Moimty 'REACTIONS AGAINST THE CLASSICAL SYSTEM. SOCIALISM. It is a striking tribute to the classical system of political economy and to the intellect, power, and personal excellence of its leaders, that the development of economic thought since iSAO can best be understood and described as a series of reactions against the dominant doctrim-s of that school. The earliest and most passionate protest against the classical economy came from the socialists. (See Socim. IsM.) The antagonism between socialism and the classical economy is fundamental and irre concilable. The foundation of the latter was luissssrz•fniee and its theories were huilt around the system of private capitalistic enterprise: while socialism is in essence a protest against hi.tsrz•tiirr and the private ownership of capi tal. The rise of modern socialistic doctrine may conveniently lie dated from NN'illiain Godwin's Inquiry Concern i ng Political ,1 ;Wire (1793) although Godwin himself was inclined toward anarchism; hut the chief bond uniting the early socialists was their common hatred of the orthodox political economy. In recent times, largely under the influence of Karl Marx (q.v.), sociali in has acquired a positive theory which is adopted with substantial unanimity by the great mass of people who may correctly be called so cialists. Logically enough, this 'scientific social ism' has its roots in the Pficardian theory of value and distribution. :Mutilating his theory of value and interpreting it ethically. they claim that, as labor is the sole cause of value. the laborer is entitled to the whole produee of industry. They accept a part of his gloomy law of wages, magnify the class antagonism inherest in his theory of distribution. and glory in the pessimism which unconsciously pervaded his analysis. On the basis of a broader his torical survey than Ricardo permitted himself to make. they confidently assert that the regime of capitalism is lint a temporary stage in indus trial evolution. and that it must inevitably give way to a regime of collective production. theory of value has met little but critic•isni from the economists. but his doctrine that the under lying causes of all social such as religion, literature. and art, are eeonomic in called by him the materialistic con ception of history. has profoundly influenced the science, particularly in Germany. The chief ollic•e of the socialists has been to arouse sym pathy for the classes of society whose condition is such as to make socialism attractive to them.
THE SoctoLoGusTs. To the sociologists may he ascribed the most fundamental and inclusive pro test against the inctInids of the Classical Sehuol. The Ricardians aimed at an abstract science of rigid precision. universal in application. raised above the of particular• epochs and national boundaries. They were thus led to neglect history. custom. law, and ethics; they spoke as if the existing stage Df economic de velopment was permanent, and their method of treatment was predominantly deductive. The most etfec•tive protest against these exaggerations was made by the Historical School, which will be noted hereafter; but a more fundamental pro test, and mm prior in point of time, was made by Auguste Comte (17 9 8-1857). the father of modern sociology. He exercised great influenee in shaping the of political economy and marking out its particular place among the social sciences. The influence of sociology upon modern economic thought will he discussed more fully in the article SOCIOLOGY.
Titr•, llisTomem. SCHOOL. The most influential
reaction against the classical economy was that inaugurated by what is known as the Historical School of Germany, and is usually dated front the work of Lorenz von Stein, Der Nozinlism us tut Coin in on ism us des hen! igen Pro nkreichs, written in 1842, or, more correctly, from Wilhelm Boscher's Grundriss zu. Vorlesu nye', fiber die Stun tsirirt schaft nu eh geschichtlicher ethode, published in 1 4 3. Two contemporaries of lloseher, Bruno Hildebrand and Karl Knies, must be associated with Hoscher and Stein in the introduction of this method, which has trans formed economic science in Germany and pro foundly affected it the world over. The char acteristics of the Classical School which these writers most earnestly attacked were what have been called its cosmopolitanism am l its per petualism—the belief in economic laws valid for all nations and all times. The positive doctrines of these writers, briefly summarized, maintain the propositions that economics is a social or political science which can be profitably pursued only in connection with the other sciences of social or political life. particularly administra tion, law, and history; and that not only are economic phenomena conditione(I by general so cial and political institutions, but that these institutions are products of an ordered historical development. so that the economic science of any particular nation can only be studied and formulated in connection with the historical development of that nation. Thus instead of a universal political economy we have au historical national economy. The work of the Historical School must be regarded as the most important movement of economic thought in the latter half of the nineteenth century. but only a few words can be devoted to its rise and development. From the standpoint of method it was simply an application to economic investigation of a method that had been developed and popularized by Grimm. Savigny. and other German investigators in philology, history. and jurisprn denee. a generation before the rise of the His torical School of political economy. What may he called the nationalistic spirit of the school was the result of irresistible political forces of the day, first expressed in the economic publica tions of Friedrich List (1789-1846). Germany was in the process of developing into a great empire, and. as has been pointed out in connec tion with the mercantile system. such a period in the life of a nation is almost invariably attended with protective legislation designed to make the new State industrially, as well as politically, independent and homogeneous. The new German economics simply voiced these economic and political tendencies, to which atten tion had been called by List. The work of the German economists who succeeded Roscher, Knies, and Hildebrand has been marked by a predominant use of the inductive method and a close adherence to actual economic phenomena ; by special study of the effect of legal institutions, custom. law. and ethics upon economic phe nomena; by an intermediate attitude between extreme protectionism and extreme free-trade views; and by a discriminating sympathy with the claims of socialism. Quite generally they look to the State rather than to individual initiative to solve the problem of poverty, and they have thus become known as Katheder Socialisten (socialists of the professorial chair), or State Socialists, as contrasted with the Social Democrats, whose radical programme they refuse to indorse.