Non Nova, Noviter? Heinrich Dietzel and the Last Breath of Classical Political Economy in Germany
Total Page:16
File Type:pdf, Size:1020Kb
1 NON NOVA, NOVITER? HEINRICH DIETZEL AND THE LAST BREATH OF CLASSICAL POLITICAL ECONOMY IN GERMANY Ian Coelho de Souza Almeida Cedeplar/UFMG ABSTRACT In the Germany of the last quarter of the nineteenth-century, the dispute between the German Historical School of Economics and the newly founded Austrian school dominated economic discourse. In this environment, one author stood out in his criticism of both sides: Heinrich Dietzel. Dietzel proposed a theory and method, his Sozialökonomik, as a solution for the Methodenstreit. The intention was detaching from, and building upon, the latest developments of classical political economy (such as John Stuart Mill’s). This paper presents Dietzel’s work as relates to all these concerns and to the idea of social science as existed at the time. Keywords: Heinrich Dietzel; Sozialökonomik; Social Economics; Methodenstreit; Value Theory; History of Economic Thought; Wilhelm Dilthey JEL: B13; B15; A12 Área 1: História Econômica, do Pensamento Econômico e Demografia Histórica 2 I. Introduction - Classical Political Economy in Germany Gottlob Heinrich Andreas Dietzel (1857–1935) was a German economist born in Leipzig. He studied law in Heidelberg and Berlin, where he also pursued a doctoral degree in Political Economy under the supervision of Adolph Wagner, a member of the second generation of the German Historical School of Economics (GHSE). Dietzel became full professor at the University of Dorpat in 1885 (the University of Tartu in the local idiom), today located in Estonia. Starting in 1890 and continuing until the end of his life, he taught at the University of Bonn. Our primary intention here is to present the work of this forgotten author, who had a unique view of political economy, particularly when one takes into consideration that, during the last quarter of the nineteenth-century, German-speaking countries were largely divided between the historical method of GHSE and the position of the first Austrian economists, pupils of Carl Menger. Dietzel, on the other hand, came to the defense of classical political economy. He reformulated the position of several authors of classical political economy in order to build his idea of the discipline. He strongly criticized John Stuart Mill, but clearly followed him in several regards. Jean-Baptiste Say was another author that largely influenced him. And, of course, he showed a strong deference to Adam Smith and David Ricardo. Although Dietzel was not the only one to put forth classical positions, as Erwin Beckerath (1944, p. 3) points out, he certainly went further than others (such as Wilhelm Lexis and Karl Bücher), in approximating method and theory to the classical doctrine. The Austrians also were much closer to the classics than the GHSE and criticized several misinterpretations and false accusation of the GHSE against them. The work of Richard Schüller (1895), a pupil of Menger, provides a good summary of this. This does not mean that the Austrians were supporters of classical political economy. They were critical of the classical political economy, but had a different perspective from this critic if compared to GHSE. Both GHSE’s different perspective and their mistakes concerning the classical theory drove some of them—particularly Gustav Schmoller—to equate Austrians with the classical school, in several erroneous aspects.1 Dietzel agrees with these critiques on GHSE’s interpretation of the classics. However, he saw unnecessary detours in the Austrian attempt to bring a solution for the actual problems of classical political economy. There are very few works on Dietzel, but his defense of political economy is something Carsten Kasprzok (2005) and Beckerath (1944) also brought forward. We here address some points the authors already covered, but we emphasize how Dietzel’s attempt to rebuild political economy also was a solution to the Methodenstreit and how this was related to the social sciences in general, particularly with respect to new developments in the justification of its scientific character. During this presentation, it will be possible to notice a parallel other than Dietzel’s proximity to classical political economists: the closeness of his discourse to John Neville Keynes ([1890] 1999). Both thinkers endeavored to reform the method of political economy while, at the same time, 1 See the translation of Menger’s 1891 journal article in occasion of Adam Smith’s centenary (Carl Menger, Erwin Dekker and Stefan Kolev 2016). Bruce Caldwell (2004, p. 48) also emphasizes this in a comment on Schmoller’s bad reception in Menger’s Principles of Political Economy: “Because Schmoller was a fellow critic of the British classical school, his review of the Principles must have come as a shock to Menger. How could Schmoller possibly accuse him of being a follower of Ricardo? Both Schmoller and Menger felt that the classical theory was fundamentally flawed. For Menger, the solution was to invent a new theory. For Schmoller, the error was the premature use of theorizing in the social sciences.” 3 avoiding exclusion of competing perspectives. Dietzel was reformulating classical political economy, but always tried to bring forward all advancements within these other perspectives. Indeed, in his view, they all had something to contribute—mainly regarding the Methodenstreit. Along these lines, Gregory Moore (2003) underlines that Keynes found usefulness in the position of both sides in the British version of the Methodenstreit, that is, the historical and theoretical perspectives. Nevertheless, ultimately—as did Dietzel—he favored the theoretical perspective: The method of political economy cannot adequately be described by any single phrase; and accordingly no one method will be advocated to the entire exclusion of other methods. It will, on the contrary, be strewn that, according to the special department or aspect of the science under investigation, the appropriate method may be either abstract or realistic, deductive or inductive, mathematical or statistical, hypothetical or historical. (Keynes, [1890] 1999, p. 20) Dietzel, nevertheless, went further in his criticism and tried to erect a complete system of political economy that would replace the existing alternatives in Germany. In order to discuss all that we have pointed out, in addition to this introduction and the conclusion, we present three other sections. In Section Two, we present Dietzel’s definition of the basic concepts in political economy. His criticism was against all perspectives then existing regarding delimiting the economic phenomena and the disciplines of the science of political economy (which were designated to reach distinct objectives regarding the phenomena). He even changed the name of the discipline, accusing others of bringing unnecessary misunderstandings to the science. This is the reason he adopted the term Sozialökonomik instead of political economy or one of the other titles that the GHSE used. In Section Three, we present how he formulated the structure of the discipline of Sozialökonomik and how he saw it as a solution to the Methodenstreit. In the last section, we present Dietzel’s idea of value. This is a last example of how the author was close to classical political economy. Although this was not such a central topic for the GHSE, which had among its members both Marginalists (such as Eugene von Philippovich) and anti-Marginalists (such as Schmoller), this was key to the Austrians and the British. This thus makes it possible for us to demonstrate how, although Dietzel was closer to the Austrians (at least if compared to the GHSE), he diverged from them along several major points. II. Dietzel and the state of political economy in Germany The GHSE-dominated2 Political Economy in Germany and the biggest name during the last quarter of the nineteenth-century was certainly Schmoller. This feeling of domination, however, was not shared by all, and certainly not by Dietzel (1884a, pp. 115–118). His argument revolves around the fact that there was more than one understanding of what the historical method and the objective of 2 It is common to depict GHSE as largely dominant in Germany, mainly with Schmoller’s generation, from the 1870’s until their loss of influence in the beginning of the new century. This happened mainly because of the foundation of the Verein für Sozialpolitik, which had great influence on public discourse (see Irmela Gorges, 1980), and their positions in university and other governmental institution, something enhanced by what was called the Althoff System (see Jürgen Backhaus 1993). 4 the discipline were supposed to be.3 The major point is that, for Dietzel, the theory of political economy had to be an abstract science—in this sense, going against Schmoller’s understanding— while the practical part of the discipline had no such requirement. Therefore, in Germany, one could find several interpretations, such as Adolph Wagner, Albert Schäffle, Wilhelm Lexis, etc., who tried to develop an abstract theory of political economy in some sense. This is also the way Dietzel positioned himself against Menger’s equalization of German political economy and the GHSE. These questions follow the beginning of the Methodenstreit. Dietzel is mostly on Carl Menger’s side, mainly in his criticism of the possibility of obtaining exact knowledge using a purely inductive process, as Schmoller proposed. He, however, does not share with the Austrian the path through which political economy should be rebuilt. While Menger saw no use in returning to the classics,4 Dietzel defended the reformulation of their perspective, trusting mostly in David Ricardo’s abstract theory, the closest one to the correct method for the discipline. In this section, we present the points regarding methodology and epistemology of economics in which Dietzel departed from both GHSE and Menger, bringing him closer to the British. Questions more specific to the Methodenstreit are presented in session three. The science of economic phenomena In Section Three, we will present Dietzel’s entire system of political economy.