Methodenstreit

Methodenstreit wascontroversy overmethodepistemological charactereconomics carried on inlate 1880searly 1890s betweensupporters ofAustrian SchoolEconomics, led by Carl Menger, andproponents of(German) Historical School, led by Gustav von Schmoller.
The German word Methodenstreit meansdispute over methods.

The Historical School contended that economists could develop newbetter social laws fromcollectionstudystatisticshistorical materials,distrusted theories not derived from historical experience.
The Austrian School by contrast believed that economics wasworkphilosophical logiccould only ever be about developing rules from first principles - seeing human motivessocial interaction as far too complexbe amenablestatistical analysis - purporting their theorieshuman actionbe universally valid.

The first move was when Schmoller wrotehighly critical reviewCarl Menger's PrinciplesEconomics. Menger's reply waspamphlet entitled The ErrorsHistoricism inGerman Political Economy1884. It woulddue course include thinkers such as Lujo BrentanoWerner Sombart forHistorical School,Eugene Boehm-Bawerk, Friedrich Wieser,Ludwig von Mises forAustrian School.

The term "Austrian schooleconomics" came into existence asresult ofMethodenstreit, when Schmoller usedin an unfavourable reviewoneMenger's later bookswas intendedconvey an impressionbackwardnessobscurantismHapsburg Austria compared tomore modern Prussians.

On an intellectual levelmethodenstreit wasquestionwhether there could bescience, apart from history, which could explaindynamicshuman action. Politically there were overtones ofconflict betweenclassical liberalism ofAustrian School andwelfare state advocated byHistorical School.