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Week 7: Historial Economics, Marginalism and the Methodenstreit - Coggle…

- - - - Tenents of historicism:
        
        Human experience is contingent upon historical context - the norms, ideologies and values of a particular time are distinct frmo those of another time
        
        Totalizing logic: contexts as organic unities (cf. “false consciousness” — being out of one’s unity)
        
        Relativism: context supplies norms and values, and these vary from one setting to another
    - - Adam Smith: caricature, or “Smithianismus” - oversimplification of his ideas in the 19th century
        
        Adam Smith as symbol for the abstraction, atomism, amorality, etc. of Classical Political Economy (maybe more actually a critique of Ricardo)
        
        Political Economy as smokescreen for British hegemony over other nations, esp. Germany
    - - German liberal politician and academic
        
        He refers to his work as “economic cultural history in the context of the history of the total political and legal development of nations and statistics”
        
        Obsessed with coming to know as much as possible and assembling all of the empirics to understand the history of the economy and a national economic culture and how this develops over time
        
        They are interested in empirics to build up a whole rather than holism rather than abstraction from principles
    - - Lays out the methodological principles of the German Historical School
        
        Footnotes show influence of ancient Greek thinking and ideas of cyclical economic patterns
        
        Rather than the state market and nations Roscher is interested in the volk, the people, and the volk economy
        
        Countable in terms of population but also a non-countable thing - the volksgeist is the national spirit
        
        Roscher’s Ideas:
        
        Volk Economy as a body or organism - not something we have seen in anything else in this course
        
        This is something that is weak or strong, sick or healthy
        
        Public Economy and People’s History - “the public economy of the people has its origins simultaneously with the people”
    - - Successor German School
        
        Post-Unification - Successor German School to the likes of Hildenbrand and Roscher which is more clear in taking the position that eocnomics is normative - more forceful in making that declaration
        
        Policy-oriented German School
        
        Members include Weber (father of economic sociology)
        
        Weber: critique of Roscher
        
        Believes they produce a certain kind of resigned relativism to the world that is maybe trying to understand but not necessarily intervene in policy
      - Verein für Socialpolitik (Association for Social Policy) (1873)
        
        One of the institutional manifestations of this policy orientation is the foundation in 1873
        
        Between Manchester School (associated with a particular kind of free trade thinking) and Socialism
        
        “The goal is to lift, educate, and reconcile the lower classes on the basis of the existing order so that they would fit into the organism in harmony and peace.” - differs from proletarian seizing the means of production, about improving things within the existing configuration of social relations
      - England:
        
        Walter Bagehot and The Economist - first collumnist for the Economists paid up member of the German Historical School
        
        Hobson and the Critique of Imperialism - foremost late 19th early 20th century critqque of imperialism
        
        American “New Generation”:
        
        Transformation of the American University System - associated with importation of certain kinds of methodologies of the German Historical School (1885)
        
        Japan:
        
        Roesler as adviser - economist of the German school. Goes on to teach in Japan, ends up as an advisor on international law and the foreign ministry in Japan
- - - - Counterrevolution = Anti-Smithianismus, List, German Historical School, etc.
        
        Counter-Counterrevolution = Marginalists (Neoeconomics)
  - - - Context: Second Industrial Revolution
        
        Expansion of the Global Market:
        
        Hobsbawm, The Age of Empire, 1875-1914 - we are now contextually in the age of empire
        
        Industrialisation in countries like Russia, Sweden, North America, Japan
        
        It’s not just Britain that is industrialised, the US, Germany, Britain France are the chief national economies
        
        Pluralist economy
      - Gustav von Schmoller (1838-1917)
        
        Founding figure of VfS (recall last time)
        
        Toward the History of German Small Businesses in the Nineteenth Century: Statistical and National-Economic Investigations (1870)
        
        German Historical School person Menger is writing to
        
        Carl Menger (1840-1921)
        
        An Austrian (notably, NOT German)
        
        Studies law and jurisprudence; NOT mathematical → marginalism ≠ mathematics (this is a later misconception)
        
        “Subjective Theory of Value”: value determined by the individual
        
        “The value of goods arises from their relationship to our needs and is not inherent in the goods themselves.” → solves diamonds vs water paradox
        
        Menger vs. Schmoller
        
        Von Schmoller does not approve of Menger:
        
        Tiresomely broad discussions of examples, …rather than any link to current economic conditions, are the means by which he operates.” Schmoller about Menger
        
        1883: Menger Declares War!
        
        Assaults historicism - argued the German Historical School is inductive and that Marginalism is deductive
        
        The Volk is too large a unit of analysis - question about the composition of a number of individuals rather than the big abstract entity which in the early version of the German Historical School they were talking about the Volk as this abstract thing that needs feeding
        
        Mengers Approach:
        
        Axiomatic - builds from first principles
        
        Unit of analysis: “economizing men” - not that different from a rational actor
        
        Economic psychology - apply marginal analysis to both demand and supply
        
        Claims people rank order their needs and apply successive units of goods to satisfy lesser and less urgent needs
        
        Responding to Hayek:
        
        Ability for gov authorities to accumulate enough knowledge is impossible
        
        Rely on the self-interested business to make our own decisions → leads to spontaneous order of the free market system
        
        This aversion to government data and gov decisions vs. business data and business decisions
        
        Economic vs. non-Economic Goods:
        
        Quantitative relationship = abundance or scarcity of a good
        
        Abundant = non-economic good
        
        Scarce = economic good
  - - - In some sense won by the marginalists but whether or not it is an empiric victory or the right way to go
      - Should an economic theory be built abstractly and hypothetically or is economics to be the collection of empirical facts and their compilation to statistics?
        
        History folks believe in full empirical reality in statistics, the theory folks are more about abstraction and rational behaviour