Economist Gustav Schmoller

Gustav Schmoller was an economist active in Germany in the lasthalf of the nineteenth century. The purpose of this research is to reconsider his ideas within the context of latetwentieth century society.

SCHMOLLER AND HIS IDEAS: RELATIONSHIP

Schmoller was a part of the historicist approach to economics generally, and a part of German economic historicism specifically (Ekelund, and Hebert, 1990). Historicists raised the issue, among others, "of whether economics could be studied apart from the political, historical, and social milieu . . ." (Ekelund, and Hebert, 1990, 246). Schmoller, however, went much further, as he eventually proposed that "received theory be completely discarded, owing to the unrealism of assumptions, to the degree of theoretical abstraction, and to the neglect of interrelated and relevant facts" (Ekelund, and Hebert, 1990, 249).

Schmoller's rejection of theoretical economics resulted in the acrimonious conflict with Carl Menger, which eventually led to the discrediting of the historicist movement (Heilbronner, 1987). This outcome was unfortunate, because, while it is

1 2patently absurd to reject out of hand theoretical economics, it is equally absurd to attempt to apply economic principles in a way which attempts to divorce it from its surrounding environments (Knight, 1956).

COMMUNAL INFLUENCES ON ECONOMIC ACTIVITY, ANDTHE ROLE OF ECONOMIC THEORY AND STRUCTURE

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the conclusions of positive economics are immediately relevant to normative economic problems, questions, and goals (1953). Theories and policies in positive economics are often shaped within a framework of normative preconceptions held by economists and politicians. Thus, while positive economics, in theory, is value neutral and independent, it is, in fact, closely tied to the normative values held by those economists who develop positive economics theories and policy initiatives. Similarly, normative economics cannot be completely independent of positive economics. Any policy concluclusion developed in normative economics necessarily is based on predictions as to the outcomes associated with alternative policy initiatives (Friedman, 1953). Such predictions must be basedeither implicitly or explicityon positive economics. The ensuing 6relationship between policy conclusions and positive predictions is often murky. The relationship, however, remains valid. APPLICATION OF SCHMOLLER'S IDEAS TO CONTEMPORARY ISSUES The modern manifestation of normative economics is welfare economics (Sassone, 1989). Welfare economics provides the basis for the development of economic policy prescriptions, or policy initia

Category: Economics - E