Wednesday, January 28, 2009

The Methodenstreit

This post is part of a series exploring Principles of Economics by Carl Menger.  The following explores content from the Introduction.

Previously in this series: The Mathematical Marginalists

When Menger's Principles of Economics was published, its brilliance and tremendous insight was undeniable to most who read it. In Germany, however, it was subject to an academic blackout, conducted by Gustav von Schmoller, "who, from his throne at the University of Berlin, ruled the German academic world in the latter part of the 19th Century."1 As mentioned in a previous post, the German intelligentsia at the time was extremely beholden to the state: and the University of Berlin was the nerve center for state apologia (scholars there called themselves the "intellectual bodyguard of the House of Hohenzollern"). Schmoller and his cronies were also hard-core anti-theory members of the Historical School (also mentioned previously). The following funny story exemplifies just how anti-theory Schmoller was:

At a conference in Geneva where [Vilfredo] Pareto was presenting a paper, Gustav von Schmoller was in the audience and kept noisily interrupting Pareto's talk by shouting "There are no laws in economics!" The next day, when Pareto spotted Schmoller in the streets of Geneva. Pareto approached Schmoller and hid his face, pretending to be a beggar (which was not too difficult since Pareto was a shabby dresser). "Please, Sir," Pareto said, "Can you tell me where I can find a restaurant where you can eat for nothing?" Schmoller replied, "My dear man, there are no such restaurants, but there is a place around the corner where you can have a good meal very cheaply." "Ah," said Pareto triumphantly, unveiling himself, "so there are laws in economics!"2

To such an avid foe of economic theory and and a disbeliever in economics laws, Menger, who so thoroughly established the former and brilliantly discovered the latter, must have seemed like the ultimate nemesis. But Schmoller didn't deign to debate Menger. Being at the top of the heap, he had the luxury of attacking Menger by snubbing him...

The crowning offence from the Austrian point of view was given by Schmoller himself who, on the appearance of Menger’s pamphlet, took the probably unprecedented step of announcing in his journal that, although he had received a copy of the book for review, he was unable to review it because he had immediately returned it to the author

...and by blacklisting him and his students...

Schmoller, indeed, went so far as to declare publicly that members of the “abstract” school were unfit to fill a teaching position in a German university, and his influence was quite sufficient to make this equivalent to a complete exclusion of all adherents to Menger’s doctrines from academic positions in Germany.

Schmoller, for all his power and arrogance, could not stop the Marginal Revolution, as it swept his profession in spite of him. The real damage he did, however, was to preoccupy Menger in a methodological debate (famously known as the Methodenstreit) for almost the rest of his career. Menger wrote tract after tract defending his methodology. This seems a waste of his brilliance, when contemplating how much he might have accomplished had he been able to focus on further developing actual economic theory.

1The History of Economic Thought Web Site,

Next in this series: Menger's Axioms

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