Abstract
The relevance of the Historical School for modern development economics arises not only from its members’ methodological contributions, but also from the research findings and concepts that emerged from applying this methodology on problems of economic development. A particularly notable example is the attempts to identify typical development paths and stages of economic development. This research entered into the development of the concept of the economic system by Werner Sombart, who devised it as an analytical tool to distinguish alternative ways of organising economic life from an historical perspective. Sombart’s economic systems finally served Arthur Spiethoff as the basis for the formulation of his concept of economic styles, which, as will be shown in Chap. 13, embraces in a single concept all demands on a theoretical framework for the study of today’s low-income countries.
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Notes
- 1.
For a more comprehensive review and critique of the older stage theories see Sombart (1925, pp. 6–14), and Spiethoff (1932, pp. 901–910).
- 2.
For Schmoller’s historical stage theory see Schmoller (1884), as well as Schmoller (1923a, b). See also Schefold (1989, p. 91ff).
- 3.
See, for instance, Sombart (1925).
- 4.
Sombart rejected Karl Bücher’s theory by noting that the distance between producer and consumer had actually not varied much over the different periods of economic life (for the full argument see Sombart, 1925).
- 5.
The definition and use of “ideal types” in economics can be traced back to Max Weber (1904). Ideal types, in Weber’s sense, represent deliberate mental constructs (“utopias”) formed by the scientist to understand the essential properties of his subject of research. They are obtained by a one-sided exaggeration of one or more characteristics which are unified into a single picture that is, however, never to be found empirically in the real world. Although the ideal type is a model or construct, it differs from the abstract models of pure (or general) theory that are encountered particularly in the natural sciences. While the latter arrive at generalisations by isolating a few phenomena from observed reality, Weber’s ideal types describe an ideal picture with which the scientist can compare time-conditioned historical situations and institutional patterns. Redlich (1970) proposed that the idea of real types can be expressed as models by reduction, while ideal types represent models by construction. For the exact or natural sciences, the formulation of abstract models is often their main objective of research. In the social sciences, however, ideal types are means, not ends, of the investigation. As Lane and Riemersma (1953) note, the conceptualisation by Sombart of his economic systems as “ideal types” does not exactly correspond with the use of ideal types in Weber’s sense, as Sombart did not develop his economic systems purely as mental constructs, but with reference to concrete empirical evidence from historical situations in Europe in both medieval and modern times. As will be further discussed in Sect. 12.2.1, Spiethoff also used ideal type models in Sombart’s sense, but furthermore proposed the notion of “real types” to define models that represent the totality of all essential and uniform pattern of a specific historical (i.e. time-conditioned) reality (see Spiethoff 1948, p. 571; and Spiethoff, 1953 for an English translation by Fritz Redlich).
- 6.
Sombart (1925, p. 30) defined as an epoch a historical period during which a specific economic system is realised, that is, during which economic life displays specific characteristic patterns that correspond with the attributes of a particular economic system.
- 7.
Schmoller, as well as Karl Marx, had already used organisation and technique, respectively, as parameters to distinguish between different economic periods. The specific contribution that Sombart made was the introduction of the economic spirit as a further defining element (Lane and Riemersma 1953).
- 8.
Sombart actually identified as the historically most important economic systems in Europe (i) the early subsistence economy, (ii) the crafts and (iii) capitalism.
- 9.
In an inquiry into the economic style of Eastern European transition economies, Backhaus (1997) avails himself of the open nature of Spiethoff’s concept by adding three new categories to it: First, the social constitution (Sozialverfassung) as a central element of the modern welfare state; second, the fiscal constitution (Steuerverfassung) which is closely associated with the social constitution; and finally, the international order and global governance structure (internationale Verankerung in Bündnissen und Vertragswerken) as a third new and nowadays increasingly significant category.
- 10.
In the German original, Spiethoff writes: “Für jeden […] Stil ist eine Allgemeine Volkswirtschaftslehre möglich. Für ihn hat sie Allgemeingültigkeit, für ihn ist sie eine echte Theorie. Aber sie gilt nur für ihren eigenen Stil, nicht darüber hinaus, nicht für alles Wirtschaftsleben, nicht für das aller Zeiten”.
- 11.
In the German original, the complete quote reads: “Ein neues Verfahren in der Auswertung der alten Theorie ist es, aber keine neue Theorie”. Spiethoff, a pupil of Schmoller, was his long-time assistant and later editor of Schmollers Jahrbuch. He was closely involved into Schmoller’s work at the Grundriß, and was later both friend and advisor to Schmoller’s wife Lucie, who finalised the publication of the second and fully revised edition of the Grundriß in 1923.
- 12.
A concrete example for this is Spiethoff’s important work in business cycle theory (Spiethoff 1925), on which he based his later book Die Wirtschaftlichen Wechsellagen: Aufschwung, Krise, Stockung (Tübingen: Mohr 1955).
- 13.
Fritz Redlich, in his translation of texts by Spiethoff, considered “economic gestalt theory” the best conceivable translation of anschauliche Theorie as the method creates theories by isolating the gestalt of economic and social systems. Others have found still further translations. Among these are “empirical-realistic theory”, “concrete theory”, “historical-concrete theory”, “observational theory”, “essential-intrinsic theory” (E. Salin), “realistic theory” (Hero Möller) and “all-round sociological theory” (H. W. Singer). The German name “anschauliche Theorie” was first coined by Edgar Salin in a review article of Sombart’s Der Moderne Kapitalismus (Salin 1927).
- 14.
A third approach that Spiethoff (1952) describes in his original discussion is economic history. The approach of economic history is concerned with unique historical cases that are not susceptible to theoretical treatment because they display no regularities.
- 15.
Essential are those phenomena which appear to be causes or conditions of the phenomenon under investigation, or at least indicative for these causes and conditions (Spiethoff 1953, p. 446).
- 16.
As theories are built to explain regularities in economic life, Spiethoff rightly notes that only factors that uniformly affect a phenomenon of interest are susceptible to theoretical treatment.
- 17.
Elsewhere, Spiethoff (1948) described the methodology of economic gestalt theory as follows: The scientist first establishes the object and scope of analysis in a “system of meaning” (Sinneszusammenhang). By a process of inductive reasoning, he then sets out to delimit unique phenomena and selects those of their characteristics which, in relation to that system of meaning, are regular and essential. That way, economic gestalt theory finally arrives at a generalising presentation of the uniformities of a discrete species of phenomena.
- 18.
For example, the homo economicus can be regarded as an ideal type model of man in that it originates in the scientist’s mind by exaggeration of certain elements in observed reality, but still remains a synthetic construction that has no necessary counterpart in real life. For a further definition and distinction between ideal and real types, see footnote 5.
- 19.
It has to be emphasised that “historical” (geschichtlich) does not imply that a theory deals only with the past. In fact, the German word “geschichtlich”, as Spiethoff uses it, has wider connotations than in the English usage in that it denotes all temporary (i.e. time-bound) economic conditions, even if they may appear, at first sight, nonhistorical. Elsewhere (Spiethoff 1932, p. 922), he differentiates between bedingte (conditioned) and unbedingte or zeitlose (unconditioned or timeless) theory to denote the same distinction as between historical and nonhistorical theory.
- 20.
Elsewhere (1953), Spiethoff differentiates between objective causality (Sachkausalität) and motivational causality (Motivkausalität). The former relates to phenomena that are “explained” by objective factors that caused them. Through the latter kind of causality, phenomena are “understood” as expressions of the specific motives that govern individual choices.
- 21.
Much of his critique of the historical method in general, and Spiethoff’s concept of economic styles, is laid down in Eucken (1950). Supplementary readings include Eucken (1938, 1940).
- 22.
The economic order or system is a central theme in all of Eucken’s work. In his Foundations, he defines it as to “comprise the totality of forms through which the everyday economic process at any particular time or place, past or present, is actually controlled (Eucken 1950b, p. 227). He further remarks that only few economic systems have been intentionally designed on the basis of certain constitutional principles or a comprehensive plan, while most evolved in the course of history and were shaped, among others, by existing natural and technical conditions, the motivations and interests of economic actors, or the rules, conventions and institutions which emerged in the course of the everyday economic process. In contrast, constitutions or legal systems rarely determine the character of an economic system, but rather codify already existing elements of the economic system.
- 23.
See Table 12.2.
- 24.
Moreover, he urged economists to approach the theoretical analysis of complex economic phenomena by breaking them down into their different components, namely into the subsystems which have evolved through time, and which only function as part of a particular economic order or system, and thus can only be understood in the context of the structure of this larger system.
- 25.
In German original, Eucken spoke of this method as “pointierend hervorhebende Abstraktion” (Eucken 1950a, p. 123).
- 26.
On a discussion of the methodological difference between real types and ideal types see footnote 5 and Sect. 12.2.1.
- 27.
The demise of the Historical School’s contextual economics in favour of the isolated analysis of neoclassical economics also has its reason in the conservation of economic forms and systems on both sides of the Iron Curtain during the Cold War. This situation kept economic systems and their interrelations with other areas of societies relatively stable, and hence favoured the isolated analysis of economic phenomena without consideration of context-specific influences from political, social or cultural spheres on economic outcomes.
- 28.
The only texts by Spiethoff available in English are the translations by Fritz Redlich (see Spiethoff 1952, 1953; Redlich 1970).
- 29.
See, for instance, Ludwig (1988) on Spain; Ammon (1994) on France; Stemmermann (1996) on Italy; Ackermann (1996) on Japan; Nienhaus (1996) on Islamic countries; Rudner (1996) on Mexico; Hickmann (1996) on France, Germany and Russia; Müller-Pelzer (1997) on France; Hermann-Pillath (2005) on China; Rossi (2006) on France and Italy; and Wrobel (2007) on Europe, Russia and China.
- 30.
Additional reading on the works of Thorstein Veblen, John R. Commons, Wesley C. Mitchell, John M. Clark and other American Institutionalists can be found in Grunchy (1947). Hodgson (2004) offers a contemporary account of the rise, fall and potential rebirth of old institutional economics.
- 31.
In spite of the common ground that the German Historical and the American Institutional Schools of Economics share, Veblen also refused to consider the Historical School a modern, evolutionary science. That was, however, not because he did not recognise their understanding of the evolutionary nature of economic processes. Rather did Veblen consider their historical-empirical research as falling short of being science due to the lack of theoretical formulation of their results – a shortcoming that in particular Spiethoff and other members of the “youngest” Historical School saw and sought to overcome.
- 32.
See Sect. 13.1 for a discussion of the methodological contributions of the Historical School of Economics.
- 33.
This conclusion draws on a comment by Erik Reinert to an earlier version of this book, and I am very grateful to him for pointing out to me the additional support for a context-sensitive economic theory that the old American Institutional School of Economics can provide.
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Altmann, M.P. (2011). From Stage Theories to the Concept of Economic Styles. In: Contextual Development Economics. The European Heritage in Economics and the Social Sciences, vol 8. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-7231-6_12
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