------------ EH.NET BOOK REVIEW --------------  
EH.NET Book Review (September 2005)  
  
Erik Grimmer-Solem, _The Rise of Historical Economics and Social   
Reform in Germany, 1864-1894_. Oxford: Clarendon Press, 2003. xiii +   
338 pp. $74 (cloth), ISBN: 0-19-926041-9.  
  
Reviewed for EH.NET by Nicholas W. Balabkins, Department of   
Economics, Lehigh University.  
  
  
The late Harry Johnson of the University of Chicago once wrote that   
in order to carry out an intellectual revolution, one must propound a   
doctrine that has three features. First, it should be summarized in a   
single sentence. Second, it should provide young economists with a   
reason for ignoring the work of their elders. Third, it should tell   
the new generation how to promote and implement that intellectual   
revolution.  
  
In the 1870s and 1880s, the members of the Verein f�r Socialpolitik   
(something like the German counterpart of the American Economic   
Association) erected the statistical, institutional, and historical   
foundations for the welfare legislation that Bismarck's Germany   
passed in the early 1880s. But the Verein's intellectual legacy   
remained locked up in the German script for more than a century in   
English-speaking libraries. Now Erik Grimmer-Solem, a bilingual and   
well-trained contemporary mainstream economist, has resurrected this   
legacy in this volume.  
  
Grimmer-Solem's book has three parts. The first deals with the   
emergence of the empirical mode of economic inquiry in late   
nineteenth-century Germany. The aim of the "young Turks" in German   
economics was to draft well-documented bills to improve the daily lot   
of the masses of German industrial workers (pp. 35-85), and to   
promote social well-being in a united German Reich. Grimmer-Solem   
quotes Wilhelm Hasbach's observation in the _Economic Journal_ in   
1891 on the "feverish activity" in economic history and descriptive   
work in Germany. This, he wrote, was encouraged by the rise of the   
"Historical School," a variety of practical, social, and economic   
problems whose solution required a solid empirical foundation (p. 78).  
  
Part II examines the still much misunderstood German term "die   
soziale Frage," or "social question." It surveys Germany's social,   
economic and demographic problems from 1860 to 1870. Here,   
Grimmer-Solem describes how historical economists built the empirical   
foundations for social reform legislation designed to thwart the   
spreading Marxian appeal to industrial masses and intellectuals.   
Hands-on research was in vogue, and empirical social scientists   
enjoyed status (pp. 130-31), whereas the surviving elderly "armchair   
economists," with their "laissez-faire" wisdom, had lost their former   
influence. The Historical Economists favored an empirically-based   
social science "directed by ethics to serve tangible human needs," as   
the author puts it (p. 135).  
  
Part III deals with social and economic policy making problems   
between 1872 and 1880. Here, Grimmer-Solem stresses the role of the   
Verein f�r Socialpolitik (pp. 171-73) in the emergence of social   
insurance legislation (pp. 210-23). This is one of the key parts of   
the entire book and could be read as an opening salvo. The volume   
ends with a conclusion (pp. 280-84), a comprehensive bibliography,   
and a detailed index.  
  
This is an admirably thorough, clear-eyed study of Historical   
Economics that puts great emphasis on the role of the empirical   
foundations that led to the world's first social legislation. In   
1883, the Reichstag provided for health insurance and in 1884, it   
provided coverage for accident insurance in the workplace. The first   
old-age pension law followed in 1889.  
  
Alas, among English-speaking economists, German Historical Economics   
has never attained meaningful standing. For Joseph A. Schumpeter, for   
instance, German Historical Economics was nothing but endless   
history. Schumpeter wanted to be known as an economic theorist first,   
and considered social policy-making, or _Sozialpolitik_, an almost   
shameful activity. In 1926, Schumpeter wrote an almost adoring essay   
on Gustav Schmoller, praising to the sky his broad-based manner of   
economic inquiry. Alas, in Schumpeter's _Ten Great Economists_,   
published in 1951, the essay on Schmoller was missing.  
  
Critics of any book serve readers and masters of many different   
agendas. For the contemporary math-oriented mainstream economist,   
Grimmer-Solem's volume is likely to be of little importance. Today's   
mainstreamers are classroom-oriented economists. Pressing economic   
and social problems are not quite their bag. I found Grimmer-Solem's   
book an admirable rejection of Schumpeter's innuendo that Historical   
Economics is nothing but bunk, i.e., "endless history." Grimmer-Solem   
has resurrected the various techniques of statistical data collection   
that helped to solve the pressing social problems in the united   
German Reich. Personally, I found Grimmer-Solem's volume a bit short   
on the rapidly-spreading Marxian message among German workers and   
intellectuals.  
  
In conclusion, this is a bracing, judicious and eye-opening volume on   
the nature and functions of the German Historical School of Economics.  
  
  
Nicholas W. Balabkins is Emeritus Professor of Economics at Lehigh University.  
  
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