In light of a number of recent (rather long) posts on Austrian methodology I thought this Wikipedia entry was pretty interesting.
Methodenstreit, in intellectual history beyond German-language discourse, was an economics controversy carried on for about a decade around 1890, between that field’s Austrian School and the (German) Historical School. On an intellectual level it concerned whether any science (as opposed to only history) could explain the dynamics of human action; politically, it reflected conflict between the minarchism of the early Austrian School and the welfare state advocated by the Historical School.
In it, Carl Menger led the supporters of the Austrian School’s view, and Gustav von Schmoller proponents of the Historical School’s.
Background
The Historical School contended that economists could develop new and better social laws from the collection and study of statistics and historical materials, and distrusted theories not derived from historical experience. Thus, the German Historical School focused on specific dynamic institutions as the largest variable in changes in political economy. The Historical School were themselves reacting against materialist determinism, the idea that human action could, and would (once science advanced enough), be explained as physical and chemical reactions.[1]
The Austrian School, carefully founded and first developed by Carl Menger in the 1860ies, and published in 1871 as Grundsätze der Volkswirtschaftslehre (English title: Principles of Economics), by contrast believed that economics was the work of philosophical logic and could only ever be about developing rules from first principles — seeing human motives and social interaction as far too complex to be amenable to statistical analysis — and purporting their theories of human action to be universally valid.
Three points:
- Debate over methodology has been going on for a long time
- Methodology is important
- Menger sounds like Mises (at least according to Wiki) contrary to what Max Keiser is trying to get you to believe.
