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The Historical Setting of the Austrian School of Economics
Ludwig von Mises

The Conflict with the German
Historical School

3. The Methodenstreit

In the Untersuchungen Menger rejected the epistemological ideas that underlay the writings of the Historical School. Schmoller published a rather contemptuous review of this book. Menger reacted, in 1884, with a pamphlet, Die Irrt?mer des Historismus in der Deutschen National?konomie, The various publications that this controversy engendered are known under the name of the Methodenstreit, the clash over methods.

The Methodenstreit contributed but little to the clarification of the problems involved. Menger was too much under the sway of John Stuart Mill's empiricism to carry his own point of view to its full logical consequences. Schmoller and his disciples, committed to defend an untenable position, did not even realize what the controversy was about.

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.

There was, first of all, radical materalist determinism, a philosophy almost universally accepted in Germany at that time by physicists, chemists, and biologists, although it has never been expressly and clearly formulated. As these people saw it, human ideas, volition's, and actions are produced by physical and chemical events that the natural sciences will one day describe in the same way in which today they describe the emergence of a chemical compound out of the combination of several ingredients. As the only road that could lead to this final scientific accomplishment they advocated experimentation in physiological and biological laboratories.

Schmoller and his disciples passionately rejected this philosophy, not because they were aware of its deficiencies, but because it was incompatible with the religious tenets of the Prussian Government. They virtually preferred to it a doctrine that was but little different from Comte's positivism (which, of course, they publicly disparaged on account of its atheism and its French origin). In fact, positivism, sensibly interpreted, must result in materialist determinism. But most of Comte's followers were not outspoken in this regard. Their discussions did not always preclude the conclusion that the laws of social physics (sociology), the establishment of which was in their opinion the highest goal of science, could be discovered by what they called a more "scientific" method of dealing with the material assembled by the traditional procedures of the historians. This was the position Schmoller embraced with regard to economics. Again and again he blamed the economists for having prematurely made inferences from quantitatively insufficient material. What, in his opinion, was needed in order to substitute a realistic science of economics for the hasty generalizations of the British "armchair" economists was more statistics, more history, and more collection of "material." Out of the results of such research the economists of the future, he maintained, would one day develop new insights by "induction."

Schmoller was so confused that he failed to see the incompatibility of his own epistemological doctrine and the rejection of positivism's attack upon history. He did not realize the gulf that separated his views from those of the German philosophers who demolished positivism's ideas about the use and the treatment of history-first Dilthey, and later Windelband, Rickert, and Max Weber. In the same article in which he censured Menger's Grunds?tze, he reviewed also the first important book of Dilthey, his Einleitung in die Geisteswissenschaften. But he did not grasp the fact that the tenor of Dilthey's doctrine was the annihilation of the fundamental thesis of his own epistemology, viz., that some laws of social development could be distilled from historical experience.

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