Academic journal article Journal of Economic Issues

Schmoller, Durkheim, and Old European Institutionalist Economics

Academic journal article Journal of Economic Issues

Schmoller, Durkheim, and Old European Institutionalist Economics

Article excerpt

Two Institutionalist Concepts

In this paper we shall consider the institutional theories of two outstanding European scholars: Gustav Schmoller (1838-1917) and Emile Durkheim (1858-1917). (1) Schmoller's and Durkheim's concepts of institutionalism can best be understood as phenomena that developed out of the particular character of the European intellectual and economic environment from the early 1860s to the end of World War I (Grimmer-Solem and Romani 1998). The prevalence of institutionalism within the discipline of economics was widespread in European as well as American social science at the time, although the term "institutional economics" did not appear before 1916-1918 (Rutherford 2000, 292). (2) Institutional, historicist, and various evolutionary ideas all contended with each other and were intermixed in different ways. Nevertheless, three related characteristics can be identified. The first is a shared notion of the social sciences as rejecting a natural law position (i.e., the economy was not determined by given and unchanging natural laws but by social norms and conventions that were malleable over time). The second stresses the necessity of a new social-scientific method grounded on empirical inquiries from psychology, anthropology, statistics, or history. The third is a view of economic and social arrangements or institutions fundamentally in need of significant social reform.

In this line, we will analyze how the fundamental economic and social change followed by industrialization was reflected in Schmoller's and Durkheim's works around the turn of the twentieth century by discussing what kind of institutional theory each developed to explain these seminal changes. We are aware that there is no single, agreed set of definitive guidelines shared by these two institutionalists, yet a number of common themes emerge. An item of foremost importance for their institutionalist approach is the incorporation of a richer, context-dependent conception of human agency. The core ideas of their institutionalism concern institutions, habits, rules, and their evolution. It builds upon psychological, anthropological, and sociological research into how economic agents behave. These agents are born into and socialized within a world of institutions.

After reconstructing Schmoller's concept of moral-economic institutionalism in the first part of this paper and Durkheim's science of institutions" in the second, we will then summarize and compare the two approaches in light of their mutual critique. Three questions will guide our discussion as the central theme. First, how could the interrelation of social change and socioeconomic institutions generally be understood and conceived? Second, what role did the modern state play with respect to morals and social justice? And, third, what role did evolutionary thought play in the explanation of social processes and institutions?

Gustav Schmoller and the Concept of Moral-Economic Institutionalism

The economic and social transition from a traditional order to an industrial society, which accelerated in Germany in the l850s, involved radical changes in the basic structures of the workplace and of economic activity in general. The resulting problems--the rise of an industrial working class, the growth of cities and rural flight, the displacement of old industrial centers and the emergence of new ones--were discussed by economists at the time as a social question (Nau l997a, 70-99; Nau 2000, 507-31; Grimmer-Solem and Romani 1999, 334). Schmoller shared with many of his contemporaries the view that the rapid industrialization of society must be accompanied by an economic policy of social reform (Nau 1997b, 49-102). His institutional economics was part of a "political economy of social reform" that took shape as an international phenomenon between 1870 and 1900 (Grimmer-Salem and Romani 1998, 287). …

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