Gustav Von Schmoller

Born June 24, 1838, in Heilbronn; died June 27,1917, in Bad Harzburg. German economist, historian, and state and public figure.

A leading representative of the new (younger) historical school of political economy, Schmoller became a professor at the University of Halle in 1864, the University of Strassburg in 1872, and the University of Berlin in 1882. He became a member of the Prussian Staatsrat (State Council) in 1884 and the Prussian Herrenhaus (Upper House) in 1899. He helped found the Verein für Sozialpolitik (Association for Social Policy) in 1872 and became its chairman in 1890. In 1881 he assumed the editorship of the Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im deutschen Reich.

Schmoller’s principal theoretical work was Foundations for the Comprehensive Study of National Economy (vols. 1–2, 1900–04). Basing his theories on the ideas of the historical school, he criticized the formal deductive constructs of classical political economy. According to Schmoller, concrete historical research must precede the creation of an economic theory, since only a historical approach makes it possible to determine the causal relations between social phenomena. The behavior of economic entities (individuals and groups) results from the interaction of a variety of factors; therefore, economic science should concern itself with, for example, the intentions of individuals considered as economic units, the level of technological development, the character of existing social institutions, and natural conditions. Schmoller suggested that political economy, as the basic social science, encompasses such disciplines as psychology, sociology, and geography; it is therefore normative and provides a basis upon which to make ethical judgments and practical recommendations.

Criticizing Marxism from the perspective of Katheder-socialism, Schmoller defended active government intervention in the economy in order to stimulate the national economy and mitigate class contradictions. The existence of social classes—whose emergence he linked with racial characteristics, the division of labor, and unequal distribution of income—and the struggle between social classes were considered a necessary condition for social progress. He saw the aim of class struggle, however, not as the revolutionary transformation of society but as a compromise between the opposing parties, who must not violate common ethical standards. Schmoller wrote several works on the socioeconomic and political history of various countries of Western Europe.