List of three main founders of older historical school of economics:- 1. Wilhelm Roscher 2. Bruno Hildebrand 3. Karl Knies.
Founder # 1. Wilhelm Roscher (1817-1896):
Roscher was the founder of the Older Historical School. Roscher did not repudiate classical theory completely. He asserted that economic theory should be supplemented with history; and studied in close touch with other sciences like Jurisprudence, political science and history of civilisation.
He attempted to introduce the relative character of economics, tying the theory to place and time. “It was exactly because he combined with his new thought a useful exposition of classical economics that his work had a much wider appeal than did that of Hildebrand and Knies, which was differently designed”.
Roscher denied absolute truth as to general economic laws. He held that the economist should confine himself to the statement of the laws of government which are applicable to his particular economy. He was not sure about the methodological issues.
He regarded history as most important, because it alone can provide the historical sense which enabled the statesmen to solve political problems wisely. At other times, he advocated the collection of historical materials for purposes of illustrations. Roscher tried to prove four propositions.
The first proposition states that political economy is a relative science and cannot be termed absolute. It has to be viewed as one part of the social science along with law, political structure etc.
The second proposition is that the current economic relations between individuals reflect both the specific character of the state and the cultural evolution through which it has passed. The state is not just a sum total of its individual members.
Thirdly, in order to derive laws of economics, the information should cover as many people as possible, including comparative information of the old and new civilizations.
Fourthly, different economic institutions have most probably been partly good and partly bad for all people. Therefore, it is a slow process to arrive at definite conclusions about them through historical method. His depth of ideas and his contribution have been recognised by world renowned economists. Schmoller has rightly pointed out that, “Roscher is the most universally trained cultural historian among the economists”.
Founder # 2. Bruno Hildebrand (1812-1878):
Hildebrand was the second member of the trio constituting the older historical school. He has given a much more elaborate and consistent opposition to classicism. He rejected the claim of classical school to have found natural economic laws which would be valid for all times and for all countries. He separated practical problems of economic policy from theoretical analysis and concentrated attention on the latter.
According to him, economics had to examine carefully the development of individual people and of mankind as a whole. It had to produce an economic history of culture. It had to work in close collaboration with other branches of history and with statistics. He stated that Adam Smith, like Mercantilists and Physiocrats before him, erred in attempting to build a theory which would apply to all times and all places.
The classicists forgot that man, as a social being, is always a child of civilisation and a product of history, his wants, his character, his relations to goods and men being ever-changing. Moreover, they are atomistic, making the individual the head of society and holding that society itself is based upon an exchange contract and private advantage being regarded as the source and bond of community.
Hildebrand criticized classical economists for their materialistic tendencies saying that the scheme must aim at the welfare of the state. He distinguished three phases of economic development – natural economy, money economy and credit economy. This was a far progressive view as compared with that of Roscher which contained a cyclical theory of historical change involving youth, manhood and decay of the economy. Hildebrand looked at the credit stage as the goal for the economy. He did not suggest any modification in the theories of production and distribution.
Founder # 3. Karl Knies (1821-1898):
Karl Knies was the last of the trio of the Older Historical School. But he was the most thorough and logical expositor of the historical method. He was more precise in his formulation of the methodological issues than were his predecessors.
Knies not only rejected the view of the classical political economists that there exists natural laws, but even questioned the existence of historical laws of economic development of nations as believed by his predecessors. He distinguished the laws of social science from those of the natural science.
The laws of natural science represent exactly similar cause and effect relationship. The laws of social science, on the other hand, are the laws of analogy which make the historical sequence of one nation correspond, in particular conditions, with those of other nations, but never identical to them. He criticised Roscher for having admitted the universal applicability of some economic laws and Hildebrand for making concession in case of pure economic theory.
Knies rejected the absolutism of economic theories. He said that economic theory should cast off its absolute character and instead be a product of historical circumstances. Economic theory is relative and not absolute, applicable to specific historical circumstances and not everywhere and at all times.
The three economists differ in the details and character of their contribution. They all criticised the classical school and their common stand here was that the classical laws could not be universal and perpetual because they had been derived on an abstract basis. Instead they favoured inductive logic. They wanted that the basis of analysis be shifted from the individual as such to the whole society and that the motives of actions be not economic rationality but the totality of the society.
They wanted to widen the scope of economics and brought in a fresh approach. But they differed regarding the very existence and nature of economic laws. Roscher supplemented the classical theory with that of inductive analysis; Hildebrand claimed that there were historical laws of development and Knies denied the very existence of even these laws.
None of these men, however, was in search of the type of laws which the classical school had put forth. The classical school considered economic phenomena and behaviour independent of the other dimensions of social existence while the historical school took a much broader view.