4 Friedrich Benedikt Wilhelm Hermann on capital and profits∗ Heinz D. Kurz 1. Introduction In the second part of Der isolierte Staat Johann Heinrich von Thünen called our author’s treatment of profits ‘the most profound and valuable disquisition on the issue I ever encountered’ (Thünen, [1850] 1990, p. 334 n).1 Julius Kautz, who in 1860 published one of the first histories of German economic thought, saw in him ‘one of the greatest and most important thinkers’ whose work started ‘the golden age of German economic literature’; Kautz added that ‘among all the continen- tal experts he comes closest to the great authorities of the new-English school’ and praised his ‘mathematical sharpness and the decidedness of his method which is informed by the natural sciences’ (Kautz, 1860, pp. 633–4, 637–8). Albert Schäffle considered him ‘the sharpest of the German economists, their first math- ematical thinker’ (Schäffle, 1870, p. 122; similarly Helferich, 1878, pp. 640–1). Carl Menger credited him with avoiding ‘the most frequent mistake that is made not only in the classification but also in the definition of capital’, which is said to con- sist ‘in the stress laid on the technical instead of the economic standpoint’ (Menger, [1871] 1981, p. 303). In Wilhelm Roscher’s view our author was ‘doubtless one of the most excellent economists of the 19th century’ (Roscher, 1874, p. 861). John Kells Ingram spoke of his ‘rare technological knowledge’, which ‘gave him a great advantage in dealing with some economic questions’, and pointed out that for his ‘keen analytical power’ his fellow countrymen compared him with Ricardo; our economist is, however, said to avoid ‘several one-sided views of the English economist’ (Ingram, [1888] 1967, pp. 181–2). Alfred Marshall saw his ‘brilliant genius’ to have led German economists to develop ‘careful and profound analyses which add much to our knowledge’ and which have ‘greatly extended the bound- aries of economic theory’ (Marshall, [1890] 1977, p. 634). James W. Crook in 1898 wrote that his work ‘marks a great advance on previous theoretical economic stud- ies, and even to-day exercises considerable influence on economic thought’ (Crook, 1898, p. 22). According to Joseph A. Schumpeter our author was ‘miles above’ * Reprinted with permission from The European Journal of the History of Economic Thought, 5:1, 1998. 1 Translations from German sources are mine. Unless otherwise stated, all emphases in quotations are in the original. Hermann on capital and profits 69 his contemporaries in Germany in terms of ‘the sharpness of his eye, analytical talent and originality’ (Schumpeter, 1914, p. 56): his work is said to represent ‘the culminating point of the highroad of German economists of his time’ (1914, p. 55). In a later work Schumpeter expressed the fear that ‘we might feel inclined to discount the reputation’ of our author ‘on the ground that he stands out for lack of competition’ (Schumpeter, 1954, p. 503). Ironically, the author on whom so much praise has been showered has almost totally fallen into oblivion. His name is not only absent from general contribu- tions to economics but also from many studies devoted to the history of economic thought. He is neither mentioned in the first three editions of Blaug (1962)2 nor in Spiegel (1971), Routh (1975), Brems (1986), Niehans (1990) and Rima (1991). He is mentioned only once in Ekelund and Hébert (1983) and twice in Pribram (1983). The situation is somewhat more favourable in books devoted to the history of eco- nomic thought written in his mother tongue, German: see especially Stavenhagen (1957), Schneider (1962) and more recently Brandt (1992) and Baloglou (1995). However, the impression remains that for the community of historians of economic thought taken as a whole the economist under consideration barely existed. To be praised may be the first step to being lost sight of. The author under consideration is Johann Benedikt Wilhelm Hermann.3 He was born in 1795 in the free town of Dinkelsbühl, which later fell to the kingdom of Bavaria. After his studies (1813–17) at the Alexander Universität Erlangen and the Julius Universität Würzburg he, together with a friend, founded a private school for boys in Nürnberg. When in 1821 he left the school he became a teacher of math- ematics, first in Erlangen and then in Nürnberg. In 1826 and 1828 he published a textbook on algebra and arithmetic and two volumes on polytechnical institutes. In 1827 he assumed the position of an Extraordinarius of technology, political arith- metic and political economy at the Ludwig-Maximilians-Universität München; in 1832 he was promoted to a full professorship. 1832 saw the publication of his magnum opus, the Staatswirthschaftliche Untersuchungen (Hermann, 1832). In 1839 King Ludwig I appointed Hermann to the position of the Director of the newly founded Bavarian Statistical Bureau which Hermann held during the rest of his life; the establishment of the Bureau was mainly his work. In addition, one year later he assumed a position in the Ministry of the Interior and in 1845 was promoted to the rank of a Councillor to the Ministry. In the late 1830s he had already become the main advisor on economic and social questions to Maximilian II of Bavaria. In 1848–9 he was a member of the German National Assembly in Frankfurt am Main. He sided with the liberals and advocated, among other things, a federalist structure of the emerging German nation state; the inclusion of Austria, that is, a ‘great German solution’ (großdeutsche Lösung); the abolition of nobility by birth; and the recognition of the sovereignty of the people. This did not pass unno- ticed in Munich and after his return from the Frankfurt Paulskirche he had to leave the Ministry for a lack of adequate missions. From 1849 to 1855 he was a member of the Bavarian parliament. 1850 saw his reappointment to the Bavarian 2 He is mentioned once in the two subsequent editions (cf., e.g. Blaug, 1997). 3 On Hermann’s life and work, see Weinberger (1925) and Pix (1995). 70 Heinz D. Kurz civil service: the king thought that Bavaria was badly advised to dispense with the services of a man possessed of as many talents and qualities as Hermann. He served in the Ministry of Finance; chaired, in 1852, the newly founded Commis- sion on Science and Technology of the Bavarian Academy of Sciences; and was appointed, in 1855, to the positions of a Councillor to the Bavarian Government and the Director of the Administration of Bavarian Mines and Saltworks. Hermann died in 1868 from pneumonia. His students included Lujo Brentano, Adolf Held, Alfons R. von Helferich, the successor to his chair at the University of Munich, Georg Friedrich Knapp and Georg Mayr. A second edition of the Untersuchungen was published two years after Hermann’s death by Helferich and Mayr (Hermann, 1870); 1874 saw a reprint of the book. Hermann’s knowledge of contemporary English and continental economic lit- erature was remarkable. One might be inclined to think that this reflects the impact of his teachers in Erlangen, in particular Karl Heinrich Rau. However, Hermann attended only Rau’s lecture on agriculture and forestry, Johann Paul Harl’s lecture on political economy and public finance and Michael Alexander Lips’s lecture entitled ‘Encyclopedia of Cameralism’. None of these lectures seems to have been very fertile in the sense of exposing the student to different traditions of economic thought. Apparently, Hermann was essentially self-taught: he read the English and continental authors in their mother languages (English, French, Italian) and thus did not see them through the lenses of received German interpretations. In his curriculum vitae he writes that he had ‘studied cameralism and Say’. Belonging to a minority of Protestants in an environment dominated by Roman Catholics, Hermann appears to have followed the Protestant Bildungsideal as best he could. In 1817 he got his doctoral degree without presenting an inaugural dissertation. When in 1823 he applied for a Habilitation, a fight broke out in the Philosophical Faculty about the procedure. Eventually, Hermann presented two dissertations, one in mathematics, the other in cameralism. Only the latter had to be printed and, curiously, Hermann was forced to defend it twice. The work is written in Latin and deals with economic concepts and analyses in early Roman authors (cf. Hermann, 1823). Interestingly, the dissertation foreshadows several of the concerns and ideas of the Untersuchungen. This chapter attempts to recall some of the achievements of this remarkable German economist, paying special attention to his contribution to the theory of capital and profits. The emphasis will be on the first edition of the Untersuchungen, which contains Hermann’s original contributions.4 Given his multifarious interests and activities, he was left little time to publish in the field of political economy. 4 This view is also expressed by Roscher (1874, pp. 862–3) who writes that while the first edition witnesses Hermann’s ‘early achieved maturity’, the ‘substantially expanded’ second edition docu- ments his ‘long preserved freshness’. Roscher adds that it is ‘remarkable that in such a long time span of a healthy and active life the man has not intellectually grown more.’ See also Streissler (1994). It comes as no surprise that in 1924 Karl Diehl edited a reprint of the first and not the second edition. Recently Horst Claus Recktenwald published a facsimile edition of the first edi- tion, accompanied by a commentary (Recktenwald, 1987). Alas, Recktenwald’s assessment of Hermann’s work is in some instances grossly misleading. Hermann on capital and profits 71 Apart from his magnum opus there are only a few articles mainly on statistical matters and several book reviews or review articles.