Gustav von Schmoller, 1838-1917.

German Historicism was resurrected under 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.

Schmoller's attacks on Classical and Neoclassical theory were more vociferous than his predecessors such as Roscher had dared essay - rejecting theory as such and not merely its pretensions to universalism. As a result, Schmoller deplored the older Historicists' penchant for "stages" theories of history and their attempt to provide a "positive" as opposed to "normative" theory of economic history. Much of the work undertaken or commissioned by Schmoller was directed largely to microscopic analysis of political and economic history.

Schmoller's opposition to Neoclassical economics entered him into a famous methodological debate (Methodenstreit) with Carl Menger. Although many argue that he lost the debate by the simple fact of non-engagement (it is reported that upon receiving Menger's Investigations, he returned it unread to its author and published a "semi-review" of it claiming that, indeed, it had not even been worth reading), Schmoller nonetheless retained his grip on the German university appointment system and kept Classical and Neoclassical economic theory largely out of German teaching - earning him the eternal emnity of the only potential challenger at the time, Menger's Austrian School.

Gustav Schmoller's political involvements were also important: in 1872, he formed the Verein für Sozialpolitik, ("Society for Social Policy"), a group of largely conservative economists which supported a kind of corporatist state-industry-labor nexus. Liberals deplored their advocacy for state interventionism and came to label Schmoller and the Historicists as Kathedersozialisten (or "Socialists of the Chair") - a jest they never entirely lived down.

In the meantime, actual Socialists and Marxians regarded Schmoller's group (Adolph Wagner notwithstanding) as an instrument of government and businesses to control and mollify the working classes. This was virtually confirmed time and time again when the Verein would come up with patchy justifications for the industrial policies of Bismarck. The Verein rarely opposed an economic policy decision by the Imperial German government.

Nonetheless, it is not unlikely that Schmoller's legacy in economics has been tainted by the fact that one of the most prominent recorders of the history of economic thought - Joseph Schumpeter - was himself an Austrian with little sympathy for the Historical School.

A small anecdote from Pareto:

At a conference in Geneva where 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, "so there are laws in economics!"

[from Pareto, The Mind and Society,1935: xviii].

• Information on Gustav Schmoller, (1) , (2) , (3) .

• On the History of German Small Industry in the 19th Century, 1870.
• "The Idea of Justice in Political Economy", 1881, Annals of AAPSS.
• Social and Industrial History, 1890.
• The Mercantile System and its Historical Significance, 1897.
• Outline of General Economic History , two volumes, 1900/1904

• Biography of Schmoller (in German).
• The only academic institution still under Schmoller's watchful eye.