Rationalism brought about two revolutionary changes in the sciences of human action. Into history, which had hitherto been the only science of human action, it introduced the critical method. It freed that science from its naive attachment to what had been handed down in the chronicles and historical works of the past and taught it not only to draw upon new sources?documents, inscriptions, and the like?but to subject all sources to critical scrutiny. What the science of history thereby gained can never be lost again, nor has its value ever been contested. Even the attempts undertaken in recent times to “intuit” history cannot do without the critical method. History can be investigated only on the basis of sources, and no one will seriously want to question the fact that its subject matter must be approached critically. The only question that can raise uncertainty is not whether, but how sources are to be analyzed and criticized.

The other great accomplishment of rationalism was the construction of a theoretical science of human action, i.e., a science that aims at the ascertainment of universally valid laws of human conduct. All that this science owes to August Comte is its name. Its foundations had been laid in the eighteenth century. What the thinkers of the eighteenth and the early nineteenth centuries strove to develop above all was economics, which is up to the present the best elaborated branch of sociology. However, they also sought to provide the basis for a system of thought extending beyond the relatively narrow sphere of economic theory and embracing the whole of sociology.1

The fundamental admissibility and possibility of sociology was challenged in the second half of the nineteenth century. To many the idea was intolerable that there can be laws of human action independent of the historical milieu. Accordingly, they considered history as the only science competent to take human action as its cognitive object. This attack upon sociology’s right to exist was leveled almost exclusively against economics. Its critics did not realize that economics is only a branch of a more comprehensive science extending beyond its domain, but exhibiting the same logical character. Later, when sociology became better known in Germany and all its branches came under attack, the fact went unnoticed that it makes the same claim to universal validity for its statements as economics does. For in the meanwhile the treatment of the problem by Windelband, Rickert, and Max Weber had set it in a new light, as a result of which the logical character of sociology had come to be viewed differently.

The rejection of sociology and economics was also motivated, perhaps even above all else, by political considerations. For a goodly number, like Schmoller, Brentano, and Hasbach, for example, these were indeed decisive.2  Many wished to support political and economic programs which, had they been subjected to examination by the methods of economic theory, would have been shown to be quite senseless, not in terms of a different scale of value, but precisely from the point of view of the goals that their advocates hoped to achieve by means of them. Interventionism could appear as a suitable policy for attaining these goals only to one who ignored all the arguments of economics. To everyone else it had to be evident that such a policy is inexpedient.3  In the speech of May 2, 1879, before the Reichstag with which Bismarck sought to justify his financial and economic program, he asserted that he set no greater store by science in regard to all these questions than in regard to any other judgment on organic institutions, that the abstract theories of science in this respect left him completely cold, and that he judged “according to the experience familiar to US.”4  The Historical-Realist School, in treating of the economic aspects of political science, proclaimed the same view, with more words, but scarcely with better arguments. In any case, however, there were also unbiased objections in the debate over the scientific character of sociology. The following discussions deal only with these.

There are two different ways of setting methodological and epistemological investigations upon a secure foundation. One can attempt to reach solid ground by undertaking to deal directly with the ultimate problems of epistemology. This procedure would no doubt be the best if it offered any promise of success, so that one could hope to find truly firm ground at that deep level. However, one can also take another path, by starting from the definite concepts and propositions of science and verifying their logical character. It is evident that cognition of the ultimate foundations of our knowledge can never be attained in this manner. But neither does the first way offer such a possibility. On the other hand, the second way protects us from the fate that has befallen most investigations that have been concerned with the methodological and epistemological questions of economics in recent years. These investigations became so badly bogged down in the difficulty of the ultimate problems of epistemology that they never reached the point where they could deal with the logical problems of sociology, which are comparatively easier to solve. The ultimate problems pose difficulties that are not to be mastered with the limited means of the human mind.

The scope of the following discussions is, from the outset, much more narrowly circumscribed. We do not propose to treat of the ultimate questions of cognition. All that will be undertaken here is to explain what sociology is and with what claim to validity it constructs its concepts and arrives at its conclusions. The fact that we shall be primarily concerned with economic theory requires no special justification. It is that branch of sociology which has thus far received fullest development and has attained the greatest systematic precision. The logical character of a science is studied to greatest advantage in its most highly developed branches. In the following discussions the starting point will not be, as is regrettably the practice in many works on methodology and epistemology, the formulation given to the problems and their solutions by the classical economists, which is logically unsatisfactory, but, of course, the present state of the theory.5

• 1Kracauer, Soziologie als Wissenschaft (Dresden, 1922), pp. 20ff.
• 2Cf. Pohle, Die gegenwärtige Krisis in der deutschen Volkswirtschaftslehre (2nd ed.; Leipzig, 1921), pp. 86 ff., 116 ff.
• 3Cf. my Kritik des Interventionismus, pp. 2 ff., 57 ff.
• 4Fürst Bismarcks Reden, ed. by Stein, VII, 202.
• 5Even Menger does not start from the modern statements of subjectivist economics in his famous Untersuchungen über die Methode der Sozialwissenschaften, but from the system, the methodology, and the logic of classical economics. The transition from the classical to the modern system did not take place all at once, but gradually. It took a long time until its effects were felt in all branches of economic thought, and still a longer time before the significance of the revolution that had taken place was fully appreciated. Only to the retrospective gaze of the historian of economic thought do the years in which Menger, Jevons, and Walras brought forth their theories appear as the beginning of a new era in the history of our science.

To begin with, departing from the procedure usually followed, one must distinguish the methodological from the logical problem.

As a rule, methodology is understood to be logic conceived as the theory of the methods of thought. We shall speak of it in the less customary sense as the technique of scientific thought (heuristic) and contrast it, as an art (ars inveniendi), to the science of logic.

For a long time, following in the path of Bacon, the inductive method has been held in especially high esteem. The natural sciences, so one heard, particularly from laymen, owed their success primarily to perfect induction. It was said that the general law could be derived only when all individual cases had been compiled. One did not let oneself be disconcerted by the fact that Bacon and most of those who expounded his theory themselves had no successes to show and that precisely the most successful inquirers had taken a different view. No notice was taken of the fact that Galileo, for example, had declared the customary perfect induction uncertain, and that for the comparison of a number of individual cases he substituted the analysis of one case, from which he derived the law that was then to be experimentally verified. What was altogether fantastic was that perfect induction was praised as the specific method of the natural sciences, whereas in fact it was not used by scientists at all, but by antiquarians. Because of the scarcity of the sources available to them, the latter set out in principle to draw their conclusions from an exhaustive study of all the accessible data.

What counts is not the data, but the mind that deals with them. The data that Galileo, Newton, Ricardo, Menger, and Freud made use of for their great discoveries lay at the disposal of every one of their contemporaries and of untold previous generations. Galileo was certainly not the first to observe the swinging motion of the chandelier in the cathedral at Pisa. Many doctors before Breuer had gone to the bedside of a person suffering from hysteria. It is merely the routine of scientific procedure that can be taught and presented in textbooks. The power to accomplish feats of scientific achievement can be awakened only in one who already possesses the necessary intellectual gifts and strength of character. To be sure, without the foundations, which mastery of the scientific technique and literature provides, nothing can be accomplished. However, the decisive factor remains the personality of the thinker.

On this point opinions are no longer divided. We need not spend any more time on it.

The situation is altogether different with regard to the logical problem. In the course of the Methodenstreit *  the question of the logical character of sociology fell into the background until it was finally dropped entirely. But in the early years of the Methodenstreit this was not the case. At that time, first Walter Bagehot and then Carl Menger argued against the rejection in principle of every theoretical science of human action by pointing out the character and logical necessity of a theoretical science of social phenomena. It is well known flow this dispute ended in Germany. Economics disappeared from the universities, and its place was taken, occasionally even under its name, by the study of the economic aspects of political science, an encyclopedic collection of knowledge from various subjects. Whoever wished to define this study scientifically viewed it as a history of governmental administration, economic conditions, and economic policy continued into the most recent past. From this history one endeavored, by adherence to the standards of value accepted by the authorities and the political parties, to derive practical rules for future economic policy in a way similar to that of the writer on military affairs who seeks to discover rules for the conduct of coming wars from the study of the campaigns of the past. In general, the investigator of the economic aspects of political science differed from the historian in that he was usually more concerned with the most recent past and with problems of internal politics, finance, and economic policy and was less intent on concealing his political point of view and quicker to draw from the past practical applications for the politics of the future. The logical character of his work scarcely ever became a problem for him. If it did, however, his mind was soon set at rest by the dicta of Schmoller.

The first sign of disquietude is to be seen in the controversy over value judgments that broke out in the second and third lustrums of the twentieth century. The matter-of-factness with which political demands were advanced as postulates of science in lectures, textbooks, and monographs began to give offense. A group of younger professors insisted that the world view of the instructor should not influence the content of his teaching or at least that the instructor, as soon as he does present his personal value judgments, point out the subjective character of what is being taught. However, the discussions connected with this agitation scarcely touched upon the problem of the possibility of a theoretical science of social phenomena.6

• *A discussion concerning the method and epistemological character of economics carried on in the second half of the eighties and into the nineties of the last century between Carl Menger and his supporters on the side of the Austrian School of economics, and the proponents of the German Historical School, led by Gustav von Schmoller.
• 6The point in question in the dispute about the freedom of the social sciences from all valuations had long since been resolved. It had never in any way constituted a problem whose solution could have caused any difficulties. Cf. Cantillon, Essai sur la nature du commerce en general, ed. with an English translation by Higgs (London, 1931), pp. 84-85; Ricardo, Notes on Malthus’ “Principles of Political Economy,” ed. by Hollander and Gregory (Baltimore, 1928), p. 180; Mill, J. S., System of Logic Ratiocinative and Inductive (8th ed.; London, 1872), Book VI, chapter 12, §6; Cairnes, Essays in Political Economy, Theoretical and Applied (London, 1873), pp. 256 ff.; Sidgwick, The Principles of Political Economy (2nd ed.; London, 1887), pp. 12 ff.

In the meantime, completely apart from everything connected with the logical problems involved in the relation between sociology and history, an important advance had taken place in the logic of the moral sciences.

The demand had long since been made that history be at last raised to the status of a genuine science by adopting the methods of the natural—i.e., the nomothetic—sciences.7  Some declared this demand unrealizable because they saw no way by which one could discover historical laws. Imbued with the conviction that only nomothetic science can properly lay claim to the name of science, they regretfully admitted that history is not a science. (For this reason many wanted to call it an art.) Others again credited themselves with the power of formulating “laws of world history.” Kurt Breysig proved the most prolific in this respect.

It should be noted that what was at issue was not the problem of a theoretical science of human action. What was sought were laws of historical development, laws of history, not laws of sociology. Breysig’s thirty-first law, for example, reads: “Under the rule of the Kaiser and of the people, which developed concomitantly, the national economy had to advance to a hitherto unheard of boom in trade and industry.”8

In France Bergson and in Germany Windelband, Rickert, and Max Weber combated the confusion of concepts that underlay this demand for a new science of history. They sought to define logically the character of history and historical investigation and to demonstrate the inapplicability of the concepts and procedures of physics to history. What the Southwest German School of New Criticism thereby accomplished, notwithstanding its shortcomings, deserves the highest recognition and must constitute the foundation and starting point of all further investigations concerning the logic of history. Yet in one respect this accomplishment is completely inadequate: it is not based on any acquaintance with the problem of a theoretical science of social phenomena and for that reason pays no heed to it. Windelband, Rickert, and Max Weber knew only the natural sciences and history; they were strangers to the existence of sociology as a nomothetic science.9

This statement, as far as it concerns Max Weber, requires further elaboration. Weber was, to be sure, a professor of economics at two universities and a professor of sociology at two others. Nevertheless, he was neither an economist nor a sociologist, but an historian10  He was not acquainted with the system of economic theory. In his view economics and sociology were historical sciences. He considered sociology a kind of more highly generalized and summarized history.

It needs scarcely to be emphasized that in pointing this out we do not mean to belittle Max Weber and his work. Weber was one of the most brilliant figures of German science of the twentieth century. He was a pioneer and trail blazer, and coming generations will have enough to do to make his heritage intellectually their own and to digest and elaborate it. That he was an historian and an investigator into the logical character of history does not mean that he failed with regard to the problems which the period presented and which he undertook to treat. His field was just that of history, and in this field he did far more than his share. And finally, if it is possible today to approach the logical problems of sociology with better conceptual tools, this is primarily due to the work that Max Weber devoted to the logical problems of history.

• 7On this point cf. Bernheim, Lehrbuch der historischen Methode (6th ed.; Leipzig, 1908), pp. 101 ff.; Rothacker, Einleitung in die Geisteswissenschaften (Tübingen, 1920), p. 195.
• 8Breysig, Der Stufenbau und die Gesetze der Weltgeschichte (2nd ed.; Berlin, 1927), p. 165.
• 9Cf. above p. 119 concerning Rickert’s observations, in which he admits the possibility of “a presentation according to the methods of the natural sciences and by means of generalization” of the “vicissitudes of civilized mankind.”
• 10Jaspers (Max Weber [Oldenburg, 1932], p. 43) calls Weber a “universal historian” and adds: “His sociology is universal history.” On Weber as an economist, cf. my Kritik des Interventionismus, pp. 85 ff.

In Weber’s eyes,

the real configuration (i.e., the configuration in the concrete case) of the sociocultural life which surrounds us, in its universal, but for that reason no less individually framed, context and in its connection with other sociocultural conditions, likewise individually constituted, out of which it has come into existence

appears as the “starting point of the social sciences.”11  But wherever

the causal explanation of a “cultural phenomenon?an “historical individual”?comes into question, knowledge of laws of causation cannot be the end, but only the means of investigation. It facilitates and makes possible for us the imputation of the culturally significant components of the phenomena, in their individuality, to their concrete causes. As far and only as far as it accomplishes this is it valuable for the cognition of individual concatenations. And the more “general,” i.e., the more abstract, the laws, the less they accomplish for the requirements of the causal imputation of individual phenomena and thereby, indirectly, for the understanding of the meaning of cultural events.12

Weber places “historian and sociologist” in the same category: the task of both is “cognition of cultural reality.”13  Therefore, for him the logical and methodological problem is the same in sociology and history, viz.,

What is the logical function and structure of the concepts with which our science, like every science, deals? Or, more particularly, formulated with regard to the crucial problem: what importance do theory and the formation of theoretical concepts have for the cognition of cultural reality?15

Max Weber’s answer to this question is, in effect, that “abstract economic theory” is but a “special case of a way of forming concepts which is peculiar to the sciences of human culture and, in a certain sphere, indispensable for them”; here we have “before us an example of those syntheses which are generally termed ‘ideas’ of historical phenomena.”15  It is the production of a “conceptual representation” which coordinates “definite references and events of historical life into a cosmos of interrelationships immanently free of contradiction.” We make the characteristic features of this interrelationship clear to ourselves pragmatically by constructing an “ideal type.”16  The ideal type

is arrived at through the one-sided intensification of one or several aspects and through integration into an immanently consistent conceptual representation of a multiplicity of scattered and discrete individual phenomena, present here in greater number, there in less, and occasionally not at all, which are in congruity with these one-sidedly intensified aspects.17

Consequently, “abstract economic theory,” which, in Weber’s view, presents “an ideal representation of proceedings on the commodity market in the social organization of an exchange economy, free competition, and strictly rational action,”18  I has the same logical character as the “idea of the ‘town economy’ of the Middle Ages” or as the “idea of handicraft”19  or as ideas “like individualism, imperialism, mercantilism, and innumerable conventional ideas formed in a similar way by means of which we seek to grasp reality in thought and understanding.”20  These concepts cannot be defined “according to their content through a ‘presuppositionless’ description of any one concrete phenomenon or through an abstracting and lumping together of that which is common to several concrete phenomena.”21  They are specimens, says Weber, of the “ideal type,” a concept peculiar to history and sociology?in short, to all cultural sciences.

Yet even for Weber sociology and history are not identical. “Sociology constructs type concepts and seeks the general principles of events,” while history

strives for causal analysis and imputation of individual culturally important actions, institutions, and personalities . . . As is the case with every generalizing science, the character of its abstractions postulates that its concepts must be relatively free of content. What it offers instead is increased clarity of concepts. This increased clarity is obtained through the greatest possible adequacy to meaning [Sinnadäquanz], which is what sociology strives to attain in forming its concepts.22

Hence, the difference between sociology and history is considered as only one of degree. In both, the object of cognition is identical. Both make use of the same logical method of forming concepts. They are different merely in the extent of their proximity to reality, their fullness of content, and the purity of their ideal-typical constructions. Thus Max Weber has implicitly answered the question that had once constituted the substance of the Methodenstreit entirely in the sense of those who denied the logical legitimacy of a theoretical science of social phenomena. According to him, social science is logically conceivable only as a special, qualified kind of historical investigation.

However, the theory with which he is acquainted and which he rejects is not the theory that Walter Bagehot and Carl Menger had in mind when they attacked the epistemology of the Historical School. What Max Weber is thinking of is something entirely different. He wants to prove to us

the senselessness of the idea, which at times even dominates the historians of our subject, that the goal of cultural science, even if a long way off, should be to construct a logically complete system of concepts in which reality would be comprehended in an arrangement in some sense definitive and from which it could again be deduced.23

Nothing appears to him more hazardous than

the intermingling of history and theory arising from “naturalistic” prejudices, whether one believes that the “real” substance, the “essence,” of historical reality has been fixed in those theoretical, conceptual representations,24  or one uses them as a Procrustean bed into which history is to be squeezed, or one hypostatizes the “concepts” as a “genuine” reality standing behind the flux of phenomena as real “forces” which work themselves out in history.25

As far as Max Weber seeks to define the logical character of historical investigation, as far as he rejects the endeavors to construct “historical laws,” and as far as he demonstrates, following in the footsteps of Windelband and Rickert, the inapplicability to history of the methods used by the natural sciences in forming their concepts, one can agree with him without hesitation. In all these respects he continues and perfects the work of his predecessors, and his contributions to epistemology are imperishable.26  But where he went beyond this and attempted to determine the character of sociological investigation, he failed and had to fail because by sociology he understood something entirely different from the nomothetic science of human action, the possibility of which had constituted the subject of the Methodenstreit. The reason why Weber fell into this misconception can be easily understood and explained from his personal history and from the state in which the knowledge of the findings of sociological investigation existed in his day in the German Reich, and especially at the universities. Historians of the subject may concern themselves with this aspect of the question. All that is of importance to us here is the rectification of the misunderstandings which, while they certainly do not owe their origin to Max Weber, received wide dissemination through his having made them the foundation of his epistemology.27

The basis of Weber’s misconceptions can be exposed only by consideration of the question whether the concepts of economic theory do in fact have the logical character of the “ideal type.” This question is plainly to be answered in the negative. It is quite true also of the concepts of economics that they are “never empirically identifiable in reality” in their “conceptual purity.”28  Concepts are never and nowhere to be found in reality; they belong rather to the province of thought. They are the intellectual means by which we seek to grasp reality in thought. Yet it cannot be contended that these concepts of economic theory are obtained through “one-sided intensification of one or several aspects and through integration into an immanently consistent conceptual representation of a multiplicity of scattered and discrete individual phenomena, present here in greater number, there in less, and occasionally not at all, which are in congruity with these onesidedly intensified aspects.” On the contrary, they are obtained through reflections having in view the comprehension of what is contained in each of the individual phenomena taken into consideration. To determine whether the construction of this or that concept or proposition really succeeds in this intention in a way that is logically unobjectionable and correctly grasps reality is one of the tasks of the science whose logical character is the subject of dispute. What interests us here is not the question of the material truth of individual concepts and propositions and of the theoretical structure connecting them into a system, but the logical permissibility and expedience of formulating such propositions, not to mention their necessity for the attainment of the goals set for that science.

Human action, which constitutes the subject matter of all investigation in the social sciences, both historical and theoretical, presupposes a state of affairs that we shall express in Gottl’s formulation, since Max Weber opposed it with what we regard as defective reasoning. Gottl considers “privation” (by which he understands the fact that “an aspiration can never be realized without in some way impairing the fulfillment of other aspirations”) as one of the two “fundamental conditions” that govern our action.29  Now Weber maintains that there are exceptions to this fundamental situation in which man finds himself. It is not true that “the conflict of several ends, and therefore the necessity of choosing among them, is a state of affairs which holds absolutely.”30  However, this objection of Weber’s is correct only insofar as there are also “free goods”; but as far as it is correct, “action” does not take place. If all goods were “free goods,” man would economize only with his personal activity, i.e., with the application of his personal powers and his passing life. He would disregard the things of the external world.31  Only in a Cockaigne populated by men who were immortal and indifferent to the passage of time, in which every man is always and everywhere perfectly satisfied and fully sated, or in a world in which an improvement in satisfaction and further satiation cannot be attained, would the state of affairs that Gottl calls “privation” not exist. Only as far as it does exist does action take place; as far as it is lacking, action is also lacking.

Once one has realized this, one also implicitly realizes that every action involves choice among various possibilities. All action is economizing with the means available for the realization of attainable ends. The fundamental law of action is the economic principle. Every action is under its sway. He who wants to deny the possibility of economic science must begin by calling into question the universal validity of the economic principle, i.e., that the necessity to economize is characteristic of all action by its very nature. But only one who has completely misunderstood the principle can do this.

The most common misunderstanding consists in seeing in the economic principle a statement about the material and the content of action. One reaches into psychology, constructs the concept of want, and then searches for the bridge between want, the presentation of a feeling of uneasiness, and the concrete decision in action. Thus the want becomes a judge over action: it is thought that the correct action, the one corresponding to the want, can be contrasted to the incorrect action. However, we can never identify the want otherwise than in the action.32  The action is always in accord with the want because we can infer the want only from the action. Whatever anyone says about his own wants is always only discussion and criticism of past and future behavior; the want first becomes manifest in action and only in action. It is, of course, clear to everyone that with regard to what we say about the wants of other—not to mention all—men, there can be only two possibilities: either we state how they have acted or presumably will act, or we state how they should have acted or how they should act in the future.

For this reason no misunderstanding can be more fundamental than that of historicism when it sees in the “desire for economy a part of a later development” and adds that the “man in the state of nature does not act with the fullest purposiveness”;33  or when it explains the economic principle as a specific feature of production in a money economy.34  Max Scheler correctly refuted this idea, although he himself was prevented, by his desire to find an absolute determination of the Tank of values, from drawing the conclusions from his answer that are crucial for ethics.

That the pleasant is, ceteris paribus, preferred to the unpleasant is not a proposition based on observation and induction; it lies in the nature of these values and in the nature of sentient feeling. If, for example, a traveler, an historian, or a zoologist were to describe a type of man or animal to us in which the opposite were the case, we would “a priori” neither believe him nor need to believe him. We would say: This is out of the question.
At most these beings feel different things to be pleasant and unpleasant from what we do; or else, it is not that they prefer the unpleasant to the pleasant, but that for them there must exist a value (perhaps unknown to us) of a modality which is “higher” than the modality of this stage and that they can bear the unpleasant only because they “prefer” this value. Or we are confronted by a case of perversion of desires, in consequence of which they experience things injurious to life as “pleasant.” Like all these relations, what our proposition expresses is also at the same time a law of insight into alien expressions of life and concrete historical valuations (indeed, even into one’s own remembered valuations). Therefore, it is already presupposed in all observations and inductions. For example, it is “a priori” as concerns all ethnological experience. Not even the adoption of the point of view of the theory of evolution can further “explain” this proposition and the facts it denotes.35

What Scheler says here about the pleasant and the unpleasant is the fundamental law of action, which is valid independently of place, time, race, and the like, If we substitute in Scheler’s remarks “subjectively considered more important” for “pleasant,” and “subjectively considered less important” for “unpleasant,” this becomes even clearer.

Historicism does not take its task seriously enough in being satisfied with the simple statement that the quality of human action is not supertemporal and has changed in the course of evolution. In undertaking to defend such statements, one at least has the obligation to point out in what respects the action of the allegedly prerational era differed from that of the rational era; how, for example, action other than rational could take place or would have been able to take place. Max Weber alone felt this obligation. We owe to him the only attempt ever made to raise this basic thesis of historicism from the level of a journalistic aperçu to that of scientific investigation.

Within the realm of “meaningful action” Weber distinguishes four types. Action can

be (1) purposive-rational, i.e., guided by anticipations of the behavior of the objects of the external world and of other men, and using these anticipations as “conditions” or as “means” for the attainment of the ends rationally considered and sought by the actor himself;
(2) valuational, i.e., guided by conscious belief in the unqualified intrinsic value of a definite mode of conduct?ethical, aesthetic, religious, or any other?purely for its own sake and independently of its consequences;
(3) affective, especially emotional, when it is guided by burning passions and moods; and
(4) traditional, when it is guided by the familiarity of custom.36

Beyond every kind of meaningful action there is “a merely reactive mode of behavior which is not attendant on a subjectively intended meaning.” The boundaries between meaningful and merely reactive action are in a state Of flux.37

First, let us consider what Max Weber calls “merely reactive” behavior. Biology and the natural sciences in general are able to approach the behavior of the objects of their examination only from without. For that reason they can establish no more than the existence of a relationship of stimulus and response. Beyond this they must say: ignorabimus. The natural scientist may dimly suspect that somehow the behavior of the object stimulated has to be explained in a way similar to that of rational human action, but it is not given for him to see more deeply into these matters. With regard to human behavior, however, our position is entirely different. Here we grasp meaning, i.e., as Max Weber says, “the meaning subjectively intended by the actor,” which is “not an objectively ‘correct’ or a metaphysically determined ‘real’ meaning.”38  Where we observe among animals, which we are unable to credit with human reason, a mode of behavior that we would be in a position to grasp if he had observed it in a human being, we speak of instinctive behavior.

The response of a human being to stimuli can be either reactive or meaningful, or both reactive and meaningful at the same time. The body responds reactively to poisons, but, in addition, action can also respond meaningfully by taking an antidote. Only meaningful action, on the other hand, responds to an increase in market prices. From the point of view of psychology, the boundary between meaningful and reactive behavior is indeterminate, as is the boundary between consciousness and unconsciousness. However, it may be that only the imperfection of our thinking prevents us from discovering that action and reaction to stimuli are essentially alike and that the difference between them is merely one of degree.

When we say that an instance of human behavior is merely reactive, instinctive, or conative, we mean that it takes place unconsciously. It must be noted, however, that where we deem it inexpedient to conduct ourselves in such a way, we meaningfully set about to eliminate merely reactive, instinctive, or conative behavior. If my hand is touched by a sharp knife, I instinctively draw it back; but if, for example, a surgical operation is intended, I will endeavor to overcome reactive behavior through conscious action. Conscious volition controls all spheres of our behavior that are at all accessible to it by tolerating only that reactive, instinctive, or conative conduct which it sanctions as expedient and would itself have carried out. Consequently, from the point of view of the investigation proper to the science of human action, which aims at something quite different from that proper to psychology, the boundary between meaningful and merely reactive behavior is not at all indeterminate. As far as the will has the power to become efficacious, there is only meaningful action,

This leads us to an examination of the types of behavior that Weber contrasts with rational behavior. To begin with, it is quite clear that what Weber calls “valuational” behavior cannot be fundamentally distinguished from “rational” behavior. The results that rational conduct aims at are also values and, as such, they are beyond rationality. To use Weber’s expression, they have “unqualified intrinsic value.” Rational action is “ ‘rational’ only in its means.”39  What Weber calls “valuational” conduct differs from rational conduct only in that it regards a definite mode of behavior also as a value and accordingly arranges it in the rank order of values. If someone not only wants to earn his livelihood in general, but also in a way which is “respectable” and “in accordance with his station in life”?let us say as a Prussian Junker of the older stamp, who preferred a government career to the bar?or if someone forgoes the advantages that a Civil Service career offers because he does not want to renounce his political convictions, this is in no way an action that could be termed nonrational. Adherence to received views of life or to political convictions is an end like any other, and like any other it enters into the rank order of values.

Weber here falls into the old misunderstanding which the basic idea of utilitarianism repeatedly encounters, namely, that of regarding as an “end” only values that are material and can be expressed in money. When Weber holds that “whoever acts, without consideration of the consequences to be anticipated, in the service of his conviction of what duty, honor, beauty, religious instruction, filial love, or the importance of an ‘issue,’ no matter of what kind, seem to dictate to him” acts “in a purely valuational manner,”40  he employs an inappropriate mode of expression to describe this state of affairs. It would be more accurate to say that there are men who place the value of duty, honor, beauty, and the like so high that they set aside other goals and ends for their sake. Then one sees rather easily that what is involved here are ends, different, to be sure, from those at which the masses aim, but ends nevertheless, and that therefore an action directed at their realization must likewise be termed rational.

The situation is no different with regard to traditional behavior. A farmer replies to an agricultural chemist who recommends to him the use of artificial fertilizers that he does not allow any city man to interfere in his farming. He wants to continue to proceed in the same way that has been customary in his village for generations, as his father and grandfather, all able farmers, have taught him, a way that has up to now always proved itself successful. This attitude on his part merely signifies that the farmer wants to keep to the received method because he regards it as the better method. When an aristocratic landowner rejects the proposal of his steward to use his name, title, and coat of arms as a trade mark on the packages of butter going to the retail market from his estate, basing his refusal on the argument that such a practice does not conform to aristocratic tradition, he means: I will forgo an increase in my income that I could attain only by the sacrifice of a part of my dignity. In the one case, the custom of the family is retained because—whether it is warranted or not is of no importance for us—it is considered more “rational”; in the other case, because a value is attached to it which is placed above the value that could be realized through its sacrifice.

Finally, there remains “affective” action. Under the impulse of passion, the rank order of ends shifts, and one more easily yields to an emotional impulse that demands immediate satisfaction. Later, on cooler consideration, one judges matters differently. He who endangers his own life in rushing to the aid of a drowning man is able to do so because he yields to the momentary impulse to help, or because he feels the duty to prove himself a hero under such circumstances, or because he wants to earn a reward for saving the man’s life. In each case, his action is contingent upon the fact that he momentarily places the value of coming to the man’s aid so high that other considerations—his own life, the fate of his own family—fall into the background. It may be that subsequent reconsideration will lead him to a different judgment. But at the moment—and this is the only thing that matters—even this action was “rational.”

Consequently, the distinction Max Weber draws within the sphere of meaningful action when he seeks to contrast rational and nonrational action cannot be maintained. Everything that we can regard as human action, because it goes beyond the merely reactive behavior of the organs of the human body, is rational: it chooses between given possibilities in order to attain the most ardently desired goal. No other view is needed for a science that wants to consider action as such, aside from the character of its goals.

Weber’s basic error lies in his misunderstanding of the claim to universal validity made by the propositions of sociology. The economic principle, the fundamental law of the formation of exchange ratios, the law of returns, the law of population, and all other like propositions are valid always and everywhere if the conditions assumed by them are given.

Max Weber repeatedly cites Gresham’s law as an example of a proposition of economics. However, he does not neglect to place the word “law” in quotation marks in order to show that in this case, as well as in the case of the other propositions of sociology, understood as a discipline involving the method of historical understanding, all that is at issue is a question of “typical chances, confirmed by observation, of a course of social action to be expected in the presence of certain states of affairs which can be understood from the typical motives and typical meaning intended by the actors.”41  This “so-called ‘Gresham’s law,’” is, he says,

a rationally evident anticipation of human action under given conditions and under the ideal-typical assumption of purely rational action. Only experience (which ultimately can in some way be expressed “statistically”) concerning the actual disappearance from circulation of specie undervalued in the official statutes can teach us how far action really does take place in accordance with it. This experience does in fact demonstrate that the proposition has a very far-reaching validity.42

Gresham’s law—which, incidentally, was referred to by Aristophanes in the Frogs, and clearly enunciated by Nicolaus Oresmius (1364), and not until 1858 named after Sir Thomas Gresham by Macleod—is a special application of the general theory of price controls to monetary relations.43  The essential element here is not the “disappearance” of “good” money, but the fact that payments that can be made with the same legal effect in “good” or in “bad” money, as suits the debtor, are made in money undervalued by the authorities. It will not do to assert that this is always the case “under the ideal-typical assumption of purely rational action,” not even when one uses the word “rational” as a synonym for “aiming at the greatest monetary gain,” which is apparently what Max Weber has in mind.

A short while ago a case was reported in which Gresham’s law was “set aside.” A number of Austrian entrepreneurs visited Moscow and were made acquainted by the Russian rulers (who wanted to induce them to grant long-term commodity credits to the Soviet Union) with the situation of Russia by means of the old method that Prince Potemkin employed in dealing with his sovereign. The gentlemen were led into a department store where they made use of the opportunity to purchase small mementos of their trip and presents for their friends back in Austria. When one of the travelers paid with a large banknote, he received a gold piece in his change. Amazed, he remarked that he had not known gold coins effectively circulated in Russia. To this the cashier replied that customers occasionally paid in gold and that in such a case he treated the gold pieces like every other kind of money and likewise gave them out again in change. The Austrian, who was apparently not one to believe in “miracles,” was not satisfied with this reply and looked into the matter further. Finally, he succeeded in learning that an hour before the visit of his party a government official had appeared in the department store, handed over a gold piece to the cashier, and ordered him to conspicuously hand this one gold piece al pari to one of the foreigners in giving him his change. If the incident really took place in this way, the “pure purposive-rationality” (in Weber’s sense) of the behavior of the Soviet authorities can certainly not be denied. The costs arising for them from it?which are determined by the premium on gold—appeared warranted in their eyes by the end—obtaining long-term commodity credits. If such conduct is not “rational,” I wonder what else would be.

If the conditions that Gresham’s law assumes are not given, then action such as the law describes does not take place. If the actor does not know the market value differing from the legally controlled value, or if he does not know that he may make his payments in money that is valued lower by the market, or if he has another reason for giving the creditor more than is due him—for example, because he wants to give him a present, or because he fears violent acts on the part of the creditor—then the assumptions of the law do not apply. Experience teaches that for the mass of debtor-creditor relationships these assumptions do apply. But even if experience were to show that the assumed conditions are not given in the majority of cases, this could in no way weaken the chain of reasoning that has led to the construction of the law or deprive the law of the importance that is its due. However, whether or not the conditions assumed by the law are given, and whether or not action such as the law describes takes place, “purely purposive-rational” action occurs in any case. Even one who gives the creditor a present or who avoids the threat of an extortionist acts rationally and purposively, as does one who acts differently, out of ignorance, from the way he would act if he were better informed.

Gresham’s law represents the application to a particular case of laws of catallactics that are valid without exception always and everywhere, provided acts of exchange are assumed. If they are conceived imperfectly and inexactly as referring only to direct and immediate monetary gain—if, for example, they are interpreted to mean that one seeks to purchase and to pay one’s debts as cheaply as possible and to sell as dearly as possible-then, of course, they must still be supplemented by a series of further propositions if one wants to explain, let us say, the particularly cheap prices of advertised articles offered by department stores in order to attract customers. No one, however, can deny that in this case too the department stores proceed “purely rationally” and purposively on the basis of cool consideration.

If I simply want to buy soap, I will inquire about the price in many stores and then buy in the cheapest one. If I consider the trouble and loss of time which such shopping requires so bothersome that I would rather pay a few cents more, then I will go into the nearest store without making any further inquiries. If I also want to combine the support of a poor disabled veteran with the purchase of soap, then I will buy from the invalid peddler, though this may be more expensive. In these cases, if I wanted to enter my expenditures accurately in my household account book, I should have to set down the cost of the soap at its common selling price and make a separate entry of the overpayment, in the one instance as “for my convenience,” and in the other as “for charity.”44

The laws of catallactics are not inexact, as the formulation that many authors have given them would lead us to believe. When we ascribe the character of universal validity and objectivity to the propositions of catallactics, objectivity is not only to be understood in the usual and literal epistemological sense, but also in the sense of freedom from the taint of value judgment, in accordance with the demand made?with, of course, complete justification?for the social sciences in the most recent dispute over this question. Only the subjective theory of value, which treats every value judgment, i.e., every subjective valuation, in the same way in order to explain the formation of exchange ratios and which makes no attempt whatever to separate “normal” action from “abnormal” action, lives up to this demand. The discussion of value judgments would have been more fruitful if those who took part in it had been familiar with modern economics and had understood how it solves the problem of objectivity.

The refusal to admit that the theorems of economics have the character of scientific laws and the proposal to speak rather of “tendencies” can be explained only by the unfamiliarity with which the Historical-Realist School combats modern economics. Whenever economics is spoken of, it thinks only of classical economics. Thus, Karl Muhs, to cite the most recent representative of this school, maintains that

chains of causal connection, pure and self-contained, of such a kind that a given fact everlastingly and unconditionally has another as a consequence, appear at no time in economic life. In reality, every causal connection is usually combined with other facts, likewise operating with a certain intensity as causes. The latter as a rule influence to some extent the effects of the former. The result, therefore, comes into being as the effect of a causal complex. Reduction of the entire process to a simple formula, in which one effect is attributed to one cause, is impossible because it is incompatible with the multifarious causal complexity of the process. Where definite facts do causally govern an occurrence to a great extent . . . it is more suitable to speak of regularities or conformities to law or tendencies, but always with the reservation that the operation of such tendencies can be hampered or modified by other causal factors.

This is the realization of the conditional and relative nature of all regularity in the phenomena of the economic and social spheres, which has long since established itself in economics.45

One can understand the wide dissemination of these and related views when one considers, on the one hand, how obvious they must seem to everyone who has in mind the distinction between economic and noneconomic principles of price determination that has come down to us from classical economics and was at first retained in the terminology—though it is certainly not in accordance with the purport—even of the founders of the Austrian School;46 and when one considers, on the other hand, that we are confronted here with the basic error of the Historical-Realist School.

Every law of causation?no matter in what science?gives us information about a relationship of cause and effect. This information, in its theoretical value for our knowledge as well as in its practical importance for the understanding of concrete events and for the orientation of our action, is in no way influenced by the fact that at the same time another causal relationship can lead to the opposite result, so that the effect of one is entirely or in part counterbalanced by the effect of the other. Occasionally one endeavors to take this into account by qualifying the law with the addition ceteris paribus, but this, after all, is self-evident. The law of returns does not lose its character as a law because changes in technology, for example, take place that compensate for its effects. The appeal to the multiplicity and complexity of “life” is logically untenable. The human body also lives, and its processes are subject to a “multifarious causal complexity.” Yet surely no one would want to deny the character of a law to the proposition that eating protein, carbohydrates, and fat is beneficial to the functions of the body simply because eating cyanide at the same time must prove fatal.47

To summarize: The laws of sociology are neither ideal types nor average types. Rather, they are the expression of what is to be singled out of the fullness and diversity of phenomena from the point of view of the science that aims at the cognition of what is essential and necessary in every instance of human action. Sociological concepts are not derived “through one-sided intensification of one or several aspects and through integration into an immanently consistent conceptual representation of a multiplicity of scattered and discrete individual phenomena, present here in greater number, there in less, and occasionally not at all, which are in congruity with these one-sidedly intensified aspects.” They are rather a generalization of the features to be found in the same way in every single instance to which they refer. The causal propositions of sociology are not expressions of what happens as a rule, but by no means must always happen. They express that which necessarily must always happen as far as the conditions they assume are given.

• 11Max Weber, Gesammelte Aufsätze zur Wissenschaftslehre (Tübingen, 1922), pp. 172 f.
• 12Ibid., p. 178.
• 13Ibid., p. 181.
• 15Ibid., p. 185.
• 15Ibid., p. 189 f.
• 16Ibid., p. 190.
• 17Ibid., p. 191.
• 18Ibid., p. 190.
• 19Ibid., p. 191.
• 20Ibid., p. 193.
• 21Ibid., p. 193.
• 22Ibid., pp. 520 f.
• 23Ibid., p. 184.
• 24Namely, in the ideal types.
• 25Weber, Gesammelte Aufsätze zur Wissenschaftslehre, p. 195.
• 26Schelting aptly says: “With the concept of the ‘ideal type’ Max Weber for the first time clearly and plainly recognized a specific mode of forming concepts. The ‘ideal type’ is a logical discovery. It is not an ‘invention.’ In no way did Max Weber want to urge anything upon science that it had not already accomplished. He wanted to clarify a logical state of affairs already existing because it is of the essence of cognition in the cultural sciences.” Cf. Alexander von Schelting, “Die logische Theorie der historischen Kulturwissenschaft von Max Weber und im besonderen sein Begriff des Idealtypus,” Archiv für Sozialwissenschaft, XLIX, 174. Cf. further Marcus Pfister, Die Entwicklung zum Idealtypus (Tübingen, 1928), pp. 131ff.
• 2727Max Weber’s epistemology has been continued and revised by Alfred Schütz (Der sinnhafte Aufbau der sozialen Welt (Vienna, 1932) in a way which also seeks to dispose of the judgment of the logical character of economic propositions to which I objected. (Cf. pp. 277 ff. especially). Schütz’s penetrating investigations, based on Husserl’s system, lead to findings whose importance and fruitfulness, both for epistemology and historical science itself, must be valued very highly. However, an evaluation of the concept of the ideal type, as it is newly conceived by Schütz, would exceed the scope of this treatise. I must reserve dealing with his ideas for another work.
• 28Weber, Wissenschaftslehre, p. 191.
• 29Friedrich von Gottl-Ottlilienfeld, Die Herrschaft des Wortes (1901), now in Wirtschaft als Leben (Jena, 1925), pp. 165 f.
• 30Weber, Wissenschaftslehre, p. 117, n. 2. Compare with this Weber’s paraphrase: “the fundamental state of affairs to which are connected all those phenomena which we term ‘socioeconomic’ in the broadest sense.” Ibid., p. 161.
• 3131Cf. my Socialism, trans. by J. Kahane (New Haven, Conn.: Yale University Press, 1951). Cf. further Eli F. Heckscher, “A Plea for Theory in Economic History,” Economic History, I, 527.
• 32Concerning the hypostatization involved in the concept of “want,” cf. Felix Kaufmann, “Logik und Wirtschaftswissenschaft,” Archiv für Sozialwissenschaft, LIV, 620 ff.
• 33Halberstädter, Die Problematik des wirtschaftlichen Prinzips (Berlin and Leipzig, 1925), p. 61.
• 34Cf. Wilhelm Lexis, Allgemeine Volkswirtschaftslehre (3rd ed.; Berlin and Leipzig, 1926), p. 14.
• 35Max Scheler, Der Formalismus in der Ethik und die formale Wertethik (2nd ed.; Halle, 1921), p. 104.
• 36Max Weber, “Wirtschaft und Gesellschaft,” Grundriss der Sozialökonomik (Tübingen, 1922), Part III, p. 12.
• 37Ibid., p. 2.
• 38Ibid., p. 1.
• 39Ibid., p. 13.
• 40Ibid., p. 12.
• 41Ibid., p. 9.
• 42Ibid., p. 5.
• 43Cf. my Kritik des Interventionismus, pp. 123 ff.
• 44Cf. further below pp. 177 f.
• 45Karl Muhs, “Die ‘wertlose’ Nationalökonomie,” Jahrbücher für Nationalökonomie und Statistik, CXXIX, 808.
• 46On this point cf. below pp. 174 ff.
• 47I have intentionally not chosen as an example here a proposition of a natural science involving mathematics, but a statement of biology. The statement is imprecise in the form in which I present it and cannot assume the strict character of a law in any conceivable form. I have done this because it was incumbent upon me to show that, with the argument of the joint operation of a multiplicity of causal factors, the character of the strictest conformity to law cannot be denied even to a statement of this kind.

Economic theory, like every theory and every science, is rationalistic in the sense that it makes use of the methods of reason?ratio. What, indeed, could science be without reason? Nevertheless, one may seek to pit metaphysical poetry, masquerading as philosophy, against discursive reasoning. However, to do this is to reject science as such.

The rejection of science, of scientific reasoning, and, consequently, of rationalism is in no way a requirement of life, as some would have us believe. It is rather a postulate fabricated by eccentrics and snobs, full of resentment against life. The average man may not trouble his head about the teachings of “gray theory,” yet he avidly seizes upon all the findings of science that lend themselves to the improvement of man’s technical equipment in the battle for the increase of his material wealth. The fact that many of those who make their living by scientific work are unable to find inner satisfaction in this employment is not an argument for the abolition of science.

However, those who rally round the standard of antirationalism in the theory of social phenomena, especially in economics and in the historical sciences, do not in the least want to do away with science. Indeed, they want to do something altogether different. They want, on the one hand, to smuggle into particular scientific chains of reasoning arguments and statements that are unable to withstand the test of a rational critique, and, on the other hand, to dispose, without relevant criticism, of propositions to which they are at a loss to raise any tenable objections. What is usually involved in such cases is a concession to the designs and ideas of political parties, though often it is simply the desire of a less gifted person-who would somehow like to be noticed at any cost-for scientific achievement. Not everyone is so honest as to admit openly what his real motive is; it is no pleasure to spend one’s whole life in the shadow of a greater man.48

If someone advocates national autarky, wants to shut his country off from trade with other countries, and is prepared to bear all the material and spiritual consequences of such a policy in order to reach this goal, then this is a value judgment, which, as such, cannot be refuted by argumentation. However, this is not really the case. The masses could be induced to make certain small sacrifices in favor of autarky, but they are scarcely ever to be moved to favor making large sacrifices for such an ideal. Only the literati are enthusiastic about poverty, i.e., the poverty of others. The rest of mankind, however, prefer prosperity to misery. Inasmuch as one can scarcely appear before the public with the argument that the attainment of this or that ideal of the literati is not too dearly bought even at the price of a considerable reduction in general prosperity, and at the same time entertain any hopes of success, one must seek to prove that its attainment imposes only an inconsiderable or no material sacrifice; indeed, that it even brings a distinct material gain. In order to prove this, in order to demonstrate that the restriction of trade and commerce with foreign countries, nationalization and municipalization, and even wars are “besides, ever so much a good business,” one must strive to insert irrational links into the chain of reasoning, because it is impossible to prove things of this kind with the rational, sober arguments of science. It is obvious that the employment of irrational elements in the train of an argument is impermissible. Ends are irrational, i.e., they neither require nor are capable of a rational justification. But what is merely the means to given ends must always be subject to rational examination.

The misunderstanding—excusable in the light of the development of the doctrines, though for that reason all the more serious—that identifies “rational” action with “correct” action is universally propagated. Max Weber expressly combated this confusion,49  although, as we have seen, he repeatedly fell into it in other passages of his writings.

“The theory of marginal utility,” says Weber, “treats . . . human action as if it took place from A to Z under the control of a businesslike calculation: calculation based on knowledge of all the relevant conditions.”51  This is precisely the procedure of classical economics, but in no way that of modern economics. Because it had not succeeded in overcoming the apparent antinomy of value, no other way remained open for classical economics than to start with the action of the businessman. Since it could not deal with the concept of use value, which it did not know how to divide into objective and subjective use value, it was unable to revert to what lies behind and, in the last analysis, governs and directs the conduct of the businessman and entrepreneur, viz., the conduct of the consumers. Whatever did not pass through a businessman’s calculations and account books was outside the orbit of classical economics. However, if one limits one’s consideration to the conduct of the businessman, then, of course, one must distinguish between the correct and the incorrect conduct of business. For as a businessman—though not also in his capacity as a consumer—the entrepreneur has as his given goal the greatest possible monetary profit of the undertaking.

Modern economics, however, does not start from the action of the businessman, but from that of the consumers, that is to say, from the action of everybody. In its view, therefore—and herein lies its “subjectivism,” in contrast to the “objectivism” of the classical economists, and, at the same time, its “objectivity,” in contrast to the normative position of the older school?action on the part of the economizing individual is neither correct nor incorrect. Modern economics is not and cannot be concerned with whether someone prefers healthful food or narcotic poisons; no matter how perverted may be the ethical or other ideas that govern his conduct, its “correctness” is not a matter to be judged by economics. Economics has to explain the formation of prices on the market, which means how prices are really arrived at, not how they ought to be arrived at. Prohibitionists see a serious failing of mankind in the consumption of alcoholic beverages, which they attribute to misunderstanding, weakness of character, and immorality. But in the view of catallactics there is only the fact that there is a demand for alcohol. He who has to explain the price of brandy is not concerned with the question whether it is “rational” or moral to drink brandy. I may think what I will about motion picture dramas, but as an economist I have to explain the formation of the market prices for the cinema, actors, and theater seats, not sit in judgment on the films. Catallactics does not ask whether or not the consumers are right, noble, generous, wise, moral, patriotic, or church-going. It is concerned not with why they act, but only with how they act.

Modern subjectivist economics—the theory of marginal utility—again takes up the old theory of supply and demand, which once had to be given up on account of the inability of the classical economists to resolve the paradox of value, and develops it further. If one sees the significance of the movements of market prices, as the modern theory does, in the fact that a state of rest is riot reached until total demand and total supply coincide, it is clear that all factors that influence the conduct of the parties on the market?and consequently also “noneconomic” and “irrational” factors, like misunderstanding, love, hate, customs habit, and magnanimity—are included.

Therefore, Schelting’s statement that economic theory “assumes a society that arose only through the operation of economic factors”[51] does not apply to modern economics if one understands the term “economic factors” in Schelting’s sense. In another section,52  I point out that even Menger and Böhm-Bawerk did not completely grasp this logical fundamental of the theory they founded and that not until later was the significance of the transition from the objective to the subjective theory of value appreciated.

No less inaccurate is the assertion, made in accordance with the view universally prevailing among the supporters of the Historical-Realist School, that “the other chief fictions of abstract theory are ‘free competition’ and the absolute insignificance of governmental and other acknowledged regulations for the development of the cooperative economic action of economic subjects.”53  This does not even apply to classical economics. Scarcely anyone would want to maintain that the modern theory has bestowed too little attention on the problem of monopoly prices. The case of limited competition on the buyers’ or sellers’ side offers the theory no special problem: it always has to deal only with the subjects appearing and acting on the market. Nothing else is to be predicated of those who may still enter the market if no factors hold them back than that their supervention would change the market situation. Nor does the theory?and this is true of both the classical and the modern?assume the “absolute insignificance of governmental and other acknowledged regulations.” It devotes very searching investigations to these “interferences” and constructs a special theory of price controls and interventionism.

Mitscherlich too maintains that the theory of marginal utility is “best tailored for the free economy.” For that reason, the Middle Ages would “not at all have been able to think of it.” There it would have been “pointless.” “What, indeed,” he asks, “would the Middle Ages have said to the statement of a Carl Menger when he argues: ‘That final degree of intensity of the want which can still be satisfied by the given supply—i.e., the marginal utility—serves as the measure of valuation’?”54

It may be presumed that the Middle Ages would have understood no more of the modern theory of price formation than of Newtonian mechanics or of the modern notions of the functions of the heart. Nevertheless, rain drops fell no differently in the Middle Ages than they do today, and hearts did not beat otherwise than they do now. Though the men of the Middle Ages would not have understood the law of marginal utility, they nevertheless did not and could not act otherwise than as the law of marginal utility describes. Even the man of the Middle Ages sought to apportion the means at his disposal in such a way that he attained the same level of satisfaction in every single kind of want. Even in the Middle Ages the wealthier man did not differ from the poorer man only in that he ate more. Even in the Middle Ages no one voluntarily exchanged a horse for a cow unless he valued the cow more highly than the horse. Even at that time the interventionist acts of the government and other institutions of compulsion brought about effects no different from those which the modern theory of price controls and intervention points out.

The objection is urged against modern economic theory that the economy of free competition necessarily” constitutes “its basic schema” and that it is unable to “comprehend theoretically the organized economy of the present, the economy of regulated competition” and the “entire phenomenon of imperialism.”55  When this objection is raised, it suffices to point out that what historically started the battle against the theory and has given that battle its pertinacity and its popularity is the fact that precisely on the basis of the theory, and only on this basis, is an accurate judgment possible of the effects both of every individual interventionist measure and of the total phenomenon of interventionism in all of its historical forms. One simply turns the facts of history upside down when one maintains that the Historical School rejected economic theory because the latter was incapable of explaining the historical phenomenon of interventionism. In fact, the theory was rejected precisely because one had to arrive at an explanation on the basis of it. This explanation, however, was not politically acceptable to the adherents of the Historical School, but, on the other hand, they were at a loss to refute it. Only by equating “theoretically comprehend” with “uncritically glorify” can one assert that modern economics has not theoretically comprehended the phenomenon of imperialism.

And certainly no one who has followed the political and economic discussions of recent years with even the slightest attentiveness will want to deny that everything that has been done for the elucidation of the problems presented by the “regulated” economy was accomplished exclusively by theorists with the methods of “pure” theory. Not to mention currency problems and monopoly prices, let us remind ourselves only of the discussions concerning the cause of unemployment as a permanent phenomenon and those concerning the problems of protectionism.56

Three assumptions, Max Weber thinks, underlie abstract economic theory: the social organization of an exchange economy, free competition, and strictly rational action. We have already discussed free competition and strictly rational—i.e., purposive—action. For the third assumption the reader is referred, on the one hand, to the starting point of all investigations of the modern school, viz., the isolated, exchangeless economy, which some sought to ridicule as the Robinson Crusoe economy; and, on the other hand, to the investigations concerning the economy of an imaginary socialist community.57

• 48Freud reports a case in which this was openly admitted. Freud, “Zur Geschichte der psychoanalytischen Bewegung,” Sammlung Kleiner Schriften zur Neurosenlehre, 4th Series (2nd ed.; Vienna, 1922), p. 57.
• 49Cf. Max Weber, Wissenschaftslehre, p. 503.
• 51Schelting, “Die logische Theorie der historischen Kulturwissenschaft von Max Weber und im besonderen sein Begriff des Idealtypus,” p. 721.
• 52Cf. below pp. I 71 ff.
• 53Schelting, loc. cit., P. 721.
• 54Mitscherlich, “Wirtschaftswissenschaft als Wissenschaft,” <em>Schmollers Jahrbuch</em>, L, 397.
• 55Salin, <em>Geschichte der Volkswirtschaftslehre</em> (2nd ed.; Berlin, 1929), pp. 97 f.
• 56Cf. Heckscher, op. cit., p. 525.
• 57Weber, Wissenschaftslehre, p. 190.

One can completely agree with Max Weber when he declares:

Wherever the causal explanation of a “cultural phenomenon”—an “historical individual”—comes into question, knowledge of laws of causation cannot be the end, but only the means of investigation, It facilitates and makes possible for us the imputation of the culturally significant components of the phenomena, in their individuality, to their concrete causes. As far and only as far as it accomplishes this is it valuable for the cognition of concatenations in individual cases.58

Weber is wrong, however, when he adds

The more “general,” i.e., the more abstract, the laws, the less they accomplish for the requirements of the causal imputation of individual phenomena and thereby, indirectly, for the understanding of the meaning of cultural events . . . From the point of view of exact natural science, “laws” are all the more important and valuable the more general they are; from the point of view of the cognition of historical phenomena in their concrete setting, the most general laws are also always the least valuable because they are the most empty of content. For the more comprehensive is the validity of a generic concept—i.e., its scope—the more it leads us away from the fullness of reality; because, in order to contain the most common element possible of many phenomena, to be as abstract as possible, it must consequently be devoid of content.59

Although Weber even goes so far as to speak of “all so-called ‘economic laws’ without exception” in the arguments by which he arrives at these conclusions, he could, nevertheless, only have had in mind the well-known attempts to discover laws of historical development. If one recalls Hegel’s famous proposition: “World history . . . depicts the development of the spirit’s consciousness of its freedom, and the material realization brought about by this consciousness,”60  or one of Breysig’s propositions, then Weber’s statements at once become understandable. Applied to the propositions of sociology, they appear inconceivable.

Whoever undertakes to write the history of the last decade will not be able to ignore the problem of reparations.61  At the center of this problem, however, stands that of the transfer of the funds involved. Its essence is the question whether or not the stability of the gold value of German money can be affected by the payment of sums for reparations, and particularly by their transfer to foreign countries. This question can be examined only by the methods of economic theory. Any other way of examining it would simply be nonsensical. It is worthy of note that not just some of those who have participated in this discussion, but all without exception, from first to last resort to the universally valid propositions of economic theory. Even one who starts from the balance-of-payments theory, which science has decisively rejected, adheres to a doctrine that makes the same logical claim to universal validity as the theory that modem science acknowledges as correct. Without recourse to such propositions, a discussion of the consequences that must follow on certain assumptions could never be carried on. In the absence of a universally valid theory, the historian will be unable to make any statements connected with the transfer of funds, no matter whether the payments are actually made according to the Dawes Plan or whether they cease for some reason not yet given. Let us assume that the payments are made and that the gold value of the mark does not change. Without recourse to the principle of the theory of purchasing-power parity, one could still not infer from this that Germany’s payment had not affected its currency. It could be that another causal chain, acting at the same time, did not permit the effect on currency anticipated by the balance-of-payments theory to become visible. And if this were so, the historian would either completely overlook this second causal chain or would not be able to understand its effect.

History cannot be imagined without theory. The naive belief that, unprejudiced by any theory, one can derive history directly from the sources is quite untenable. Rickert has argued in an irrefutable way that the task of history does not consist in the duplication of reality, but in its reconstitution and simplification by means of concepts.62  If one renounces the construction and use of theories concerning the connections among phenomena, on no account does one arrive at a solution of the problems that is free of theory and therefore in closer conformity with reality. We cannot think without making use of the category of causality. All thinking, even that of the historian, postulates this principle. The only question is whether one wants to have recourse to causal explanations that have been elaborated and critically examined by scientific thought or to uncritical, popular, prescientific “dogmas.” No explanations reveal themselves directly from the facts. Even if one wanted to draw conclusions uncritically—post hoc, ergo propter hoc—one would be completely at a loss in view of the confusing plethora and diversity of phenomena. It is precisely the “multifarious causal complexity” of processes of which Muhs speaks,63  i.e., the concurrence in them of a multiplicity of causal factors, that makes theory necessary.

For ages historians have made use of theories provided by nonscientific thought and laying claim to universal validity. Consider to what an extent such a theory is contained in the simple sentence, “The defeated king found himself forced to conclude peace under unfavorable conditions.” What is involved here are simple and scarcely disputed theories, which, by their very character, are nonscientific, but this does not change the fact that they are still theories, i.e., statements understood as universally valid. In addition, the historian employs theories taken from all the other sciences, and it goes without saying that one is justified in demanding, in such cases, that the theories used conform to the present state of science, i.e., they must, in our view, be correct theories. The old Chinese historian could trace extraordinarily dry weather back to moral lapses on the part of the emperor and report that after the monarch’s expiation rain fell again. The ancient historian could ascribe the early death of the king’s son to the jealousy of the gods. Today, in the present state of meteorology and pathology, we look for a different explanation. Even though the sources were to inform us unequivocally that Numa Pompilius was acquainted with Camena Egeria, we would be unable to believe it and would disregard them. The intercourse of witches with the devil has been established as proved according to the rules of legal evidence; yet, on the strength of our theory, we deny this possibility, all documents to the contrary notwithstanding.64  The historian must regard all other sciences as auxiliary to his own and must be thoroughly familiar with as much of them as is required by the particular tasks he has set for himself. Whoever treats of the history of the Julian-Claudian dynasty will scarcely be able to do without a knowledge of the theory of heredity and psychiatry. Whoever writes a history of bridge-building will need a thorough knowledge of bridge-building; whoever writes a history of strategy will need a thorough knowledge of strategy.

Now the proponents of historicism, of course, admit all this as far as all other sciences are concerned, but they deny it with reference to sociology. Here the matter seems to them to be different. No substantial reason for this difference is to be discovered, but, psychologically, the resistance of many historians is easily understood. As far as the other sciences are relevant to history, the alternative is either that the historian needs to acquire a moderate degree of knowledge, which does not exceed the amount possessed as a matter of course by every educated person, or that special fields of historical knowledge not closely connected with the sphere proper to history become autonomous disciplines. One does not have to be a meteorologist to know that no matter how serious the failings of the monarch, they cannot influence the weather. And even one who understands only very little of the theory of heredity will know what weight to attach to the divine extraction that historical sources attribute to many dynasties. Making the history of medicine and similar disciplines autonomous affects but slightly the sphere proper to history. The claims of sociology, however, even if only as a result of the failure to recognize the boundaries between sociological and historical investigations, are felt by many historians as an infringement on their very own domain.

Each and every proposition of history implicitly contains theorems of sociology. No statement concerning the effect of political measures is conceivable that could forgo recourse to universally valid propositions about human action. Whether the topic under discussion is the “social question,” mercantilist policy, imperialism, power politics, or wars and revolutions, we again and again encounter in the historian’s discussions statements that are inferences from universally valid propositions of sociology. just as Monsieur Jourdain was astonished to learn that what he had always been speaking was prose, so historians too show surprise when one points out to them that they make use of the theorems of sociology from first to last.

It is regrettable, however, that these theorems, which they unhesitatingly employ, occasionally belong to prescientific thought. One who disregards the results of modern sociology does not therefore work “free of theory.” He employs the naive, obsolete theory of an epoch of scientific thought long since superseded or else the still more naive theory of prescientific thought. The effect this has on economic history is nothing short of grotesque. Economic history did not become possible until classical economics had produced a scientific apparatus for political and economic thought. Previous attempts—for example, those dealing with the history of trade—were nothing but a compilation of memoranda. Nowadays the economic historian seeks to emancipate himself from theory altogether. He disdains to approach his task with the logical tools of a developed scientific theory and prefers to content himself with the small measure of theoretical knowledge that today reaches everyone through the newspapers and daily conversation. The presuppositionlessness of which these historians boast consists, in reality, in the uncritical repetition of eclectic, contradictory, and logically untenable popular misconceptions, which have been a hundred times refuted by modern sciences.65  Thus, the diligent work performed by entire generations of scholars has remained unproductive. The Historical School failed precisely in the province of social and economic history, which it claimed as its proper domain.

Now the champions of history “devoid of theory” maintain, of course, that their concepts and theorems must be derived from the historical data, inasmuch as there are no universally valid, supertemporal laws of human action. As we have seen, the thesis that there can also be irrational action and that rational action is generally only the result of a long historical development rests on a gross misunderstanding. Historicism, however, goes still further. It dismisses the doctrine of the supertemporality of reason as a prejudice of the Enlightenment. The logical structure of human reason, we are informed, has changed in the course of the ages, in the same way as, for example, technical knowledge and skills.66

We shall not enter here into what is to be said in principle, from the standpoint of sociology, against this postulate of historicism.67  In any case, such reasoning would prove unacceptable to the proponents of historicism, who deny the possibility of any supertemporal theory in contradistinction to historical experience. Therefore, we must confine ourselves to what even historicism must acknowledge as an immanent critique of its thesis. The first point to be established, however, is that none of the sources of historical information accessible to us contains anything that could shake the assumption of the immutability of reason. Never has even an attempt been made to state concretely in what respects the logical structure of reason could have changed in the course of the ages. The champions of historicism would be greatly embarrassed if one were to require of them that they illustrate their thesis by pointing out an example.

In this respect, the failure of ethnology has been no less conspicuous than that of history. Wilhelm Jerusalem to be sure, has emphatically stated: “Kant’s firm belief in the timeless, completely immutable logical structure of our reason . . . has not only not been confirmed by the findings of modern ethnology, but has been proved completely incorrect.”68  But even Jerusalem has not undertaken in a single instance to show us in what way the logic of primitive peoples is structurally different from our logic. A general appeal to the writings of ethnologists is not sufficient here. Ethnology shows only that the conclusions arrived at by the reasoning of primitive peoples are different from those which we arrive at and that the range of things primitive peoples are accustomed to think about is different from the circle of our intellectual interests. When primitive man assumes magical and mystical connections where we assume connections of a different kind, or where we find no connection at all, or when he sees no connection where we do see one, this shows only that the content of his reasoning differs from that of our own, but not that his reasoning is of a different logical structure from ours.

In support of his statement, Jerusalem refers repeatedly to the works of Lévy-Bruhl. However, nothing that Lévy-Bruhl sets forth in his admirable Writings on this topic says anything more than that members of primitive races have no understanding of the problems with which, in the civilized countries, a narrow circle of intellectually distinguished men concern themselves. “An African,” says Lévy-Bruhl, borrowing from Bentley’s narrative,

never thinks a matter out if he can help it. . . . They never recognized any similarity between their own trading and the coast factory. They considered that when the white man wanted cloth, he opened a bale and got it. Whence the bales came and why and how—that they never thought of.

The primitive man has a habit of mind which makes him

stop short at his earliest perception of things and never reason if he can in any way avoid it.69

Lévy-Bruhl and Bentley seem to have confined their association to the members of primitive races. Had they also looked about in Europe—and, one might add, among European economists and politicians—they would certainly not have considered the practice of never thinking matters out and never reasoning as peculiarities of primitive peoples alone. As Lévy-Bruhl says, citing a report by Mangin, the Mossi on the Niger river are lacking in reflection. For that reason they are also wanting in ideas.

Conversation with them turns only upon women, food, and (in the rainy season) the crops.70

What other subjects did many contemporaries of Newton, Kant, and Lévy-Bruhl prefer?

It must be pointed out, moreover, that from the data he compiled, Lévy-Bruhl never draws the conclusions that Jerusalem wants to infer from them. For example, expressly summing up his observations about the causal reasoning of primitive races, Lévy-Bruhl remarks:

The primitive mind, like our own, is anxious to find the reasons for what happens, but it does not seek these in the same direction as we do. It moves in a world where innumerable occult powers are everywhere present, and always in action or ready to act.71

And, on the basis of searching investigations, Cassirer arrives at the conclusion:

When one compares the empirical-scientific and the mythical conceptions of the world, it becomes immediately obvious that the contrast between them is not based on their employing totally different categories in the study and explanation of reality. It is not in the nature, the quality of these categories, that myth and empirical-scientific cognition differ, but in their modality. The methods of connecting things that both employ in order to give the perceptibly diverse the form of unity so as to fit the manifold into a framework demonstrates a thoroughgoing analogy and correspondence. They exhibit the same most general “forms” of perception and reasoning which constitute the unity of consciousness as such and which, therefore, constitute the unity of mythical consciousness in the same way as that of pure cognitive consciousness.72

What the proponents of historicism fail to see is that even propositions like: “The theorems of classical economics possessed relative truth for the age in which they were constructed” can be enunciated only if one has already adopted a supertemporal, universally valid theory. Without such a theory the historian could not consider his task anything more than the compilation and publication of source materials. Thus, it has been no fortuitous coincidence, but inner necessity, that the age in which historicism has held sway has been characterized by a progressive decline in historical research and historical writing. With a few laudable exceptions, for history the upshot of historicism has been, on the one hand, the publication of sources, and, on the other hand, dilettantist constructions, such as those of Chamberlain and Spengler.

If history is not to be a meaningless absurdity, then every statement that it makes about a causal relationship must be thought through to its conclusion and examined for its compatibility with the entire structure of our knowledge. However, this cannot be done without sociological theory.

One must agree completely with Max Weber when he says that for the causal explanation of cultural phenomena “knowledge of laws of causation cannot be the end, but only the means of investigation.” Sociology is an auxiliary—though, to be sure, an indispensable auxiliary—of history. Sociological—and especially economic—theory stands in the same relationship to politics. Every science is an end in itself only for him who thirsts after the knowledge of it.

• 58Weber, Wissenschaftslehre, p. 190.
• 59Ibid., pp. 178 ff.
• 60G.W.F. Hegel, <em>Vorlesungen über die Philosophie der Weltgeschichte</em>, ed. by Lasson (Leipzig, 1917), Vol. 1 (<em>Philosophische Bibliothek</em>, Vol. 171a), p. 148.
• 61In judging this example it should be noted that it has been carried over unchanged from the first publication of this article, which appeared in 1929.
• 6262Cf. Rickert, <em>Kulturwissenschaft und Naturwissenschaft</em>, pp. 28 ff. Cf. further, Sombart, “Zur Methode der exakten und historischen Nationalökonomie,” <em>Schmollers Jahrbuch</em>, LII, 647.
• 63Cf. Muhs, op. cit., p. 808.
• 64“Historiquement, le diable est beaucoup plus solidement prouvé que Pisistrate: nous n’avons pas un seul mot d’un contemporain qui dise avoir vu Pisistrate; des milliers des ‘temoins oculaires’ déclarent avoir vu le diable, il y a peu de faits historiques établis sur un pareil nombre de témoignages indépendants. Pourtant nous n’hesitons plus à rejeter le diable et à admettre Pisistrate. C’est que l’existence du diable serait inconciliable avec les lois de toutes les sciences constituées.” Langlois-Seignobos, Introduction aux études historiques (3rd ed.; Paris, 1905), pp. 177 f.
• 65Cf. Celestin Charles Alfred Bouglé, Qu’est-ce que la sociologie? (5th ed.; Paris, 1925), pp. 54 ff.
• 66Cf. Karl Mannheim, “Historismus,” Archiv für Sozialwissenschaft, LII, 9.
• 67Cf. Husserl, Logische Untersuchungen, I, 136 ff.
• 68Franz W. Jerusalem, “Die soziologische Bedingtheit des Denkens und der Denkformen,” Versuche zu einer Soziologie des Wissens, ed. by Max Scheler (Munich and Leipzig, 1924), p. 183.
• 69Cf. Lévy-Bruhl, Primitive Mentality, trans. by Lilian Clare (New York, 1923), pp. 27 f.
• 70Ibid., p. 27.
• 71Ibid., p. 437.
• 72Ernst Cassirer, Philosophie der symbolischen Formen (Berlin, 1925), II, 78.

Max Weber did not want merely to outline a program and methodology for a science of social phenomena. In addition to excellent treatises on history, he himself published extensive works that he termed sociological. We, of course, cannot recognize their claim to this designation. This is not meant as an unfavorable criticism. The investigations collected in Weber’s posthumously published major work, Wirtschaft und Gesellschaft, belong to the best that German scientific literature of the last decades has produced. Yet in their most important parts they are not sociological theory in our sense. Nor are they history in the customary meaning of the term. History deals with one town or with German towns or with European towns in the Middle Ages. Until Weber’s time it knew nothing like the brilliant chapter in his book that deals simply with the “town” in general, a universal theory of town settlement for all times and among all peoples, the ideal type of the town in itself.

Weber, who did not realize that there is a science that aims at universally valid propositions, considered this sociology. If we were to acquiesce in this usage and to seek another name for what we understand by sociology, we should cause hopeless confusion. Therefore, we must maintain out distinction and attempt to give another name to what Weber regarded as sociology. Perhaps the most suitable would be: universal teachings of history, or more briefly, universal history.

The fact that one usually designates by this name attempts at presenting comprehensively the history of all ages and nations need not prevent us from employing it to denote what Weber undertook to do. For such presentations are unable to proceed otherwise than by joining to the history of the development of one culture or of one people the history of the development of another. Consequently, universal history in this sense signifies only a series of works that do not lose their original character and independence in being thus subsumed under a common category. Universal history in our sense—sociology in Weber’s sense—would consist in bringing into relief and treating individually the ideal-typical constructions employed by history. It would correspond approximately, but only approximately, to what Bernheim, in his thematic division of the province of history, designates as universal history, or cultural history in the wider sense. To specialized history he contrasts universal history, within which he differentiates two subdivisions:

It need certainly not be especially emphasized that the point in question is, of course, not the terminology, but only the logical and conceptual distinction.

The situation is analogous in the treatment of economic problems. Between economic theory, on the one hand, and economic history and descriptive economics?which must also be economic history?on the other, lies universal descriptive economics, which serves for the special treatment of the ideal-typical constructions employed by economic history.

The boundaries between these domains are not always observed in actual scientific work and in its presentation for the public, and, indeed, there is no necessity for such a separation. The creative mind yields what it has to offer, and for this we are indebted to it. Nevertheless, even one who would never think of overstepping the boundaries that separate the individual domains of subject matter must be acquainted with what is happening on the other side of the boundaries. No sociologist can do without history, and no historian can do without sociology

Historicism declared the historical method the only one permissible and appropriate for the treatment of the problems posed by the sciences of human action. One group of the proponents of historicism considered a theoretical science of human action altogether impossible. Others did not want to deny completely the possibility of such a science in the distant future, which would have at its disposal the fruits of more ample spadework on the part of historians. The opponents of historicism, of course, never challenged the justification, the logical admissibility, or the usefulness of historical investigation. What was called into question in the Methodenstreit was never history, but always only theory. From the point of view of economics and political science the fateful error of historicism lay precisely in its rejection of theory. Indeed, the tenor of the attack upon theory was essentially political and was directed toward protecting from disagreeable criticism economic policies that could not withstand scientific examination. From the point of view of science, the failure to recognize the truth that all historical investigation and every description of social conditions presuppose theoretical concepts and propositions was more serious than the misconception that history and descriptive economics could be pursued without theory. The most pressing task of the logic of historical science is to combat this error.

• 73Bernheim, op. cit., p. 53. Kracauer (op. cit., pp. 24 ff.) speaks of comparative social history and comparative cultural history.

We call the method of scientific work that examines the effect, ceteris paribus, of change in one factor, the static method.74  Nearly everything that sociology and its hitherto best developed branch, economics, have thus far accomplished is due to the use of the static method. The assumption it makes, viz., that all other conditions remain perfectly unchanged, is an indispensable fiction for reasoning and science. In life everything is continually in flux, but for thought we must construct an imaginary state of rest.75  In this manner we conceptually isolate the individual factors in order to be able to study the effect of changes in them. The word “static” should not prevent us from seeing that the method in question is one whose goal is precisely the investigation of change.76

In the present state of the science, it is not yet possible to determine whether dynamic laws are feasible within the system of catallactics. A dynamic law would need to be able to show how changes would have to occur on the basis of forces acting within the static system even though no change in the data took place from without. It is well known that Ricardo and many epigones of the classical school—even Marx, for example—undertook such attempts, and that similar efforts have been made on the basis of modern science as well. We need not go into this more deeply at this time. Nor need we be concerned here with the question whether laws of sociological dynamics could be demonstrated to hold outside the narrow frame of economic theory. We must adhere to the notion of the dynamic law only in order to contrast it to the notion of the historical law.77

The formulation of historical laws, i.e., laws of historical change, has repeatedly been designated as the task of history. Many even set out to formulate such laws. Of course, these laws did not meet the demands one must make of a scientific law. They lacked universal validity.

In all these “laws,” as, for example, in Breysig’s, of which we have given an example above, the basis of this deficiency lies in the fact that ideal types were used in the construction of the law. Inasmuch as ideal types do not possess universal validity, propositions involving them must be similarly deficient. All the concepts encountered in the thirty-first law of Breysig, which has already been quoted, are to be viewed as ideal types. Not only are “rule of the Kaiser,” “rule of the people,” and “boom in trade and industry” to be understood in this way, but also “national economy” in the sense in which this term is employed by Breysig.

Laws of historical stages occupy a special position. Stages of historical development arranged in a series are delineated as ideal types, and then the statement is made that history consists in the progression from one stage to the next, and thence on to the third, and so on. It is obvious that as long as the necessity of such a progression cannot be established, this does not yet signify the demonstration of a conformity to law.78  If, however, the progression is maintained to be necessary, then this pronouncement, but not the ideal-typical constructions of the stages, would have to be regarded as a law, although only if its content were free of every reference to ideal types.

The laws of progress seek to satisfy this requirement. They trace the operation of one or several forces to whose permanent action they unequivocally attribute the direction in which social changes take place. Whether this development leads to good or evil, whether it signifies improvement or decline, is immaterial. Progress means here: progression on the necessary path. Now, it is, of course, true that all laws of progress hitherto formulated, in so far as they are not to be rejected from the outset as fictions in no way corresponding to reality, lose the strict character of law through their connection with ideal-typical constructions. Yet it would not be difficult to enucleate clearly the sociological law underlying each of them and to verify it. Even if we were then to deny that the historical law is a law, we should nevertheless find in it a law of sociological dynamics.

Work performed under the division of labor is more productive than isolated work. The same expenditure of labor and of goods of higher order produces a greater quantity of output and enables feats to be accomplished that an isolated worker would never be in a position to achieve. Whether or not this proposition of empirical technology and the physiology of labor is valid without exception—as far as we are at all warranted in speaking of absolute validity in the case of an empirical law—is of no importance for us, since, in any case, it is certain that only one or two instances, if any, can be cited, and then only with difficulty, for which it would not be valid. The increase in productivity brought about by the division of labor is what gives impetus to the formation of society and to the progressive intensification of social cooperation. We owe the origin and development of human society and, consequently, of culture and civilization, to the fact that work performed under the division of labor is more productive than when performed in isolation. The history of sociology as a science began with the realization of the importance for the formation of society of the increase in productivity achieved under the division of labor. However, sociology in general, and economics in particular, have viewed the law of the division of labor not as a constituent part of their own structure of thought, but as a datum, though one which is almost always—or, for all practical purposes, always—present. It is instructive to see how the Historical School sought to arrive at a “historical law” in this case.

Bücher’s theory of stages wants to comprehend “all economic development, at least that of the Central and Western European nations, where it can be historically traced with sufficient accuracy” under a “principle of central significance for understanding the essential phenomena of the economy.” The theory finds this principle in the relation in which the production of goods stands to their consumption. Specifically, it is discernible in the length of the route that goods must travel in passing from producers to consumers. Hence follows his division into the three stages of the self-sufficient household economy, the town economy, and the national economy.79

We shall not dwell on the fact that each one of the three stages is delineated, and can be delineated, only as an ideal type. This is a shortcoming characteristic of all these “laws.” What is noteworthy is only that the freedom with which the historian may construct ideal types enables Bücher to reject the obvious idea, apparently displeasing to him for political reasons, that “mankind is on the point of rising to a new stage of development, which would have to be contrasted to the three previous stages under the name of world economy.”80  However, it cannot be our task to point out all the minor weaknesses and flaws in Bücher’s schematization. What concerns us is exclusively the logical form, and not the concrete content, of the theory. All that Bücher is in a position to state is that in the course of historical development up to the present three stages are to be distinguished. He is unable to give us any information about the causa movens of the changes that have occurred hitherto or about future developments. One cannot understand how Bücher, on the basis of his theory, comes to call every succeeding stage the “next higher” in relation to the preceding one, or why he assumes without hesitation that “the transition from the national economy to the next higher stage . . . will come,” while expressly adding that one cannot know how “the economic future will look in detail.”81  The metaphorical use of the term “stage” need Dot have led him to say “higher” stage instead of merely “succeeding” stage; and on the basis of his theory nothing can warrant his predicting that any further change will take place, much less his confident assurance that such a change could not consist in a regression to one of the previous stages. Consequently, it is impossible to see a “law” in a theory of this kind; and Bücher rightly avoids designating it as such.82

A question, however, which is in any case much more important than whether or not one is dealing with a “law” here is whether the construction of such schemata is useful for the enlargement and deepening of our knowledge of reality.

We must answer this question in the negative. The attempt to force economic history into a concise schema is not only without value for cognition, as we see from the remarks above; it has an effect nothing short of detrimental. It was responsible for Bücher’s failure to see that a shortening of the route that goods traveled in passing from producers to consumers occurred in the later Roman Empire precisely as a result of the decline in the division of labor. The dispute about whether or not the economy of the ancients is to be viewed as a self-sufficient household economy may appear idle to us when we reject Bücher’s, as we do every similar, schematization. Yet if one does not wish to close one’s mind to the possibility of understanding one of the greatest changes in history, the decline of ancient civilization, one must not fail to appreciate the fact that antiquity had gone further in the division of labor—or, to use Bücher’s own words, in “the length of the route that goods travel in passing from the producers to the consumers”—than the first centuries of the Middle Ages. The realization of the higher productivity of work performed under the division of labor places at our disposal the indispensable means for the construction of the ideal types necessary for the intellectual comprehension of this event. In this respect, the concepts of the self-sufficient household economy (production solely for one’s own consumption, the exchangeless economy), the town economy (production for a clientele), and the national economy (commodity production) may prove their usefulness as ideal types appropriate to the subject matter. The decisive and fateful error lies not in their construction, but in the attempt to connect them with a schema of stages and to base this schema on the law of the division of labor.

It was therefore with good reason that Bücher refrained from any attempt to base his theory of stages on the law of the higher productivity of work performed under the division of labor. This law makes only one statement about the objective result that can be attained through the division of labor. It does not say that the tendency toward further intensification of the division of labor is always operative. Whenever and wherever an economic subject is confronted with the choice between a procedure employing a more intensive and one employing a less intensive division of labor, he will adopt the former, provided that he has also recognized the objectively greater output that he can thereby attain and provided also that he values this difference in output more highly than the other consequences which, perhaps, are bound up with the transition to a more intensive division of labor. However, the law as such can make no statement about whether or to what extent this recognition does in fact take place. It can teach us to comprehend and explain causally a change that has already taken place, whether it be in the direction of a more intensive or of a less intensive development of the division of labor, but the law cannot show us why or even that the division of labor must always be more intensively cultivated. We are able to arrive at this conclusion only on the basis of an historical judgment—that is, one formed with the conceptual means at the disposal of history—of what peoples, groups, and individuals want under the influence of the factors determining their existence: their inborn qualities (racial inheritance) and their natural, social, and intellectual environment.

However, we do not know how these external factors are transformed within the human mind to produce thoughts and volitions directed and operating upon the outer world. We are able to ascertain this only post factum, but in no way can we deduce it in advance from a known regularity formulated as a law. Hence, we cannot infer from the law of the division of labor that the division of labor must always make further progress. The division of labor may again be set back temporarily or even permanently. A government may be dominated by an ideology that sees its social ideal in the reversion to autarky. One may consider this quite improbable, but one cannot make a clear and definite prediction about it, for the reasons which have already been given. In any case, one must not overlook the fact that today an ideology hostile to the international division of labor is beginning to exercise a great influence upon the foreign economic policy of many nations.

The law of the division of labor does not belong to the universally valid system of a priori laws of human action. It is a datum, not an economic law. For that reason it appears impossible to formulate on its basis an exact law of progress, i.e., a law free of ideal-typical constructions. On this point the optimists among the liberal sociologists of the Enlightenment, who were confident of progress and who were always reproached with “defective historical intelligence,” were logically much more correct than their critics. They never denied that they based their firm belief in continual social progress not on “laws,” but on the assumption that the “good” and the “reasonable” must ultimately prevail.

The same shortcomings can be shown in every attempt to construct a theory of historical stages. Underlying all such theories are generally, though not always, observations and discoveries that are correct in themselves. But the use that these theories make of them is impermissible. Even where the experience to which they refer does not exhibit merely a nonrepeatable succession of phenomena, these theories go far beyond what is logically legitimate. Before the beginnings of an independent social science, historians were aware of the importance of proper location for productivity. Since the conditions that make locations appear more or less favorable undergo change, one acquires a means of historically explaining shifts of location and migratory movements. On the other hand, the theories of geographical stages, entirely apart from the fact that they present the law of location in the most crudely oversimplified and inadequate way, render access to the understanding of these problems only more difficult. Hegel maintained:

World history goes from East to West; for Europe is obviously the end of world history, and Asia, the beginning. While the “East” in itself is something quite relative, there exists for world history an East xατ εξοχην; for, although the earth is a sphere, history, nevertheless, does not travel in a circle around it, but has, on the contrary, a determinate East, viz., Asia. Here rises the external, physical sun, and in the West it sinks down; in compensation for which, however, the inner sun of self-consciousness, which diffuses a nobler splendor, rises here.83

And according to Mougeolle, there is a “law of altitudes,” namely, that in the course of history the city is increasingly forced down into flat land by the mountains; and a “law of latitudes,” to the effect that civilization has always moved from the tropics toward the poles.84  In these laws too we find all the shortcomings that attach to every theory of historical stages. The causa movens of the changes is not shown, and the accuracy of the geographical concepts that they contain cannot conceal the fact that for the rest they are based on ideal-typical constructions, and indeed on such as are uncertain and therefore unusable, like “world history” and “civilization.” But still more serious by far is the fact that without any hesitation they leap from the statement of the law of location to a volition uniquely determined by it.

Becher accounts as follows for his opinion that the possibility of historical laws cannot be denied in principle:

One did not want to admit historical laws as such because they are of a secondary, reducible, and derivative nature. This rejection rests upon an unsuitable, narrowly conceived notion of law, which, if applied consistently to the natural sciences, would compel us to deny the title of natural laws to many relationships that everyone designates as such. For most of the laws of natural science—e.g., the laws of Kepler, the laws of wave theory concerning resonance, interference, and so on, and the geometric-optical laws of the effect of concave mirrors and lenses—are of a secondary and derivative character. They can be traced back to more fundamental laws. The laws of nature are no more all ultimate, irreducible, or fundamental than they are all elementary, i.e., laws of elementary, not complex phenomena. . . . However, if this designation is quite generally conferred on numerous “laws” of natural science which are neither fundamental nor elementary, then it will not do to deny it to historical laws simply because they are not fundamental or elementary in character.85

In my opinion, this argument does not get to the heart of the matter. The question is not whether the designation “law” is to be applied only to fundamental or elementary regularities. This, after all, is an unimportant question of terminology. In and of itself, it would not be impossible, although inexpedient in the greatest measure and disregardful of all economy of thought, to formulate the laws of acoustics as statements about concerts rather than sound waves. However, it would certainly not be possible to include in these laws, if they are to retain the character of laws of natural science, statements about the quality and expression of the musical performance. They would have to confine themselves to what can be described by the methods of physics. We are unable to include the entire course of historical phenomena in laws, not because they are complicated and numerous or because factors and conditions independent of one another are involved in them, but because they include also factors whose role we are unable to determine precisely. The concepts of sociology extend as far as exactness is possible in principle. On the other side of these boundaries lies the domain of history, which, by means of ideal types, fills with the data of historical life the frame provided by sociology.

• 74The distinction between statics and dynamics as I conceive it differs from the distinction as Amonn conceives it. This difference cannot be gone into more thoroughly here. However, I must, of course, call particular attention to what Amonn says regarding the entirely different meaning that attaches to these conceptual correlates in mechanics and in economics. The concepts of statics and dynamics in economics do not involve the application of an analogy drawn from mechanics, but represent a mode of thinking appropriate to the character of economic science, for which only the name employed by mechanics was borrowed. Cf. Alfred Amonn, Grundzüge der Volkswohlstandslehre (Jena, 1926), Part I, 275 ff.
• 75Cf. J.B. Clark, Essentials of Economic Theory (New York, 1907), pp. 130 ff.
• 76It is a serious misunderstanding to believe, as Flügge does (“Institutionalismus in der Nationalökonomie der Vereinigten Staaten,” Jahrbücher für Nationalökonomie und Statistik, New Series, LXXI, 339) that the construction of a static state would not be suited to lead to the understanding of economic changes.
• 77Cf. above pp. 77 f.
• 78Cf. Georg Simmel, Die Probleme der Geschichtsphilosophie (4th ed.; Munich and Leipzig, 1922), pp. 107 ff.
• 79Cf. Karl Bücher, Die Entstehung der Volkswirtschaft, Series I (10th ed.; Tübingen, 1917), p. 91. Bücher’s theory of historical stages is taken here as representative of an entire class of such theories, among which, for example, we may number that of Schmoller. The dispute over precedence connected with Bücher’s theory is without importance from our point of view.
• 80Ibid., p. 149.
• 81Ibid., p. 150.
• 82On the other hand, Erich Becher, Geisteswissenschaften und Naturwissenschaften (Munich and Leipzig, 1921), pp. 131, 171f. is inclined to see in these theories of historical stages “universal laws, or, if one wishes to speak more reservedly, principles of historical economic development.”
• 83Hegel, Vorlesungen über die Philosophie der Weltgeschichte, pp. 232 f.
• 84Cf. Mougeolle, Les problèmes de l’histoire, pp. 98 ff., 121 ff.
• 85Cf. Becher, Geisteswissenschaften und Naturwissenschaften, p. 175.

Sociology cannot grasp human action in its fullness. It must take the actions of individuals as ultimately given. The predictions it makes about them can be only qualitative, not quantitative. Accordingly, it can say nothing about the magnitude of their effects. This is roughly what is meant by the statement that the characteristic feature of history is concern with the individual, the irrational, life, and the domain of freedom.86  For sociology, which is unable to determine in advance what they will be, the value judgments that are made in human action are ultimate data. This is the reason why history cannot predict things to come and why it is an illusion to believe that qualitative economics can be replaced or supplemented by quantitative economics.87  Economics as a theoretical science can impart no knowledge other than qualitative. And economic history can furnish us with quantitative knowledge only post factum.

Social science is exact in the sense that it strives with conceptual rigor for an unequivocally defined and provable system. It is idle to dispute over whether one should make use of mathematical forms of presentation in sociology, and particularly in economics. The problems confronting sociology in all its branches, including economics, present such extraordinary difficulties that, in the eyes of many, even the most perplexing mathematical problems possess the advantage of being more easily visualized. Whoever believes that he cannot do without the help that the reasoning and terminology of mathematics affords him in the mastery of economic problems is welcome to make use of them. Vestigia terrent! Those theorists who are usually designated as the great masters of mathematical economics accomplished what they did without mathematics. Only afterwards did they seek to present their ideas in mathematical form. Thus far, the use of mathematical formulations in economics has done more harm than good. The metaphorical character of the relatively more easily visualized concepts and ideas imported into economics from mechanics, which may be warranted as a didactic and occasionally as a heuristic expedient as well, has been the occasion of much misunderstanding. Only too often the criticism to which every analogy must be subjected has been neglected in this case. Of primary importance is what is set forth in words in the preliminary statement that has to serve as the starting point for further mathematical elaboration. This statement, however, is always nonmathematical.88  Whether or not its further elaboration in mathematical terms can be useful depends on the correctness of this initial nonmathematical statement. To be sure, if the mathematical elaboration is itself incorrect, it will arrive at incorrect results even though it may start from a correct statement; but mathematical analysis can never expose an error made in an incorrect statement.

Even the mathematical sciences of nature owe their theories not to mathematical, but to nonmathematical reasoning. Mathematics has a significance in the natural sciences altogether different from what it has in sociology and economics. This is because physics is able to discover empirically constant relationships, which it describes in its equations.89  The scientific technology based on physics is thereby rendered capable of solving given problems with quantitative definiteness. The engineer is able to calculate how a bridge must be constructed in order to bear a given load. These constant relationships cannot be demonstrated in economics. The quantity theory of money, for example, shows that, ceteris paribus, an increase in the quantity of money leads to a decrease in the purchasing power of the monetary unit, but the doubling of the quantity of money does not bring about a fifty percent decline in its purchasing power. The relationship between the quantity of money and its purchasing power is not constant. it is a mistake to think that, from statistical investigations concerning the relationship of the supply of and the demand for definite commodities, quantitative conclusions can be drawn that would be applicable to the future configuration of this relationship. Whatever can be established in this way has only historical significance, whereas the ascertainment of the specific gravity of different substances, for example, has universal validity.90

Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. The economist can and does know in advance what effect an increase in the quantity of money will have upon its purchasing power or what consequences price controls must have. Therefore, the inflations of the age of war and revolution, and the controls enacted in connection with them, brought about no results unforeseen by economics. However, this knowledge is not quantitatively definite. For example, economics is not in a position to say just how great the reduction in demand will be with which consumption will react to a definite quantitative increase in price. For economics, the concrete value judgments of individuals appear only as data. But no other science?not even psychology?can do any more here.

To be sure, even the valuations of individuals are causally determined. We also understand how they come about. That we are unable to foretell their concrete configuration is due to the fact that we here come up against a boundary beyond which all scientific cognition is denied to us. Whoever wants to predict valuations and volitions would have to know the relationship of the world within us to the world outside us. Laplace was unmindful of this when he dreamed of his cosmic formula.

• 86Simmel seeks in an ingenious way to express this singularity of the historical in his discussion of individual causality. Cf. Simmel, op. cit., pp. 100 ff.
• 87Mitchell shares this illusion with many others. Cf. Wesley C. Mitchell, “Quantitative Analysis in Economic Theory,” American Economic Review, XV, 1 ff.
• 88Cf. Dingler, Der Zusammenbruch der Wissenschaft (Munich, 1926), pp. 63 ff.; Schams, “Die Casselschen Gleichungen und die mathematische Wirtschaftstheorie,” Jahrbücher für Nationalökonomie und Statistik, New Series III, LXXII, 386 ff. Painlevé aptly states the objection to the mathematical treatment of economics in his preface to the French edition of Jevons’ Principles (Paris, 1909), pp. v ff.
• 89Cairnes, The Character and Logical Method of Political Economy, pp. 118 ff.; Eulenburg, “Sind historische Gesetze möglich?” Hauptprobleme der Soziologie (Munich, 1923), I, 43.
• 9090Therefore, it would also be a mistake to attempt to attack the statement in the text by referring to the fact that the natural sciences borrowed the statistical method from sociology and now seek to make it serve their own purposes.

If one conceives of “nature” as Kant did, as “the existence of things as far as it is determined according to universal laws,”91  and if one says, in agreement with Rickert, “Empirical reality becomes nature when we view it with respect to the universal; it becomes history when we view it with respect to the particular and the individual,”92  then one must necessarily arrive at the conclusion that sociology—supposing such a discipline at all feasible—is to be regarded as a natural science, that is, as one making use of the methods of the sciences of nature. On the other hand, one must, in that case, deny the possibility of historical laws. Of course, in many instances the idea that natural science and nomothetic science are identical concepts lay at the root of the contention that history had only to adopt the methods of the sciences of nature in order to become a nomothetic science of human action. Terminological misunderstandings of all kinds have enveloped discussion of these questions in the greatest confusion.

Kant’s and Rickert’s terminology is no doubt to be accounted for by the fact that sociology remained unknown to both and even the very possibility of a theoretical science of social phenomena never seriously became a problem for them. As regards Kant, this requires no further proof.93  As for Rickert, one need only note the sparse and altogether inadequate comments he devoted ‘to sociology. Though Rickert must admit that there can be no objection to “a natural science or a generalized presentation of social reality,”94  it does not occur to him to become familiar with sociology itself in order to find some way toward the solution of its logical problems. He disregards the principle that “occupation with the philosophy of science presupposes knowledge of the sciences themselves.”95  It would be a mistake to reproach Rickert for this, especially as his own contributions to the logic of history are not to be disputed. Nevertheless, it must be pointed out with regret that Rickert remains far behind Menger as regards the recognition of the distinction—set forth at the very beginning of the latter’s work—which appears within the social sciences themselves, between the historical sciences, directed toward the comprehension of phenomena in their particularity, and the theoretical sciences, which are directed toward the comprehension of the universal characteristics of phenomena.96

The last position still held in the dogged battle against the recognition of sociology is that of those who would limit the validity of sociological laws to a definite historical period. It was Marxism that first fell back upon this expedient. In the view of interventionism, whose triumph in the sphere of practical politics the adherents of the Historical School wanted to aid in achieving, every attempt to demonstrate a regularity in the sequence of social phenomena had to appear as a dangerous challenge to the dogma of the omnipotence of government interference. Interventionism simply rejected every theory. The case was different with Marxism, at least in the province of theory. In practical politics, of course, the attitude of Marxism gradually underwent a change: step by step the Marxist parties proceeded to adopt the slogans of interventionism. But it did not occur to the Marxist theoreticians to call into question the demonstration by classical economics that all forms of government interference with the market are senseless because the goals aimed at cannot be attained by means of them. The Marxists adopted this view all the more readily because it enabled them to point out the futility of every attempt to reform the existing social order and to refer all the discontented to the coming regime of socialism.

What Marxism needed was a theory that enabled it to quash the extremely embarrassing economic discussion of the possibility of realizing the socialist community?a discussion to which it was unable to contribute any relevant arguments. The theory of economic systems offered it this opportunity. According to this theory, in the course of history one economic system succeeds another, and in this succession—as is the case in all theories of historical stages—the later system is to be regarded as the “higher” system. The basic metaphysical and teleological orientation, which the scientific theories of historical stages presented by List, Hildebrand, Schmoller, and Bücher seek to disguise, is quite naively adopted by Marxism, although it insistently claims for itself the title of “scientific” socialism. The end and goal of all history is the socialist Kingdom of Promise. However, inasmuch as socialism is a new economic system and has not yet been achieved, it would be “utopian”—and, in the language of Marxism, this means unscientific—to attempt today to discover the laws by which the economy and society of this future system will be governed. The only function of science, on this view, is to investigate the laws of present and past economic systems. In Kapital Marx wanted to undertake this task in regard to the present, capitalist economic system. Later, attempts were made to distinguish within the era of capitalism several subsidiary periods, each with its peculiar economic system (early capitalism, high capitalism, late capitalism, and the transition period) and to delineate the economy of each.

We can disregard here the inadequacy of the efforts that Sombart, Rosa Luxemburg, Hilferding, Bucharin, and others devoted to these tasks.97  The only question that concerns us here is: Would a theory valid for only one historical era still be a theory in the sense in which we differentiate theory from history? If we recall what we have said above concerning the logical character of laws of historical stages, the answer cannot be difficult to find. The division of the entire course of history into periods can be undertaken only on the basis of ideal types. Consequently, the idea of an individual economic period lacks universal validity from the very outset, since the characteristics that define it need not be exhibited in every individual case comprised by it. Thus, a “theoretical” proposition that is supposed to be valid only for the conditions of that economic period can likewise be conceived only in ideal-typical terms.

If one assumes, for example, the predominance of the “capitalist spirit” as the criterion of the capitalist era of history, one, of course, does not assert that this spirit, no matter how narrowly circumscribed, straightway seized all men living in that era. The idea that still other “spirits” were operative as well is quite compatible with the ideal type; for it is certainly never maintained that the capitalist spirit prevailed without exception, but only that it predominated, in the era of capitalism. However, if one then formulates, let us say, laws of price determination in the capitalist economy, these laws can surely not be intended as having no exception. At least where different mentalities are to be found alongside the otherwise predominant capitalist spirit, other laws of price determination can, and indeed must, be valid. For this reason, whoever is willing to grant recognition solely to theories that are dependent on history disputes in fact the legitimacy of every universally valid theory. The only science he accepts in the sphere of human action is history, with the logical structure of the ideal type peculiar to it.

However, for this school, as well as for all other proponents of historicism, the rejection of the possibility of a universally valid theory is of merely academic significance. In effect, it is programmatic and nothing more. In actual practice, use is unhesitatingly made of concepts and propositions that, from the logical point of view, can be understood only as having universal validity. Every particular “spirit” that is supposed to be peculiar to each of the individual periods reveals itself on closer examination as an ideal dominating the majority of individuals in a given period, and the particular form of the economy proves to be a technique of social cooperation imposed by the distinctiveness of this ideal and by the prevailing views about the best way of realizing it.

The objection may be made that the species homo sapiens is but a temporal phenomenon and that, accordingly, a science of human action pure and simple could differ merely in degree, but not in logical character, from a science of human action valid within a limited historical period. However, this objection misunderstands the sole meaning that can be attached to the concept of universal validity in the realm of the science of human action, viz., valid wherever the assumed conditions, which are to be strictly defined, are given. The determination of the subject matter of the science of human action is not based on the empirical distinction between man and his prehuman ancestors, but on the conceptual difference between action and the merely reactive behavior of cells.

• 91Kant, Prolegomena zu einer jeden künftigen Metaphysik, ed. by Insel, IV, 417, §14.
• 92Heinrich Rickert, Die Grenzen der naturwissenschaftlichen Begriffsbildung (2nd ed.; Tübingen, 1913), p. 224; Rickert, Kulturwissenschaft und Naturwissenschaft, p. 60.
• 93Concerning Kant’s fundamental social views, cf. my Socialism, pp. 298, 434.
• 94Rickert, Die Grenzen der naturwissenschaftlichen Begriffsbildung, pp. 196 f.; similarly, p. 174. The conclusion at which Rickert finally arrives—that sociology can never take the place of history—is, of course, to be concurred with.
• 95Hermann Weyl, “Philosophie der Mathematik und Naturwissenschaft,” Handbuch der Philosophie (Munich and Berlin, 1927), p. 3. Wundt has endeavored to base his investigations on a more thoroughgoing study of the social sciences. Cf. Wundt, Logik (3rd ed.; Stuttgart, 1908), III, 458 ff. The period and milieu in which he worked explain the fact that he misunderstood modern subjectivist economics in his study. He could not be made aware of this deficiency even, as we have already seen, by Menger’s book on methodology.
• 96Cf. Carl Menger, Untersuchungen über die Methode der Sozialwissenschaften und der politischen Ökonomie insbesondere (Leipzig, 1883), pp. 3 ff.
• 97One could not arrive at such a theory by any of the procedures of thought available to us. Cf. above pp. 9 ff., 26 ff.

The battle of the proponents of historicism against the nomothetic science of human action was absurd and preposterous, and the rejection of the demand of naturalism that historical investigations, pursued with the methods of the natural sciences, should seek for “historical laws” was necessary and fully justified.

History cannot fulfill its task if it does not employ the most precise logic. At every step of the way it must make use of universally valid concepts and propositions; it must use reason​—ratio—; it must, whether it wants to or not, theorize. If this is the case, then it is obvious that nothing but the best theory is good enough for it. The historian is not warranted in uncritically accepting any concept or proposition from the stock of naive popular habits of thought. He must first subject all concepts and propositions to a sharp, critical examination. He must think every idea through to its consequences, and again and again question and examine it. He must connect the individual ideas into a coherent system. In short, he must either practice theorizing himself or accept theory where it is developed in a scientific way with all the resources available to the human mind.

It is evident that the mere elaboration of a theory is not yet a contribution to history. Yet history can get on with the task proper to it only when the resources that theory provides are completely exhausted, Only there does the realm of history—the realm of the individual, of that which happens but once, of the historical whole—begin. It cannot cross the threshold of this realm until it has been brought there by the power of rational thinking.

Rothacker maintains that the specific “understanding” made use of in the moral sciences proceeds along the two paths of conception and explanation up to the point at which a leap “into an irrational relationship” paves the way for it.

If a work is conceived, no understanding in the strict sense is involved. If it is explained, there is likewise no understanding. But where we find ourselves compelled to look for something that is individually vital in a work, something that is not completely analyzable in conception nor completely explicable, we expect to encounter attempts at pure understanding, at understanding in the pregnant sense.

However, “rational measures” which have first been “exploited to the full” must precede this understanding.98

At the start of the Methodenstreit, Walter Bagehot, who, in 1876, was the first to object to the rejection of theory by the Historical School, declared that an historical presentation of economics is

no substitute for a preliminary theory. You might as well try to substitute a corollary for the proposition on which it depends. The history of . . . is the history of a confused conflict of many causes; and unless you know what sort of effect each cause is likely to produce, you cannot explain any part of what happens. It is like trying to explain the bursting of a boiler without knowing the theory of steam. Any history . . . could not be usefully told, unless there was a considerable accumulation of applicable doctrine before existing. You might as well try to write the “life” of a ship, making up as you went along the theory of naval construction. Clumsy dissertations would run over the narrative; and the result would be a perfect puzzle,99

The champions of historicism forgot this. They wanted to compile data “devoid of theory.” This made the work of even the best of them fruitless. History can never really be history without the intellectual tools provided by the theory of human action. History must rest on theory, not to alienate itself from its proper tasks, but on the contrary, in order more than ever to discharge them in the true sense of history.

And Bagehot’s words should never be forgotten:

Rightly conceived, the historical method is no rival to the abstract method rightly conceived.100

• 98Rothacker, “Logik und Systematik der Geisteswissenschaften,” Handbuch der Philosophie (Munich and Berlin, 1927), pp. 123 f.
• 99Bagehot, “The Postulates of English Political Economy,” Works, edited by Russel Barrington (London, 1915), VII, pp. 103-104. The fact that Bagehot in the following pages of his treatise makes untenable concessions to the arguments of historicism and supports the idea of laws which are to be valid only for a definite period need not be considered here. On this point, cf. John Neville Keynes, The Scope and Method of Political Economy (London, 1891), pp. 289 ff.
• 100Bagehot, “The Postulates of English Political Economy,” p. 104.