Gustav von schmoller and adolph wagner legacy and lessons for civil society and the state

Frambach The contributions to this volume of The European Heritage in Economics and the Social Sciences series are dedicated to Gustav Schmoller and Adolph Wagner, haps the most eminent

The European Heritage in Economics and the Social Sciences

Series Editors: J G Backhaus · G Chaloupek · H.A Frambach

Gustav von

Schmoller and Adolph Wagner

Jürgen Backhaus

Günther Chaloupek

Hans A Frambach Editors

Legacy and Lessons for

Civil Society and the State

The European Heritage in Economics and the Social Sciences

The European heritage in economics and the social sciences is largely locked in languages other than English Witness such classics as Storch’s Cours d’Economie Politique, Wicksell’s Finanztheoretische Untersuchungen and Geld, Zins und Güterpreise or Pareto’s Trattato di Sociologia Generale Since about 1937, partly caused by the forced exodus of many scholars from the German language countries and the international reactions to this event, English has become the undisputed primary language of economics and the social sciences For about one generation, this language shift did not result in a loss of access to the European non-English sources However, after foreign language requirements were dropped as entry pre-requisites for receiving the PhD at major research universities, the European heritage

in economics and the social sciences has become largely inaccessible to the vast majority of practicing scholars

In this series, we hope to publish works that address this problem in a threefold manner An aspect of the European heritage in a language other than English should

be critically documented and discussed, reconstructed and assessed from a modern scientific point of view, and tested with respect to its relevance for contemporary economic, social, or political discourse

We welcome submissions that fit this bill in order to make the European heritage

in economics and the social sciences available to the international research community of scholars in economics and the social sciences

More information about this series at http://www.springer.com/series/5902

Jürgen Backhaus • Günther Chaloupek Hans A Frambach

ISSN 1572-1744 ISSN 2197-5892 (electronic)

The European Heritage in Economics and the Social Sciences

ISBN 978-3-319-78992-7 ISBN 978-3-319-78993-4 (eBook)

https://doi.org/10.1007/978-3-319-78993-4

Library of Congress Control Number: 2018946098

© Springer International Publishing AG, part of Springer Nature 2018

This work is subject to copyright All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed.

The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use.

The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors

or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims

in published maps and institutional affiliations.

Printed on acid-free paper

This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Introduction 1

Ursula Backhaus, Günther Chaloupek, and Hans A Frambach

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow 7

Gustav Schmoller and Adolph Wagner: The Idea

of Social Justice in Health Care 49

Ursula Backhaus

Timely Lessons for the Post-9/11 World

from Schmoller and Wagner 65

Nicholas Wolfgang Balabkins

Wagner’s Law, Money and the Theory

of Financial Crisis: Adolph Wagner’s Early Viennese Publications 77

Günther Chaloupek

Similarities and Differences in Central Concepts

of Social Economy: Adolph Wagner’s State Socialism

and Heinrich Pesch’s Solidarism 93

Hans A Frambach

Adolph Wagner Revisited: Is Redistribution of Income

and Wealth a Public Good? 107

Andries Nentjes

Contents

Wagner’s Law, Government Size and Economic Growth:

An Empirical Test and Theoretical Explanations

for Italy 1861–2008 129

Francesco Forte and Cosimo Magazzino

Empirical Evidence for “Wagner’s Law of Increasing

Government Activity” for Austria 153

Reinhard Neck and Johannes Jaenicke

Meinecke’s Sonderweg 175

F L van Holthoon

Contents

© Springer International Publishing AG, part of Springer Nature 2018

J Backhaus et al (eds.), Gustav von Schmoller and Adolph Wagner,

The European Heritage in Economics and the Social Sciences 21,

https://doi.org/10.1007/978-3-319-78993-4_1

Introduction

Ursula Backhaus, Günther Chaloupek, and Hans A. Frambach

The contributions to this volume of The European Heritage in Economics and the

Social Sciences series are dedicated to Gustav Schmoller and Adolph Wagner, haps the most eminent representatives of German economic thought in the second half of the nineteenth century There are important parallels in their lives and works Both came from Southern German states – Schmoller from Württemberg, Wagner from Bavaria; both spent the major part of their academic career at the University of Berlin, the academic centre of the Prussian dominated German Reich; as founders

per-of the Verein für Socialpolitik they were united in their efforts to promote the

estab-lishment of encompassing social policy schemes, what earned them the name of

Kathedersozialisten (“Socialists of the Chair”) In some points, Wagner’s concept of state socialism went beyond what Schmoller had aimed at with his welfare state model, but both economists held that in principle private ownership of the means of production was essential for the performance of the economy and for raising the standard of living of the working class

Schmoller and Wagner were different from each other in their methodological approach to economics as a social science In Max Weber’s characterization, Schmoller and his followers maintained “that the final goal of any science was to bring order into its objects by a system of concepts which are derived from the

studies on a great variety of subjects Schmoller’s textbook Grundriß was an

ambi-tious attempt to draw a summary of the findings of historical research Schmoller also claimed objective validity for normative implications of the results of social science, provided that the criteria of his methodology are fulfilled Following this concept of economic and social science, the “Schmoller program” (Backhaus

1993/94) extended far beyond the sphere of universities in its endeavour to influence the political process by organizing support from its academic and non-academic advocates for the promotion of social policy reforms

If Adolph Wagner was in basic agreement with Schmoller with respect to the possibility of deriving normative propositions from the results of social science investigations, with respect to methodology he followed an orientation that was dif-ferent from Schmoller’s Therefore, in his writings he represents a current of eco-nomic thinking in Germany in the second half of the nineteenth century that did not follow the dominant trend of historicism Like other nineteenth century economists, e.g Mangoldt or Dietzel, Wagner denied that theoretical propositions and explana-tions could primarily be derived from detailed historical-empirical investigations

“Wagner was a systematologist rather than a historical theorist”, whose primary concern in his main field of research “was a theoretical analysis of the rules of

‘social’ finance and tax policy” (Priddat 1997, p. 343)

Wagner shared with Schmoller the conviction about the significance of tions for the economic process, but for him the theoretical point of view was more important than history This can be seen from the “law of increasing state expendi-ture” that still carries his name As a hypothesis about a long term trend, Wagner first derived it from theoretical rather than empirical considerations

institu-If Wagner still enjoys considerable reputation as one of the founders of public finance, his important contributions to monetary theory have largely fallen into oblivion – which is all the more regrettable as contributions from nineteenth century Germany to this area of economic research are rather insignificant, if not infamous (G.F. Knapp’s “state theory of money”) Much influenced by the writings of Thomas Tooke, Wagner was a follower of the Banking School, contributing interesting argu-ments to the debate about endogeneity of money Even more importantly, his theory

of financial crisis, developed around 1860, is a remarkable anticipation of modern crisis theories, though largely unnoticed by contemporary economists

In the last decades, a certain revival of interest in the Historical School has occurred, which arises from the uneasiness about the development of modern main-stream economics Especially after the financial crisis of 2008/09 there is an increas-ing awareness among economists of the relevance of “historical and evolutionary explanations of the workings of complex processes as economic meltdowns,

U Backhaus et al.

economic policy making, the power of vested interests, the aims of political elites and the formation of institutions and public opinion” (Cardoso and Psalidopoulos

2016, p. 14) With many economists searching for a method of economic analysis not restricted to abstract mathematical models, the writings of Schmoller and other authors of the Historical School have gained a new topicality with their potential to provide suggestions for a more comprehensive approach to economic reality

In the same vein, Wagner’s emphasis on the role of the state as an integral part of economic theory can contribute to correct the blindness of mainstream economics towards institutions and power Above all, “Wagner’s law” can still serve as a fruit-ful hypothesis for empirical studies of state activities, as two contributions to this volume convincingly demonstrate

It has been part of the mission of the Heilbronn Symposia from their very ning to direct the attention of economists to these neglected currents of economic thought (Backhaus 1993, 1993/94, 1997) One hundred years after Schmoller’s and Wagner’s death in 1917, the contributions to this book take the anniversary as occa-sion to look into their approach; trace the influence of their ideas in Germany and in other countries; and explore the relevance of their thought in a global economy

begin-In the second chapter, Karl-Heinz Schmidt highlights the interdisciplinary approach by Gustav Schmoller Schmidt comments on the “Schmoller program” and Schmoller’s diverse activities at the university and in politics The contribution demonstrates that Schmoller’s career-curve which had steeply risen since the end of the nineteenth century, declined rapidly after Schmoller’s death in 1917 It is a rather recent phenomenon that a new interest in Schmoller and his program has emerged, due to his interdisciplinary empirical approach, also under the aspect of what is called “big data”

In the third chapter, Robert Jansen investigates Schmoller’s influence during the turbulent years of high capitalism which lasted from 1870 up to 1940  in the Netherlands, when the country – like Germany – experienced class and labour con-flicts The essay examines the relevance of Schmoller’s views about labour relations

in Dutch parliamentary debates and economics

The economist Gang Li (fourth chapter) sees value in the economic- developmental aspects of the work of Schmoller By translating parts of the work of Gustav Schmoller into the Chinese language, Li wants to make the tradition of German economic and social thought available to the Chinese scholarly community In this chapter, Gang Li describes the current research on Schmoller in China, the obstacles

it is facing, and its potential for future development of the country

Social justice is a major concern of both, Gustav Schmoller and Adolph Wagner The aim of the chapter “Gustav Schmoller and Adolph Wagner: The Idea of Social Justice in Health Care”  by Ursula Backhaus is to show, how the idea of social jus-tice relates to health care and its institutions at the time of early industrialization Schmoller designed and suggested market-based social institutions to address three basic risks of life: health insurance, cooperative accident insurance, and provisions

in the case of the loss of the breadwinner Wagner not only foresaw the growing influence of the state in developed societies over time, but also formulated the con-ditions under which the state should play a role in the provision and finance of, for instance, health care

What is the impact of terrorism on the structure of state budgets? In the chapter

“Timely Lessons for the Post-9/11 World from Schmoller and Wagner” Nicholas Balabkins investigates this issue under the aspect of Wagner’s law and Schmoller’s emphasis on social welfare legislation In particular, he argues that after 9/11, “a tectonic event in U.S history”, protection of the population against terrorism has become an important function of the state, thus becoming an unforeseen new driving force for expansion of public expenditure

Günther Chaloupek deals in the chapter “Wagner’s Law, Money and the Theory

of Financial Crisis: Adolph Wagner’s Early Viennese Publications” with Adolph Wagner’s publications during his first engagement as professional economist with the commercial academy in Vienna from 1858 to 1863 During this period Wagner’s research interests were devoted to state finances and monetary policy In the book

Die Ordnung des österreichischen Staatshaushaltes (1863) he first formulated the law which carries his name up to the present He argues that correct classification of the various expenditure categories is conditional for a rational decision about financ-

ing alternatives, especially taxes versus credit Wagner’s book Die Geld- und

Credittheorie der Peel’schen Bankakte (1862) is perhaps the most important bution to monetary theory from nineteenth century Germany His theory of financial crisis is a remarkable anticipation of modern crisis theories

contri-In chapter “Similarities and Differences in Central Concepts of Social Economy: Adolph Wagner’s State Socialism and Heinrich Pesch’s Solidarism” Hans Frambach deals with the relationship between Adolph Wagner and Heinrich Pesch SJ (1854–1926), one of the founders of Catholic social theory Pesch, who shared Wagner’s concerns for social justice and for improvement of the living conditions of the work-ing class, took over many ideas from Wagner, including central aspects of the con-cept of state socialism, and used these in the construction of his own key concept of solidarism The article compares common features and differences in the central concepts of these two outstanding economists

According to Andries Nentjes (chapter “Adolph Wagner Revisited: Is Redistribution of Income and Wealth a Public Good?”) Adolph Wagner did break new grounds in economics by conceiving redistribution of wealth and income as a provision in the collective need for less economic inequality In his organic concep-tion of society the government has an identity of its own and makes decisions in the general interest The two Swedes Wicksell (1896) and Lindahl (1919) followed Wagner in the idea that redistribution is a collective good But in their individualist Austrian economics approach they construct the government’s decision on redistri-bution as the outcome of consensus in parliament, attained by delegates that repre-sent citizens with various individual interests Decades later he Americans Hochman and Rodgers (1969) defended a theory in which donators that care for other people voluntarily pay taxes to support those in need That claim has been widely refuted Such transfer programs would fail because of the incentive to free ride Therefore redistribution cannot pass for a public good The whole American discussion has been blind for the Swedish contribution Although the work of Wicksell and Lindahl can be viewed as a rehabilitation of Wagner’s notion that redistribution is a collec-tive good, his attachment to the organic conception of society would have withheld him from accepting their individualist approach to redistribution

U Backhaus et al.

This volume includes two empirical investigations of the significance of

“Wagner’s law” In the  chapter “Adolph Wagner Revisited: Is Redistribution of Income and Wealth a Public Good?” Francesco Forte and Cosimo Magazzino present an econometric study for Italy for the period of 1861–2008 (divided into subperiods) for Wagner’s law of growth of public expenditure Actual expenditure growth is compared with “optimal” expenditure growth as defined by maximization

of GDP. The results show that only in one subperiod actual expenditure growth falls short of the optimum (1861–1914), whereas in all other subperiods growth of actual expenditure is stronger In this sense, there are two Wagner laws, as emerging in the Italian case, which are interpreted by alternative paradigms

In the second contribution related to Wagner’s law (chapter “Empirical Evidence for “Wagner’s Law of Increasing Government Activity” for Austria”), Reinhard Neck and Johannes Jaenicke first discuss problems of specifying and testing it and report on several tests for Austria, both for the Austrian part of the Habsburg Monarchy before World War I and the Second Republic of Austria after World War

II. In neither period can they find evidence for Wagner’s law Instead, the growth in public expenditures in recent times seems to be driven by a discrepancy between wages and prices in the public sector as opposed to those in the private sector, as follows from Baumol’s “Cost Disease” hypothesis

Did Germany differ from the development of other European nations? This is the topic of F.L van Holthoon’s essay on “Meinecke and the German Sonderweg” (chapter “Meinecke’s Sonderweg”), which traces an indirect influence by von Schmoller to the Sonderweg

The papers collected in this volume are the revised contributions to the 30th Heilbronn Symposion in Economics and the Social Sciences in 2017 On behalf of the entire Heilbronn group, we would like to thank the city council and the Lord Mayor of the City of Heilbronn for their continued generous support

© Springer International Publishing AG, part of Springer Nature 2018

J Backhaus et al (eds.), Gustav von Schmoller and Adolph Wagner,

The European Heritage in Economics and the Social Sciences 21,

https://doi.org/10.1007/978-3-319-78993-4_2

Gustav Schmoller’s Program and Its

Valuation Today and Tomorrow

Karl-Heinz Schmidt

The nineteenth century was a period of peace and wars, but also of increasing poverty and wealth, of the foundation of national states and of the introduction of social security systems In Germany the economic and social development – mainly during the first half of the century – was determined by lack of investment and inno-vations During the second half investment and innovations, yet, were increased significantly Though this is just a rough description of the economic development, the most important determinant factors of economic growth and social change are sketched herewith Also, the framework conditions of academic teaching and research and of the influence of university professors on practical policies can be identified An important example in Germany is given by the personality, scientific works and organizational and political activities of Gustav Schmoller during his lifetime (1838–1917) (Rieter 2008, p. 323; Brinkmann 1956, pp. 135, 136), who, can be seen as author and organizer of his own special program, in later comments called the “Schmoller Program” (Backhaus, J.G., I/1993, II/1994, pp. 4, 5) From the present-day view it may be concluded, that Schmoller fell into oblivion after the First World War, but that his works are revisited by a considerable community of researchers in Germany and on the international level The concerned movement may be called “Schmollerism”

The following paragraphs shall demonstrate the development of Schmoller’s activities in pursuing his program, and their effects on research, teaching and practi-cal policies in the long run, at present and in the future development of economics

K.-H Schmidt ( * )

Department of Economics, University of Paderborn, Paderborn, Germany

e-mail: Karl-Heinz_Schmidt@wiwi.uni-paderborn.de

2 Biographical Data, “Schmoller’s Program” and the Main Fields of Research, Teaching and Influence on Politics

Gustav Schmoller was born on June 24, 1838 in Heilbronn (Württemberg) He died

on June 27, 1917 in Bad Harzburg (Lower Saxony) According to a broad social- economic approach, it is important to explain the behavior and activities of an indi-vidual by references to the history of the family (Rieter and Rodney 2006, p. 143) Schmoller’s father was a financial administrator for the State of Württemberg; Schmoller’s mother, daughter of a family of physicians and natural scientists, died, when her son Gustav was only 8 years of age During vacations in his grandfather’s home Gustav learnt about natural sciences and organization of scientific investiga-tions and experiments in social sciences (Backhaus 1993/1994, p. 7; Hansen 1993,

pp. 112–113) During his youth the boy was of weak health Therefore his father took care for his son to guide that he got used to regular work, recreation and a hygienic way of life (Hintze 1928, repr in: Recktenwald 1965, p. 334) Because of the son’s weak health and under consideration of the family-tradition, the father determined Gustav to be educated as a civil servant Following this objective, the father employed him prior to the son’s university studies for 1 year as a clerk in his revenue office in Heilbronn Gustav learnt there about basic elements of financial and public law, and he got insights into the way of life in the country and into the structure of the regional economy and society (Hintze 1928, p. 334)

The further periods of Gustav’s life were shaped by his university studies of tory and philosophy in Tübingen, a career in public administration of the Kingdom

his-of Württemberg and his promotion to a prhis-ofessorship at the university After studies

at the University of Tübingen and winning a remarkable prize by presenting his sertation (“The Economic Views Held At the Time of The Reformation”), Schmoller worked as a statistician at the Statistical Office in Stuttgart His activities included the work on an industrial craft census He also published a critical pamphlet on protective tariffs in Württemberg and on the positive effects of the tariff policies in Prussia Because of these activities he was forced to leave the civil service in Württemberg, but fortunately he got a position as Associated Professor at the University of Halle in Prussia There he was soon promoted to full Professor Since then Schmoller’s university career continued successfully (Rieter 2008, p.  323):

dis-1872 appointment at the University of Strassburg, since 1882 professorship in ical economy at the University of Berlin In addition, Schmoller was appointed in Berlin to the Prussian State Council (1884) and to the Prussian Upper House (1889) Furthermore, as Jürgen Backhaus pointed out in his related study, Schmoller “… received an hereditary knighthood on the occasion of his seventieth birthday in 1908 and devoted the last years of his retirement to a complete revision of his monumen-

polit-tal “Grundriß der allgemeinen Volkswirtschaftslehre” (two volumes, 1923)” (Backhaus 1993/1994, p. 8)

This leads us to the “Schmoller Program” and the main fields of the author’s academic and political activities Joseph Schumpeter had used the term “program” first in the title of his valuable study on Schmoller’s academic research and related

activities of 1926 (Schumpeter 1926, pp 1-52), translated and quoted by Jürgen Backhaus in his introductory chapter to a collection of essays on Gustav Schmoller (1993/1994) In that article Schumpeter had emphasized two tasks of investigating

a specific situation (Backhaus 1993/1994, p.  5): 1 to complete the collection of facts and figures of the situation as a precondition for further research, and 2 “… to put all this information together in a definite order, in order to make it accessible” (p. 5) But above that, Schumpeter had emphasized that the work on the collected material has to be continued and that new methods would have to be developed He concluded: “Schmoller has actually worked his way through all the stages of his program, and therein lies his greatness” (Backhaus 1993/1994, p. 5) According to Backhaus’ translated quotations, Schumpeter completed his definition of the Schmoller Program by a different characterization Schumpeter emphasized, that the apriori-framework for investigation “… is further refined in a continuing interplay of subject matter and mental process That this program could once be regarded as spe-cific to a particular school is evidence for the importance of the task Schmoller con-fronted” (Quoted from Backhaus 1993/1994, p. 5) Moreover, Backhaus wrote that Schmoller had recognized, that at least three steps were necessary to fulfill his pro-gram: “the formation of a state executive power willing to launch policies of social reform”, “… the reform of the universities”, and the organization of institutions to influence political options and legislative proposals formulated by these institutions,

as it happened in the “Verein für Socialpolitik” (Backhaus 1993/1994, p. 19).The program obviously was the framework and basis of Schmoller’s longterm scientific and political activities

3 Studies on Schmoller’s Works

3.1 Memorial Articles of 1917 and After

In order to demonstrate Schmoller’s public reputation in academic, social and ical life, some examples of statements by academic colleagues, friends or critical authors around 1917, the year of Schmoller’s end of life, may be taken as adequate information

polit-In 1917 already, Hermann Schumacher, former student and later successor of Gustav Schmoller as editor of the journal “Schmollers Jahrbuch”, published a memorial statement in another journal To that article Arthur Spiethoff, former research assistant at Schmoller’s university-chair, referred in his memorial article on

“Gustav v Schmoller”, published in “Schmollers Jahrbuch” 1918 Spiethoff’s cle described Schmoller’s personality and academic works by a summarizing com-ment (Spiethoff 1918, pp. 11–30) Some of Spiethoff’s statements about Schmoller’s character and activities point out the reputation of Schmoller around 1917 and the basis of the critical comments delivered earlier and later by other authors

arti-Spiethoff emphasized mainly three qualifications of Gustav Schmoller: (1) In a rare way Schmoller has amplified the scientific horizon of economics (p.  11)

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

(2) Schmoller’s activities as academic teacher and expert of social policy are not less important than his impact in research (p. 16) (3) Schmoller’s personality is “… rich and fully structured” (“reich und vollgegliedert”) (p. 20), in Spiethoff’s view not determined from outside, though his turn to economics and to an academic career seem to be included by external relations (p. 21) Spiethoff concluded, that without the former experience of practical work in the Statistical Office, which was supervised by his brother-in-law Gustav Rümelin, secondly without the intensive public criticism of his earlier study (1862) on a Prussian-French trade contract and against the government of Württemberg, and thirdly without the offer of a professor-ship at the University of Halle – prior to the procedure of “Habilitation” – Schmoller probably would not have entered into an academic career in economic science To quote Spiethoff’s original text.

Without the tradition of the paternal family, the necessity of study for bread and the tion with Gustav Rümelin Schmoller probably would not have entered the field of econom- ics, but he would have stayed with history or philosophy (p. 21) (transl K.-H. Schmidt) 1

connec-In very clear words Spiethoff also summarized Schmoller’s valuable tions as author and lecturer, and his outstanding energy to work intensively and successfully

qualifica-Schmoller‘s working power was breath-taking Work was the passion of his life (p.  27) (transl Sch.) 2

Finally Spiethoff emphasized, that German economic science of the preceding decades could not be imagined without Gustav Schmoller.3

Concerning the future development of economic science Spiethoff added, that there are many aspects of Schmoller’s work which give room for different points of view, and that no single person will be able to continue this author’s work Therefore Schmoller’s influence on the long-term development of the concerned field of sci-ence would be felt for a considerable time-period.4

The author of this comment, Arthur Spiethoff, of course, could not yet recognize the future development of economics in the Anglo-Saxon countries and its impact in the “foreseeable future”

Even before Arthur Spiethoff’s respectful appreciation, F.  Lifschitz had mented on Schmoller’s work from a totally different point of view In a broad study

com-on “The Historical School of Eccom-onomics” Lifschitz, University of Bern, in 1914 voiced thorough criticism of the school’s main authors  – F.  List, W.  Roscher,

1 “Ohne die Überlieferung der väterlichen Familie, die Notwendigkeit des Brotstudiums und die Verbindung mit Gustav Rümelin wäre Schmoller wohl nicht zur Volkswirtschaftslehre gekommen, sondern bei der Geschichte oder Philosophie geblieben” (p. 21).

2 “Schmollers Arbeitsenergie war für den bloßen Zuschauer atemberaubend Arbeit war die Leidenschaft seines Lebens” (p. 27).

3 “Die deutsche Volkswirtschaftslehre der letzten Jahrzehnte ist ohne Gustav Schmoller nicht zu denken” (p. 29).

4 “Deshalb ist sein Einfluss auf die Entwicklung unserer Wissenschaft ein vielfältiger gewesen und wird es für eine absehbare Zukunft bleiben” (p. 30).

B.  Hildebrand, K.  Knies and G.  Schmoller To concentrate on the evaluation of Schmoller in the related chapter, and to demonstrate how differently the scientific work of Schmoller was evaluated – earlier than 1917 – some of Lifschitz’ argu-ments against Schmoller’s personality and works should be considered (Lifschitz

1914, pp. 199–253)

Lifschitz concentrated his critical comments on Schmoller’s methodology According to Lifschitz’ view Schmoller did not explain the definition of “statistical laws” and of an “economic phenomenon” (p.  250) Also, the term “Historical Concept and Method” was not defined Even the term “Historical” would not be clearly interpreted (p. 253) Moreover, Lifschitz referred to Bernhard Harms (1913), who had complained, that the Historical School had not presented any studies in clear theoretical concepts (Harms 1913; Lifschitz 1914, p. 253)

But it seems more relevant to refer again to Schumpeter’s evaluation of Gustav Schmoller Therefore the article of 1926 is considered again We refer to “Schmoller’s Program” and follow Schumpeter’s short-cut definition:

“To approach to the material with a minimum of theoretical Apriori, then trying to stand the contextual relations, also to enlarge the Apriori for the future and to work on new concepts, which serve as (provisionally) available instruments in relation to additional material and so on; in continuing reciprocal interaction between material and theoretical comprehension … (Thus) the same program means: to understand history by means of his- tory” (transl Sch.; Orig.: Schumpeter, J., 1926 , pp. 45, 46) 5

under-Schumpeter’s statement, yet, could not avoid further debates about the relations between scholars of history and of economic theory Economic theory became dom-inant between 1917/1926 and 2017, though new research projects were carried out

in order to bring economic theory and history into a new balance The impact could

be recognized since the late twentieth century in terms of “New Economic History” and “Historical economics”

3.2 Studies on Schmoller’s Works Published Around 1988

and After

The contrast between Schmoller’s reputation in academic research, teaching and practical policies at the beginning of the 20th and of the twenty-first century could not be underestimated To quote Jürgen Backhaus again: “In his time, Schmoller was one of the most respected professional economists in the world …” (Backhaus

1993/1994, p. 3) Actually, about one hundred years after his death, Schmoller is

“… widely ignored by professional economists today” (p. 3)

5 “Mit einer Minimalbelastung an Apriori an das Material herantreten, damit Zusammenhänge zu erfassen suchen, dabei das Apriori für die Zukunft vermehren und neue Auffassungsweisen erarbe- iten, die weiterem Material gegenüber als (provisorisch) vorhandenes Rüstzeug dienen und so weiter in steter Wechselwirkung zwischen Material und gedanklicher Verarbeitung … (So) heißt dasselbe Programm: Begreifen der Geschichte aus der Geschichte.” (Schumpeter 1926 , pp. 45, 46) Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

Earlier than Backhaus, another author, Jürgen von Kempski, mentioned, that Schmoller “today” (1964) is seen as a “dead dog”, like Hegel earlier at Schmoller’s time But von Kempski presumed, that history probably will bring about corrections

of such a verdict (von Kempski 1964, p. 200)

Nearly parallel to von Kempski, Erwin von Beckerath found it remarkable, that Schmoller’s personality, apart from the acknowledgement of the academic field, was attractive for many famous representatives of different academic disciplines, esp sociology, philosophy and history, while “today” the memory for Schmoller is covered by shadows (“umschattet”) (von Beckerath 1962a, , p. 68)

Instead, von Beckerath discussed Schmoller’s positive effects on economic and social sciences in diverse articles (von Beckerath 1962a, p 203 ff) In his above mentioned contribution he emphasized the former controversy about induc-tive and deductive methods and hostile attitudes towardsc economic theory (“Theoriefeindlichkeit”) (von Beckerath 1962b, p. 69) Von Beckerath emphasized, that Schmoller always saw that thinking necessarily proceeds by making simplified assumptions

Schmoller was always convinced that thinking under simplified assumptions is necessary, including thinking in terms of an ‘imaginative picture’, the definition of terms and the com- prehensible dissection: the ‘deduction based on given truth, on established sentences’(transl Sch.; Orig.: Schumpeter, J., 1926 , p. 69) 6

These statements permit us to conclude that Schmoller was always prepared to apply – as first leg – the analytical opportunities of economic theory in order to put adequate questions; but he also needed  – as a second leg  – the investigation of empirical data He was convinced that both legs were necessary in order to demon-strate the reality with the richness of forms (“Reichtum an Formen”) (p. 69).Another article written by Erwin von Beckerath concerned the development of German public fincance It was published (1938) on behalf of the celebration of

100 years since Schmoller’s birth In this article the author tried to explain Schmoller’s position in the field of public finance and to demonstrate the basic results of Schmoller’s studies in the history of public finance In his broader essay on “theory and practice of the German tax-reform” Schmoller had pointed out the aims of pub-lic finance being directed to social policy He had emphasized “more justice, more taxation of wealth and less tax-burden on low income groups of the population” Von Beckerath also mentioned, that Schmoller and Adolf Wagner had followed similar objectives concerning the future public finance, but their views differed with respect

to the ways and means to realize them (von Beckerath (1962a, p. 206)

Most of the problems and views, which Schmoller expressed in his articles, have been revisited mainly in studies and articles which were published around 1988 and after – in Germany and on the international level Some examples should be men-tioned into relation to Schmoller’s program

6 “Schmoller hat das Denken unter vereinfachten Annahmen, im “gedachten Bilde”, die Begriffsbildung und begriffliche Zergliederung: das “Deduzieren aus gegebenen Wahrheiten, aus feststehenden Sätzen”… stets für unerlässlich gehalten” (p. 69).

The first example of studies on Schmoller’s works published 1988 is a book written by Nicholas W. Balabkins: “Not by theory alone …” The same author con-tributed also 1988 an article on “Gustav Schmoller and the Emergence of Welfare Capitalism” It was published in the collection of “Essays on Gustav Schmoller”, edited by Jürgen G. Backhaus 1993/1994 Another Balabkins-essay was published

1993 in an additional book edited by Jürgen G. Backhaus, entitled: “Gustav von Schmoller und die Probleme von heute” The essay by N. Balabkins broadens the perspective of Schmoller’s methodological approach by demonstrating the relations between Schmoller and the genealogical tree of national-economic science The subtitle refers again to Balabkins’ above mentioned book, but here in German: “Mit der Theorie allein kommt man nicht aus” All three contributions of the same author aimed at the integration of Schmoller’s works and the work of the German Historical School into the long term development of economic sciences According to Balabkins, Gustav Schmoller was the real founder of the German Association for Social Policy (Verein für Socialpolitik) in 1872, focused on the foundations of social security legislation The politics of Chancellor Bismarck has put the related program and institutions into practice Therefore Balabkins concluded: “According

to my view Gustav Schmoller was in fact the father of the welfare state” (Balabkins

1993a, p. 25) This view was consolidated by pointing out the preparation and formance of social reforms Balabkins concluded: “Schmoller and his friends were taking the first modern steps towards the welfare state” (translated from German) (p. 31) Moreover, Balabkins argued, that Schmoller also pursued the integration of economic, social and historical phenomena, for example “… when discussing the law of demand and supply, (Schmoller) still insisted that the idea of ‘circular causa-tion’ is at work and that a monocausal explanation of price-quantity relations is not quite proper” (Balabkins 1988, p. 65)

per-Schmoller’s interest in building a welfare state – at his time the introduction of a social-security-system – is based on his thinking in terms of justice There are a variety of articles and related chapters in his books, which concern the problems and the impact of economic and social justice in the society It seems, that “justice” is the most important concern in political economy, not only at Schmoller’s time In

1988 Manfred Prisching contributed a related article entitled: “Schmoller’s Theory

of Society” (Backhaus, J.G. I/1993, II/1994/1, p. 117–152)

4 Rise and Decline of Schmoller’s Influence on Economics, and the Impact of New Interest and ‘“Big Data”

on the Future Development of “Schmollerism”

Nearly every list of references to a survey-article on Gustav Schmoller demonstrates the scientific rise of the young research-assistant in Württemberg along a steep career-ladder up to the status of an internationally well-known and – in Germany – politically influential university-professor, author and organizer of academic institu-tions during the last decades of the nineteenth century and the beginnings of the

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

twentieth century (Rieter 2008, p.  323; Winkel 1989, pp.  97–107) The list of Schmoller’s publications including important books and famous articles starts with his dissertation (“Die nationalökonomischen Ansichten in Deutschland während der Reformation”, 1860) The second publication, (“Der französische Handelsvertrag und seine Gegner”, 1862), caused a heavy dispute on political concepts and on opportunities of Schmoller’s academic career The consequence was, that the author applied for a professorship in Halle, where his subsequent book, a study on the his-tory of small manufacturing firms at the nineteenth century, was published (1870) Since then the number of publications increased steadily, and the objectives and titles became more differentiated, including topics from history, economics, politi-cal economy, and from social and cultural sciences.

Schmoller’s great work of two volumes, the “Grundriß der allgemeinen Volkswirtschaftslehre” (last edition 1923), is registered as well as Schmoller’s out-standing academic, political and social publications They sustained his impressive reputation reflected also by a long list of contributions to scientific journals and memorial articles Some of the essays in honor of Gustav Schmoller were men-tioned above, for example the essays by Spiethoff (1918) and Schumpeter (1926) Other later articles written by authors with expertise on Schmoller’s works and activities also should be considered:

– Karl Brandt (1988) emphasized, that Gustav Schmoller was one of the most well-known authors of national economics, spiritual leader of the younger his-torical school and organizer of a group of scholars and colleagues who followed his way of thinking; furthermore, that Schmoller succeeded to perform the breakthrough of historicism in economic and social sciences (Brandt 1988, col 1056,1057) But on the whole, Brandt evaluated Schmoller’s scientific reputation

to be contested: representative of empiricism versus organizer of blocking the influence of neoclassical thinking on economic-historical research and publica-tions As positive results Brandt emphasized Schmoller’s contributions to institu-tional economics, comparative economic systems, structural analyses, socio-economic research and historical researching (Brandt 1988, col 1058).– Carl Brinkmann (1956) earlier had confirmed, that Schmoller’s “Grundriß” dem-onstrated the author’s understanding of the empirical economy and of teaching economics.7 Brinkmann concluded, that the „Grundriß“should be taken not only

as a monument, which summarizes a life-long work, but also as a first attempt of universal comparisons of values and value-systems (p. 136)

– Additional summarizing articles on Gustav Schmoller are contained in tional reference-books like “The New Palgrave” They also emphasize Schmoller’s methodological, historical, socio-economic and political-economic studies Together with his activities concerning academic teaching and the orga-nization of institutions and political contacts the publications were effective as backbones of Schmoller’s status in the development of the historical approach of

interna-7 “… Verständnis von Wirtschaftswirklichkeit und Wirtschaftslehren in ihrer Relativität aber auch

in ihrem ewigen Zusammenhang …” (1956, p. 136).

economics On the other side, warnings could already be recognized soon after the end of the First World War, that attempts were made to develop new approaches of economic theory For example Georg von Below (1924) designed Schmoller as the most eagerly researching and experienced representative of the Historical School But methodological deficits and lacks of his terminology should not be left aside (Below 1924, p. 318)

– In the same volume of the journal (Schmollers Jahrbuch) we also find an article

by Edgar Salin on Schmoller’s status in the history of national-economics (Salin

1924, pp. 307–314) Salin concluded, that Schmoller’s rich personality, ity, knowledge and broad view remain exemplary, but Schmoller’s work as a whole should be valuated neither as historical painting nor as theoretical building.8

mental-Herewith the question arises, why Schmoller’s influence on economic sciences declined after the First World War Different authors have tried to find adequate and solid answers It seems necessary to turn to some of the concerned authors., Karl Heinrich Kaufhold, a scholar of economic history and history of economic thought, published several articles, related to Gustav Schmoller, in the late twentieth century

In one of these essays Kaufhold tried to identify the causes of Schmoller’s declining influence on economic sciences during the 1920’s and the subsequent decades The author first of all mentioned the widespread acceptance of neoclassical and Keynesian theories at that time and even more intensively after the Second World War (Kaufhold 1989, p. 104) But Kaufhold presumed that Schmoller would not have accepted those theories Therefore the next question should be, why neoclas-sics and Keynesianism were discussed in Germany, given the availability of the realistic concepts of the Younger Historical School Kaufhold presumed that Schmoller and his adherents had not developed their theoretical approach far enough, but that the available economic theories did not satisfy Schmoller’s own demand for a reliable theoretical approach at their research In the author’s words:

“It seems, that the available theories did not satisfy Schmoller’s demand for theories“(transl Sch.; Orig Kaufhold, K.H., 1989 , p. 105) 9

In any case, it should be a reliable conclusion, that Schmoller „… was not ing deduction from economic reasoning “(Schefold 1987, p. 257) In consequence,

exclud-he turned to an interdisciplinary approach including “… texclud-he psychological, logical and philosophical aspects of the problems Schmoller tried to establish a

socio-“solid empirical foundation” through detailed and monographic historical research; formation of economic theory should “… be based on the knowledge of sufficient historical facts and material” (p. 257) But though the results of Schmoller’s histori-cal studies were acknowledged as very important, Schefold concluded, “… that

8 (Schmollers Werk) … “mangelt … jene letzte Vollendung, die einen Forscher, über seine zeitliche Stellung hinaus, für alle Zukunft und vor der Geschichte in den Rang der Großen, der Bahnbrecher, der Gestalter und der Vollender der Wissenschaft erhebt” (Salin 1924 , p. 313).

9 “Es scheint also, die vorhandenen Theorien hätten den Ansprüchen nicht genügt, die Schmoller

an sie stellte” (Kaufhold 1989 , p. 105).

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

Schmoller’s influence on the development of the economic sciences in Germany was rather unfortunate: it contributed to the neglect of economic theory in Germany for a full half century” (p. 257).

Bertram Schefold also pointed out that it was Schmoller’s intention “to free political economy from false abstraction” (p.  257) This objective may be inter-preted as a bridge to the actual discussion on the impact of new interests and of “Big Data” on the relation between empirical data and theoretical modelling in economic sciences Gustav Schmoller had recommended to walk on “two legs”: inductive and deductive methods

Turning to new interests in comments on Gustav Schmoller and the Younger Historical School some articles of the first or second decade of the twenty-first cen-tury should be considered The authors Heinz Rieter and Joachim Zweynert dis-cussed Gustav Schmoller’s work in relation to forms and effects of “Globalisation” (Rieter and Zweynert 2006, pp. 225–250) Second, Rieter’s article on Schmoller’s childhood and youth in Heilbronn contains interesting details on the historical and social background of the later author (Rieter 2006, pp.  141–143) Furthermore, Rieter published an informative article in German concerning Schmoller’s memo-ries of his youth in Heilbronn (Rieter 2008, pp. 323–332) These articles demon-strate that new interests in Schmoller’s personality, methodology, scientific works and historical framework conditions have come to the fore This might suggest that the phase of decline and oblivion of Schmoller’s works has come to an end, even that a new wave of Schmoller-interests may be coming up In Japan new interests in Schmoller and the German Historical School are documented in articles and books (Shionoya 2005)

In their broadly based paper on the relations of Schmoller’s scientific work and the process of “Globalisation” Rieter and Zweynert (2006) “… intend to show that one reasonable interpretation of Gustav Schmoller’s economic thought is to see it as

a reaction to the challenges of globalization” (Rieter and Zweynert 2006, p. 227) The authors identify Schmoller’s basic methodological position as being character-ized by the integration of economic affairs and their political, social and cultural context The authors interpret this process as “… basically an answer to the differentiation process caused by the increasing inclusion of the German economy

into … the Weltwirtschaft “(p 227) In addition, Rieter and Zweynert emphasize

“… Schmoller’s main concern that too fast a transformation of social relations would endanger social cohesion This is the main reason why he directed his atten-tion mainly to the interplay between state and economy and demanded to give the national interests of the country priority over its relation to the international com-munity” (p. 227) The authors, yet, do not want to identify Schmoller as an opponent

of globalization, but to point out Schmoller’s main problem: the relations of

“Progress and Vergesellschaftung”, in Schmoller’s view being one and the same (as the authors see it) (p. 228), but with “… more emphasis on the moment of develop-ment, the process in Vergesellschaftung” (p. 228, footnote 7) Rieter and Zweynert furthermore add that in spite of being critical of the Younger Historical School and Gustav Schmoller, they expose their statement, “… that his broader vision of eco-nomic affairs enabled him to see and to analyze problems caused by globalization

authors quote from Schmoller what they call “… his theory of Vergesellschaftung:

“What I have in mind, is the connection between economic life and the essential, controlling organs of social and political life, – the dependence of the main eco-nomic institutions of any period upon the nature of the political body or bodies most important at the time” (quoted from Schmoller, G., 1897, translated, in: Rieter, H and Zweynert, J., 2006, p. 235)

To conclude, the main important problems are in Schmoller’s view the economic progress and the social integration In order to solve both problems economics and social sciences have to be applied for analysis and for planning adequate measures

of related policies

The two articles by Heinz Rieter on Schmoller’s last, autobiographical essay (2006 and 2008) contain interesting information about the individual motives, activ-itites, social framework conditions and phases of Schmoller’s private life and pro-fessional career Later authors will be grateful to have the related publications at their disposal

The same positive evaluation may be proclaimed concerning Yuichi Shionoya’s book on “The Soul of the German Historical School” Though it is focused on meth-odological problems, it demonstrates the fundamental level of the scientific works

of Schmoller, Weber and Schumpeter, and simultaneously it delivers more insight into the scientific concepts of the authors (Shionoya 2005)

Other authors of recent contributions to the debate on methological problems call for more investigations based on specified detailed microeconomic studies, for example quantifying the economic actions of every household, every firm etc in a city By reviews and comments on the whole set of data reliable statements for the macro-group as objective of the study should be possible Some related articles may

be mentioned The main idea seems to be as follows: If “Big Data” means the immense quantity of structured empirical data, which are available every day, every-where and related to every socio-economic activity, a keen vision may be pro-claimed: to describe the structure and development of the total network of activities

by long term series of interrelated variables based on the collected empirical data They are expected to describe and to explain the real world by themselves If these series of structured data are combined with a minimal set of theoretical hypotheses and conclusions, as Gustav Schmoller had demanded, the resulting approach may

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

be called “Schmollerism” It should be applicable in different economic situations and phases of economic development But it is important to note, that even this concept needs at least some basic assumptions concerning human behavior, eco-nomic resources and relations between institutions and economic activities.

German newspapers and journals recently published related reports on scientific congress-speeches and discussions (for example FAZ, 07.09.2016 and 02.10.2016): e.g “Ökonomen auf Sinnsuche” (02.10.2016) and “How economists want to finish their own crisis” (07.09.2016) (translated version) The concerned contributions included different views of the authors involved in the debates on the relations of economic theory and history At the annual congress of the “Verein für Socialpolitik (VfS)” in 2016 economists demanded that economists must leave the ivory towers

of economic theory; they should teach the students and inform the public audience about the relevance of their theories and models for the real world The German economic-historian Albrecht Ritschl, London, emphasized, that history should be acknowledged as an “immensely important, by far not yet totally exploited source

of empirical facts and experiments, which should be investigated by scholars of economic sciences” (FAZ, 07.09.2016, p. 17) Nils Goldschmidt, Siegen, author of articles on history of economic thought, demanded more discussions on the empiri-cal basis of open, further developing economics (FAZ, 22.08.2016, p.  20) Axel Ockenfels, Cologne, in a later article, proclaimed that economists can offer a spe-cific model for every specific empirical situation – but also for a contrasting case The question for the relevant model, instead, would not be answered on the grounds

of theoretical reasoning Therefore Ockenfels concluded, that without checking the models by empirical research the relevance-problem cannot be solved: “Ohne Realitätscheck geht es nicht” (Ockenfels, A.: Die Ökonomik im Realitätscheck”, in: FAZ, 27.12.2016, p. 18) These statements sound similar to N.W. Balabkins book- title “Not by theory alone …” (1988) It seems, both statements correspond to

“Schmollerism”

5 Summary and Conclusions

The objective of the article was to point out the scientific rise of Gustav Schmoller and his fall into oblivion soon after his death in 1917, but also to demonstrate, that since the end of the twentieth century and recently (around 2017) new interests in Schmoller’s works are proclaimed An evolution of new interests “in Schmoller” seems to be going on, mainly in terms of publication of new studies on the long term effects of “Schmoller’s Program” and research-results Also, it was maintained that this aspect may be called “Schmollerism”

In three paragraphs of the article ahead the development of Gustav Schmoller’s life and scientific works was discussed – not in details of every phase of his life, and not for his activities in total, but concerning important works and influences on economic and social sciences The first paragraph summarized some biographical data, which may explain Schmoller’s career Also, comments on the “Schmoller

Program” and Schmoller’s diverse activities at the university and in politics and society are considered The second paragraph mainly concerned Schmoller’s publi-cations, first, published around 1917 or after, second around 1988 or after It was demonstrated that Schmoller’s career-curve had steeply arisen since the end of the nineteenth century, but that it relatively shortly came to decline after Schmoller’s death, mainly during the 1920’s and later The third paragraph should demonstrate the rise of new interests in “Schmoller” The new key-word “Big Data” was men-tioned, and the term “Schmollerism” was introduced to refer to new attempts to keep the “Schmoller-Program” fit for critical statements, but also for opportunities during a future development of a broadened research approach of theory-guided historical/empirical investigations in economic and social sciences To conclude:

“Schmoller is alive again in sciences.”

References

Backhaus, J.G (1993/1994): Gustav Schmoller and the Problems of Today, in: History of Economic Ideas, I/1993, II/1994/1, Roma, Gruppo Editoriale Internazionale, pp. 3–25.

Balabkins, N (1988): Not by Theory alone … The Economics of Gustav Schmoller and Its Legacy

to America Berlin, Duncker & Humblot.

Balabkins, N (1993a): Schmoller und der Stammbaum der nationalökonomischen Wissenschaft:

„Mit der Theorie allein kommt man nicht aus“ In: Backhaus, J.G (ed.): Gustav Schmoller und die Probleme von heute Berlin, Duncker & Humblot, pp. 19–26.

Balabkins, N (1993b): Gustav Schmoller and the Emergency of Welfare Capitalism In: History of Economic Ideas, I/1993, II/1994/1, Roma, Gruppo Editorale Internationale, pp. 27–42 Brandt, K (1988): Schmoller, in: Staatslexikon, 7th edition, vol 4, Freiburg, Basel, Wien, col 1056–1058.

Brinkmann, C (1956): Schmoller, Gustav, in: Handwörterbuch der Sozialwissenschaften, 9 Band, Stuttgart a.o., Fischer a.o., pp. 135,136.

Goldschmidt, N.: Was die Kritiker der pluralen Ökonomik nicht verstehen In: FAZ, 22.08.2016,

p. 20.

Hansen, R (1993): Gustav Schmoller und die Sozialpolitik von Heute, in: J.  Backhaus (ed.): Gustav Schmoller und die Probleme von heute Berlin, Duncker & Humblot, pp. 111–184 Harms, B (1913): Weltwirtschaft und Weltwirtschaftslehre, in: Weltwirtschaftliches Archiv, vol

I, p. 2.

Hintze, O (1928): Gustav von Schmoller, repr in: Recktenwald, H.C (ed.): Lebensbilder großer Nationalökonomen (1965), Köln, Berlin, pp. 333–345.

Kaufhold, K.H (1989): Gustav Schmoller heute: die Entwicklung der Sozialwissenschaften in

Deutschland und Italien Bologna, Berlin, Duncker & Humblot, pp. 89–116.

Lifschitz, F (1914): Die historische Schule der Wirtschaftswissenschaft, Bern, Stämpfli & Cie.

Ockenfels, A.: Die Ökonomik im Realitätscheck In: FAZ, 27.12.2016, p. 18.

Plickert, Ph.: Ökonomen auf Sinnsuche In: FAZ, 02.10.2016.

Rieter, H (2008): Gustav Schmollers Erinnerungen an seine Jugendzeit In: Schrenk, Chr., Wanner,

P (ed.): heilbronnica 4 Beiträge zur Stadt- und Regionalgeschichte Quellen und Forschungen zur Geschichte der Stadt Heilbronn, 19 Jahrbuch für schwäbisch-fränkische Geschichte 36, Stadtarchiv Heilbronn, pp. 323–350.

Rieter, H and Zweynert, J. (2006): Gustav Schmoller and Globalisation In: Schmollers Jahrbuch

126, pp. 225–250.

Gustav Schmoller’s Program and Its Valuation Today and Tomorrow

Rieter, H., Rodney, Martin (transl.) (2006): “My Early Years in Heilbronn”  – Gustav von Schmoller’s Last, Autobiographical Essay In: Schmollers Jahrbuch 126, pp. 141–162 Salin, E (1924): Zur Stellung G.  Schmollers in der Geschichte der Nationalökonomie In: Schmollers Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reiche, München und Leipzig, pp. 307–314.

Schefold, B (1987): Schmoller, Gustav von (1838–1917) In: Eatwell, J.  a.o (eds): The New Palgrave, Vol 4, London.

Schmoller, G (1919/1923): Grundriß der allgemeinen Volkswirtschaftslehre, 2 vol., München, Leipzig, Duncker & Humblot.

Schumpeter, J. (1926): Gustav v Schmoller und die Probleme von heute In: Schmollers Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reiche, 50 Jg., 1 Halbband,

Von Beckerath, E (1962a): Gustav v Schmollers finanzgeschichtliche Studien und seine

finan-ztheoretische Betrachtung In: Lynkeus Gestalten und Probleme aus Wirtschaft und Polititk Tübingen, J.C.B. Mohr (Paul Siebeck), pp. 203–220.

Von Beckerath, E (1962b): Gustav von Schmoller In: Lynkeus Gestalten und Probleme aus

Wirtschaft und Politik Tübingen, J.C.B. Mohr (Paul Siebeck), pp. 68–71.

Von Below, G (1924): Zur Stellung G. Schmollers in der Geschichte der Nationaläkonomie In: Schmollers Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reiche, München und Leipzig, pp. 315–319.

Von Kempski, J.  (1964): Stein, Schmoller, Weber und die Einheit der Sozialwissenschaft

In: Kloten, N., Krelle, W., Müller, H., Neumark, Fr (eds.): Systeme und Methoden in den Wirtschafts- und Sozialwissenschaften, Tübingen, J.C.B. Mohr (Paul Siebeck), pp. 191–206 Winkel, H (1989): Gustav von Schmoller (1838-1917) In: Starbatty (ed.), Klassiker des ökono- mischen Denkens, vol II, Verlag Beck, München, pp. 97–118.

© Springer International Publishing AG, part of Springer Nature 2018

J Backhaus et al (eds.), Gustav von Schmoller and Adolph Wagner,

The European Heritage in Economics and the Social Sciences 21,

The Great Recession with its deepest trough in 2007 and 2008 triggered an interest

in evidence based policies to help governments to address urgent societal problems, such as unemployment, inequality of income, mismanagement of financial institu-tions and environmental deterioration At the same time a new generation of econo-mists with ideas of their own appeared Economists like Mariana Mazzucato (1968), Branko Milanovic (1953) and Thomas Piketty (1971) belong to this generation They test their theories with empirical and historical investigations, and do not hesi-tate to cooperate with other academic disciplines In their shadow exists a group of past heterodox economists including personalities such as Gustav von Schmoller (1838–1917),1 Adolph Wagner (1835–1917), Lujo Brentano (1844–1931) and Werner Sombart (1863–1941) These economists also witnessed serious economic crises and political conflicts during their careers The Heilbronn Symposium 2017 deserves our appreciation for raising the question whether these economists threaten

to be forgotten

1 The German Empire raised Schmoller to the peerage in 1908 He became ‘Von Schmoller’ In this essay I will refer to him as ‘Schmoller’.

To answer this question I restrict my essay to an investigation of Gustav Schmoller

in the Netherlands during the turbulent years of high capitalism lasting from 1870

through 1940 Schmoller adhered to the German Ethical-Historical School, but he

was not an undisputed academic and public personality Worried about the threat of revolution, he recommended social reform based on thorough empirical, historical and ethical investigations To determine his influence the emphasis of my essay will

be put on class conflict and labour relations Paragraph 1 describes his views on class conflict and labour relations during the turbulent years of capitalism Paragraph

2 discusses his reputation and the use of his views in parliamentary debates Paragraph 3 examines the familiarity of Dutch economists with Schmoller The emphasis will be on the economists Marie Willem Frederik Treub (1858–1931) and Johannes Antonius Veraart (1886–1955) To investigate the influence of his ideas about class conflict and labour relations I applied close reading, carried out a digital search of parliamentary proceedings and media, and conducted archival research.2

2 Schmoller and the Turbulent Years

To understand Schmoller and the turbulent years, the readership should remind that German society experienced a dramatic sequence of political changes, class con-flicts and economic crises between the years 1870 through 1940 German citizens underwent the rise and decline of the German Empire with its feudal society (1871–1918), the dissolution of the Weimar democracy (1918–1933), and the dictatorship

of Nazism (1933/1940, 1945) Simultaneously, German labourers organized selves to obtain better wages, to improve their labour conditions, and to achieve a say in labour relations In 1933 the National Socialist Party suppressed the German trade unions

them-To give an impression of the labour conflicts Fig. 1 shows the intensity of strikes

in Germany and the Netherlands from 1900 through 1933 (As of April 1933 the German Statistical Office did not publish data about labour conflicts)

Schmoller enjoyed the social opportunity to combine political appointments with

an academic career He was an example of a well-educated member of a class-

ridden society, who became a representative in the Staatsrat in 1844 The senate of

the University of Berlin sent him as a representative to the House of Lords

(Herrenhaus) from 1899 up to 1917 His chairmanship of the Kolonial Politische

Aktionskomité should be seen within the context of the German colonial ambitions (Clark 2015, p. 670; Grimmer-Solem 2007, p. 318)

Schmoller (1913, pp.  28, 39, 41) observed the emancipation of the labouring class and the potential threats of revolution up to 1917 He admired chancellor Otto

von Bismarck (1815–1898) and agreed with his rejection of Manchester economics and laissez-faire policies Schmoller’s agreement with this rejection had its origin in

2 I used the digital search engine Delpher to find relevant articles in magazines and newspapers

between 1870 and 1940.

the French revolution which replaced the ancient European order with a new social order based on a philosophy of natural law This philosophy liberated the individual from his social restraints, gave birth to an economic man who pursued his self- interests, and restricted government interference with the result that production and consumption increased The downside of this historical event was an era of misery among labourers, including diminishing wage levels, rule of capital, and repression (Schmoller 1864, pp. 394–395)

Aware of the miseries of the labouring class and the potential threat of revolution (from the Paris commune of 1871), Schmoller propagated social reform with the intention to guarantee the continuation of free institutions Only the preservation of

a middle class, the education of lower classes (Bildung), and the improvement of

income and property withstood a trend of alternating rule by financial and labour interests:

Nur die soziale Reform kann den Preussischen Staat in Traditionen erhalten die ihn gross gemacht, nur sie erhält die Aristocratie der Bildung und des Geistes an der Spitze des Staates, nur sie bietet uns Gewähr dafür, dass der Macht und dem Glanz des neurerstan- denen Deutschen Reiches auch die innere Gesundheit in der Zukunft entsprechen wird

(Schmoller 1875 , pp. 5–6).

Schmoller belonged to the initiators of the Verein für Sozialpolitik, a think tank

that held its first meeting in 1872.3 At this meeting he presented his views about

3 The year 1872 was an important year for German labour emancipation, because the German

Empire accepted the right of association.

Fig 1 Intensity of strikes in Germany and the Netherlands 1900-1933 Note See appendix I

Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

labour contracts He considered labour contracts as free and voluntary contracts among individual labourers and employers Civil law provided in his opinion the legal framework to conclude labour contracts The public authorities should abstain from interference with legal obligations and prohibitions However, he observed all kinds of legal obligations and prohibitions Legislation could only provide general guidance under circumstances of stable production technologies Changing eco-nomic conditions prevented wage directives (Schmoller 1872, pp.  295–296) Schmoller (1872, pp. 296, 300–301) drew the attention of his audience to the misery

of the labourers Conflicts between labourers and employers indicated that labour contracts were not free, because of pressures from the involved parties Under nor-mal economic conditions individual labourers were in a weaker position to bargain

The adoption of the right of association (Coalitionsfreiheit) contributed to the

wel-fare of the labouring class but not without inevitable conflicts Strikes and the lock-

outs became the main instruments in these conflicts The right of association raised

for Schmoller (1872, pp. 310–311, 318–320) the question about how to change this state of war into a state of peace As a solution he proposed the meeting to maintain

the right of association including the rejection to adopt again the punishment of breach of labour contract; to subject labour conflicts to boards of conciliation and

arbitration (Einigungsämter), to use trade union funds correctly, and to establish

courts with administrative authorities about health and safety.4 In his view the best

way to restore social peace was the establishment of boards of conciliation and

arbitration These boards consisted of elected representatives from labour and employer organizations in a certain trade, who determined the labour conditions for short periods of time during rising conflicts The parties involved should establish the boards voluntarily The state had to provide these boards with the required authorities to implement their decisions and to determine the boundaries within which the recognized trade unions could operate

3 Reputation and Parliamentary Debate

3.1 Reputation

The rise of the German Empire changed the European balance of power in the nineteenth century Dutch governments, aware of the strategic location of their country, approached the main contenders Germany and Great Britain with a prudent foreign policy At the same time Dutch industry and agriculture obtained access to a profitable German market (Hellema 2014, p. 64) German political ideas and sciences started to have an impact on Dutch society The Dutch historian Ernst Kossmann (1978, p.  213) remarked that almost all political groups found their

4 Plenary meetings of the Verein discussed and voted about proposed measures of social reform to

alleviate the consequences of capitalism (Bordewijk 1931 , p. 609; Biesecker and Kesting 2003 ,

pp. 109–110).

Joseph Schumpeter (1986, p. 861) suggested that the new German economics mildly affected Dutch economists Tieben and Schoorl (2015, pp. 59, 72) rejected

his suggestion that the influence of the German Ethical-Historical School was mild

in the Netherlands They argued that a historical undercurrent existed in Dutch nomics into the twentieth century This undercurrent included economists and poli-ticians with social liberal convictions, such as Hendrik Jacob Hamaker (1844–1911), Baltus Pekelharing (1841–1921), Hendrik Goeman Borgesius (1847–1947), Arnold Kerdijk (1846–1905) and Samuel van Houten (1844–1911).6 Kerdijk and

eco-Pekelharing even visited the Verein für Sozialpolitik and organized themselves around the journal Vragen des Tijds, because journals refused their articles

(Boschloo 1989, p. 237; Taal 1980, pp. 38–39)

Schmoller played a major role in an international discussion about the question whether the methodology of economics had to be either theoretical (deductive) or historical (inductive) He preferred the latter methodology which entailed the collec-tion and the analysis of facts within their historical context.7 The Dutch economist Verrijn Stuart (1943, pp. 27, 34) argued that economics as a science should pursue truthfulness Economists had to subject themselves to the law of logic and to the demands of their object Economics, politics and ethics had to be separated Schmoller sinned against this separation Historical economics put according to Verrijn Stuart economics at the service of politics and ethics Schmoller made economics investi-

gate social problems with ethischem Pathos to support social reform Although Verrijn

Stuart (1943, pp. 38–39) disagreed, he admitted that historical and theoretical nomics were useful and necessary No principal contradiction existed between them

eco-5 For example Anton van Gijn (1866–1933) studied economics under Adolph Wagner in Berlin He lectured as an extraordinary professor of Public Finance at the University of Leiden from 1918 up

to 1921 Van Gijn succeeded M.W.F. Treub as minister of Finance in 1916 See: Biografisch denboek van Nederland, www.resources.huygens.knaw.nl The lawyer H.J. Tasman remembered a lecture of Schmoller about slavery in Roman families and Malthus Tasman who wrote Schmoller’s obituary considered him more likely as an historian than an economist Monographies were his strength See: De Groene Amsterdammer, 21 July 1917 , p. 2.

woor-6 Tieben and Schoorl ( 2015 , p.  72) referred to Bordewijk ( 1931 ) who claimed that the Historical School gained ground in the Netherlands with the inaugural lecture of M.W.F. Treub.

Ethical-7 Historical economics considered causal relationships within a context of time and location Theoretical economics provided a general but valid causal relationship among economic phenomena.

Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

3.2 Parliamentary Debates

Several Dutch members of parliament quoted Schmoller in the German language during their debates about mainly labour relations, disability and old age insurance

To give an impression of his influence Table 1 shows their political affiliations and

Table 1 References to Gustav Schmoller in Dutch parliament 1870–1940

Breach labour contract

1903 Right to strikeBreach labour contract Van Asch van Wijck,

Disability and old age insurance

1913

Disability and old age insurance

1913

Disability and old age insurance

Say in conditions of employment

the subjects of their quotations from 1870 through 1940 These subjects belonged to

the main themes of the German Ethical-Historical School, in particular to labour

questions, and social and economic policy

In April 1903 the liberal member of parliament Hendrik Drucker (1857–1917) referred to the German discussion 25 years before about the question whether or not

a breach of labour contract should be prosecuted (3 April 1903, p. 1056) Immediate causes for raising this question in the Netherlands were the Railway Strike and the intention of the cabinet Kuyper (1901–1905) to take legal measures against strikes This intention met nation wide resistance Drucker quoted Schmoller:

Die unendlich übertriebene Angst vor Socialdemocratie und der ganzen Arbeiterbewegung, die den Philister kennzeichnet, der keine Kenntniss unserer ganzen socialen Bewegung und der Geschichte ähnlicher früherer Bewegungen hat, trägt dazu bei, dasz man dafür

wenn mann, wie er meint, durch ein solches Gesetz zeigt, dasz man noch courage habe,

Drucker deemed it undesirable to adopt criminal provisions against breach of labour contracts before the adoption of a regulation of the legal status of employees (1903, p. 1059)

Three years later, in a parliamentary debate about labour contracts, the social democrat Piet Tak (1848–1907) argued that since Schmoller and Brentano empha-sized the special characteristics of labour as a means of exchange, the view that the labourer had a weaker position in labour negotiations than the employer met hardly any resistance (Tak, 8 March 1906, p. 1242)

Tak discussed the political issue of breach of labour contracts and strikes He considered strikes as a suspension of work for which a period of notice should not apply The normal rules of Dutch law did not solve this issue The most accurate representation of the situation was to consider strikes as an equivalent to a state of war Schmoller expressed a similar view:

Die Masse des arbeitenden Volkes kann nicht mehr glauben, dass das positive Recht den idealen Forderungen entspricht, und in der Empfindung hiervon macht sie von ihrem Rechte der Selbsthilfe gebrauch Der Arbeiter bricht den vorgeblich ‘freien’ Vertrag, weil er weist, dass sie, denen er ihn bricht, ihn oft genug übervorteilt und ungerecht behandelt haben Er fühlt sich in einer Art Kriegszustandes, und zwar nicht vorübergehend, nicht von heute zu

This was Schmoller’s view in general about the relationship between labourer and employer, how much more should that apply to the relationship with regard to strikes To restrict or suspend the contract without dissolving the relationship was the essence of strikes It was a situation of an emergency which could according to Tak only be remedied by means of industrial organization In the absence of indus-trial organization labour legislation should contain peace and war regulations to deal with the consequences of strikes (Tak, 30 May 1906, p. 1902)

8 Philistersinn means narrow mindedness in the sense of petty bourgeois A modern German alent is spiessbürgerlich.

equiv-Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

The social democrat Roel Stenhuis (1885–1963) claimed that the fight of the trade union movement was inevitable This movement had the moral obligation to continue her fight for labour contracts and to interfere in questions of distribution and production The strong position of the labourer in the class conflict made most employers accept labour participation, although there were still employers, who would like to reverse that situation (Stenhuis, 27 February 1925, p. 343) If labour participation restricted itself to formal negotiations about the level of wages and the duration of labour, than the words of professor Schmoller applied:

Im übrigen ist unter der oft besprochenen Gleichberechtigung beider Teile im ganzen nichts anderes zu verstehen, als dass die Unternehmer die Arbeiterorganisationen dulden, anerkennen, mit ihnen verhandeln, und dass sie dabei die Arbeitervertreter so höflich behandeln, wie sich Käufer und Verkäufer auf dem Markte zu begegnen pflegen Die Unternehmer müssen aufhören, die Forderung einer Lohnerhöhung oder der kürzung der Arbeitszeit als Insubordination zu behandeln Sie müssen den Arbeitern mit den Formen der Achtung, der Rücksichtnahme, der Menslichkeit gegenübertreten, wie sie heute überhaupt zwischen den verschiedenen Klassen, die auf einander angewiesen sind, die Voraussetzung

II 1904 , p. 278).

Stenhuis believed that the description of so-called employee participation about labour conditions was drawn correctly If that was nothing more than a negotiation about the price of labour force, then one could not speak about real employee par-ticipation In his view this participation should include a right to have access to financial administrations to control whether the labour conditions corresponded with the financial results (Stenhuis, 27 February 1925, pp. 343–344)

In 1936 the social democrat Maup Mendels (1868–1944) remarked that since

Schmoller and Brentano state socialism (or Bismarck socialism) differed from social democracy The lattter designated state socialism as extensive state interven-

tion in the economy Social democracy preferred self-help by society (social groups) and rejected top down state dirigation of the economy Mendels referred to the Plan

of Labour (Plan van de Arbeid) that spoke about industrial boards with extensive say The Law on Industrial Councils of 1933 (Wet op Bedrijfsraden 1933) provided

in his opinion this possibility (Mendels, 7 February 1936, p. 284).9

4 Treub and Veraart

4.1 Treub

Marie W.F. Treub was an unconventional but active social liberal personality.10 Like Schmoller he used the social opportunity to combine an academic ambition with a political career In 1896 the University of Amsterdam appointed Treub as a profes-

9 The Law on Industrial Councils 1933 preceded the post-war legislation about industrial tion under public law, but turned out to be an unsuccessful attempt to institutionalize meetings between labourers and employers (Windmuller & De Galan, deel 1, 1979 , p. 69).

organiza-10 Treub established the Economic League (Economische Bond) in 1917 Various sources describe the League as a liberal party The historian Huberts ( 2017 , pp. 54–55, 259) describes the League

sor of economics and statistics, where he lectured for 9 years From 1914 up to 1918

he served as minister of Finance in the extra-parliamentary cabinet Cort van der Linden Entrusted with social legislation and employment, he contributed to the foundations of the Dutch welfare state with initiatives supporting the unemployed

In 1921 he left active politics and continued his career as chairman of the

Entrepreneurial Council of the Netherlands-Indies (Oud 1990, pp.  148–149; Slijkerman 2016, p. 10) Considering Treub’s political career, it does not come as surprise that he shared with Schmoller an academic interest in class conflict, labour relations, social reform and taxation.11

In 1896 Treub criticized the actual state of economics in his inaugural speech.12

He did not only deny the absolute and universal validity of concepts such as final

utility and diminishing returns, but he also critisized the French revolution and its

philosophy of natural law This revolution failed to establish new institutions with social misery as a result The philosophy of natural law emphasized individual rights of freedom and equality These individual rights propagated economic indi-vidualism and freedom of labour contracts He considered both responsible for the substitution of skilled labour by child labour in the English industry (Treub 1896,

pp. 5–6, 12, 15; Treub 1931, pp. 120–121, 221; Vermaat 1987, p. 101)

Treub (1896, pp. 19–20, 31) regarded the rise of the German Ethical-Historical

School as a response to the social consequences of natural law From his perspective law had the obligation to unite economics and morality, because law allowed state authorities to enforce regulations In case the use of individual rights to satisfy material needs had anti-social or immoral consequences the authorities had to restrain these rights in the interest of society He also referred to Schmoller and the

Verein für Sozial Politik The Verein contributed to a new social perspective on

eco-nomics by resisting disruptive economic individualism Ecoeco-nomics started to develop in line with Schmoller’s ideas about economics as social economics Welfare should be distributed more equally as a pre-condition for social progress Legal and economic institutions sustained this progress in a process toward the ideal

of distributive justice (Treub 1896, p. 32; Treub 1904, pp. 82–84, 118).13

as a predecessor of Dutch fascism Treub rejected the accusation of having fascist sympathies already in 1928 He had only changed his ideas about trade unions (Slijkerman 2016 , p. 343).

11 Minister of Finance Treub reformed the Dutch income tax system in 1915 See: Meijer ( 2000 ) for

a detailed discussion of income taxation and ethical-historical thinking In particular, Meijer cusses the contributions by Treub and Schmoller.

dis-12 Treub’s objections against theoretical economics motivated him to supervise and to annotate the

translation of Richard T. Ely’s An introduction to political economy (1901) as an alternative to the

textbooks of Vissering (1818–1888) and Pierson (1839–1909) This American economist studied under Adolph Wagner in Berlin from 1911 up to 1913 See: Verrijn Stuart ( 1943 ), p. 34; Senn ( 1997 ), p. 45; Dorfman ( 1955 ), p. 24; Wils ( 2005 ), p. 365.

13 Vermaat ( 1987, pp. 99, 103, 105) described Treub as a student of the German Ethical-Historical

individual-ism and eternal economic laws, because human behaviour adapted flexibly to changing morals and

legal institutions Vermaat ( 1987, p. 102) argued that Treub passed the German Ethical-Historical

with the institutional economist John R. Commons (1862–1945).

Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

To temper class conflict Treub wanted to harmonize labour and capital within a legal framework The democratic state, the cooperation and the trade union belonged

to the institutions which could determine the social conditions of labourers and societal progress He considered trade unions as rising institutions which had weak-ened their position with political affiliations The trade unions achieved their real importance when they stopped pursuing non-related objectives and concentrated on the original objective of improving labour conditions Treub mentioned the British trade unions which pursued humane labour conditions without getting entangled in politics To the contrary, the French trade unions were involved in anarchism and general strikes Trade unions should adopt the British trade union model with its neutral actions The German developments were important, because here trade unions removed themselves from social democratic control Revisionist social dem-ocrats like Eduard Bernstein (1850–1932) supported this removal with theoretical arguments (Treub 1908, pp. 62–63, 65)

Trade union activities characterized class conflicts, because these activities intended to obtain concessions from employers Treub (1908, p. 66) did not deny class conflicts, but he disavowed that class conflicts existed in the social democratic sense, leading to increased class contradictions and to augmented consciousness among both classes He distinguished various factors that tempered class conflicts, including scientific progress, coöperations, gradual disappearance of the class char-acter of the state (evolution of voting rights), and change from indirect taxation (excise duties) to direct taxation (Treub 1908, pp. 20–26)

Weak trade unions used in his view strikes as weapons In proportion to an increase in strength and importance trade unions would prevent aimless waste of energy Powerful trade unions did not encourage strikes as weapons, but attempted either to prevent strikes or to make them superfluous (Treub 1908, pp. 66–67).Modern trade unions prevented class conflicts, because their strength compelled employers to listen and to negotiate Strikes were not anymore about wages and labour time but about recognition of trade unions Trade unions changed from orga-nizing strikes to negotiating collective agreements which acknowledged equal rights

to labourers and say in enterprises (marxist theoreticians disapproved this ment.14 Many labourers became social reformers attempting to increase their skills with the intention to serve the standards of living of the labouring community (Treub 1908, pp. 67–68)

develop-Employers also organized themselves in associations Both parties became ger with the result that strikes and lock-outs diminished in favour of contracts and judicial dispute settlements Labour legislation, nationalization of monopolies, coöperations and trade unions established a social order that improved the economic position of labourers and gave them a voice in industrial relations The labourers

stron-14 The German miner strike of 1905 motivated Brentano to give a lecture about a new kind of lation within the system of collective bargaining, namely the extension of a union collective agree-

regu-ment to the entire workforce in a particular trade, ‘dass die in diesem festgesetzten

(Bordewijk 1931 , p. 616).

obtained more influence on the production This was not possible without restricting capitalist rule together with legislation and agreements involving both parties This resulted in a gradual reduction of class conflicts (Treub 1908, pp. 69–70)

Treub became very interested in voluntary coöperations to structure society with the intention to ensure welfare and social stability as a next step in social evolution The coöperation was a modern type of social organization like once the guild system of the middle ages Labourers purchased and managed their own fac-tories at their own risk, and shared profits or losses as the case may be Individual input of labour instead of capital investment was decisive This type of society would show an organicist coherence between newly established groups Eighteenth century individualism had destroyed this coherence Organization of society along the lines of coöperations restricted excessive economic competition and individual rights in favour of societal interests As an example, he discussed the so-called user coöperation This type of coöperation represented users regardless of their class origins (Ely 1901, pp. 244–245; Treub 1908, p. 22; Slijkerman 2016, p. 86).15 In his memoirs Treub uttered himself with less enthusiasm about coöperations Especially, he rejected productive labour coöperations making profits, because these coöperations had no interest in extending the number of participants (Treub

1931, p. 172)

4.2 Veraart

The catholic Veraart also pursued an academic and a political career.16 He studied economics under Treub at the University of Amsterdam, where he defended his doctoral dissertation about wages in 1910.17 Veraart wrote his dissertation in a tradition that repudiated the natural law concept of economic individualism.18 He possessed an in-depth knowledge about the writings of German economists and

15 Patel ( 2016 , pp. 222–223) wrote that president Franklin D. Roosevelt had an interest in the nization of parts of society along coöperative lines In 1936 Roosevelt sent a small team to Europe

orga-(in particular Sweden) to study coöperations as an alternative to laissez-faire capitalism American

protagonists of coöperations argued that coöperations maintained and nourished democracy.

16 More information about Veraart, his economics and political attitude toward Rerum Novarum, in:

Jansen (2017).

17 David van Embden (1875–1962) supervised Veraart’s dissertation Van Embden succeeded Treub

at the University of Amsterdam in 1905 He paid attention to ethics and social evolution in his lectures Van Embden considered the investigation of the main causes of historical processes, the finding of regularities in history, and the prediction of the future as the main tasks of social evolu- tionism National Archive, Collection Veraart ( 1905–1955 ), archive inventory number 2.21.306, number 50.

18 National Archive, Collection Veraart ( 1905–1955 ), archive inventory number 2.21.306, number 906.

Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

ethicists.19 Another indication of this familiarity was his adoption of the division

of the era of capitalism from Werner Sombart in his lectures for the British

Newman Association in 1943.20

In his dissertation Veraart (1910, p. 6; 1921, pp. 7–8) distinguished between a

realist approach and an ethical approach to economics The realist approach

con-sisted of a descriptive and a theoretical approach The descriptive approach focussed

on collecting facts about the economy The theoretical approach included an cal investigation and a pure theoretical investigation The former investigated eco-nomic phenomena like wages as a special case of prices in a context of causality The latter studied special economic phenomena from a general theoretical perspec-tive To put it differently, this type of investigation applied general pricing theory to wages, because wages did not differ from market prices (Veraart 1910, pp. 8, 50–51)

empiri-He subscribed to a subjective theory of value to determine prices and wages Subjects expressed the value of the available means of satisfaction (consumer goods, services, factors of production) with their preparedness to pay or to accept an amount of money in a range between a minimum and a maximum amount These

means of satisfaction had either user value, productive value or exchange value The

mechanism of determining prices did not differ from the determination of wages Both resulted from an exchange between a demanding subject and a supplying sub-ject involving subjective and objective factors The subjective factors included max-imum and minimum valuation, individual power and market policy, and government intervention The available quantities and compositions of the means of satisfaction constituted the objective factors (Veraart 1910, pp. 28, 68–69; 1947, pp. 75–76).Veraart (1910, p. 6) made various references to Schmoller He had difficulties to understand the restrictiveness of Schmoller’ s object of economics.21 Veraart broadly defined economics as all the efforts of taking care of mankind with scarce means of satisfaction This definition also covered the taking care of those who did not show any efforts, because all efforts had to be (or should be) investigated He considered

Schmoller’s concept of Wirtschaften as complicated (Veraart 1910, pp.  10, 11–12)

Veraart analyzed Wirtschaften with regard to his own definition of economics

Schmoller’s concept made one think at first of an activity on behalf of the external

physical satisfaction of our existential needs (in German: die Thätigkeit für die äuszere

körperlichen Bedürfnisbefriedigung deren Befriedigung die Bedingung unserer Existenz ist ) Schmoller gave a negative definiton of Thätigkeit (English translation activity):

Er umfasst nicht alles ‘arbeiten’ denn es giebt ein Arbeiten für höhere nicht wirtschaftliche Zwecke, nicht alle Thätigkeit für äuszere Bedürfnisbefriedigung, denn dazu gehört auch das

Veraart 1910, p. 11).

19 Veraart discussed amongst others the catholic ethicist Heinrich Pesch s.j (1854–1926) in his sertation Pesch studied under Schmoller and Wagner He belonged to the Solidarist School Solidarists distinguished between a capitalist mode of production and a capitalist way of thinking They declined capitalist thought, because it aimed to obtain profits for the sole purpose of profits (Rutjens 1993 , p. 44).

dis-20 Veraart adopted from Sombart the following eras of capitalism: 1500–1800 primitive capitalism; 1800–1870 free capitalism; and 1870–1940 high capitalism National Archive, Collection Veraart

( 1905–1955 ), archive inventory number 2.21.306, number 664.

21 Economists disagreed about the question whether the object of economics restricted itself to material welfare or not.

In this definition Schmoller introduced the concept of Arbeiten für höhere nicht

wirtschafliche Zwecke without clarifying the meaning of the word wirtschaftlich

This restricted, in the view of Veraart, the process of taking care with scarce means

of satisfaction, because it did not even include the entire material welfare Veraarts

problem was to determine which efforts belonged either to äuszere

Bedürfnisbefriedigung or to höhere nicht wirtschafliche Zwecke Did walking,

sports and healthcare either belong to external physical satisfaction or to higher non-economic objectives?

Veraart (1910, pp.  53–54, 60–61) applied his distinction between a realist approach and an ethical approach to review the investigations of other scholars Many economists followed a hypothetical-theoretical approach and neglected empirical and descriptive investigations These economists also assumed a hypothetical- theoretical character of wages Schmoller belonged to the exceptions

He used surveys and statistical data to support his argumentation He met with regard

to empirical theory and descriptive analysis the requirement of paying attention to the composition of wages of different groups of labourers Veraart (1910, pp. 60, 61–62) described Schmoller as a realistic author, because he did not apply a pure theoretical approach to wages This meant that he did not consider wages as normal market prices Applying his kind of investigation of prices would lead in the eyes of

Veraart to the discovery of the mainly ‘hypothetical theory of subjective factors’ of

the Austrian School Further, Schmoller belonged to the few economists, who did not put the difference between nominal and reals wages in the forefront, because of his realist point of view Neither did he pay attention to the objective factor nor to the

difference between wage (Arbeitslohn) and labour income (Veraart 1910, p. 60).Veraart investigated whether or not economists paid attention to subjective an objective factors with regard to prices and wages He claimed that economists did not conduct any realist-theoretical research about subjective factors such as the

enforcement community Even Schmoller seemed to restrict himself to the esis of free exchange and economic individualism Hypothetical theories should include subjective factors about pricing (Veraart 1910, p. 76)

hypoth-Schmoller presented an actual discussion about the level of wages in his

Grundrisz II sections 211 and 212 Here, he discussed some subjective factors clearer than any other publication about the subject, but neglected the objective fac-

tor Referring to labour relations (Arbeitsverhältnis) he wrote:

(…) dasz es von einer wachsenden Rechtsordnung in bestimmte Bahnen gewiesen, sich der

This quotation referred to interference of an enforcement community, but did not

contain any explicative extension to industrial labourers Schmoller did not neglect the importance of power, but here too he abstained to give a further explication

He  remarked with regard to the labour market:

(…) dasz hier noch mehr als auf dem Warenmarkt, hinter Angebot und Nachfrage Gruppen

von Menschen mit ihren Gefühlen, Sitten, Beziehungen stehen, dasz ihre sociale Stellung und Organisation, ihre Macht und ihre Schwäche, alle die socialen Einrichtungen und rech- tlichen Ordnungen, welche ihr Thun und Lassen bestimmen, den Lohn und seine

1910 , p. 114).

Gustav von Schmoller in the Netherlands 1870–1940 A Forgotten Economist?

Veraart (1910, pp. 114–115) argued that this quotation indicated that Schmoller showed more awareness of the factor power than any other economist, but he missed

a detailed discussion about power and (industrial) labour He claimed that Schmoller

paid only attention to the subjective factor position of power as a result of supply

and demand Schmoller reduced the investigation of the wage impact of supply and demand to a historical discussion of labour markets and trade unions in Western Europe He did not pay sufficient attention to wage levels Veraart explained that the French economist Pierre-Émile Levasseur (1828–1911) produced a more complete discussion about the wage formation of modern industrial workers (Veraart 1910,

His inaugural speech about labour legislation referred to the beautiful tions of the German Ethical-Historical School and its rejection of the dogma of

contribu-economic freedom This dogma had damaged the working class contribu-economically and morally Absence of policies could not be excused anymore He expressed his appreciation of Schmoller’s scholarly writings (Veraart 1919, pp. 9–10).23

It was tempting to consider the Realist School as a revival of the German Ethical-

Historical School Veraart (1940, p. 21) rejected this view, although both schools investigated similar phenomena and had views about causality quite different from

the exact sciences The German Ethical-Historical School lacked in his opinion a critical effective approach and had no theory of its own except a vague history of

human welfare.24 To the contrary, the Realist School attempted to renew economics

including the development of theory

Veraart witnessed a growing aversion to nineteenth century capitalism Labour legislation and trade organizations developed on a large scale and - despite of the abominable theories of the class conflict - peaceful parliamentary methods and trade unions tried for an understanding between labourers and employers During his stay

in London Veraart became convinced that in many respects the Netherlands led the way to a new social and economic order not only in ideas but also in facts He had

22 Levasseur mentioned the following determining factors of modern industrial wages: productivité

du travail, fonds des salaires et accroissement de la richesse, cỏte de la vie de la class ouvrière, concurrence entre les travailleurs, institutions, coutume (Veraart 1910 , p. 116).

23 See also: Intreerede Prof Mr J.A. Veraart, in: Maasbode, 10 februari 1919

24 The subjective effective critical approach evaluated the effectiveness of human action in terms of the objective(s) set either individually or collectively The objective effective approach evaluated the effectiveness of human action in terms of reasonable satisfaction of reasonable human needs (Cobbenhagen 1935 , p. 430).