But Hildebrand’s absolutism had no more influence than Roscher’s eclecticism, unless we make an exception of his generalisation concerning the three phases of economic development, which he differentiates as follows: the period of natural economy, that of money economy, and finally that of credit. Beyond that he merely contented himself with publishing a number of fragmentary studies on special questions of statistics or history, without, for the most part, making any attempt to modify the Classical theory of production and distribution.
The critical study of 1848 hinted at a sequel which was to embody the principles of the new method. But the sequel never appeared, and the difficult task of carrying the subject farther was entrusted to Karl Knies, another professor, who in 1853 published a bulky treatise bearing the title of Political Economy from the Historical Point of View.[812] But there is as much divergence between his views and those of his predecessors as there is between Roscher’s and Hildebrand’s. He not only questions the existence of natural laws, but even doubts whether there are any laws of development at all—a point Hildebrand never had any doubts about—and thinks that all we can say is that there are certain analogies presented by the development of different countries. Knies cannot share in the belief of either Hildebrand or Roscher, nor does he hold with the Classical school. He thinks that political economy is simply a history of ideas concerning the economic development of a nation at different periods of its growth.
Knies’s work passed almost unnoticed, ignored by historians and economists alike, until the younger Historical school called attention to his book, of which a new edition appeared in 1883. Knies makes frequent complaints of Roscher’s neglect to consider his ideas.
Such heroic professions naturally lead us to expect that Knies would spare no effort to show the superiority of the new method. But his subsequent works dealing with money and credit, upon which his real reputation rests, bear scarcely a trace of the Historical spirit.
The three founders of the science devoted a great deal of time to a criticism of the Classical method, but failed to agree as to the aim and scope of the science and left to others the task of applying their principles.
This task was attempted by the newer Historical school, which sprang up around Schmoller towards the end of 1870. This new school possesses two distinctive characteristics.
(1) The useless controversy concerning economic laws which Hildebrand and Knies had raised is abandoned. The members of the school are careful not to deny the existence of natural social laws or uniformities, and they considered that the search for these was the chief object of the science. In reality they are economic determinists. “We know now,” says Schmoller,[813] “that psychical causation is something other than mechanical, but it bears the same stamp of necessity.” What they do deny is that these laws are discoverable by Classical methods, and on this point they agree with every criticism made by their predecessors.
As to the possibility of formulating “the laws of development” upon which Hildebrand laid such stress, they professed themselves very sceptical. “We have no knowledge of the laws of history, although we sometimes speak of economic and statistical laws,”[814] writes Schmoller. “We cannot,” he regretfully says later, “even say whether the economic life of humanity possesses any element of unity or shows any traces of uniform development, or whether it is making for progress at all.”[815] This very characteristic passage from Schmoller was written in 1904,[816] and forms the conclusion of the great synthetic treatise. All attempts at a philosophy of history are treated with the same disdain.[817]
(2) The newer Historical school, not content merely with advocating the use of the Historical method, hastened to put theory into practice. Since about 1860 German economists have shown a disposition to turn away from economic theory and to devote their entire energy to practical problems, sociological studies and historical or realistic research. The number of economic monographs has increased enormously. The institutions of the Middle Ages and of antiquity, the economic doctrines of the ancients, statistics, the economic organisation of the present day, these are some of the topics discussed. Political economy is lost in the maze of realistic studies, whether of the present day or of the past.
Although the Historical school has done an enormous amount of work we must not forget that historical monographs were printed before their time, and that certain socialistic treatises, such as Marx’s Kapital, are really attempts at historical synthesis. The special merit of the school consists in the impulse it gave to systematic study of this description. The result has been a renewed interest in history and in the development of economic institutions. We cannot attempt an account of all these works and their varied contents. We must remain satisfied if we can catch the spirit of the movement. The names of Schmoller, Brentano, Held, Bücher, and Sombart are known to every student of economic history. Marshall, the greatest of modern theorists, has on more than one occasion paid them a glowing tribute.[818]