Gustav Friedrich von Schmoller was the leading economist of Imperial Germany at the turn of the twentieth century.
He was the most important representative of the Younger Historical School, also called the “historical-ethical school”, which dominated German economics until the outbreak of World War I.
As one of the founders and long-time chairman of the Verein fur Socialpolitik, the most important association of economists in Germany until today, he had a strong influence on social and economic politics in Imperial Germany. Because of his aim to improve the situation of the working class by means of moderate social reforms and education, he and other members of the Verein, such as Lujo Brentano and Adolph Wagner, were often ridiculed as “socialists of the chair” (Oppenheim 1872). His political ideas even influenced Bismarck’s social legislation, and today he is considered as one of the pioneers of the German welfare state. Schmoller also had a strong influence on the Prussian education politics and used his relations to Friedrich Althoff (1839-1908), who was in charge of the Prussian university system at the Ministry of Education in Berlin, to control the appointment of important academic positions in Prussia.Many German economists after World War I, who tried to catch up with the international theoretical development in economics and favoured an economic science free of value-judgments, considered the Younger Historical School an aberration, which cut the ties to classical economics and delayed progress in German economics for half a century. Historicism was considered as “anti-theoretical”, Schmoller as a “dead dog” (Kempski 1964: 200), and his major work, the Grundriβ der allgemeinen Volkswirtschaftslehre, as an “unassailable mountain” (Salin 1967: 140). In his article in Schmollers Jahrbuch, Joseph Schumpeter was giving a more differentiated recognition of Schmoller’s merits compared with most of his contemporaries (Schumpeter 1926). However, Schumpeter later complained in the History of Economic Analysis that in Germany “economic theory as understood in England was in many places almost completely in abeyance for several decades” (Schumpeter 1954: 804). In the past two decades, the general dissatisfaction with mainstream formal theorizing and neoliberal economic policy has led to a growing interest in Schmoller’s historical, institutional, interdisciplinary, and ethical approach, and to a less prejudiced reception of his writings (Peukert 2001).