Conclusion
Even though the methodological battle between Menger and Schmoller concluded without a decisive victor, it ended up causing significant damage to the reputation of the GHSE. The status and prestige of the GHSE were also seriously downgraded by accusations that its adherents provided the theoretical foundations that led to WWI, the rise of Nazism, and WWII.
As such, the GHSE was blamed for many of the devastating outcomes associated with these events, including the destruction and horrors of both wars, the rise of authoritarianism and tyranny, and various economic problems. Subsequently, the important contributions made by the GHSE to the discipline of economics were largely forgotten by neoclassical and neoliberal economists, including its role in establishing political economy as an independent academic discipline, as well as its influence on the development of economic thought and education in the US.After WWI, American economists, who were once so impressed with the GHSE that they integrated many of its fundamental features into the curricula of their own universities, gradually emancipated themselves from any European influence on their system of education. The GHSE was no longer a school of thought that they looked toward for inspiration. To the contrary, they became critical of the historical method, the collectivist approach, and positive state action, while dismissing the notion of a relationship between ethics and economics. In fact, they actually purged these features of the GHSE from the discipline of economics. However, doing so deprived mainstream economists of important sources of enlightenment, creativity, critical thinking, and social and economic progress.
Contrary to the totalitarian regimes of the 20th century, the GHSE was opposed to dictating the actions of individuals in their private spheres. Since
Decline and Demise of the German Historical School of Economics 235 its adherents often argued that universal laws of development did not exist, they did not make any attempts to design the future for individuals based on unrealistic abstract assumptions.
In fact, the GHSE represented an alternative to all forms of centralization and authoritarianism, socialist and communist revolutions, as well as the unrestricted and destructive activities of the capitalist system. Its adherents wanted to facilitate the conditions that would provide people with the freedom of self-determination, while simultaneously protecting them from coercion. Accordingly, they supported the limitation of state action, the protection of labor rights, the public ownership or management of strategic industries, and the public provision of various social services and programs. They also accepted the state and all other economic agents as moral and ethical entities that aimed to achieve the common welfare. However, following the demise of the GHSE, ethical economics disappeared from the discipline of economics. More specifically, since the rise of neoliberalism, people have been progressively conditioned to adopt the view that economics should not involve moral and ethical standards, which have been depicted as purely arbitrary and subjective judgments. In recent decades, it has become impossible to hide the fact that economic decisions and actions that are free from ethical and moral judgments have caused enormous damage to societies and the world, including unprecedented social and economic inequality, misery, extreme poverty, unemployment, health problems, pollution, and environmental degradation. Unfortunately, the leading economists who are currently advising governments, international organizations, and institutions on how to address these pressing matters belong to the same school of thought that brought us to this point through its strict commitment to the neoliberal agenda and extensive application of mathematics to economics. In reality, their ignorance of the history of their own discipline, along with their lack of interest in other areas of the social sciences and their outright dismissal of ethical economics, will likely continue to undo more of the human progress that has been achieved since the times of Ancient Greece.Notes
1 For many years, ‘pupils’ of the theorists of the ASE, including Menger, von Wieser, and Bohm-Bawerk, were ‘excluded from German chairs’ (Mitchell 1949, 188). However, this situation changed in the 1920s, as adherents of the ASE, such as Hayek and Mises, as well as some of the disciples of ordo-liberalism, including Wilhelm Ropke (1899-1966), Alfred Muller-Armack, Walter Eucken, and Franz Bohm, played important roles in the discipline of economics, mainly at the universities of Austria and Germany.
2 The emigration of thousands of highly trained German academics who were fleeing Nazi rule after 1933 significantly contributed to the progress and development of almost every single discipline at institutions of higher learning in the US. In fact, this situation played an important role in helping American education and culture attain internationally leading status.