Cameralism and the German Historical School of Economics
While political economy found ‘its origin chiefly in the study of questions of finance and foreign commerce’ in England and Italy, it developed out of the science of law and the cameralistic sciences in Germany (Roscher 1878, 97).
That is to say, the development of a separate and independent discipline of political economy began during the 17th century in Germany with the emergence of cameralism. The first chair in political economy was established at Frankfurt University in 1727, nearly a century ahead of Britain, which did not do so until 1826 at Oxford University (Backhaus 2009B, 5, Tribe 1984, 263). Since the discipline of economics arose out of cameralism, the establishment of the first chair in political economy in Germany essentially marked the beginning of modern economics. Subsequently, in the early 19th century, cameralists faced ‘heavy criticism from a competing system of political and economic theory; and by the 1820s cameralism at least had all but disappeared’ (Tribe 1984, 277). At that time, classical economics started to garner some attention in Germany. However, since cameralism was already being taught at German universities since 1727 and cameralistic public administration and finance were successfully being practiced, German political economists did not really have a reason to turn to classical economics. For them, the fundamental principles, ideas, and policies of classical economics, including individualism, the laissez-faire approach, competitiveness, the overexploitation of natural resources, and the destruction of the natural environment for purely economic gains, were all foreign concepts that were unfit for the German spirit and way of thinking, both of which were highly influenced by cameralism. Despite the fading role of cameralism in the 19th century, universities in Germany and Austria continued to teach cameralist science, which played a significant role in the initial development of public administration, political economy, finance, statistics, bureaucratic organization, and political practices and thinking in those two countries.Karl Heinrich Rau (1792—1870), a German political economist who was a very influential professor at the University of Heidelberg, where he lectured for nearly five decades, had a crucial role in the development of cameralism and mathematical economics in the 19th century (Neff 1950, 191). Rau’s textbook Lehrbuch der politischen Okonomie (1826) ‘dominated instruction in economics in German universities for almost 50 years’ (Mitchell 1969, 531). In fact, it was widely considered to be an encyclopedia of economic knowledge in the 19th century, when it became the main textbook of cameralism in Germany and was frequently used to train public servants. Many of the ideas and methods that it presented were similar to those put forth by other cameralistic writers, as he discussed Nationalokonomie and Staatswirthschaft at length. However, the ideas presented by Rau in Lehrbuch derpolitischen Okonomie (1826) were also ‘modern, and distinct from an eighteenth century cameralistic tradition where the discussion of economic activity was irrevocably linked to the work of economic administration; but although it incorporated elements of Smithian political economy’ (Tribe 2002, 5). Rau argued that while cameralism could not remain the same as it had been in the previous century, it might be possible to ‘rejuvenate it’ (Tribe 1988, 193). Accordingly, he combined cameralistic ideas with the classical economics of Adam Smith (Neff 1950, 217). In doing so, he emphasized the importance of reforming the discipline of economics, while supporting the historical method and statistical observations.
Rau’s Lehrbuch der politischen Okonomie was very inf luential in the development and formation of the economic thoughts, ideas, and approaches of some of the prominent theorists of the GHSE, mainly Wilhelm Georg Friedrich Roscher (1817-1894) and Bruno Hildebrand (1812-1878). Even though cameralism lost its leading status in the early decades of the 19th century, adherents of the GHSE were generally familiar with it, because polizei- wissenschaft and staatswirthschaft were still being taught at German universities and considered important components of the discipline of political economy under the leadership of the GHSE (St.
Marc 1892, 85-86). These courses dealt with the essence of the state, including its constitution, goals, justice, security, public safety, public administration, and the good order of civil life, all of which were necessary for the achievement of the common good (ibid.: 85). Roscher (1878, 98), who is accepted as the founder of the GHSE, due in large part to the publication of his Outline for Lectures of Political Economy in 1843, pointed out that political economists were required to possess ‘knowledge of the natural side of the cameralistic sciences’ in the 19th century. According to him, such knowledge was ‘indispensable to every detailed and living theory, and especially to the application of economic science to practice’ (Roscher 1878, 98).Roscher actually attended Rau’s lectures in Heidelberg. As a result, he was strongly inf luenced by Rau’s views and ideas in his own work System der Volkswirtschaft (1854). In fact, the ‘descriptive features’ of Rau’s works inspired Roscher to ‘adapt theoretical principles to historical circumstances’ (Tribe 1988, 206). This led Roscher to undertake significant efforts to ‘modernize’ cameralism, which involved applying certain ‘aspects’ of political theory and history to political economy (ibid.: 203, 206). In his Geschichte der National- Oekonomik in Deutschland (1874), Roscher basically ‘trimmed cameralism to its bare economic essentials, discarding most of the extraneous garbage about technology, agriculture, forestry and the rest’ (Wakefield 2005, 313-314). He also eliminated some of the fundamental policies of cameralism. For instance, he did not believe that population growth would necessarily lead to increases in state revenue and wealth, which was one of the main tenets of cameralists. Additionally, Roscher did not support the idea of a ruler that planned and designed all minuscule aspects of economic activity in society in order to advance the development of the national economy. He also opposed extremely protective trade measures.
Meanwhile, some of the features of cameralism that were supported by Roscher (1878, 91) included an emphasis on ‘the close connection between politics and Political Economy, in the case of the science of finance, or of the science of governmental house-keeping, otherwise the administration of public affairs.’ He also used the term police in the same sense as cameralists, referring to the power of the state and its institutions to prevent ‘all disturbances of external order among the people’ (Roscher 1878, 92). Like the cameralists, he argued that the police could ‘extend its action into all the domains of national life’ whenever the domestic peace, security, and order were endangered (ibid.).In addition to Roscher, other theorists of the GHSE were also inf luenced by cameralism. In fact, many of them worked to further develop, ‘refine and extend’ Roscher’s views on cameralism (Wakefield 2005, 314). During the leadership of the GHSE, cameralist principles, goals, and policies became important parts of the national economy (Nationalokonomie). Furthermore, university classes under the GHSE focused on the development and progress of the national economy, as was the case when cameralism was dominant. Another similarity between the cameralists and adherents of the GHSE was that both considered multidisciplinary research and the study of ancient civilizations to be important. More specifically, both schools of thought believed that political economy required other social sciences and historical investigation in order to achieve economic progress and development. Moreover, adherents of the GHSE and cameralism placed a high value to the historical approach because they thought it allowed them to gain a better understanding of the development and advancement of institutions of society. To be more precise, they thought that it was important to properly comprehend the historical evolution of the industries, customs, and cultural practices of societies in order to determine what factors facilitated or inhibited their progress.
In fact, adherents of both cameralism and the GHSE relied on historical enquiry to provide the basis for any great institutional decisions made by the ruler.The treatment of ethical values was another point of convergence between cameralism and the GHSE. Basically, theorists of the GHSE tried to integrate ethical standards into economics. To be more precise, they declared that moral and ethical judgments played a central role in the decisions and actions of both states and individuals. Gustav von Schmoller (1838—1917) produced the most extensive work on the importance of ethics in social and economic life and making economics into an ethical discipline. He argued that the most advanced civilizations placed a high value on the ethical and moral practices of individuals, as well as those of social and economic institutions. According to him, there would be no progress in economics or the institutions of society in the absence of moral and ethical practices.
Without the existence of cameralism, the GHSE would likely have turned out very differently, given the many parallels that existed between these two schools of thought. That is to say, the GHSE could not have reached the level of success it achieved without the significant contributions that cameralism made to its fundamental ideas and principles.