Encyclopædia Britannica, Ninth Edition/Friedrich Benedict Wilhelm von Hermann
From this time onwards Hermann’s life was one of great and varied practical activity. From the year 1836 he acted as inspector of technical instruction in Bavaria, and made frequent journeys to Berlin and Paris in order to study the methods there pursued. In the state service of Bavaria, to which he devoted himself, he rose gradually but rapidly. In 1837 he was placed on the council for superintendence of church and school work; in 1839 he was entrusted with the direction of the bureau of statistics; in 1845 he was one of the councillors for the interior; in 1848 he sat as member for Munich in the national assembly at Frankfort. In this assembly Hermann, with Heckscher and Sommaruga, was mainly instrumental in organizing the so-called “Great German” party, and was selected as one of the representatives of their views at Vienna. Warmly supporting the customs union (Zollverein), he acted in 1851 as one of its commissioners at the great industrial exhibition at London, and published an elaborate report on the woollen goods. Three years later he was president of the committee of judges at the similar exhibition at Munich, and the report of its proceedings was drawn up by him. In 1855 he became councillor of state (Staatsrath im ordentlichen Dienst), the highest honour in the service to which he could attain.
It is hardly surprising that in the midst of such varied and weighty practical occupations Hermann did not find time for carrying on systematically his work in the pure science of economics. Yet the long series of reviews, mainly of works on economical subjects, published in the Münchener Gelehrte Anzeigen from 1835 to 1847, attest his unabated industry and constant interest in the subject on its theoretical side, while his more elaborate papers in Rau’s Archiv der politischen Oekonomie and in the Augsburger Allgemeine Zeitung show the wide extent of his practical knowledge. As head of the bureau of statistics he published a series of annual reports (Beiträge zur Statistik des Königreichs Bayern, Heft 1–17, 1850–1867) which are of very high value, especially as regards the growth of population. His only complete work in economic science, the Researches, had gone out of print a very few years after the book was published, but not until near the close of his life did Hermann find an opportunity of undertaking a revision of it. Upon this task he was engaged at the time of his death, 23d November 1868, and he had recast, enlarged, and amended nearly two-thirds of the volume. The second edition, prepared from his MS., and including those parts of the first edition which had not been revised or superseded, was published in 1870 by his friends Dr Helferich and Dr Mayr. There have since been several reprints.
Although the Staatswirthschaftliche Untersuchungen is not a systematic treatise on political economy, it must nevertheless be regarded as in many respects the most important contribution to the science since the Wealth of Nations. It cannot, indeed, be said to contain principles which are in themselves novel or original; Hermann’s merits are not so much those of a discoverer as of a most acute and subtle critic. Like Ricardo he excels in abstract analysis, in resolution of complex phenomena into their simpler elements, but he has a more firm hold than Ricardo ever seems to have possessed of the true nature of these elementary facts, and a remarkable power of precisely stating and comprehensively combining them. The peculiar value of the Researches consists in the strict analysis to which the primary notions of economics are subjected, in the general conception of the method and plan of the science which emerges from this analysis, and in the masterly way in which fundamental principles are carried out in the detailed problems of the science. Only in the fashion indicated by Hermann can we hope to render clear the position of a pure theory of economic facts as an indispensable and independent branch of social science. The historic method of inquiry, fatal to much that has been regarded as distinctive of the abstract or English school of political economy, harmonizes perfectly with the theory of the elementary facts from which economical development takes its start, as stated by Hermann and those Continental writers who have followed him.
The Researches, in the 2d edition, consists of ten separate essays, of which the first, on the fundamental notions of economics (“Grundlegung,” pp. 1–77), the fifth (pp. 143–389, on “Production”), the sixth (pp. 390–459, on “Price”), the eighth (pp. 448–531, on “Profit”), and the ninth (pp. 582–598,on “Revenue”) are of the greatest importance. In the “Grundlegung,” a clear and lucid description is given of the simple phenomena, in family, community, and state, upon which economical inquiries are founded. Human wants and the satisfaction to be obtained for them by labour exercised on natural agents are recognized as the primitive facts. But in the satisfaction of wants there are two aspects, the technical and the economical. Technically we consider solely the process by which commodities of a quality suited to satisfy want are obtained. Economically we have always to estimate the ratio between the effort expended and the result obtained. An “economy” is a distribution of forces so that the result, satisfaction, may be obtained with least expenditure of effort, with least loss of utility. The influence of this economical principle, the institutions to which it gives rise, the conditions under which it is possible, and the circumstances which affect, modify, or counteract it, are traced with reference to the individual, the family, the community, and the state or nation. The increasing complexity of the phenomena does not alter the nature of the principle which lies at the basis of them, and it is the business of economic theory to analyse these phenomena under guidance of the general principle. Economics is therefore defined by Hermann as the “quantitative theory of goods;” and, though he is sparing in the use of symbols, his method of treatment is throughout mathematical. Deserving of attention is the manner in which he points out the influence of collective feeling and collective wants as giving rise to special institutions (government, defence) in the community. To this first fundamental essay the three succeeding papers (“Wants,” “Goods,” “Economy,” pp. 78–142) are appendices. The treatment of these, the classifications given, the detailed discussion of particular points, e.g., the productivity of labour, and the distinction drawn between economical estimates from the individual or the collective point of view, make up a solid contribution to the science.
The fifth essay is an elaborate treatise on the theory of production, treating the agents of production free goods, labour, and capital separately, then the interests of the several parties engaged, and the changes due to variations in the cost of producing. Under “Labour” is given the most complete and systematic discussion of separation of employments. Capital is defined so as to include land, but careful reference is made to the distinctive peculiarities of this form of wealth. Especially remarkable is Hermann’s treatment of what he calls Nutz-capital (i.e., service-capital), with regard to which he accepts almost entirely the view of J. B. Say. Under fixed capital a very elaborate treatment of the nature and economic influence of machines is given, while the handling of changes in the cost of production, both here and in the essay on “Profit,” is acute and luminous.
The sixth essay analyses the forces which underlie supply and demand. These are stated to be:—(a) on the side of the purchaser—(1) his desire for the commodity in question, or its utility to him, (2) his means, (3) the competition of sellers; (b) on the side of the seller—(1) cost of production, (2) competition of the buyers, (3) the value of the medium of exchange. The same considerations are shown to hold good in the case of the price of labour, though unfortunately the seventh essay, on “Wages,” is incomplete. The eighth essay, on “Profit,” discusses very elaborately the rate of return on the various species of capital and the circumstances that determine it, distinguishes interest from profit in general, and marks as a special form the profit of the entrepreneur (Unternehmergewinn). This last he regards as distinct from wages of superintendence, and from insurance for risk. The ninth and tenth essays, on “Revenue” and “Consumption,” are perhaps specially interesting from the clear mode in which the theory, afterwards called that of the wages fund, is rejected, and from the precision with which the diverse points of view for estimating net revenue are discriminated.
This brief analysis is sufficient to show the high value of Hermann’s work as a contribution to pure economics. On practical questions, those of economic legislation, his opinions are only to be gathered with difficulty from the papers in the Gelehrte Anzeigen, and generally were expressed with such reference to special circumstances as to render doubtful their full import. It seems probable, however, that his views on protection were far from clear, and that he was somewhat under the sway of the dangerous principle that the best financial policy is encouragement of national industry. It is difficult, however, to speak definitely on this subject.