Roscher was born on 21 October 1817, in Hanover into a family of civil servants.
From 1835 he studied history, philosophy and linguistics in Gottingen and then classical philology and history in Berlin. He obtained his doctorate in Gottingen in 1838, his habilita- tion in 1840 and then became a lecturer there in history and economics and public finance (Staatswissenschaften).
In 1842 he published his historical study about Thucydides and only one year later his Grundriβ zu Vorlesungen uber die Staatswirthschaft, nach geschich- tlicher Methode (Outline of Lectures on the Public Economy, Using the Historical Method). This work made him, together with Bruno Hildebrand (1812-1878) and Karl Knies (1821-1898), one of the founders of the so-called “Older Historical School of Economics” in Germany. In 1848 he was appointed to a chair at the University of Leipzig, where he worked on his monumental magnum opus System der Volkswirthschaft. Hand- und Lesebuch fur Geschdftsmdnner und Studierende (System of Economics. Hand- and Reading Book for Businessmen and Students), which comprises altogether five volumes and whose first volume saw numerous editions. For the history of the sciences in Germany, a project launched by the historical commission of the Bavarian Academy of Sciences, Roscher contributed his Geschichte der National-Oekonomik in Deutschland (History of Political Economy in Germany) in 1874, a work of more than 1000 pages. In 1892 he published Politik: Geschichtliche Naturlehre der Monarchie, Aristokratie und Demokratie (Politics: Historical Natural Doctrine of Monarchy, Aristocracy and Democracy), which contains an encyclopaedia of the history of political constitutions in Europe and is a most important early German contribution to what became political science.Roscher lived in seclusion. His deep rootedness in the Protestant faith is reflected in his long-term activity in the Leipzig Protestant mission society and in poor relief.
See in this context also Roscher (1896). Politically he was conservative and supported German colonialism and imperialism on the grounds that Germany needed a secure supply of raw materials and an outlet for its products (see Roscher 1885). Roscher died on 4 June 1894 in Leipzig.Roscher advocated what he called the “historico-physiological method”, which he contrasted with the “idealistic method” (see Weber 1922; Priddat 1995). While the former tried to take due account of the historical specificities in the economic, social, cultural and political development of different nations, the latter abstracted from them and focused attention on ideal or optimal states. While the former was positive economics, the latter was essentially normative. The former saw “organic unities”, where the latter saw only abstract principles at work. As a studied historian Roscher endorsed the historical-inductive method, which was designed to provide a realistic picture of the economy, capturing its essential institutional and cultural features. His focus was on socio-economic development, which he saw unfold in a succession of stages characterized by differences in terms of political constitution and social institutions, property rights, the labour process up to the aspirations and mind-sets of people. In an analogy to the life of humans, Roscher distinguished between four stages of development: childhood, youth, manhood and old age. While Friedrich List had advocated the view that development is only ascending, Roscher saw both ascending and descending phases. He carried out comparative studies of different economies and people, and saw them belonging to different phases in the process of development, which, while not linear and uniform, exhibited certain common patterns and similarities. The emphasis was on comparative dynamics and historical relativism. An important message was that people behave differently in different socio-economic regimes, and it was important to understand how historical conditions shaped the behaviour.
It was clear that from such a holistic perspective the idea of “methodological individualism”, that is, of reconstructing the economy and society by starting from autonomous individuals and their economically driven interaction, was unacceptable. Roscher’s historicism did not, however, prompt him, as it did members of the younger Historical School, to downplay or even deny the importance of economic theory. In fact, Roscher elaborated several theoretical economic concepts and relationships between magnitudes (variables) himself, typically seeking to find empirical support for them. His historical-inductive approach therefore did not imply an uncompromising opposition to the idealistic-deductive method. Roscher was, rather, concerned with identifying the precise role of each and the best way of combining the two. He stressed that, to him, politics was the doctrine of the laws of development of the state, with political economy and statistics being facets of politics. He claimed to have reflected upon each and every law of development through comparing the epochs of the life of the various nations and peoples he knew of. In short, he saw economics as a part and parcel of “universal history”.In Roscher’s view, major representatives of the idealistic method were the classical economists, who in one part of their analyses derived economic laws from hypotheses about people’s behaviour and the economic problems they faced. He felt that some of the classical economists had gone too far by claiming that there existed definite causal relationships that are valid at all times and in all circumstances, whereas he was convinced there existed only historically contingent patterns of behaviour. This criticism would have applied more to marginal theory, which was on the rise in the last quarter of the nineteenth century. In fact, there are close similarities between Roscher and Adam Smith, who also judiciously combined theoretical and historical analyses and whom Roscher esteemed highly.
Both were of the opinion that historical analysis was indispensable because it informed about the subject matter of economics. They were convinced that while the historical material illustrates economic theory and defines the confines within which the latter is applicable, economic theory makes the material speak to us. From this point of view economic development is both the expression of abstract economic laws or regularities and of the specific cultural and institutional particularities of a nation, of its “character” and “mentality” (Sinnesart); see also Salin (1968).In his Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte (Views of Economics from the Historical Point of View), first published in 1861, Roscher develops a three-stages theory of socio-economic development, which revolves around changes in the relative importance of the three “factors” of production - nature (land), labour and capital - in various epochs in history (1861: ch. 1). In it Roscher applies the concept of factor substitution, which he discusses in great detail, in a historico-philosophical way. He comes back to his concept of history as unfolding in stages in Politik (1892), but now uses a different classification according to different types of government - from patriarchal kingdom via the aristocracy of knights and priests to absolute monarchy and then democracy. Degenerate forms are plutocracy and “Caesarism”, which amounts to military dictatorship. As Schefold (1987: 221) remarked: “Roscher did not systematically attempt an integration of his theory of political development and the stages of economic evolution.” There is not, at any rate, the idea that certain economic stages imply certain types of government; while there are some correspondences, there is no one-to-one fit.
In his treatise “Zur Lehre von den Absatzkrisen” (“On the doctrine of sales crises”), first published in 1849, and in several other essays, Roscher traces slumps back to a deficiency of aggregate effective demand and develops views that may perhaps be said to foreshadow elements of Keynes’s.
In particular, he rejects Say’s law (that is, he sees in it only an identity) with reference to the fact, already noted by John Stuart Mill, that in a monetary economy, in which money is also used as a store of value, acts of sales and acts of purchases may be separated from another. Sales crises, Roscher insisted, are triggered by commercial excess speculation (see Hagemann 1995, 2011). Schumpeter (1954: 740), however, plays down the achievements of Roscher’s respective analysis, whose content he circumscribes in the following terms: “crises will occur if anything of sufficient importance will go wrong”. He adds that Roscher’s theory “can only be described as a fricassee of most of the ideas that were current at the time he wrote” (ibid.). While this judgement is not entirely false, it is also not entirely fair.Die Grundlagen der Nationalokonomie (The Foundations of Economics), volume 1 of his magnum opus, System der Volkswirthschaft, which was first published in 1854, saw its twenty-sixth edition in 1922 and came out in an English translation in 1878. Roscher, on the one hand, develops the argument along seemingly classical lines of thought. He deals with production (and credit), circulation, distribution, consumption and population. He adopts essentially a cost of production explanation of relative prices; in determining rent he has recourse to Ricardo’s principle of extensive diminishing returns, but confounds it with earlier physiocratic conceptions; and as regards wages and population he moves in the footsteps of Malthus’s theory of population. His theory of profits reflects various influences, especially the idea of profits as some sort of wage (an idea Smith had vigorously rejected) and as a compensation for “abstinence”. He accepts Smith’s premise that individuals are self-interested, but he sees this principle complemented with, and corrected by, another principle, namely, human conscience and empathy, which expresses Roscher’s piety. However, there are also elements in his analysis that clearly foreshadow marginalist ideas.
The reference to demand and supply is, of course, not new and does not mean much unless it is supplemented with an analysis of how demand and supply are determined. In this regard Roscher emphasizes some ideas that became prominent with marginalism, especially the marginal productivity principle. Johann Heinrich von Thunen had stated this principle, with whose Isolated State Roscher was familiar. Roscher was no historicist in the strict sense of the word. Whether he was “a very meritorious follower of the English ‘classics’”, as Schumpeter (1954: 508) opined, is however dubious. More to the point is Streissler (1994), who saw in Roscher’s work the culmination of the “German proto-neoclassical theory”.There is an empirical-cum-historical part of the Grundlagen in which Roscher provides accounts of the history of the main types of income, wages, profits, interest and rent, of the development of population and of the prices of major “necessary goods” and also of some “luxuries”. The other four volumes of System deal with the economics of land cultivation and of the related primary production (vol. 2, 1859); the economics of trade and industry (vol. 3, 1881); the system of public finance (vol. 4, 1886); and the system of poor relief and the poor laws (vol. 5, 1894).
Roscher also contributed some new ideas and insights in other fields of economic inquiry. These include the theory of property rights and of incentives and its effects. In a talk on Betrachtungen uber die geographische Lage der groβen Stadte (Considerations on the Geographical Location of Large Cities) he gave in 1871 in Leipzig, he stresses that decisions about settlements and the building of towns and cities was hardly ever based on purely economic considerations, but involved numerous other aspects.
Basically all of Roscher’s contributions contain a fair share of observations on important precursors of ideas and doctrines. His magnum opus in this regard is his Geschichte. According to Edgar Salin (1968) it is Roscher’s “only work of lasting significance”. The book reflects well his erudition and comprehensive knowledge of the history of economic thought in Germany, focusing attention on cameralism and the German Use Value School (Nutzwertschule), but assessing also early contributions to mathematical economics, such as those of von Thunen and Friedrich Benedikt Wilhelm Hermann. Roscher holds Thunen especially in high esteem. While Roscher was keen to take account of anything that happened in the German economics profession since its beginnings, he missed out some important works, including Hermann Heinrich Gossen’s conceptualization of economic activities as time-constrained processes and his formalization of marginal utility theory (Gossen 1854). Schumpeter (1954) benefited from Roscher’s work, but felt that Roscher’s judgements were not always reliable.
Roscher was one of the most important and influential economists of Germany in the nineteenth century, which can already be inferred from the success of his textbook, the Grundlagen. However, soon after his death his work fell into almost complete oblivion. A reason for this may be that he was more learned than original and that his huge tomes were considered rather forbidding. Another reason could be that he frequently only sketched his ideas, but did not fully develop them. Hence it remains somewhat unclear how deep his understanding was.
During his life, however, he was a towering figure of German economics. Carl Menger dedicated his Grundsatze der Volkswirthschaftslehre (1871) to him and Alfred Marshall expressed his indebtedness especially to Thunen, from whom he had taken the marginal productivity principle, but also to Roscher. Marx who repeatedly referred to the Grundlagen accused its author, whom he dubbed “Wilhelm Thukydides Roscher”, of syncretism, “eclectic professorial twaddle” and “ingenious apologetic fancies” (Marx 1954: 209, 95n., 199n.). Schumpeter called Roscher “the incarnation of professorial learning” (1954: 809). While he bowed to Roscher’s erudition, he criticized him for “his almost Keynesian dislike of laissez faire” (1954: 284n.); his entire failure to grasp the “true meaning” of Thunen’s theory (1954: 465); and his inclination “to extoll [the] merits [of some authors - here the reference is to Oresme], particularly its originality, beyond all reason” (1954: 95). (This inclination is quite frequent among historians of economic thought.) More recently there has been a resurgence of interest in Roscher and more generally in the German Historical School. Erich Streissler revisited Roscher’s works and, interestingly, called him “an economic theorist of world-class and of lasting world-class” (1994: 37).
Heinz D. Kurz
See also:
German and Austrian schools (II); Bruno Hildebrand (I); Historical economics (II); Karl Heinrich Marx (I); Carl Menger (I); Joseph Alois Schumpeter (I); Johann Heinrich von Thunen (I).