Thorstein Veblen
Gustav Schmoller's Economics

Quarterly Journal of Economics, vol. 16, (Nov., 1901), pp. 69-73
(= The Place of Science in Modern Civilisation and Other Essays, pp. 252-278)
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[252] Professor Schmoller's Grundriss (1*) is an event of the first importance 
in economic literature. It appears from later advices that the second and 
concluding volume of the work is hardly to be looked for at as early a date as 
the author's expressions in his preface had led us to anticipate. What lies 
before Professor Schmoller's readers, therefore, in this first volume of the 
Outlines is but one-half of the compendious statement which he here purposes 
making of his theoretical position and of his views and exemplification of the 
scope and method of economic science. It may accordingly seem adventurous to 
attempt a characterisation of his economic system on the basis of this avowedly 
incomplete statement. And yet such an endeavor is not altogether gratuitous, nor 
need it in any great measure proceed on hypothetical grounds. The introduction 
comprised in the present volume sketches the author's aim in an outline 
sufficiently full to afford a convincing view of the "system" of science for 
which he speaks; and the two books by which the introduction is followed show 
Professor Schmoller's method of inquiry consistently carried out, as well as the 
reach and nature of the theoretical conclusions which he considers to lie within 
the competency of economic science. And with regard to an economist who is so 
much of an innovator, - not to say so much of an iconoclast, - and whose work 
[253] touches the foundations of the science so intimately and profoundly, the 
interest of his critics and associates must, at least for the present, center 
chiefly about these questions as to the scope and nature assigned to the theory 
by his discussion, as to the range and character of the material of which he 
makes use, and as to the methods of inquiry which his sagacity and experience 
commend. So, therefore, while the Outlines is yet incomplete, considered as a 
compendium of details of doctrine, the work in its unfinished state need not 
thereby be an inadequate expression of Professor Schmoller's relation to 
economic science.
Herewith for the first time economic readers are put in possession of a fully 
advised deliverance on economic science at large as seen and cultivated by that 
modernised historical school of which Professor Schmoller is the authoritative 
exponent. Valuable and characteristic as his earlier discussions on the scope 
and method of the science are, they are but preliminary studies and tentative 
formulations as compared with this maturer work, which not only avows itself a 
definitive formulation, but has about it an air of finality perceptible at every 
turn. But this comes near saying that it embodies the sole comprehensive 
working-out of the scientific aims of the historical school. Discussions 
partially covering the field, monographs and sketches there are in great number, 
showing the manner of economic theory that was to be looked for as an outcome of 
the "historical diversion." Some of these, especially some of the later ones, 
are extremely valuable in the results they offer, as well as significant of the 
trend which the science is taking under the hands of the German students.(2*) 
But a comprehen-[254]sive work, aiming to formulate a body of economic theory on 
the basis afforded by the "historical method," has not hitherto been seriously 
attempted.
To the broad statement just made exception might perhaps be taken in favor of 
Schaeffle's half-forgotten work of the seventies, together possibly with several 
other less notable and less consistent endeavors of a similar kind, dating back 
to the early decades of the school. Probably none of the younger generation of 
economists would be tempted to cite Roscher's work as invalidating such a 
statement as the one made above. Although time has been allowed for the 
acceptance and authentication of these endeavors of the earlier historical 
economists in the direction of a system of economic theory, - that is to say, of 
an economic science, - they have failed of authentication at the hands of the 
students of the science; and there seems no reason to regard this failure as 
less than definitive.
During the last two decades the historical school has branched into two main 
directions of growth, somewhat divergent, so that broad general statements 
regarding the historical economists can be less confidently made to-day than 
perhaps at any earlier time. Now, as regards the more conservative branch, the 
historical economists of the stricter observance, - these modern continuers of 
what may be called the elder line of the historical school can scarcely be said 
to cultivate a science at all, their aim being not theoretical work. Assuredly, 
the work of this elder line, of which Professor Wagner is the unquestioned head, 
is by no means idle. It is work of a sufficiently important and valuable order, 
perhaps it is indispensable to the task which the science has in hand, but, 
broadly [255] speaking, it need not be counted with in so far as it touches 
directly upon economic theory. This elder line of German economics, in its 
numerous modern representatives, shows both insight and impartiality; but as 
regards economic theory their work bears the character of eclecticism rather 
than that of a constructive advance. Frequent and peremptory as their utterances 
commonly are on points of doctrine, it is only very rarely that these utterances 
embody theoretical views arrived at or verified by the economists who make them 
or by such methods of inquiry as are characteristic of these economists. Where 
these expressions of doctrine are not of the nature of maxims of expediency, 
they are, as is well known, commonly borrowed somewhat uncritically from 
classical sources. Of constructive scientific work - that is to say, of theory - 
this elder line of German economics is innocent; nor does there seem to be any 
prospect of an eventual output of theory on the part of that branch of the 
historical school, unless they should unexpectedly take advice, and make the 
scope, and therefore the method, of their inquiry something more than historical 
in the sense in which that term is currently accepted. The historical economics 
of the conservative kind seems to be a barren field in the theoretical respect.
So that whatever characteristic articles of general theory the historical school 
may enrich the science with are to be looked for at the hands of those men who, 
like Professor Schmoller, have departed from the strict observance of the 
historical method. A peculiar interest, therefore, attaches to his work as the 
best accepted and most authoritative spokesman of that branch of historical 
economics which professes to cultivate theoretical inquiry. It serves to show in 
what manner and degree this more scientific wing of the historical school have 
out-[256]grown the original "historical" standpoint and range of conceptions, 
and how they have passed from a distrust of all economic theory to an eager 
quest of theoretical formulations that shall cover all phenomena of economic 
life to better purpose than the body of doctrine received from the classical 
writers and more in consonance with the canons of contemporary science at large. 
That this should have been the outcome of the half-century of development 
through which the school has now passed might well seem unexpected, if not 
incredible, to any who saw the beginning of that divergence within the school, a 
generation ago, out of which this modernised, theoretical historical economics 
has arisen.
Professor Schmoller entered the field early, in the sixties, as a protestant 
against the aims and ideals then in vogue in economics. His protest ran not only 
against the methods and results of the classical writers, but also against the 
views professed by the leaders of the historical school, both as regards the 
scope of the science and as regards the character of the laws or generalisations 
sought by the science. His early work, in so far as he was at variance with his 
colleagues, was chiefly critical; and there is no good evidence that he then had 
a clear conception of the character of that constructive work to which it has 
been his persistent aim to turn the science. Hence he came to figure in common 
repute as an iconoclast and an extreme exponent of the historical school, in 
that he was held practically to deny the feasibility of a scientific treatment 
of economic matters and to aim at confining economics to narrative, statistics, 
and description. This iconoclastic or critical phase of his economic discussion 
is now past, and with it the uncertainty as to the trend and outcome of his 
scientific activity.
[257] To understand the significance of the diversion created by Professor 
Schmoller as regards the scope and method of economics, it is necessary, very 
briefly, to indicate the position occupied by that early generation of 
historical economists from which his teaching diverged, and more particularly 
those points of the older canon at which he has come to differ 
characteristically from the views previously in vogue.
As regards the situation in which the historical school, as exemplified by its 
leaders, was then placed, it is, of course, something of a commonplace that by 
the end of its first twenty years of endeavor in the reform of economic science 
the school bad, in point of systematic results, scarcely got beyond 
preliminaries. And even these preliminaries were not in all respects obviously 
to the purpose. A new and wider scope had been indicated for economic inquiry, 
as well as a new aim and method for theoretical discussion. But the new ideals 
of theoretical advance, as well as the ways and means indicated for their 
attainment, still had mainly a speculative interest. Nothing substantial had 
been done towards the realisation of the former or the mise en oeuvre of the 
latter. The historical economists can scarcely be said at that time to have put 
their hand to the new engines which they professed to house in their workshop. 
Apart from polemics and speculation concerning ideals, the serious interest and 
endeavors of the school had up to that time been in the field of history rather 
than in that of economics, except so far as the adepts of the new school 
continued in a fragmentary way to inculcate and, in some slight and uncertain 
degree, to elaborate the dogmas of the classical writers whom they sought to 
discredit.
The character of historical economics at the time when Professor Schmoller 
entered on his work of criticism and [258] revision is fairly shown by Roscher's 
writings. Whatever may be thought to-day of Roscher's rank as all economist, in 
contrast with Knies and Hildebrand, it will scarcely be questioned that at the 
close of the first quarter-century of the life history of the historical school 
it was Roscher's conception of the scope and method of economics that found the 
widest acceptance and that best expressed the animus of that body of students 
who professed to cultivate economics by the historical method. For the purpose 
in hand Roscher's views may, therefore, be taken as typical, all the more 
readily since for the very general purpose here intended there are no serious 
discrepancies between Roscher and his two illustrious contemporaries. The chief 
difference is that Roscher is more naive and more specific. He has also left a 
more considerable volume of results achieved by the professed use of his method.
Roscher's professed method was what he calls the "historico-physiological" 
method. This lie contrasts with the "philosophical" or "idealistic" method. But 
his air of depreciation as regards "philosophical" methods in economics must not 
be taken to mean that Roscher's own economic speculations were devoid of all 
philosophical or metaphysical basis. It only means that his philosophical 
postulates were different from those of the economists whom he discredits, and 
that they were regarded by him as self-evident.
As must necessarily be the case with a writer who had neither a special aptitude 
for nor special training in philosophical inquiries, Roscher's metaphysical 
postulates are, of course, chiefly tacit. They are the common-sense, commonplace 
metaphysics afloat in educated German circles in the time of Roscher's youth, - 
during tile period when his growth and education gave him his outlook on life 
[259] and knowledge and laid the basis of his intellectual habits; which means 
that these postulates belong to what Höffding has called the "Romantic" school 
of thought, and are of a Hegelian complexion. Roscher being not a professed 
philosophical student, it is neither easy nor safe to particularise closely as 
regards his fundamental metaphysical tenets; but, as near as so specific an 
identification of his philosophical outlook is practicable, he must be classed 
with the Hegelian "Right." But since the Hegelian metaphysics had in Roscher's 
youth an unbroken vogue in reputable German circles, especially in those ultra-
reputable circles within which lay the gentlemanly life and human contact of 
Roscher, the postulates afforded by the Hegelian metaphysics were accepted 
simply as a matter of course, and were not recognised as metaphysical at all. 
And in this his metaphysical affiliation Roscher is fairly typical of the early 
historical school of economics.
The Hegelian metaphysics, in so far as bears upon the matter in hand, is a 
metaphysics of a self-realising life process. This life process, which is the 
central and substantial fact of the universe, is of a spiritual nature, 
"spiritual," of course, being here not contrasted with "material." The life 
process is essentially active, self-determining, and unfolds by inner necessity, 
by necessity of its own substantially active nature. The course of culture, in 
this view, is an unfolding (exfoliation) of the human spirit; and the task which 
economic science has in hand is to determine the laws of this cultural 
exfoliation in its economic aspect. But the laws of the cultural development 
with which the social sciences, in the Hegelian view, have to do are at one with 
the laws of the processes of the universe at large; and, more immediately, they 
are at one with the laws of the life process at [260] large. For the universe at 
large is itself a self-unfolding life process, substantially of a spiritual 
character, of which the economic life process which occupies the interest of the 
economist is but a phase and an aspect. Now, the course of the processes of 
unfolding life in organic nature has been fairly well ascertained by the 
students of natural history and the like; and this, in the nature of the case, 
must afford a clew to the laws of cultural development, in its economic as well 
as in any other of its aspects or hearings, - the laws of life in the universe 
being all substantially spiritual and substantially at one. So we arrive at a 
physiological conception of culture after the analogy of the ascertained 
physiological processes seen in the biological domain. It is conceived to be 
physiological after the Hegelian manner of conceiving a physiological process, 
which is, however, not the same as the modern scientific conception of a 
physiological process.(3*)
[261] Since this quasi-physiological process of cultural development is 
conceived to be an unfolding of the self-realising human spirit, whose life 
history it is, it is of the nature of the case that the cultural process should 
run through a certain sequence of phases - a certain life history prescribed by 
the nature of the active, unfolding spiritual substance. The sequence is 
determined on the whole, as regards the general features of the development, by 
the nature of life on the human plane. The history of cultural growth and 
decline necessarily repeats itself, since it is substantially the same human 
spirit that seeks to realise itself in every comprehensive sequence of cultural 
development, and since this human spirit is the only factor in the case that has 
substantial force. In its generic features the history of past cultural cycles 
is, therefore, the history of the future. Hence the importance, not to say the 
sole efficacy for economic science, of an historical scrutiny of culture. A 
well-authenticated sequence of cultural phenomena in the history of the past is 
conceived to have much the same binding force for the sequence of cultural 
phenomena in the future as a "natural law," as the term has been understood in 
physics or physiology, is conceived to have as regards the course of phenomena 
in the life history of the human body; for the onward cultural course of the 
human spirit, actively unfolding by inner necessity, is an organic process, 
following logically from the nature of this self-realising spirit. If the 
process is conceived to meet with obstacles or varying conditions, it adapts 
itself to the circumstances in any given case, and it then goes on along the 
line of its own logical bent until it eventuates in the consummation given by 
its own nature. The environment, in this view, if it is not to be conceived 
simply as a function of the spiritual force at work, is, at the most, of 
subsidiary [262] and transient consequence only. Environmental conditions can at 
best give rise to minor perturbations; they do not initiate a cumulative 
sequence which can profoundly affect the outcome or the ulterior course of the 
cultural process. Hence the sole, or almost sole, importance of historical 
inquiry in determining the laws of cultural development, economic or other.
The working conception which this romantic-historical school had of economic 
life, therefore, is, in its way, a conception of development, or evolution; but 
it is not to be confused with Darwinism or Spencerianism. Inquiry into the 
cultural development under the guidance of such preconceptions as these has led 
to generalisations, more or less arbitrary, regarding uniformities of sequence 
in phenomena, while the causes which determine the course of events, and which 
make the uniformity or variation of the sequence, have received but scant 
attention. The "natural laws" found by this means are necessarily of the nature 
of empiricism, colored by the bias or ideals of the investigator. The outcome is 
a body of aphoristic wisdom, perhaps beautiful and valuable after its kind, but 
quite fatuous when measured by the standards and aims of modern science. As is 
well known, no substantial theoretical gain was made along this romantic-
historical line of inquiry and speculation, for the reason, apparently, that 
there are no cultural laws of the kind aimed at, beyond the imprecise 
generalities that are sufficiently familiar beforehand to all passably 
intelligent adults.

It has seemed necessary to offer this much in characterisation of that 
"historical" aim and method which afforded a point of departure for Professor 
Schmoller's work of revision. When he first raised his protest against the 
prevailing ideals and methods, as being ill-advised and [263] not thorough-
going. he does not seem himself to have been entirely free from this Romantic, 
or Hegelian, bias. There is evidence to the contrary in his early writings.(4*) 
It cannot even be said that his later theoretical work does not show something 
of the same animus, as, e.g., when he assumes that there is a meliorative trend 
in the course of cultural events.(5*) What has differentiated his work from that 
of the group of writers which has above been called the elder line of historical 
economics is the weakness or relative absence of this bias in his theoretical 
work. Particularly, he has refused to bring his researches in the field of 
theory definitely to rest on ground given by the Hegelian, or Romantic, school 
of thought. He was from the first unwilling to accept classificatory statements 
of uniformity or of normality as an adequate answer to questions of scientific 
theory. He does not commonly deny the truth or the importance of the empirical 
generalisations aimed at by the early historical economists. Indeed, he makes 
much of them and has been notoriously urgent for a full survey of historical 
data and a painstaking digestion of materials with a view to a comprehensive 
work of empirical generalisation. As is well known, in his earlier work of 
criticism and methodological controversy he was led to contend that for at least 
one generation economists must be content to spend their energies on descriptive 
work of this kind; and he thereby earned the reputation of aiming to reduce 
economics to a descriptive knowledge of details and to confine its method to the 
Baconian ground of generalisation by simple enumeration. But this exhaustive 
historical scrutiny and description of [264] detail has always, in Professor 
Schmoller's view, been preliminary to an eventual theory of economic life. The 
survey of details and the empirical generalisations reached by its help are 
useful for the scientific purpose only as they serve the end of an eventual 
formulation of the laws of causation that work out in the process of economic 
life. The ulterior question, to which all else is subsidiary, is a question of 
the causes at work rather than a question of the historical uniformities 
observable in the sequence of phenomena. The scrutiny of historical details 
serves this end by defining the scope and character of the several factors 
causally at work in the growth of culture, and, what is of more immediate 
consequence, as they are at work in the shaping of the economic activities and 
the economic aims of men engaged in this unfolding cultural process as it lies 
before the investigator in the existing situation.
In the preliminary work, then, of defining and characterising the causes or 
factors of economic life, historical investigation plays a large, if not the 
largest, part; but it is by no means the sole line of inquiry to which recourse 
is had for this purpose. Nor, it may be added, is this the sole use of 
historical inquiry. To the like end a comparative study of the climatic, 
geographical, and geological features of the community's environment is drawn 
into the inquiry; and more particularly there is a careful study of ethnographic 
parallels and a scrutiny of the psychological foundations of culture and the 
psychological factors involved in cultural change.
Hence it appears that Professor Schmoller's work differs from that of the elder 
line of historical economics in respect of the scope and character of the 
preliminaries of economic theory no less than in the ulterior aim which he 
assigns the science. It is only by giving a very broad [265] meaning to the term 
that this latest development of the science can be called an "historical" 
economics. It is Darwinian rather than Hegelian, although with the earmarks of 
Hegelian affiliation visible now and again; and it is "historical" only in a 
sense similar to that in which a Darwinian account of the evolution of economic 
institutions might be caller historical. For the distinguishing characteristic 
of Professor Schmoller's work, that wherein it differs from the earlier work of 
the economists of his general class, is that it aims at a Darwinistic account of 
the origin, growth, persistence, and variation of institutions, in so far as 
these institutions have to do with the economic aspect of life either as cause 
or as effect. In much of what he has to say, he is at one with his 
contemporaries and predecessors within the historical school; and he shows at 
many points both the excellences and weaknesses due to his "historical" 
antecedents. But his striking and characteristic merits lie in the direction of 
a post-Darwinian, causal theory of the origin and growth of species in 
institutions. In this line of theoretical inquiry Professor Schmoller is not 
alone, nor does he, perhaps, go so far or with such singleness of purpose in 
this direction as some others do at given points; but the seniority belongs to 
him, land he is also in the lead as regards the comprehensiveness of his work.

But to return to the Grundriss, to which recourse must be had to substantiate 
the characterisation here offered. The entire work as projected comprises an 
Introduction and four Books, of which the introduction and the first two books 
are contained in the volume already published. The two books yet to be 
published, in a second volume, promise to be of a length corresponding to the 
first two. The present volume should accordingly contain approxi-[266]mately 
three-fifths of the whole, counted by bulk. The scheme of the work is as 
follows: An Introduction (pp. 1-124) treats of (1) the Concept of Economics, (2) 
the Psychical, Ethical (or Conventional, sittliche), and Legal Foundations of 
Economic Life and of Culture, and (3) the Literature and Method of the Science. 
This is followed by Book I. (pp. 125-228) on Land, Population, and the 
Industrial Arts, considered as collective phenomena and factors in economic 
life, and Book II. (pp. 229-457), on the Constitution of Economic Society, its 
chief organs and the causal factors to which they are due. Books III. and IV. 
are to deal with the Circulation of Goods and the Distribution of Income, and to 
give a genetic account of the Development of Economic Society.
The course outlined differs noticeably from what has been customary in treatises 
on economics. The point of departure is a comprehensive general survey of the 
factors which enter into the growth of culture, with special reference to their 
economic bearing. This survey runs chiefly on psychological and ethnographic 
ground, historical inquiry in the stricter sense being relatively scant and 
obviously of secondary consequence. It is followed up with a more detailed and 
searching discussion of the factors engaged in the economic process in any given 
situation. The factors, or "collective phenomena," in question are not the time-
honored Land, Labor, and Capital, but rather population, material environment, 
and technological conditions. Here, too, the discussion has to do with 
ethnographic rather than with properly historical material. The question of 
population concerns not the numerical force of laborers, but rather the 
diversity of race characteristics and the bearing of race endowment upon the 
growth of economic institutions. The discussion of the material environment, 
again, has relatively [267] little to say of the fertility of the soil, and 
gives much attention to diversities of climate, geographical situation, and 
geological and biological conditions. And this first book closes with a survey 
of the growth of technological knowledge and the industrial arts.
In all this the significant innovation lies not so much in the character of the 
details. They are for the most part commonplace enough as details of the 
sciences from which they are borrowed. They are shrewdly chosen and handled in 
such a way as to bring out their bearing upon the ulterior questions about which 
the economist's interest centers; but there is, as might be expected, little 
attempt to go back of the returns given by specialists in the several lines of 
research that are laid under contribution. But the significance of it all lies 
rather in the fact that material of this kind should have been drawn upon for a 
foundation for economic theory, and that it should have seemed necessary to 
Professor Schmoller to make this introductory survey so comprehensive and so 
painstaking as it is. Its meaning is that these features of human nature and 
these forces of nature and circumstances of environment are the agencies out of 
whose interaction the economic situation has arisen by a cumulative process of 
change, and that it is this cumulative process of development, and its complex 
and unstable outcome, that are to be the economist's subject-matter. The 
theoretical outcome for which such a foundation is prepared is necessarily of a 
genetic kind. It necessarily seeks to know and explain the structure and 
functions of economic society in terms of how and why they have come to be what 
they are, not, as so many economic writers have explained them, in terms of what 
they are good for and what they ought to be. It means, in other words, a 
deliberate attempt to substitute an inquiry into the efficient causes of [268] 
economic life in the place of empirical generalisations, on the one hand, and 
speculations as to the eternal fitness of things, on the other hand.
It follows from the nature of the case that an economics of this genetic 
character, working on grounds of the kind indicated, comprises nothing in the 
way of advice or admonition, no maxims of expediency, and no economic, 
political, or cultural creed. How nearly Professor Schmoller conforms to this 
canon of continence is another question. The above indicates the scope of such 
doctrines as are consistently derivable from the premises with which the work 
under review starts out, not the scope of its writer's speculations on economic 
matters.
The second book, by the help of prehistoric and ethnographic material as well as 
history, deals with the evolution of the methods of social organisation, - the 
growth of institutions in so far as this growth shapes or is shaped by the 
exigencies of economic life. The "organs," or social-economic institutions, 
whose life history is passed in review are: the family; the methods of 
settlement and domicile, in town and country; the political units of control and 
administration; differentiation of functions between industrial and other 
classes and groups; ownership, its growth and distribution; social classes and 
associations; business enterprise, industrial organisations and corporations.
As regards the singleness of purpose with which Professor Schmoller has carried 
out the scheme of economic theory for which he has sketched the outlines and 
pointed the way, it is not possible to speak with the same confidence as of his 
preliminary work. It goes without saying that this further work of elaboration 
is excellent after its kind; and this excellence, which was to be looked for at 
Professor Schmoller's hands, may easily divert the read-[269]er's attention from 
the shortcomings of the work in respect of kind rather than of quality. Now, 
while a broad generalisation on this head may be hazardous and is to be taken 
with a large margin, still, with due allowance, the following generalisation 
will probably stand, so far as regards this first volume. So long as the author 
is occupied with the life-history of institutions down to contemporary 
developments, so long his discussion proceeds by the dry light of the scientific 
interest, simply, as the term "scientific" is understood among the modern adepts 
of the natural sciences; but so soon as he comes to close quarters with the 
situation of to-day, and reaches the point where a dispassionate analysis and 
exposition of the causal complex at work in contemporary institutional changes 
should begin, so soon the scientific light breaks up into all the colors of the 
rainbow, and the author becomes an eager and eloquent counselor, and argues the 
question of what ought to be and what modern society must do to be saved. The 
argument at this point loses the character of a genetic explanation of 
phenomena, and takes on the character of appeal and admonition, urged on grounds 
of expediency, of morality, of good taste, of hygiene, of political ends, and 
even of religion. All this, of course, is what we arc used to in the common run 
of writers of the historical school; but those students whose interest centers 
in the science rather than in the ways and means of maintaining the received 
cultural forms of German society have long fancied they had ground to hope for 
something more to the purpose when Professor Schmoller came to put forth his 
great systematic work. Brilliant and no doubt valuable in its way and for its 
end, this digression into homiletics and reformatory advice means that the 
argument is running into the sands just at the stage where the science can least 
afford it. It is pre-[270]cisely at this point, where men of less years and 
breadth and weight would find it difficult to bold tenaciously to the course of 
cause and effect through the maze of jarring interests and sentiments that make 
up the contemporary situation, - it is precisely at this point that a genetic 
theory of economic life most needs the guidance of the firm, trained, 
dispassionate hand of the master. And at this point his guidance all but fails 
us.
What has just been said applies generally to Professor Schmoller's treatment of 
contemporary economic development, and it should be added that it applies at 
nearly all points with more or less of qualification. But the qualifications 
required are not large enough to belie the general characterisation just 
offered. It would be asking too large an indulgence to follow the point up in 
this place through all the discussions of the volume that fairly come tinder 
this criticism. The most that may be done is to point for illustration to the 
handling which two or three of the social-economic "organs" receive. So, for 
instance, Book II. opens with an account of the family and its place and 
function in the structure of economic society. The discussion proceeds along the 
beaten paths of ethnographic research, with repeated and well-directed recourse 
to the psychological knowledge that Professor Schmoller always has well in hand. 
Coming down into recent times, the discussion still proceeds to show how the 
large economic changes of late mediaeval and early modern times acted to break 
down the patriarchal régime of the earlier culture; but at the same time there 
comes into sight (pp. 245-249) a bias in favor of the recent as against the 
earlier form of the household. The author is no longer content to show the 
exigencies which set the earlier patriarchal household aside in favor of the 
modified patriarchal household of more recent times. He also offers [271] 
reasons why the later, modified form is intrinsically the more desirable; 
reasons, it should perhaps be said, which may be well taken, but which are 
beside the point so far as regards a scientific explanation of the changes under 
discussion.
The closing paragraphs of the section (91) dwell with a kindly insistence on the 
many elements of strength and beauty possessed by the form of household 
organisation handed down from the past generation to the present. The facts 
herewith recited by the author are, no doubt, of weight, and must be duly taken 
account of by any economist who ventures on a genetic discussion of the present 
situation and the changing fortunes of the received household. But Professor 
Schmoller has failed even to point out in what manner these elements of strength 
and beauty have in the recent past or may in the present and immediate future 
causally affect the fortunes of the institution. The failure to turn the 
material in question to scientific account becomes almost culpable in Professor 
Schmoller, since there are few, if any, who are in so favorable a position to 
outline the argument which a theoretical account of the situation at this point 
must take. Plainly, as shown by Professor Schmoller's argument, economic 
exigencies are working an incessant cumulative change in the form of 
organisation of the modern household; but he has done little towards pointing 
out in what manner and with what effect these exigencies come into play. Neither 
has he gone at all into the converse question, equally grave as a question of 
economic theory, of how the persistence, even though qualified, of the 
patriarchal family has modified and is modifying economic structure and function 
at other points and qualifying or accentuating the very exigencies themselves to 
which the changes wrought in the institution are to be traced. [272] Plainly, 
too, the strength and beauty of the traditionally received form of the household 
- that is to say, the habits of life andd of complacency which are bound up with 
this household - are elements of importance in the modern situation as affects 
the degree of persistence and the direction of change which this institution 
shows under modern circumstances. They are psychological facts, facts of habit 
and propensity and spiritual fitness, the efficiency of which as live forces 
making for survival or variation is in this connection probably second to that 
of no other factors that could be named. We had, therefore, almost a right to 
expect that Professor Schmoller's profound and comprehensive erudition in the 
fields of psychology and cultural growth should turn these facts to better ends 
than a preachment concerning an intrinsically desirable consummation.
Regarding the present visible disintegration of the family, and the closely 
related "woman question," Professor Schmoller's observations are of much the 
same texture. He notes the growing disinclination to the old-fashioned family 
life on the part of the working population, and shows that there are certain 
economic causes for this growth or deterioration of sentiment. What he has to 
offer is made up of the commonplaces of latter-day social-economic discussion, 
and is charged with a strong undertone of deprecation. What the trend of the 
causes at work to alter or fortify this body of sentiment may be, counts for 
very little in what he says on the present movement or on the immediate future 
of the institution. The best he has to offer on the "woman question" is an off-
hand reference of the ground of sentiment on which it rests to a recrudescence 
of the eighteenth century spirit of égalité. This notion of the equality of the 
sexes he refutes in graceful and affecting terms, and he pleads for [273] the 
unbroken preservation of woman's sphere and man's primacy; as if the matter of 
superiority or inferiority between the sexes could conceivably be anything more 
than a conventional outcome of the habits of life imposed upon the community by 
the circumstances under which they live. How it has come to pass that under the 
economic exigencies of the past the physical and temperamental diversity between 
the sexes has been conventionally construed into a superiority of the man and an 
inferiority of the woman, - on this head he has no more to say or to suggest 
than on the correlate question of why this conventional interpretation of the 
facts has latterly not been holding its ancient ground. The discussion of the 
family and of the relation of the sexes, in modern culture, is marked throughout 
by unwillingness or inability to penetrate behind the barrier of conventional 
finality.
The discussion of the family just cited occupies the opening chapter of Book II. 
For a further instance of Professor Schmoller's handling of a modern economic 
problem, reference may be had to the closing chapter of Book I., on the 
"Development of Technological Expedients and its Economic Significance," but 
more particularly the sections (84-86) on the modern machine industry (pp. 211-
228). In this discussion, also, the point of interest is the attention given to 
the latter-day phenomena of machine industry, and the author's method and animus 
in dealing with them. There is (pp. 211-218) a condensed and competent 
presentation of the main characteristics of the modern "machine age," followed 
(pp. 218-228) by a critical discussion of its cultural value. The customary 
eulogy, but with more than the customary discrimination, is given to the 
advantages of the régime of the machine in point of economy, creature comforts, 
and intellectual sweep; and it is pointed out how the ré-[274]gime of the 
machine has brought about a redistribution of wealth and of population and a 
reorganisation and redistribution of social and economic structures and 
functions. It is pointed out (p. 223) that the gravest social effect of the 
machine industry has been the creation of a large class of wage laborers. The 
material circumstances into which this class has been thrown, particularly in 
point of physical comfort, are dealt with in a sober and discriminating way; and 
it is shown (p. 224) that in the days of its fuller development the machine's 
régime has evolved a class of trained laborers who not only live in comfort, but 
are sound and strong in mind and body. But with the citation of these facts the 
pursuit of the chain of cause and effect in this modern machine situation comes 
to an end. The remainder of the space given to the subject is occupied with 
extremely sane and well-advised criticism, moral and esthetic, and indications 
of what the proper ideals and ends of endeavor should be.
Professor Schmoller misses the opportunity he here has of dealing with this 
material in a scientific spirit and with some valuable results for economic 
theory. He could, it is not too bold to assume, have sketched for us an 
effective method and line of research to be pursued, for instance, in following 
up the scientific question of what may be the cultural, spiritual effects of the 
machine's régime upon this large body of trained workmen, and what this body of 
trained workmen in its turn counts for as a factor in shaping the institutional 
growth of the present and the economic and cultural situation of tomorrow. Work 
of this kind, there is reason to believe, Professor Schmoller could have done 
with better effect , than any of his colleagues in the science; for he is, as 
already noticed above, possessed of the necessary qualifications in the way of 
psychological training, broad knowledge of the play of [275] cause and effect in 
cultural growth, and an ability to take a scientific point of view. Instead of 
this he harks back again to the dreary homiletical waste of the traditional 
Historismus. It seems as if a topic which he deals with as an objective matter 
so long as it lies outside the sphere of every-day humanitarian and social 
solicitude, becomes a matter to be passed upon by conventional standards of 
taste, dignity, morality, and the like, so soon as it comes within the sweep of 
latter-day German sentiment.
This habit of treating a given problem from these various and shifting points of 
view at times gives a kaleidoscopic effect that is not without interest. So in 
the matter of the technically trained working population in the machine 
industry, to which reference has already been made, something of an odd 
confusion appears when expressions taken from diverse phases of the discussion 
are brought side by side. He speaks of this class at one point (p. 224) as 
"sound, strong, spiritually and morally advancing," superior in all these 
virtues to the working classes of other times and places. At another point (pp. 
250-253) be speaks of the same popular element, under the designation of 
"socialists," as perverse, degenerate, and reactionary. This latter 
characterisation may be substantially correct, but it proceeds on grounds of 
taste and predilection, not on grounds of scientifically determinable cause and 
effect. And the two characterisations apply to the same elements of population; 
for the substantial core and tone-giving factor of the radical socialistic 
element in the German community is, notoriously, just this technically trained 
population of the industrial towns where the discipline of the machine industry 
has been at work with least mitigation. The only other fairly isolable element 
of a radical socialistic complexion is found among the students of modern 
science. Now, fur-[276]ther, in his speculations on the relation of 
technological knowledge to the advance of culture, Professor Schmoller points 
out (e.g., p. 226) that a high degree of culture connotes, on the whole, a high 
degree of technological efficiency, and conversely. In this connection he makes 
use of the terms Halbkulturvölker and Ganzkulturvölker to designate different 
degrees of cultural maturity. It is curious to reflect, in the light of what he 
has to say on these several heads, that if the socialistically affected, 
technically trained population of the industrial towns, together with the 
radical-socialistic men of science, were abstracted from the German population, 
leaving substantially the peasantry, the slums, and the aristocracy great and 
small, the resulting German community would unquestionably have to be classed as 
a Halbkulturvolk in Professor Schmoller's scheme. Whereas the elements 
abstracted, if taken by themselves, would as unquestionably be classed among the 
Ganzkulturvölker.
In conclusion, one may turn to the concluding chapter (Book II., Chapter vii.) 
of the present volume for a final illustration of Professor Schmoller's method 
and animus in handling a modern economic problem. All the more so as this 
chapter on business enterprise better sustains that scientific attitude which 
the introductory outline leads the reader to look for throughout. It shows how 
modern business enterprise is in the main an outgrowth of commercial activity, 
as also that it has retained the commercial spirit down to the present. The 
motive force of business enterprise is the self-seeking quest of dividends; but 
Professor Schmoller shows, with more dispassionate insight than many economists, 
that this self-seeking motive is hemmed in and guided at all points in the 
course of its development by considerations and conventions that are not of a 
primarily self-seeking kind. He is not content to [277] point to the beneficent 
working of a harmony of interests, but sketches the play of forces whereby a 
self-seeking business traffic has come to serve the interests of the community. 
Business enterprise has gradually emerged and come into its present central and 
dominant position in the community's industry as a concomitant of the growth of 
individual ownership and pecuniary discretion in modern life. It is therefore a 
phase of the modern cultural situation; and its survival and the direction of 
its further growth are therefore conditioned by the exigencies of the modern 
cultural situation. What this modern cultural situation is and what are the 
forces, essentially psychological, which shape the further growth of the 
situation, no one is better fitted to discuss than Professor Schmoller; and he 
has also given valuable indications (pp. 428-457) of what these factors are and 
how the inquiry into their working must be conducted. But even here, where a 
dispassionate tracing-out of the sequence of cause and effect should be easier 
to undertake, because less readily blurred with sentiment, than in the case, 
e.g., of the family, the work of tracing the developmental sequence tapers off 
into advice and admonition proceeding on the assumption that the stage now 
reached is, or at least should be, final. The attention in the later pages 
diverges from the process of growth and its conditioning circumstances, to the 
desirability of maintaining the good results attained and to the ways and means 
of holding fast that which is good in the outcome already achieved. The question 
to which an answer is sought in discussing the present phase of the development 
is not a question as to what is taking place as respects the institution of 
business enterprise, but rather a question as to what form should be given to an 
optimistic policy of fostering business enterprise and turning it to account for 
the common good. At this [278] point, as elsewhere, though perhaps in a less 
degree than elsewhere, the existing form of the institution is accepted as a 
finality. All this is disappointing in view of the fact that at no other point 
do modern economic institutions bear less of an air of finality than in the 
forms and conventions of business organisations and relations. As Professor 
Schmoller remarks (p. 455), the scope and character of business undertakings 
necessarily conform to the circumstances of the time, not to any logical scheme 
of development from small to great or from simple to complex. So also, one might 
be tempted to say, the expediency and the chance of ultimate survival of 
business enterprise is itself an open question, to be answered by a scrutiny of 
the forces that make for its survival or alteration, not by advice as to the 
best method of sustaining and controlling it.

What has here been said in criticism of Professor Schmoller's work, particularly 
as regards his departure from the path of scientific research in dealing with 
present-day phenomena, may, of course, have to be qualified, if not entirely set 
aside, when his work is completed with the promised genetic survey of modern 
institutions to be set forth in the concluding fourth book. Perhaps it may even 
be said that there is fair hope, on general grounds, of such a consummation; but 
the present volume does not afford ground for a confident expectation of this 
kind. It is perhaps needless, perhaps gratuitous, to add that the strictures 
offered indicate, after all, but relatively slight shortcomings in a work of the 
first magnitude.

NOTES:
1) Grundriss der allgemeinen Volkswirtschaftslehre. Erster Teil. Leipzig, 1900.
2) E.g., K. Bücher's Entstehung der Volkswirtschaft, and Arbeit und Rythmus; R. 
Hildebrand's Recht und Sitte; Knapp's Grundherrschaft und Rittergut; Ehrenberg's 
Zeitalter der Fugger; R. Mucke's various works.
3) A physiological conception of society, or of the community, had been employed 
before, - e.g., by the Physiocrats, - and such a concept was reached also by 
English speculators - e.g., Herbert Spencer - during Roscher's lifetime; but 
these physiological conceptions of society are reached by a different line of 
approach from that which led up to the late Hegelian physiological or biological 
conception of human culture as a spiritual structure and process. The outcome is 
also a different one, both as regards the use made of the analogy and as regards 
the theoretical results reached by its aid.
It may be remarked, by the way, that neo-Hegelianism, of the "Left," likewise 
gave rise to a theory of a self-determining cultural exfoliation; namely, the 
so-called "Materialistic Conception of History" of the Marxian socialists. This 
Marxian conception, too, had much of a physiological air; but Marx and his 
coadjutors had an advantage over Roscher and his following, in that they were to 
a greater extent schooled in the Hegelian philosophy, instead of being 
uncritical receptacles of the Romantic commonplaces left by Hegelianism as a 
residue in popular thought. They were therefore more fully conscious of the 
bearing of their postulates and less naive in their assumptions of self-
sufficiency.
4) E.g., in his controversy with Treitschke. See Grundfragen der Socialpolitik 
und der Volkswirtschaftslehre, particularly pp. 24, 25.
5) E.g., Grundriss, pp. 225, 409, 411.
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