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METHODENSTREIT – WHY CARL MENGER WAS, AND IS, RIGHT
2The (Older and Younger) Historical School ?
Older Historical School ?Wilhelm Georg Friedrich Roscher (1817 – 1894),
Grundriss zu Vorlesun-gen über die Staatswirtschaft nach geschichtlicher
Methode (1843) ?Bruno Hildebrand (1812 – 1878) ?Karl Knies (1821 –
1898) ?
Younger Historical School ?Gustav von Schmoller (1838 – 1917) ?Georg
Friedrich Knapp (1842 – 1926) ?Karl Wilhelm Bücher (1847 – 1930)
?The methodological position of the Younger Historical School: ?The
representatives of the Younger Historical School rejected economic theory for
its advocacy of universally valid economic laws. It was argued that economic
laws could only be as universal as the conditions to which they referred. Since
history was a process of constant transformation of the conditions of human
existence, there could be no such thing as an economic law. ?At best, there
could be "laws" describing the economy of a more or less unique
period and, all insights about this economy had to be derived from studies of
concrete historical episodes. ? In fact, the Younger Historical School
advocated (radical) positivism-empiricism, inductivism and relativism
(“anything goes”): One can never definitely establish whether a
hypothesized relationship between two or more variables exist or not.
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Carl Menger and the Methodenstreit?
Carl Menger (1840 – 1921), in his Untersuchungen über die Methode der
Sozialwissenschaften und der politischen Ökonomie insbesondere (1883)
refuted the methodology of the Younger Historical School. ?
His Investigations led to the Methodenstreit, the battle of method: It pitted
the emerging Austrian School against the Historical School over a critically
impor-tant question: what is the proper way to do social sci-ence??Menger
explained that there are economic laws in the sense of “exact laws of
reality”, and that the method of historical research was unable to
discover these laws. ? Example of an “exact laws of reality”: A rise
(decline) in the amount of money (in the economy) necessarily leads to a fall
(rise) in the purchasing power of a money unit (compared to a situation in
which the money sup-ply had remained unchanged). ? Mises (1984 [1969], p. 12)
saw the Methodenstreit being about episte-mology: “The term Methodenstreit
is, of course, misleading. For the issue was not to discover the most
appropriate procedure for the treatment of the problems commonly considered as
economic problems. The matter in dispute was essentially whether there could be
such a thing as a science, other than history, dealing with aspects of human
action "The realistic-empirical orientation of theoretical research, as we
saw, offers us in all realms of the world of phenomena results which are
formally imperfect, however impor-tant and valuable they may be for human
knowledge and practical life. They are theories which give us only a deficient
understanding of the phenomena, only an uncertain predic-tion of them, and by
no means an assured control of them. From the very beginning, too, the human
mind has followed another orientation of theoretical research beside the one
discussed above. It is different from the latter both in its aims and in its
approaches to cognition. The aim of this orientation, which in the future we
will call the exact one, an aim which research pursues in the same way in all
realms of the world of phenomena, is the determination of strict laws of
phenomena, of regularities in the succession of phenomena which do not present
themselves to us as absolute, but which in respect to the approaches to
cognition by which we attain to them simply bear within themselves the
guarantee of absoluteness. It is the determination of laws of phenomena which
commonly are called "laws of nature," but more correctly should be
designated by the expression "exact laws."
Refuting positivism-empiricism :
Positivism is a philosophy of science, based on the ideas of Henri de Saint
Simon (1760 – 1825) and Auguste Comte (1798 – 1857). It rests on the
asser-tion that theology and metaphysics are earlier imperfect sources of
knowledge, and that positive knowledge is based on natural phenomena, with its
properties and relations verified by the empirical sciences. ? Positivism holds
that: (1) sense experience is the only (and measurable) source of human
knowledge; (2) that knowledge can come only from affirma-tion of theories
through strict scientific method; and (3) the validity of meta-physical
speculation must be rejected. ?Empiricism (as applied in the field of social
sciences) considers natural sci-ences to be its model and can be characterised
as follows: ?Empiricism maintains that economic propositions have the same
logical status as laws of nature, and it states hypothetical relationships
between two or more events, essentially in the form of if-then statements.
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