Human beings always have had to work to survive or to enjoy the world. They just as persistently have disagreed among themselves as to whose back should be bent over the fields of toil and how the fruits of labor should be divided. Early reflections on economic matters from Hammurabi to Aristotle to Thomas Aquinas centered not on the mechanisms of economic activities but on their moral aspects, such as equity in prices and wages. Then, after 1300, with the commercial revolution in its initial stages, the analysis of economic matters was gradually detached from moral considerations; calculations of cost and profit grew more precise; greed, avarice, and selfishness became pardonable attitudes (since they were socially useful); and machines enhanced production. Finally, those who studied economic matters began, however vaguely, to view the diverse economic activities as components of self-contained systems with their own typical interrelationships between wages, prices, production, consumption, and trade that must be explored without constant recourse to moral questions. The first theoreticians of that kind, the mercantilists of the seventeenth and eighteenth centuries, stipulated as the highest goal of all economic activity the maximum wealth of a state, as measured in precious-metal possession. They deduced from this assumption a whole system of appropriate economic policies, which were based on consciously formulated generalizations, thought to be valid for all states, on the beneficial effects of positive trade balances, manufacturing, colonies, and protectionism. Still, since the mercantilists always dealt with a specific country, they remained aware of the unique conditions of each country, including its past. They were succeeded by the physiocrats, who accepted the eighteenth-century concept of a timeless nature order and equated a country’s economy with a circulatory system. In their system agricultural and to a lesser degree mining products flowed into the economy, were modified along the way into consumable products, while money as compensation flowed back to the original producers to complete the cycle. This circulation system constituted the natural (that is, ideal) order of any economy. The history of past economic conditions held no value heyond giving examples of how the economic circulation worked or did not work depending on the degree to which the positive manmade order adhered to the ideal natural order. The physiocratic view of the economy as a self-contained system governed by universal and timeless mechanisms influenced Adam Smith in his Inquiry into the Nature and Causes of the Wealth of Nations (1776). He and the classical economists of the nineteenth century were fascinated by the “pure” eeonomic order regulated by supply and demand. Were the market’s “invisible hand” to be given free play, mankind would use capital, labor, and land most efficiently in a global division of labor and experience constant improvement in economic matters—Adam Smith’s economic version of progress. Once more, little was left to history but to serve as a supplier of examples of how deviation from the natural order led to failure.
Classical economic theory penetrated the Continent and found adherents: Jean-Baptiste Say in France and Johann H. von Thiinen in Germany. But in the German area it encountered a hostile intellectual climate and, in the mid-1800s, evoked the first systematic reflections on economic matters in a historical vein, the so-called Old School of economic history. Its representatives opposed the classical economic model in which isolated individuals acted solely according to selfish and unchanging economic motives which were divorced from religion, ethics, and politics—a view simplistic enough to permit timeless generalizations, even laws. The German opposition was strengthened by strong Romantic notions of the collective as the indispensable framework of individuals. For the German economic historians the goal of economic activities was not the greatest possible gratification of the desires of isolated individuals but the welfare of the whole Volk (nation). Even a vast accumulation of individual wealth did not necessarily constitute collective prosperity. Hence the proper study of the economic aspect of human life cannot be the analysis of timeless and universal mechanisms involving the selfish, isolated individual but that of the given situation in terms of the economic activities and institutions of a specific nation throughout history. Accordingly most of the Old School’s economic history was descriptive. When its scholars proceeded to generalize, they did so on a problem close to their interest; economic development. Friedrich List had first recognized the industrial lag of the German area as the central problem and advocated “educational” tariffs as a remedy for it. He highlighted the new view that the English industrialization was no unique phenomenon but a typical stage of all national economics. The search for such stages in Western economic developments led Wilhelm Roscher to suggest a succession of typical economics; a hunting and fishing economy; livestock breeding; agriculture; a mix of agriculture and crafts; and finally a mix of agriculture, crafts, and commerce. Bruno Hildebrand saw a progress from a barter economy to a money economy to a credit economy. For him and Roscher these laws of economic development were valid for all nations. Karl Knies, however, doubted that these types transcended the unique national framework and granted transnational comparisons only the status of analogies.
World History
