Commentary on Political Economy

Thursday 8 September 2011

Nietzsche, Schumpeter and Menger - The Methodenstreit with the German Historical School

This is probably the biggest "offer" we have made to our loyal friends so far: Nothing less than a lengthy excerpt from the Nietzschebuch - originally meant to be a chapter of Krisis and now a book in its own right (close to completion). The book is called Umwertung: Nietzsche's "Trans-valuation of All Values". Enjoy reading it!

It is of the utmost importance to realize that what Nietzsche opposes is not the “instrumental” approach to society and community: Nietzsche understands that not only is this “instrumentalism” possible, but it is also valid “as a tool or strategy of power”! This may sound surprising in a philosopher who spared no effort to lampoon British Empiricism in science whilst at the same time constructing his entire philosophical Entwurf on the reality of “happenings”, of “events and appearances” and of “becoming” against all “rationalisms” – something that would normally have brought him closer to the Empiricists and even to the Machian Menger and the Austrian School. But what Nietzsche does not admit of is the validity of the “values” – scientific (truth), moral (good or evil) and ethical (justice) – that the “historicists” and the empiricists and Machians alike seek to ascribe to the “reality” of the istorein. Far from being or representing a “value”, history is an amethodon hyle – the “formless matter” of Herodotus and Thucydides – that exemplifies, e-veniences the “nature” or “physis” of the “individuals” involved. There is no “virtue” (arete’) or even “providence” (Herodotean “pro-noia”) or “spirit” (Geist) in history, but there is “fate” which is certainly not “Tyche” or “fortuna” (chance!), but rather nothing more than, most important for Nietzsche as we shall evince dramatically in Part Two of this work, the manifestation of the Will to Power as the Rationalisierung of life and the world!

Three kinds of “rationalities” are possible, therefore. One is the empiricist rationality of scientific research, another is the “teleological”, “idealist” rationality introduced by Hegel, and finally we have the Rationalisierung that Nietzsche expounds as the objectification of the Wille zur Macht. How difficult and confusing it may be to separate the three is perfectly illustrated by the most “philosophical” economic theoretician of the neoclassical and Austrian schools, Joseph Schumpeter, who combined a solid Machian background in the Vienna of Karl Renner with a Nietzschean vision of reality filtered through Max Weber. Schumpeter begins Chapter Two of his Theorie with this sweeping and suggestive summation:

“The social process which rationalizes our life and thought has led us away from the metaphysical treatment of social development and taught us to see the possibility of an empirical treatment; but it has done its work so imperfectly that we must be careful in dealing with the phenomenon itself, still more with the concept with which we comprehend it, and most of all with the word by which we designate the concept and whose associations may lead us astray in all manner of directions. Closely connected with the metaphysical preconception…. is every search for a ‘meaning’ of history. The same is true of the postulate that a nation, a civilization, or even the whole of mankind must show some kind of uniform unilinear development, as even such a matter-of-fact mind as Roscher assumed…” (p.57)

The footnote at “rationalizes” was expanded for the English translation and reads as follows:

“This is used in Max Weber’s sense. As the reader will see, “rational” and “empirical” here mean, if not identical, yet cognate, things. They are equally different from, and opposed to, “metaphysical”, which implies going beyond the reach of both “reason” and “facts”, beyond the realm, that is, of science. With some it has become a habit to use the word “rational” in much the same sense as we do “metaphysical”. Hence some warning against misunderstanding may not be out of place.”

Evident here is the maladroit manner and dis-comfort (not aided, and perhaps exacerbated, by the disjoint prose) with which Schumpeter approaches the question of the “meaning” of history. The Rationalisierung, which Schumpeter adopts from Weber, has made “possible” a scientific “empirical treatment” of “social development (Entwicklung)”, but has done so only “imperfectly”, not to such a degree that we are able to free ourselves entirely of “metaphysical” concepts – which is why “we must be careful in dealing with the phenomenon [Entwicklung] itself”. Nevertheless, Schumpeter believes that it is possible to leave “metaphysics” behind and to focus on “both ‘reason’ and ‘facts’”, and therefore on the “realm of science”. In true Machian empiricist tradition, Schumpeter completely fails to see the point that Weber was making in adopting the ante litteram Nietzschean conception of Rationalisierung to which he gave the name. “The social process which rationalizes” is an exquisitely Weberian expression: far from indicating that there is a “rational science” founded on “reason” and “facts” that can epistemologically and uncritically be opposed to a non-scientifc idealistic and “metaphysical rationalism”, Weber is saying what Nietzsche intended by the ex-ertion of the Will to Power as an ontological dimension of life and the world that “imposes” the “rationalization” of social processes and development in such a manner that they can be subjected to mathesis, to “scientific control”! What Weber posits as a “practice”, one that has clear Nietzschean onto-logical (philosophical) and onto-genetic (biological) origins, Schumpeter mistakes for an “empirical” and “objective” process that is “rational” and “factual” at once – forgetting thus the very basis of Nietzsche’s critique of Roscher and “historicism”, - certainly not (!) because they are founded on “metaphysics” (!), but because they fail to “question critically” the necessarily meta-physical foundations of their “value-systems”, of their “historical truth” or “meaning”!

Far from positing a “scientific-rational”, “ob-jective” and “empirical” methodology from which Roscher and the German Historical School have “diverged” with their philo-Hegelian “rationalist teleology”, Nietzsche is attacking the foundations of any “scientific” study of “the social process” or “social development” that does not see it for what it is – Rationalisierung, that is, “rationalization of life and the world”, the ex-pression and mani-festation of the Wille zur Macht! By contrast, Schumpeter believes that the mere abandonment of any “linearity” in the interpretation of history, of any “progressus” (as Nietzsche calls it), is sufficient to “free” his “rational science” from the pitfalls of “metaphysics”!

This contrast between Nietzsche’s approach to the world of experience and perception and appearance as “becoming”, against the Machian “empiricist” approach to “scientific reality and fact and truth” is quite revealing: both Nietzsche and Mach start from the opposition of “experience” and “perception” to any “meta-physical reality” that may lie “beyond” the human perception of life and the world – including, even for Mach, the Newtonian conception of space and time! But, a most crucial distinction, whereas Mach still believes in the epistemological “reality” of Newtonian physics and of the “laws of science” tout court, Nietzsche in extreme and radical contrast comes to question the very “scientificity” of this “science” and of this “reality”, whether Newtonian or indeed Machian, questioning in the process even the Kantian epistemological foundations of logico-mathematics! (We shall pay the closest attention to these matters – which constitute the whole thrust and import of our present work – in Part Two of this study.)

Here it will suffice to reiterate that Nietzsche shares wholeheartedly – nay, makes it a point of pride of his philosophy dating from Birth of Tragedy  - the anti-historical notion of “fate” not as “pro-noia” or pro-vidence, and not even as the “cyclical” and “pagan”, pre-Judaeo-Christian interpretation of historical time, but certainly against the mediaeval Scholastic “linear” interpretation of Christian millenarism. (Cf. Mazzarino, ‘PSC’, Vol.3, refs. to Nietzsche.) “Cyclicality”, whether in its cosmological version (the exact repetition of events or palingenesis with final apokatastasis) more attributable to Epimenides, with whose concept of “prophecy” Nietzsche would have disagreed, or even historical-analogical (the repetition of “cycles”, anakyklosis) as with Polybius and Vico (“corsi e ricorsi”), was certainly not what Nietzsche intended to oppose to his presumed Christian “linearity”, but rather the “a-historicity” or “realism” of a Thucydides or Machiavelli intent on the study of “completed actions” (autopsia, dia-gnosis).

Nietzsche may well have approved of Karl Menger’s attack on “the errors of historicism” for its unwillingness “to theorise” mathematically certain social phenomena, economic ones in particular; but most certainly not in pursuit of a “scientific empeiria”, a factual “research” that could follow “empirical methodological or scientific standards”. Rather, he would stress the “instrumental” nature of any such “mathesis”: in other words, he would insist that such “regularities and tendencies” as the neoclassical Menger and Jevons sought (the phrase is Keynes’s, who uses it to describe the latter’s innate “statistical” quest, in ‘Essays in Biography’) – a search joined even by Marx in his “scientistic” mode - exist not as “absolutes” or as “explanations”, but purely as “descriptions” of a “reality” that changes and is “trans-formed” continuously! This would explain Mazzarino’s “perplexity” [‘PSC’, Vol3, p.362] when confronting Nietzsche’s attack on Roscher for his “historicist” divergence from the Thucydidean focus on individual events and Menger’s equally virulent “anti-historicist” diatribe with this most “pro-Thucydidean” of German historians and his successor, Gustav Schmoller, for refusing to draw scientific generalizations from history because of their focus on just such individual events! Mazzarino’s perplexity can be overcome if one considers that whilst Nietzsche did not admit of a “linear history” from which a “telos” or a “scientific truth” could be deduced, nevertheless he could have agreed with Menger that “scientific instruments” could be applied in a “practical” or “strategic” sense to the study of a given “historical space” as nothing other than ex-ertions of the Will to Power, as “the rationalization of life and the world”!

It is most important to note at this juncture that, as we argue in our study on the origins of “The Neo-classical Revolution in Economics”, the Austrian and German Schools, however “heated” their controversy over the “methodology” of the social sciences (the famous “Methodenstreit”) constituted powerful forces in the concerted effort by capitalist bourgeois interests across Europe to counter the emergence of socialist parties and their ideologies in the name of an overall “methodological subjectivism” that displaced the entire focus of Political Economy from “Labour” to “individual Utility” and therefore from the dramatic transformation and concentration of the labour process (Taylorism and Fordism), of the composition of the working class (from the skilled [Gelernt]to the mass worker), and that of capital (the rise of large cartels and corporations vertically and horizontally integrated) in what has been generally described as “the Second Industrial Revolution” (see Alfred Chandler Jnr’s The Visible Hand),  to a vision of the liberal “free and competitive” market that championed the Planlosigkeit (spontaneous plan-lessness, anarchical freedom) of bourgeois civil society (Ferguson’s and Hegel’s burgerliche Gesellschaft) against the regimentation of the “planned”, “organized” economy advanced by the Sozialismus. It is the “abandonment” of all “metaphysical illusions” – the better to conceal the greater illusion of “marginal utility” - that will allow the conceptual fusion by the German ruling elites in the period to World War Two and beyond of the German Historical School’s focus on “individual”, interventionist specific projects of German industrial domination in Europe, on one hand, and of the Austrian School’s elevation of “individual” consumer choices on the other. In this context, Nietzsche’s own philosophical Entwurf, together with the spread of Machism in science that subtended both the Austrian (Menger, Bohm-Bawerk, Mises and Schumpeter, then Hayek) and the Lausanne (Walras and Pareto) Schools, must be seen as one co-ordinated and massive intellectual counter-attack by capital against the emergent working class whose political expression will culminate with the overarching intellectual vision of Max Weber. (For an initial outline of these arguments, see Cacciari’s “Sul Problema dell’Organizzazione” in ‘PNR’.)

The mathesis, which again will be the central theme of Part Two of this study, is a politically-charged praxis that Nietzsche brilliantly identified but failed to enucleate sufficiently. Despite vague warnings about the dangers of “scientisation” from far-sighted critical thinkers such as Gunnar Myrdal (‘The Politics of Economic Theory’) and Hannah Arendt (in ‘The Human Condition’) and Jurgen Habermas (in ‘Theorie und Praxis’), no serious attempt has been made to date to “theorize” or “identify” and spell out its nature and import. (We shall have occasion to explain later why Heidegger’s conception of Technik is at once inapplicable and irrelevant to the critique of capitalist social relations despite his most valiant efforts in that direction [in Die Technik und die Kehre and in Brief am Humanismus], capably but unconvincingly supported by Cacciari [‘Confronto con Heidegger’ in ‘PNR’].)

Thus, to repeat, the “difference” between Nietzsche and Menger is that whilst the former denied the possibility of a “science” of history, he may have agreed on the “instrumental” use of scientific techniques to societies and of economics in particular – what constitutes the Rationalisierung –, whereas the latter took the “historicist” denial of the “possibility” of economic “science” as “erroneous”, just as did Schumpeter. Whilst Nietzsche would agree with Roscher’s “historicism” in exalting historical “uniqueness” (except perhaps for the “analogical cyclicality” of the Eternal Return), he would also agree with Menger that this “historicism” cannot prevent (except epistemologically) the adoption of certain scientific “techniques” as strategies (ideologies) in the overall Rationalisierung of life and the world. Menger, for his part, starting from a Machian position, would argue that these “techniques” are also “scientific”. So, whereas Nietzsche understands “historicism” as “historical science” and deprecates it, Menger interprets it as “refusal to be scientific in economic matters” – which Nietzsche would allow! Marx will go even further than Menger by “historicizing” the laws of motion of modes of production in a historical-materialist sense, which is why he could deride jokingly the philo-Hegelian idealist “emanationism” of “Thukydides-Roscher” (in ch.9, Vol.1 of Das Kapital).

But the fact that Nietzsche, who championed Thucydides for confining himself to “happenings”, could attack Roscher’s “historicism” whilst Marx could do the same (although from a “historico-materialist” perspective) by lambasting “Thukydides-Roscher” ought to have warned the philosopher of Rocken about the possible different interpretations of Thucydides, with Marx placing the Greek historian clearly in the “historicist” camp. Later, Hayek and Schumpeter will assume a position similar to Menger’s. Even the Mengerian assault on Roscher and the German Historical School is evidence of Nietzsche’s mistaken “strictures” on the compass of Thucydides’s historical method, which could lend itself to broader “historicist” use in the “reflexive history” tradition (Hegel) of what Dilthey sought to theorise as the hermeneutic “Geisteswissenschaften”. (For a review of the “hermeneutic” current of historical interpretation, the obligatory reference, although from a heavily Heideggerian “perspective”, is H. Gadamer’sWahrheit und Methode.)

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