncritical notes as history seems still more unscientific.

19 Statistics, as a historical science, has the same problems to solve as history, yet not in respect to the development, but to the state of societies. Uncritical compilations, or merely superficial arrangements of statistical material lacking higher unity, do not come within the domain of scientific description. The definitions of historical statistics as “history at rest,” as “the average of historical development,” as “description of society at a definite point in time,” and other such concepts allow a great variety of misinterpretations of the true nature of this science. Historical statistics does not have the task of offering us the external picture of society at a definite point of time, which, in accordance with the selection of this point, could not help being extremely deviant and extremely incomplete, considering the totality of the life of the people. Rather, it has the task of offering a description of all factors of social life (even the ones latent at a given moment) from which the movement of society results, while history has to portray this movement itself. To be distinguished from statistics, as a historical science, are the statistical data obtained from mass observations, which, in contrast to historical statistics as well as to theoretical statistics, present themselves as mere scientific material. Historical sources brought to light and even critically determined historical facts are not “history” per se, and in the same way mere statistical material cannot be designated as “statistics.” Also the method for obtaining statistics, as really should be obvious, must be differentiated from the scientific description of statistical results. “Statistics as a science” can never be merely a method. What is commonly called “the theory of statistics” is usually by its nature the methodology (so-called theory of cognition!) of this science. More correctly only the results of a truly theoretical consideration of statistical material, the laws of the coexistence and the succession of social phenomena, should be designated as theoretical-statistical knowledge and the totality of these should be designated as theoretical statistics. The “laws of great numbers” form the most important constituent but by no means the exclusive content of theoretical statistics.

20 Cf. Appendix III: “The Relationship of the Practical Sciences of National Economy to Economic Practice and to Theoretical Economics.”

21 Montchrêtien Sieur de Vateville, who in 1615 brought out his Traicté de l’économie politique in Rouen with Jean Osmont, is mentioned as the first to use the expression “political economy” (économie politique). This expression, which has attained such wide circulation, is found however only on the title page of the work, not in the royal patent, where this is designated as Traicté économique du profit, nor anywhere in the text. It seems, therefore, to have been the result of a momentary inspiration of the author; perhaps it was borrowed from a piece of contemporary writing after the type of the text was set. The work, which is divided into three books, on trade, commerce, and shipping, is chiefly practical economics (cf. J. Gamier, Journal des économistes [Aug.-Sept., 1852]. Duval, Mémoire sur Antoine de Montchrétien [Paris, 1868]). The expression “political economy” is probably indicated already in the pseudo-Aristotelian economics, yet only in the sense of the economy of a city. In medieval Latin the word politia, more frequently still politica, is used in the sense of art of government (in the oldest glosses these expressions are translated with: “statordenunge, regiment eyner stat, kunst von der regierung der stat, ein kunst von statten zu regieren”).22 Oeconomia usually had in medieval Latin the meaning of praedium, villa rustica; Oeconomus the meaning of steward, defensor, advocatus, etc. The combination of the two expressions I have found nowhere else among early writers, not even in the church fathers (cf. Du Cange [1845], V, 333 ff. and IV, 696, Laur. Diefenbach, Glossarium Latino-german. [1857], p. 445). The writings which appeared before Montchrétien, always in connection with Aristotelian terminology, deal with politics, or with economics, but never with political economy.

23 Cf. Appendix IV: “The Terminology and the Classification of the Economic Sciences.”

24 “City order, government of a city, art of governing the city, art of governing cities.” FJ.N.

• 1Beside the present work the only examples that come to mind of works translated into English after eighty years are both classics: Richard Cantillon, Essai sur la Nature du Commerce en General (1752) in 1933, and Hermann Heinrich Gossen, Entwickelung der Gesetze des Menschlichen Verkehrs (1845) in 1983.
• 2Carl Menger, Problems of Economics and Sociology (Urbana: University of Illinois Press, 1963). The present title attempts to render literally the wording of the original German title.
• 3For specific evidence consult the Social Science Citation Index for various recent years. A brief selected bibliography of the doctrine-historical literature on Menger up to 1981, compiled by Richard Ebeling, appears in Carl Menger, Principles of Economics (New York: New York University Press, 1981), p. 10.
• 4Friedrich A. Hayek, Law, Legislation and Liberty, volume 1, Rules and Order (Chicago: University of Chicago Press, 1973), p. 147 n. 5. The index of this volume lists six references to Menger; all of them are to the Investigations.
• 5L. M. Lachmann, The Legacy of Max Weber (Berkeley: The Glendessary Press, 1971), esp. pp. 55–60. In these pages Lachmann also criticizes the deterministic arguments made by Menger in the Investigations. We return to this below.
• 6Gerald P. O’Driscoll and Mario J. Rizzo, The Economics of Time and Ignorance (Oxford: Basil Blackwell, 1985), p. 20.
• 7Ludwig von Mises, Human Action, 3rd rev. ed. (Chicago: Henry Regnery, 1966), pp. 1–117. Ludwig M. Lachmann, “Ludwig von Mises and the Extension of Subjectivism,” in Israel M. Kirzner, ed., Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises (Lexington, MA: Lexington Books, 1982), p. 32, states that Mises “saw in Menger’s distinction between ‘exact laws’ and empirical regularities the pivot of Austrian methodology,” but unfortunately provides no reference to textual evidence of this. I could not find in Mises’s writings any comment on this aspect of the Investigations.
• 8F. A. Hayek, “Carl Menger,” reprinted as the introduction to the 1981 edition of Menger, Principles of Economics, p. 12.
• 9There is no need to relate here the doctrinal history of Austrian methodology generally. I have tried to do that elsewhere: Lawrence H. White, The Methodology of the Austrian School Economists (Auburn: Ludwig von Mises Institute of Auburn University, 1984).
• 10A rather detailed account of the debate that ensued—the famed Methodenstreit—is offered by Samuel Bostaph, “The Methodological Debate Between Carl Menger and the German Historicists,” Atlantic Economic Journal 6 (September 1978): 3–16.
• 11It is a rare book in economics that deserves to be translated into English as much as eighty years after its initial publication. The book that actually receives such attention after so many years almost ipso facto qualifies as a classic. Carl Menger’s Untersuchungen uber die Methode der Socialwissenschaften und der Politischen Oekonomie Insbesondere of 1883 clearly merited the translation that it finally received in 1963 (under the title Problems of Economics and Sociology), for there is no doubt about its preeminence as a treatment of vital methodological issues in economics. When this translation fell out of print in recent years, the Institute for Humane Studies and the New York University Press became naturally eager to reissue it as part of their series of Studies in Economic Theory. This series includes the 1981 edition of Menger’s only other book-length work, Principles of Economics, which was first published in 1871. Thus the Investigations takes its well-deserved place alongside the Principles as a classic of economic thought enjoying a second century of life in a new language.
• 12a “Concrete phenomena” and “phenomenal forms” proved the best that could be done with Menger’s language at this point. It is quite literal, for Menger writes concreten Erscheinungen and Erscheinungsformen. Fortunately, the intent of his contrast is plain enough. L.S.
• 13We use the expression “individual” here merely to designate the contrast to what is “general,” the contrast between concrete phenomena and phenomenal forms.a The expressions “concrete” and “abstract” were avoided by us here intentionally, because they are ambiguous and furthermore do not characterize the above contrast exactly.
• 14It is a rare book in economics that deserves to be translated into English as much as eighty years after its initial publication. The book that actually receives such attention after so many years almost ipso facto qualifies as a classic. Carl Menger’s Untersuchungen uber die Methode der Socialwissenschaften und der Politischen Oekonomie Insbesondere of 1883 clearly merited the translation that it finally received in 1963 (under the title Problems of Economics and Sociology), for there is no doubt about its preeminence as a treatment of vital methodological issues in economics. When this translation fell out of print in recent years, the Institute for Humane Studies and the New York University Press became naturally eager to reissue it as part of their series of Studies in Economic Theory. This series includes the 1981 edition of Menger’s only other book-length work, Principles of Economics, which was first published in 1871. Thus the Investigations takes its well-deserved place alongside the Principles as a classic of economic thought enjoying a second century of life in a new language.
• 15The republication of the Investigations today is especially appropriate in light of the interest that economists have recently been taking in this work, in the writings of Carl Menger generally, and (still more generally) in the ideas of the Austrian School of Economics he founded. In his introduction to the 1963 edition of this work Louis Schneider wrote (p. 3): “Neither economists nor sociologists working in the English language have paid any notable attention to the Untersuchungen.” Since that edition appeared the situation has noticeably changed. The Investigations has been garnering numerous citations each year by authors in major economics journals, at a rate only slightly slower than that of the Principles. Citations to these and to Menger’s other works are by no means found exclusively in articles concerned with the history of economic thought.
• 16Much more evidence of Mengerian scholarship appears outside the narrow confines of the journals, in recent books and monographs by members and critics of the modern Austrian School. The direct influence of Menger’s Investigations on F. A. Hayek, noted by Schneider (pp. 12, 16) with particular regard to The Constitution of Liberty, continues to be evident in Hayek’s more recent Law, Legislation, and Liberty, particularly the first volume of this triology. In criticizing the view that such social institutions as law, language, money, and markets were deliberately designed or rationally constructed, Hayek comments that the Investigations “contains still the best earlier treatment of these problems.”
• 17Menger’s insight into the spontaneous character of economic and social orders has also had an unmistakable importance for other “Austrian” economists. Ludwig M. Lachmann, the second prominent elder statesman of the Austrian School, has pointed out the impact of the Investigations on the thought of the great sociologist Max Weber, whose views on institutions Lachmann endeavors to develop in The Legacy of Max Weber. The younger economists Gerald P. O’Driscoll, Jr. and Mario J. Rizzo, in a very recent restatement and extension of Austrian economics, enunciate a research program derived in part explicitly from the Investigations. Menger (p. 146) considered it “perhaps the most noteworthy . . . problem of the social sciences” to ask: “How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?” Menger and his heirs have, of course, offered answers that describe ways in which individual self-seeking actions can coalesce. In light of this O’Driscoll and Rizzo rephrase the question a bit more programatically: “More precisely, our self-imposed question is: How can individuals acting in the world of everyday life unintentionally produce existing institutions or, more generally, the overall pattern of social interactions?” Thus Menger’s research agenda, put forth in the Investigations, lives on.
• 18Menger’s insight into the spontaneous character of economic and social orders has also had an unmistakable importance for other “Austrian” economists. Ludwig M. Lachmann, the second prominent elder statesman of the Austrian School, has pointed out the impact of the Investigations on the thought of the great sociologist Max Weber, whose views on institutions Lachmann endeavors to develop in The Legacy of Max Weber. The younger economists Gerald P. O’Driscoll, Jr. and Mario J. Rizzo, in a very recent restatement and extension of Austrian economics, enunciate a research program derived in part explicitly from the Investigations. Menger (p. 146) considered it “perhaps the most noteworthy . . . problem of the social sciences” to ask: “How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?” Menger and his heirs have, of course, offered answers that describe ways in which individual self-seeking actions can coalesce. In light of this O’Driscoll and Rizzo rephrase the question a bit more programatically: “More precisely, our self-imposed question is: How can individuals acting in the world of everyday life unintentionally produce existing institutions or, more generally, the overall pattern of social interactions?” Thus Menger’s research agenda, put forth in the Investigations, lives on.
• 19The Investigations has clearly had direct and important bearing, and an indirect influence conveyed through the writings of Hayek and Lachmann, on the writings of the Austrian School of today. Yet in many respects the School has outgrown or rejected Menger’s methodological outlook, and it cannot be said that current Austrian methodological views derive predominantly from Carl Menger. Much of Menger’s argument has been filtered out, as it were, particularly by the writings of Ludwig von Mises in the midtwentieth century. It is noteworthy that the early chapters of Mises’s influential treatise Human Action, which discuss methodology, contain not a single reference to Menger’s Investigations. Hayek could say of the Austrian School in 1934 that, with respect to theoretical analysis, “its fundamental ideas belong fully and wholly to Carl Menger.” No one could say the same today with respect to methodology.
• 20The Investigations has clearly had direct and important bearing, and an indirect influence conveyed through the writings of Hayek and Lachmann, on the writings of the Austrian School of today. Yet in many respects the School has outgrown or rejected Menger’s methodological outlook, and it cannot be said that current Austrian methodological views derive predominantly from Carl Menger. Much of Menger’s argument has been filtered out, as it were, particularly by the writings of Ludwig von Mises in the midtwentieth century. It is noteworthy that the early chapters of Mises’s influential treatise Human Action, which discuss methodology, contain not a single reference to Menger’s Investigations. Hayek could say of the Austrian School in 1934 that, with respect to theoretical analysis, “its fundamental ideas belong fully and wholly to Carl Menger.” No one could say the same today with respect to methodology.
• 21The distinctness of the Austrian tradition in economics is correctly attributed to the consistency with which members of the school have employed a common method of analysis, namely one rooted in subjectivism. Yet the defense of this method—the explicit methodology of the school’s members—has rarely been alike from one writer to the next. It should therefore not be surprising that from a modern Austrian standpoint the Investigations receives a somewhat mixed review.
• 22b “City order, government of a city, art of governing the city, art of governing cities.” FJ.N.
• 23As Menger indicates in his Preface, the Investigations was originally written for the sake of German economists of the late nineteenth century. It was intended to be a methodological house-cleaning, to clear away in particular the antitheoretical attitudes of the dominant Historical School. For this reason three of four sections (“Books”) of the work have “Historical” in their titles and focus on the proper role of history in economic studies. Books Two and Four are particularly oriented in such a then-topical way that the modern reader will naturally take greater interest in Menger’s more sweeping statements than in the details of his argument against particular historicist doctrines. In the present state of economics antitheoretical historicism is an annoyance occasionally encountered rather than a reigning orthodoxy demanding to be overthrown. This state of affairs is of course due to the success of the “neoclassical” tradition in theoretical economics which Menger’s own Principles helped to launch. Nonetheless it is the rare page of the present work that does not have several sentences worth underlining today. It is a measure of Menger’s stature as a social scientist that what might have been solely a tract for his times holds so many passages of enduring importance.
• 24Montchrêtien Sieur de Vateville, who in 1615 brought out his Traicté de l’économie politique in Rouen with Jean Osmont, is mentioned as the first to use the expression “political economy” (économie politique). This expression, which has attained such wide circulation, is found however only on the title page of the work, not in the royal patent, where this is designated as Traicté économique du profit, nor anywhere in the text. It seems, therefore, to have been the result of a momentary inspiration of the author; perhaps it was borrowed from a piece of contemporary writing after the type of the text was set. The work, which is divided into three books, on trade, commerce, and shipping, is chiefly practical economics (cf. J. Gamier, Journal des économistes [Aug.-Sept., 1852]. Duval, Mémoire sur Antoine de Montchrétien [Paris, 1868]). The expression “political economy” is probably indicated already in the pseudo-Aristotelian economics, yet only in the sense of the economy of a city. In medieval Latin the word politia, more frequently still politica, is used in the sense of art of government (in the oldest glosses these expressions are translated with: “statordenunge, regiment eyner stat, kunst von der regierung der stat, ein kunst von statten zu regieren”).b Oeconomia usually had in medieval Latin the meaning of praedium, villa rustica; Oeconomus the meaning of steward, defensor, advocatus, etc. The combination of the two expressions I have found nowhere else among early writers, not even in the church fathers (cf. Du Cange [1845], V, 333 ff. and IV, 696, Laur. Diefenbach, Glossarium Latino-german. [1857], p. 445). The writings which appeared before Montchrétien, always in connection with Aristotelian terminology, deal with politics, or with economics, but never with political economy.