If there exists a crisis in the economy – which few would deny – is it conceivable that it had nothing to do with the way economics is actually practised within the profession of economists, within the scholarly world where economic matters are debated? Analysts, consultants, etc. form a world where academics also have their say. As a matter of fact, the argument of self-realizing prophecies emphasizes the role of what is being done in the ‘laboratories’ where economics is tested, if not exactly as it is in others, regarding physics or chemistry, yet increasingly similarly. Except that, in economics, some say that one actually more easily takes liberties with scientific consistency… 2

All in all, what has been deemed inefficient, or insufficient at the very least, is the commonplace vulgarly positivistic position that was adopted by most of the economic profession (the so-called ‘mainstream’) after Milton Friedman’s more than fifty-year-old essay in ‘positive methodology’.3 The paradox is to a certain extent that that position was already outdated among philosophers by the time it was formulated within economics. Its devastating appeal was nevertheless that it provided economists with a refuge against questions and issues that attempting to answer would perhaps bother them too much. Friedman had built a home for economists to dwell in without bothering about any other concern, especially not any that would require them to think about the fundamentals and the hypotheses of their own set of scientific standards. That being regarded as given, then it was comfortable to sit and talk between themselves: that is the main criticism that was later made and how critics of such an attitude reproached ‘mainstream’ economists with being ‘autistic’.4 Now, one may indeed argue that methodology should not be

the first concern of economists, and that they had better do economics first. However, the issue is whether methodology is all that useless, and if, in times of crisis, on the contrary, it may not become absolutely necessary. At least, that was the opinion of such great economists and thinkers as Carl Menger and Max Weber, the former being one of the main authors studied in this volume. When taking into account what they said, the debates that exist nowadays appear in a new light and seem quite important – but also quite repetitive.5 In times of crisis, it is unavoidable and urgent to display the deadlocks where the discipline has erred. That is possible only in resorting to the underlying methodological and conceptual framework. It matters principally when a process of revision of science has become so important that a whole set of dominant scientific standards needs to be debated again. To re-use an already ‘old’ epistemological frame and the notion of ‘para-

digm’ proposed by Thomas Kuhn,6 let us say that methodology matters in particular at times when it provides new conceptual frames for ancient problems previously left unsolved. How, in the nineteenth century, classical political economy lost its momentum, that was one of those great moments for the development of the field. In our eyes, one of the best ways to question that and give full attention to that analysis is to see precisely how that happened within German economic thought, both at the beginning and at the end of the so-called ‘German Historical School’: first, after the Napoleonic blockade, when both classical theory penetrated and British manufactured goods invaded Germany. Theory was soon at a loss in the face of German developmental realities towards opening up trade between regions and productive facilities, whereas massive imports of goods from Britain tended to nip them in the bud and made the Ricardian theory of ‘compared individual advantages’ look mostly like mere propaganda both for countries and economic agents,7 etc. The Ricardian frame is precisely what German economists, who wished that their country took its proper place among the civilized world, but were contradicted by its lack of political unity and economic power, would indeed first strongly doubt and then vehemently question. German philosophers would first both welcome and digest, then somehow, and for different reasons according to their own metaphysical schemes, put into practice those ideas that had come from a country that was at the same time a model and a threat from above. Economists too would then wonder how to ‘save’ ‘little Germany’, with its piecemeal principalities and kingdoms, politically a dwarf, in spite (or rather because) of the loose and moth-eaten frame of the Holy Roman Germanic Empire reactivated at the Vienna Congress in 1815; how to build a true nation upon the basis of a people conscious of its potential grandeur, which Fichte’s discourses (the Reden an die deutsche Nation for instance) had displayed. The question of the critique addressed to classical political economy is also, first and foremost, that question. Now, and secondly, it is at the other end of the nineteenth century, in its

last third, that the new matrix that the German Historical School had indeed brought, and whose domination was now achieved, was shaken in its turn.

The academia of an empire that had become the first power in exporting manufactured goods, as early as 1900, and the most stable German power that had ever existed was led by Gustav Schmoller, who had renewed the framework built by Wilhelm Roscher in the 1840s, but the crisis of knowledge was there: the Historicists had renounced the original ambition of science in an inexpiable way, explained Menger. The Austrian economist then debased both frames of the confronting classical and historical schools, reworked at the level of basic concepts, where philosophy and economics come together. That is why it is proposed in this volume to enquire into both times, when the Historical school was born and when it was debased (if not totally defeated), in order to make a little more explicit that common ground that is the substance of matrix changes and of in-depth understanding of scientific matters: the philosophy of it, its origins and consistency – to put it in a nutshell, its ‘economic philosophy’, which it is the task of the historian of ideas, the philosopher and the economist conscious that he/she works within some given framework to exhume and to explore. The field labelled Volkswirtschaftslehre or Nationalökonomie is therefore

the topic of this book. When we examine ‘German thinking in economics’, we ought to direct our interest towards German-speaking countries, including what is now Austria, on the one hand, and what the eastern marches of territories of Germanic civilization (Kultur) were during periods when it was all fragmented, or later encompassed within the two great Germanic empires, the Prussian-based one and the Austro-Hungarian empire, on the other hand. Some traits also relate Dutch-speaking areas to Germanic territories, traits commonly shared at an earlier period, in the Teutonic form of Mercantilism that Cameralism was – when Austrian Imperial Cameralists such as Becher, Hörnigk and Schröder advocated the union of all territories of Germanic ancestry against the ambitions of the French ‘Sun King’ Louis XIV to ‘universal monarchy’ over the whole of Europe. But they then diverged and, to a certain extent, the great people of that geographically ‘small’ country, the Netherlands and Flanders, followed their own destiny away from the issues at stake in more eastern territories, in places that changed from the Holy Roman Empire to the German Second Reich. The latter was proclaimed in the ‘Galerie des glaces’ of the Palace of Versailles in 1871. It was to collapse in the defeat of the First World War. The Austro-Hungarian empire also collapsed in 1918. The consequence of the fall of the two empires of central Europe (as well as, in the east, of Czarist Russia where power fell into the hands of the Bolshevik Party) was to mark the end of a ‘long nineteenth century’ whose order was to fall prey to tyrants worse than Napoleon. During this span of time, from the 1800s to 1919, German territories had

exited what Marx called the Idiotismus of rural life to enter Modernity and the bustling industrial, urban and business world. Not only forging a politically unified empire – something generations of German wished for – but becoming a first-rank worldwide economic power was a task that changed the face of Europe, the world and contributed to give Modernity some of its

lasting features. Amid all the factors that had contributed to that change, a few of which we shall recall here briefly, one aspect in particular will be the focus of this volume: the role played by ideas. What we present to the reader is purposely an ‘intellectual history’ or a ‘history of ideas’. Socio-economic circumstances in those large territories – basically most of

central continental Europe – were as different as thinking was, in a sense, unified, especially through the kind of ‘official thought’ whose standards were set by academic institutions that were more or less established by the end of the eighteenth century. The nineteenth century would develop them so well that one cannot but notice some remarkable homogeneity in approaches and attitudes towards common ‘values’ and/or ‘debates’. Disputes among scholars – which will be of much interest to us here – are therefore not only limited to some level of speculation situated ‘high above in the skies’ – which is also sometimes the case – but noticeably concrete and quite directly related to socio-economic realities, especially as governing bodies became aware and demanding of the ideas born therein. Especially in the second half of the nineteenth century, the influence of scholars had been tremendous in German-speaking territories, preparing those ‘brains trusts’ that we have become accustomed to, on the one hand, but using more direct influential positions, on the other hand, utilizing levers that would have been impossible in more democratic regimes, where assemblies and parliaments play the major role in any case: Schmoller’s leadership on the Union for Social Policy (Verein für Socialpolitik) from Berlin, Menger’s tutorship over Crown Prince Rudolf in Vienna are clear examples of that situation. In the perspective set here, ‘causal explanation’ comes first in order to

understand the linkage between ideas. As Menger stated, in the opening sentence of his masterwork in the field of economic theory, his Principles of Political Economy (Grundsätze der Volkswirtschaftslehre) published in 1871: