Summary The Revolution that bit its
own tail by J. W. Drukker
Chapter 2: The origin of traditional economic
history
2.1: Economic history determined by the phrasing of the
question
Economic history has only been practised from the 1850’s onwards. This is not
because economic history is rooted in general history and the distinction is the result
of specialisation, but because economic history is rooted in economics.
2.2: Life and social sciences in the nineteenth century:
positivism prevails
Positivism is about the use of empirical facts instead of metaphysical speculation.
Observations of causal relations would function as verification of the theory.
Life and social sciences started to use these positivist methods in their research
instead of the descriptive literary approach.
Only the discipline of history was left out of this development.
2.3: History in the nineteenth century and the role of historicism
In the history discipline, historicism was the dominant form of thought. Historicism
means that the historian is unable to view historical development without being
somehow influenced by their own time and place (context) in history. History,
according to historicism, is a unique development that does not follow any pattern - it
is instead shaped by cultural phenomena and views.
This is why history can never be written in a positivist way. Natural sciences are
nomothetic, which means that natural scientists look for general laws and patterns.
History is idiographic, which means that a historian can merely reconstruct past
thought by critically studying written sources.
2.4: Positivism and historicism are methodologically
incompatible
Because historicism and positivism are fundamentally opposed to each other, history
became even more distinctive in their choice of methodology than other 9life and
social) sciences in the nineteenth century.
,2.5: Economics and sociology do not facilitate laboratory
experiments
There was one important issue with the nomothetic life and social sciences:
conducting controlled experiments.
Because these disciplines are unable to conduct controlled experiments to verify
their theories, they had to carry out comparative research: scientists started looking
at history for similar events, developments etc.
Note that it is quite ironic that history became a substitute for empirical evidence
while they were themselves historicists.
2.6: The Methodenstreit: ‘Neoclassical’ versus ‘Historical
School’
The methodological conflict, called Methodenstreit, eventually caused the birth of
economic history as an academic field of its own.
From the 1750’s, the Classical School emerged. This school had an empirical and
descriptive approach to economics.
The Classical School was replaced by the Neoclassical School, which became more
popular, especially from the 1850’s onward. Its approach was formal, deductive-
oriënted and mechanics-related.
The Neoclassical School introduced mathematical economics. This theory
was compared to ‘laws’ in the way it was proved. It needed to have precize defined
principles and assumptions that were not contradictory with each other or with the
empirical evidence in order to be ‘true’.
One issue with this is the risk that theories describe how it could or should be instead
of how it actually is. This mistake is caused by normative conceptions that
accidentally find their way into the construction of the theory.
2.7: Economic-political backgrounds of the Methodenstreit
The Neoclassical theory got some negative reactions from countries such as
Germany and Austria that were not yet (fully) industrialised. In order to successfully
transform to the industrial production and economic stage, the countries needed to
shield off the international competition.
English neoclassicists disagreed with the above ‘infant industry protection argument’,
because it goes against the Smithian argument of optimal allocation, scarcity and
lack of hindrance. Import taxes felt like an infringement on the free market.
To solve the dispute, the help of historicists was sought. This makes the
originally economic-political debate into a methodological debate.
, 2.8: The essence of the Methodenstreit: Induction versus
deduction
Carl Menger was a neoclassicist in Vienna and made some important refinements to
the Neoclassicist paradigm. This is known as the Austrian School.
Gustav von Schmoller and Kal Bücher were critical of Menger. They called it
the ‘English theory’, and argued that every economic theory is in fact historically
bound and that the theory is only valid under the specific historical circumstances of
the period when it was formulated.
According to the Historical School, deduction is not an option for economic theory.
Induction would be better: to use the available empirical data and make
generalisations from there to make a theory.
2.9: From Historical School to traditional economic history
The contribution of the Historical School remained limited to (broad) descriptions of
historical economies. A characteristic for these works is that they always contain a
model with certain phases or stages: Stufen-theorie.
Mathematical economy was somewhat neglected in this approach.
Eventually, in the twentieth century, the phase-pattern gradually faded from
research, because it was believed that a universal economic development doesn’t
exist anyway.
2.10: The importance of traditional economic history
Traditional economic history considered it her main duty to map out how economies
functioned in the past and how this changed over time - this is an important
contribution that gives great detail for historical accounts. This was neglected by
neoclassicists.
In the first decades of the twentieth century the field of econometrics appeared. This
is a specialised form of economy that has a deductive approach and casts economic
theory into mathematical form.
It’s important to note that economic history researchers and the researchers from
econometrics did not really understand each other’s work, in the sense that they did
not grasp it. This caused the two fields to develop in isolation from each other.
From the 1850’s there was New Economic History in the United States. This is
basically the combination of economic history with the methods of econometrics.
This approach was successful on the one hand, because it answered why some
countries were rich and had economic growth. On the other hand it left the lack of
economic growth of poor countries unexplained.
own tail by J. W. Drukker
Chapter 2: The origin of traditional economic
history
2.1: Economic history determined by the phrasing of the
question
Economic history has only been practised from the 1850’s onwards. This is not
because economic history is rooted in general history and the distinction is the result
of specialisation, but because economic history is rooted in economics.
2.2: Life and social sciences in the nineteenth century:
positivism prevails
Positivism is about the use of empirical facts instead of metaphysical speculation.
Observations of causal relations would function as verification of the theory.
Life and social sciences started to use these positivist methods in their research
instead of the descriptive literary approach.
Only the discipline of history was left out of this development.
2.3: History in the nineteenth century and the role of historicism
In the history discipline, historicism was the dominant form of thought. Historicism
means that the historian is unable to view historical development without being
somehow influenced by their own time and place (context) in history. History,
according to historicism, is a unique development that does not follow any pattern - it
is instead shaped by cultural phenomena and views.
This is why history can never be written in a positivist way. Natural sciences are
nomothetic, which means that natural scientists look for general laws and patterns.
History is idiographic, which means that a historian can merely reconstruct past
thought by critically studying written sources.
2.4: Positivism and historicism are methodologically
incompatible
Because historicism and positivism are fundamentally opposed to each other, history
became even more distinctive in their choice of methodology than other 9life and
social) sciences in the nineteenth century.
,2.5: Economics and sociology do not facilitate laboratory
experiments
There was one important issue with the nomothetic life and social sciences:
conducting controlled experiments.
Because these disciplines are unable to conduct controlled experiments to verify
their theories, they had to carry out comparative research: scientists started looking
at history for similar events, developments etc.
Note that it is quite ironic that history became a substitute for empirical evidence
while they were themselves historicists.
2.6: The Methodenstreit: ‘Neoclassical’ versus ‘Historical
School’
The methodological conflict, called Methodenstreit, eventually caused the birth of
economic history as an academic field of its own.
From the 1750’s, the Classical School emerged. This school had an empirical and
descriptive approach to economics.
The Classical School was replaced by the Neoclassical School, which became more
popular, especially from the 1850’s onward. Its approach was formal, deductive-
oriënted and mechanics-related.
The Neoclassical School introduced mathematical economics. This theory
was compared to ‘laws’ in the way it was proved. It needed to have precize defined
principles and assumptions that were not contradictory with each other or with the
empirical evidence in order to be ‘true’.
One issue with this is the risk that theories describe how it could or should be instead
of how it actually is. This mistake is caused by normative conceptions that
accidentally find their way into the construction of the theory.
2.7: Economic-political backgrounds of the Methodenstreit
The Neoclassical theory got some negative reactions from countries such as
Germany and Austria that were not yet (fully) industrialised. In order to successfully
transform to the industrial production and economic stage, the countries needed to
shield off the international competition.
English neoclassicists disagreed with the above ‘infant industry protection argument’,
because it goes against the Smithian argument of optimal allocation, scarcity and
lack of hindrance. Import taxes felt like an infringement on the free market.
To solve the dispute, the help of historicists was sought. This makes the
originally economic-political debate into a methodological debate.
, 2.8: The essence of the Methodenstreit: Induction versus
deduction
Carl Menger was a neoclassicist in Vienna and made some important refinements to
the Neoclassicist paradigm. This is known as the Austrian School.
Gustav von Schmoller and Kal Bücher were critical of Menger. They called it
the ‘English theory’, and argued that every economic theory is in fact historically
bound and that the theory is only valid under the specific historical circumstances of
the period when it was formulated.
According to the Historical School, deduction is not an option for economic theory.
Induction would be better: to use the available empirical data and make
generalisations from there to make a theory.
2.9: From Historical School to traditional economic history
The contribution of the Historical School remained limited to (broad) descriptions of
historical economies. A characteristic for these works is that they always contain a
model with certain phases or stages: Stufen-theorie.
Mathematical economy was somewhat neglected in this approach.
Eventually, in the twentieth century, the phase-pattern gradually faded from
research, because it was believed that a universal economic development doesn’t
exist anyway.
2.10: The importance of traditional economic history
Traditional economic history considered it her main duty to map out how economies
functioned in the past and how this changed over time - this is an important
contribution that gives great detail for historical accounts. This was neglected by
neoclassicists.
In the first decades of the twentieth century the field of econometrics appeared. This
is a specialised form of economy that has a deductive approach and casts economic
theory into mathematical form.
It’s important to note that economic history researchers and the researchers from
econometrics did not really understand each other’s work, in the sense that they did
not grasp it. This caused the two fields to develop in isolation from each other.
From the 1850’s there was New Economic History in the United States. This is
basically the combination of economic history with the methods of econometrics.
This approach was successful on the one hand, because it answered why some
countries were rich and had economic growth. On the other hand it left the lack of
economic growth of poor countries unexplained.
