Eugen von Böhm-Bawerk, “Die klassische Nationalökonomie” (1889)

Böhm-Bawerk’s essay is a review of Lujo Brentano’s inaugural lecture, but it quickly becomes a methodological argument about the relation between theory and history in political economy. He first reconstructs Brentano’s attack on the classical school: its abstract “economic man,” its neglect of historical and social differentiation, and its tendency to convert simplified assumptions into universal laws.

Die vorliegende Schrift könnte auch betitelt sein: gegen die klassische Nationalökonomie.

English translation: The present work might just as well have been titled: Against the Classical Political Economy.

The classical economists, as Brentano presents them, strip away profession, class, nationality, custom, and culture until only a thin psychology remains. Böhm-Bawerk accepts that this is a powerful criticism of much classical reasoning, especially where complex institutions are treated as if they followed immediately from a few motives.

Es gibt in ihrer Psychologie nur zwei Triebfedern menschlichen Handelns: nämlich das Streben nach dem größtmöglichen Gewinn und den Geschlechtstrieb.

English translation: In its psychology there are only two mainsprings of human action: namely, the striving for the greatest possible gain and the sexual instinct.

Yet the review’s central move is to separate two questions Brentano tends to merge: whether the classical economists often erred, and whether those errors were caused by abstraction as such. Böhm-Bawerk grants the first point but rejects the second. Classical economics produced doctrines that later theory had to abandon, including crude labor-value reasoning, simplified wage and rent doctrines, and overconfident claims about equalization. But for Böhm-Bawerk these failures show not that theory is illegitimate, but that bad theory must be corrected by better theory and by historically informed observation.

Dank diesen vereinfachenden Voraussetzungen gelangt die klassische Nationalökonomie zu ungemein einfachen Gesetzen.

English translation: Thanks to these simplifying assumptions, classical political economy arrives at uncommonly simple laws.

The essay therefore defends isolating analysis while criticizing its careless use. Abstraction is not the same as apriorism: it is a tool for separating causal elements before returning to the complexity of real life. Böhm-Bawerk’s most important example is value theory. Ricardo’s labor theory is not, in his view, the inevitable product of abstract method; it is a mistaken theory that abstract analysis itself can overturn. Marginal utility theory is presented as evidence that rigorous theoretical work can correct classical doctrine rather than merely repeat it.

So wie sie nicht aus der vollen lebendigen Wirklichkeit geschöpft sind, so werden sie von der lebendigen Wirklichkeit auch nicht bestätigt: die Erfahrung widerspricht ihnen überall.

English translation: Just as they are not drawn from the full living reality, so they are not confirmed by living reality either: experience contradicts them at every turn.

Böhm-Bawerk is thus neither a simple defender of the old classical school nor an opponent of the historical school. He agrees that economic laws must be checked against institutions, customs, and empirical diversity. But he insists that historical description without causal theory cannot explain economic phenomena. The proper alternative is not “history before theory” in any exclusive sense, but a reciprocal method: theory supplies explanatory structure, history supplies correction, qualification, and concrete content.

The review’s significance lies in this balanced polemic. Böhm-Bawerk uses Brentano’s critique to acknowledge the limits of classical abstraction, while resisting the broader anti-theoretical conclusion that some historicists drew from those limits. Classical economics failed when it mistook provisional simplifications for complete reality; historical economics fails when it treats accumulated description as a substitute for explanation. The future of the discipline, as the essay implies, belongs to a synthesis in which abstract theory and historical specificity discipline one another.