Older method dispute in economics

Studies on the method of social sciences and political economy in particular , 1933

An older method controversy in economics is a dispute which concerned the importance of inductive and deductive research methods for economics . The dispute was mainly in the 1880s and 1890s in German-speaking countries between the Grenznutzenschule and the Historical School of Economics. This is to be distinguished from the more recent methodological dispute, which concerns the admissibility of value judgments in economics.

The Germanism “dispute over methods” has also established itself in many other languages ​​to denote this dispute.

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Gustav von Schmoller , a leading exponent of the younger historical school, took the view that there are no immutable laws of human activity. The primary object of study in economics is society as a whole ( methodological collectivism ); these and the processes in them are, however, dependent on time and place and in constant change ( relativism ). The economist's task is to develop scientific knowledge from empirical and historical research by induction . Schmoller thought that primarily deductive research made little sense because ideological thought patterns influenced the result. Concrete problems could only be understood against the background of the concrete circumstances of an economy (e.g. social structure, economic and political constitution).

The Viennese economist Carl Menger , on the other hand, considered the study of individual human behavior ( methodological individualism ) to be the right starting point for economics. Through theoretical deduction , starting from the principle of utility maximization , generally valid and unchangeable laws of human action can be derived ( existence of “absolute” truths ). It is the task of the economist to recognize this through theoretical analysis ( rationalism ). This enables economics to be an exact science that is independent of historical science.

Above all, Schmoller criticized Menger's “singular considerations” of the phenomena of value and price formation, money and income distribution, whereby the constitutive relationship to the moral-legal institutional framework is lost. He admitted that all “perfect science” is deductive, but, in Schmoller's opinion, political economy was not yet sufficiently advanced that he still considered the need for an increased use of inductive methods.

Effect and result

In the literature, Schmoller is occasionally accused of being hostile to theory and is of the opinion that Schmoller's aversion to theoretical working methods delayed the advance of theoretical analysis in Germany and thus slowed down the progress of economic knowledge. Others see the dispute as a whole as crippling, since it served more academic power politics than the promotion of epistemological insights. Menger also never succeeded in adequately justifying his position of the necessity of a pre-existing theory for observing reality. His attitude also showed the danger of the "exact" theory becoming independent, which only allows the falsification of theses on the basis of their internal logic.

The dispute was particularly significant for the Austrian School , which only came into being in the course of the dispute when Eugen von Böhm-Bawerk and Friedrich von Wieser supported Menger's views. The term “Austrian School” was only coined during the dispute and was originally used as an abuse on the part of the historians to underline the supposed provinciality of the Austrians. But this later took over him.

The methodological dispute was essentially limited to the German-speaking area. Today the dispute is over. As is customary internationally, both the inductive historical and the theoretical deductive method are used in conventional economics. Both methods are justified.

Web links

• Principles of Economics by Carl Menger
• Investigations into the Method of the Social Sciences with Special Reference to Economics by Carl Menger
• Epistemological Problems of Economics by Ludwig von Mises
• The Historical Setting of the Austrian School of Economics by Ludwig von Mises
• The New Methods Dispute by The New Methods Dispute
• The New Methods Dispute by The New Methods Dispute

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1. ^ Werner Lachmann, Volkswirtschaftslehre , Volume 2, 2003, ISBN 978-3540202196 , page 18
2. ^ Werner Lachmann, Volkswirtschaftslehre , Volume 2, 2003, ISBN 978-3540202196 , page 18
3. ↑ Werner Lachmann, Economics , Volume 2, 2003, ISBN 978-3540202196 , pages 19, 20
4. ↑ Aliki Lavranu, description, causality and teleology in: Otto G. Oexle, Crisis of Historicism - Crisis of Reality , 2007, ISBN 978-3525358108 , page 188
5. ↑ Aliki Lavranu, description, causality and teleology in: Otto G. Oexle, Crisis of Historicism - Crisis of Reality , 2007, ISBN 978-3525358108 , page 199
6. ↑ Werner Lachmann, Economics , Volume 2, 2003, ISBN 978-3540202196 , page 20
7. ^ Fritz Sollner, The History of Economic Thinking , 2001, ISBN 978-3540413424 , page 276
8. ↑ Werner Ehrlicher, Ingeborg Esenwein-Rothe and Harald Jürgensen, Compendium of Economics , Volume 1, 1975, ISBN 978-3525131480 , page 507
9. ↑ Werner Lachmann, Economics , Volume 2, 2003, ISBN 978-3540202196 , page 20