Historical School

The historical school was a German school of economic thought, which held that a study of history was the sole source of knowledge about human actions and economic matters. This school contended that economists could develop new and improved social laws from the collection and study of statistics and historical data.

The foremost proponent of the Historical School was Gustav von Schmoller.

There was a strong rejection of the applicability of classical economics to the German sphere, even if it was accepted as being valid in the British experience. This was a rejection of the idea that economic theorems could be held as universally valid. They saw economics as being the work of rigorous analysis and not of logical philosophy.

The Historical School was involved in the Methodenstreit (method war) with the Austrian School. The historical school tended to be the predominant influence in German universities in the pre First World War period and to be strong advocates of social reform by state action and the promotion of national planning.

The German historical school effectively controlled academia in Germany, mainly through the efforts of Friedrich Althoff, the Prussian minister of education in charge of university affairs from 1882 to 1907. Prussia was the intellectual powerhouse of Germany and so dominated academia throughout the German speaking world. One of the school's Austrian critice, Ludwig von Mises said of their pre-war control of German universities:

"[E]conomics in the second German Reich, as represented by the Government-appointed university professors, degenerated into an unsystematic, poorly assorted collection of various scraps of knowledge borrowed from history, geography, technology, jurisprudence, and party politics, larded with depreciatory remarks about the errors in the abstractions' of the Classical school. Most of the professors more or less eagerly made propaganda in their writings and in their courses for the policies of the Imperial Government...."

The domination of the Historical School over the study of Economics in Germany led to German academia being described as "the intellectual bodyguard of the House of Hohenzollern".