1. The idea of a study of relations between Italian and German economists between 1861 and 1930 came up during discussions at Macerata, Naples, Pisa, Ancona and Lecce among the historians and the historians of economic thought working on the national research project "Italian economists and the process of social and economic transformation", part of the TESI programme (Economic and Social Transformation in Italy) coordinated by prof. G. Fuà. We were interested in finding out if these relations played a role in the process of modernization of Italian economic culture and if they helped Italian economists to have a clearer perception of the major economic and social issues facing the country at that time. Obviously, considering the great length of the period under study, the complexity of the relations between the two countries in a crucial phase of their history and the radical changes that took place in economics in the same period, such a project seemed too ambitious if it was limited to a small number of scholars. Hence the idea of a conference which, on the one hand, would review the work already done and still underway, and on the other would pinpoint the problems to solve, the gaps to fill, the hypotheses to work on.

    There is no doubt that in the period from the Unification of Italy to the outbreak of the Great War, there was a wealth of contacts between Italian and German scholars that is unequalled in the recent history of the two countries. A quick glance at these shows that for German intellectuals, especially during the 19th century, Italy held "an extremely strong attraction" (Michels 1932, p. 280) and was a major subject of study for social scientists. From Heinrich Sieveking, Julius Beloch, Eberahrd Gothein, Wilhelm Held, Henry Simonsfeld, Reinhard Heynen, Aloys Schulte, Max Weber, Werner Sombart through to Michels himself, historians, political scientists, legal scholars and economic historians examined the development of the political institutions, economic and juridical structures that characterized the history of Italy from Roman times to the modern age (ibid., p. 280).

    On the other hand there is no doubt that Germany, with its scientific progress, the organization of its universities and its political development was the reference point for the more advanced part of the post-risorgimental Italian intelligentsia (Garin 1974, p. 9). In fact we can say that the "German model" was decisive for the modernization of Italian culture and for the definition of a modern liberal project. Suffice it to think of the debate between Italian liberalism and German culture triggered off by De Sanctis, Silvio and Bertrando Spaventa, Bendedetto Croce (just to mention the major names).

    Italo-German relations were also very intense at the level of economic culture. In the last thirty years of the 19th century, there was a rapid rise in interest in the German model of economic growth, in the relations between the State and the economy that characterized that model and in the system of social welfare connected to it (Gozzi 1984; 1988). Great attention was also attracted by the forms of scientific reflection that accompanied the evolution of that model of growth. It is useful, besides, to remember that it was not only Italy that was under the spell of the "German model", since Germany especially during the later nineteenth century was one of those countries to which students of economics gravitated (Tribe 1988, p. 2) and despite the obstacle of language, German universities were frequented not only by American but also by French, Russian and English students. For these reasons up until the 1920s, German economics exerted a powerful influence on the development of the discipline on an international scale (ibid., pp. 2-3).

    However, looking at the debates between economists in Italy between 1870 and 1910, there emerges a strange "anomaly". Looking to the German model was seen in other fields (those of philosophy, natural science, politics, administration and education) as an important element in the process of modernization of our culture and of our institutions and was regarded as a valid reference point for the construction of a modern liberal project for Italy; in the field of economics, however, it gave rise to heated disputes in liberal circles. Many economists regarded that model of economic growth as fundamentally anti-liberal, refusing as anti-liberal and anti-scientific the analyses it had produced, which tried to formulate generalizations that would be relevant to the development of economics (Krueger 1984; 1988; Balabkins 1993-1994).

    In this introduction it seemed useful to look at this "anomaly" for the simple reason that it emerged very early on due to Francesco Ferrara’s attacks on "economic Germanism" and, as well as determining the global nature of Italo-German relations, significantly influenced both the evolution of Italian economics and that of the newly-born field of public finance.

    Another element to which we will call attention is the extensive debate between Italian and German scholars on the subject of socialism. This is an aspect which has been widely studied at the historical level and which in recent years has also been analysed in the field of history of Italian economic thought. We will therefore simply recall several of the problem issues, since the work of the last few decades can today give us a new global vision that may lead to results that are different from the past.

    After the Great War, it is well known that Italo-German relations decreased but still retained a special interest in the field of study known to the Germans as Konjunkturforschung. In this sense Italo-German relations are at the heart of a crucial point in the development of Italian economics: the point which gave rise to those epistemological innovations that would lead towards dynamics.

    2. Looking at the evolution of Italian economics we find ourselves facing two paradoxes: the first is the centrality of a thinker like Francesco Ferrara, who, through economists like Pareto, Pantaleoni, Ricci, Einaudi, Del Vecchio (just to mention a few), significantly influenced the development of Italian economics; the other is the significance for Italian economics of the debate about "economic Germanism".

    As we know, foreign scholars have had difficulty understanding and explaining the central position of Ferrara in the development of Italian economics (Bousquet 1980 [ed. or. 1960], p. 249; Schumpeter 1990, p. 621). On the other hand if we examine his approach and the results he obtained, this difficulty of interpretation seems understandable. Ferrara moves in a contradictory way within the classical paradigm, at a stage when it has reached its crisis and when the emergence of marginalism has offered the prospect of a theoretical alternative. His essential reference points are Bastiat and the early Carey, whose studies are marked not so much by the originality of their theoretical content, as by their strong ideological content. Many of his contributions, interpreted in hindsight, seem to anticipate some of the later developments but they are presented in a context that is far removed from that of the marginalists. Indeed, as we shall see, Ferrara remarked on this distance, so much so that on the methodological and epistemological plane he seems in some respects nearer to those German economists that he criticised so radically. It remains to be seen, then, why Ferrara, in spite of all this, was, as Federico Caffè pointed out, the great "source of inspiration for the whole of liberal-oriented Italian economic thought" (and the ways he in part influenced socialist thought also need to be studied) (Caffè 1988, p. 241).

    Another paradox is the significance for the development of Italian economics of Ferrara’s concept of "economic Germanism", a concept which soon becomes an overall interpretative canon, but – when closely examined – proves to be surprisingly lacking in analytic content and with a high ideological density. The hypothesis being put forward here is that it was this concept that enabled the organic scheme of Ferrara’s thought (scattered in the introductions to the 1st and 2nd series of the "Biblioteca dell’Economista") to emerge and was used by Ferrara to define, in contrast to the German economists, an object of research that could be inherited with no significant changes by the marginalist approach.

    That this was Ferrara’s great achievement and, apart from the partial results he obtained, the most significant outcome of the disputes of the seventies, is explicitly stated by Maffeo Pantaleoni e Vilfredo Pareto. Pantaleoni underlined, in fact, that the essential element that emerged from the contrast between the different economic schools was basically "the extent of the field that is recognized as belonging to economics" (Pantaleoni 1963, p. 174). All the rest, the solution of individual problems, the methods of enquiry and the logical procedures to use are simply inevitable consequences of this basic act (ibid., p.176). The same view was held by Vilfredo Pareto, who acknowledged that the importance of the conflict with the German economists "about the interference of the state and the extension of its power" was due to the fact that it made it necessary to go back to the first "principles" at the basis of economics and to give priority to defining the set of relations that economics can legitimately study (Pareto 1980, p. 75).

    It may help, therefore, to have another look at the way the debate with "economic Germanism" gave rise to the definition of the object of study that Ferrara was to bequeath to later Italian economists.

    3. Let’s start from the interpretative distortions that "economic Germanism" used as an overall interpretative category produced. It seems, for instance, surprising that the accusation of anti-liberalism is levelled at economists like Hildebrand e Knies who took part in the liberal movements of 1848 and who have every right to be considered representatives of German liberalism. Admittedly, just as there are different meanings of the term liberalism from a theoretical point of view, so in the course of history there have been different expressions of liberalism. German liberalism is not only one of the forms of European liberalism, but it is also one of the most significant because of the "great elevation of doctrinal expression" that characterized it. (Racinaro 1975, pp.79-126; De Ruggiero 1984, p. 223). After Kant, it matured under the decisive influence of the Hegelian view, where the intransigent defence of the concept of private property (Cerroni 1974, pp. 25ff) is combined with criticism of the "negative" or "abstract" concept of liberty, when it is conceived only in individualistic terms and is in contrast with the law-making nature of the state (Calabrò 1974, p. 79). The whole experience of the German historical school, with varying accentuations, is collocated within the context of German liberalism and constitutes its evolved form at the level of economic analysis (Eisermann 1956, p. 235; Schiera 1987, pp. 45-76).

    This is why we cannot find in Roscher or in G. Schmoller a general criticism of free trade or of the progressive function of the free market and private enterprise; but rather a series of critical judgements – which after Keynes became quite common – on the peculiarities and the contradictions of an advanced monetary economy, on the existence of "natural laws" in economics or on the supposed optimising effect of laissez faire.

    While the simultaneous reflection on the individual and the state gives German liberalism a unique form in the history of European liberalism, this certainly does not bring it close to socialism. To do so would be to ignore the criticisms of socialism and of Marx that are found in all the representatives of the German historical school. Just think of Roscher’s criticism of Marx and of the "utopian" social planning programmes that the socialists championed (Roscher 1857, pp. 184ff, 194). Or think of Hildebrand’s radical scientific attack on Engels and on his analysis of the conditions of the English working class and of his blunt statement that socialism represents a tomb for the individual and for society (Hildebrand 1998, p. 226). Or think of the criticisms that Knies and Schmoller level at Marxism both on an analytical level and on the purely political plane (Schmoller 1904, pp. 141, 603).

    But without continuing this list, it is sufficient to recall the position of A. Wagner, who in 1895 pointed out that dealing with the economic and social problems caused by economic evolution does not mean accepting socialist views, but rather acknowledging the fact that the market is able to produce wealth but not social harmony. And concerning relations with socialism, he wrote: it must be clear from the outset that economics, in the form it has taken in Germany, "is in contradiction with socialism […] on all the essential points: in method and results, in criticism and theorems, in psychology and ethics, in philosophical foundations and in historical analysis" (Wagner 1896, p. 322).

    Similar positions can be found in "Germanists" like Lampertico, Messedaglia, Luzzati, who generally not only reveal a strong opposition to socialism, but in their studies make constant reference to the model of economic growth and to the type of political and institutional development that had been implemented in England from the 18th century (Lampertico 1875, pp. 129ff; Luzzatti 1894, pp. 11ff; Are 1974). Moreover, since Italian political and economic culture lacked the concept of the centrality of the state typical of German culture, (Marshall 1972 [ed. or. 1890], pp. 1005-6), also the economists who were inspired by the German historical school placed the main emphasis on the "centrality of the liberal socio-economic order" and on the complementary nature of intervention by the state (Cardini 1981, pp. 21ff; 1988; Gozzi 1988, p. 199).

    From this point of view it seems one can share the paradoxical statement by A. Ciccone who in 1876 declared: "I dared not name" any of the Italian economists among the socialists of the chair, "because none of them, except perhaps Cusumano, has really propounded the doctrine. They call for broader action by the government in economic matters, but they remain loyal to orthodox economic principles" (Ciccone 1876, p. 72). Besides, underlines Rabbeno, the writings of these economists show full adhesion to liberalism and the idea "if necessary" of "the intervention of the state" is accepted "very cautiously and in such a way as not to paralyze individual and associated action but rather to foster its development" (Rabbeno 1891, p. 438). What they contest are those aspects of ultraliberalism à la Ferrara whose "line of thought" was closer to the views of Bastiat and to "the French optimistic school" rather than to "Smith’s theories" (ibid., p. 466; Cossa 1892, p. 523).

    4. But the central criticism of the concept of "economic Germanism" is certainly related to the supposedly anti-theoretical and anti-scientific attitudes of the German economists. Reconstructions in recent years of the assumptions and of the development of the ideas of the German historical school, along with more detailed knowledge of the variety of orientations within the school would enable us to reject this criticism without difficulty (Gioia 1990a; 1990b; 1991; Backhaus 1993-94; Milford 1993-94; Kurz 1995, p. 9; Schefold 1993). However, I believe it is more useful, for our purposes, to examine the content of the theoretical alternative proposed by Ferrara. In this way we will be able to see why it influenced the development of Italian economics so decisively.

    Ferrara, as we know, starts from a conception of economics as an experimental science: a science whose explanations must be empirically verifiable. This idea of science takes us back to a relationship between scientific theories and reality which is similar to the one put forward by the German historical school. Indeed in the Lezioni di economia politica he explicitly refers to "the German writers", showing appreciation of their methodological approach (Ferrara 1934, p. 18). At the same time he criticises pure economics for the fact that, by breaking the relation between theory and reality, it proposes procedures that are scientifically unacceptable and tries in the field of ideas to demonstrate to be true, what is not true in reality (Ferrara 1855a, pp. XXIV-V).

    The radical criticism that he levels at the German economists in 1874-75 does not lead Ferrara to disown this approach. In fact, he tries to make it compatible with the central element of his scientific view, the existence of unchangeable "natural laws" in economics, accentuating his critical stance towards all forms of scientific relativism. Obviously, having excluded pure economics and the possibility of interpreting the concept of "natural laws" as constant relations between selected phenomena, under special restricted conditions, he is forced, as Lampertico pointed out, to take on a really mammoth task (Lampertico 1875, pp. 118ff; Perrotta 1990, p. 174). He has to demonstrate not only the existence of "natural laws" and of constant relations between facts, but also that they are empirically verifiable.

    To get around this problem Ferrara comes up with a surprising "solution", since on the one hand, at the procedural level, he salvages an approach typical of pure economics; but he does so without the necessary awareness and insisting on the idea of economics as an experimental science. So on the one hand he puts forward the distinctions between theoretical or "metaphysical" truths and historical truths, on the other hand he acknowledges the difficulty of comparing them to each other. Moreover, the rapid transformation of markets and of the firms’ structure, the growing and inevitable intermingling of public and private economies, the influence of international competition which operates in a different way from that described in Ricardo’s model, making the gap between the two types of truth unbridgeable, brings out the problem of the impossibility of empirically verifying the "metaphysical" truths established by science.

    Faced with this outcome, which appears to be in direct contradiction of the idea of economics as an experimental science, he does not go back to the distinction between "metaphysical" and historical truths, but tries to outline a different correspondence between economic theories and reality. Such a correspondence can be achieved only if scientific analysis shifts its focus from relations between phenomena to the relations between phenomena and the basic principle from which they originate: the freedom of the individual-owner. By referring economic relations to this principle Ferrara’s peculiar idea of science finds an organic form, reconciles its contradictions, and, above all, rediscovers a relation between "metaphysical truths" and historical reality:

    In effect this means not only giving up the idea of political economy as an experimental science, but also giving up the idea that science must be the explanation of relations between facts. This implies a shift from a scientific discourse to the search for a regulatory principle of economic activity: from science one passes to ethics and politics.

    5. What has been said poses some interpretative problems concerning the criticism that he levels at the German economists, with reference to the relation between science and art. According to Ferrara, while the German economists accept this distinction, they are not able to apply it coherently. Consequently: "their science is full of art and their art is very often a pretext that they use to rewrite their science texts" (Ferrara 1934, p. 18). If we examine this conclusion of Ferrara, we realize that what disturbs Ferrara is not the fact that "science" is transformed into "art", but if anything the fact that "art" becomes a "pretext" for "rewriting science", throwing doubts on the existence of immutable "natural laws" in economics and opening the way to relativism. Theory – says Ferrara explicitly – must only clarify how "a purely economic principle can operate in harmony with another of a moral and political order, without…. invalidating the truth deduced in the field of the phenomena of wealth" (Ferrara 1855b, p. XXXVIII).

    Coming back to our problem: the object of enquiry cannot be defined as a function of empirical verification, but rather as a function of the confirmation of "metaphysical" truths. In the first case, the object of enquiry should vary, at least in some of its characteristics, with variations of the historical reality under study; in the second case, it is rigidly tied to aprioristic truths, defined independently from the historical analysis.

    On the other hand, his confrontation with J. Stuart Mill also makes it clear that this was Ferrara’s intended interpretation. You will remember that in his On a definition of political economy and on the appropriate method of enquiry, Mill stated that the object of enquiry is not a starting point but a result of scientific practice. He then added – with a strongly positivist bias which seemed to be in contrast with this statement – that once the subject has been established with its outer limits, this definitively determines the type of relations that can be examined, the methods and procedures of enquiry. Fittingly, he equates the delimitation of the subject of enquiry of political economy with the establishment of the boundaries of a city, whose walls are raised after the foundation of the urban settlement. Just as the walls irreversibly define the boundaries of the city, the same thing happens for economics. New urban settlements can be accepted only if they do not question the city boundaries and its internal laws; so for economics new problems and new analytic perspectives can be accepted on condition that they are compatible with the way in which the object of enquiry is structured and with the procedures defined on this basis. Every problem that is not compatible must be rejected because if it were accepted it would require modification to the outer limits of the object of enquiry, bringing into question also the criteria of validity (Stuart-Mill 1975).

    Ferrrara reasons in exactly these terms. If the object of enquiry in political economy is trade relations in the market, if the analysis of these relations is based on the assumption of the existence of individual agents who operate under equal conditions and outside any pre-existing power structure, if they are described "as if" the state did not exist as an economic agent that follows a different form of reasoning from that of the only agent foreseen (the individual-owner), then the object thus defined validates the analysis of the set of hypothesized relations alone. Every other relation is illegitimate since it poses questions that are not compatible with such an object of research. If scientificness is defined only on the basis of the structure of this object of enquiry, Ferrara’s conclusion appears obvious. Science cannot adapt to historical changes, since they make it necessary to review the relations that can legitimately be examined. If this is so, that object of research represents not a model of scientific research but science itself and should be defended from the attacks of those who want to change its confines and who should be regarded as attacking science.

    His criticism of the J.S. Mill of Principles is therefore comprehensible. In the Introduction, Mill put forward the idea of "adapting" science to the needs posed by the "new social philosophy" (Stuart-Mill 1968, p. 199) and in all his work he disseminated "doubtful propositions" that risk undermining the analytic certainties of the economist. Mill, writes Ferrara, insinuates that relativism of economic laws can be accepted and goes to "great lengths to pull apart and to distinguish what the reader would prefer instead to see stripped of its exceptional appearance and brought down to some basic law". In the end he even appears to be "a partisan for government interference, an enemy of the machine and even an initiate of socialism" (Ferrara 1855a, p. LXXXVI).

    6. These results show the economist’s double relationship with reality: one relationship between the economist as theoretician and historical facts, another between the practical economist and reality. As far as the first is concerned, Ferrara makes a clean cut in the Gordian knot connecting theories to reality both through the apriorism of the initial hypothesis of scientific discourse, and through the elimination of the possibility of empirically verifying the explanations produced. As for the second, having discovered an absolute principle regulating economic activities, the economist reclaims a positive relationship with reality: he becomes the stern judge of the implementation of that principle in reality and the radical critic of any change to the economic and social context which might restrict its full operation.

    In this way, on the one hand, the economist evades the confrontation with history on the level of the verifiability of theories, on the other he transforms his "metaphysical truths" into a rigid interpretative canon, into a sort of Procustean bed – to use Weber’s image – into which to force historical reality. The economist appears as a "judging conscience" closed in himself and in his own certainty of Hegel’s Phaenomenologie des Geistes. The "conscience" that "contrasts evil with the beauty of his own soul" and that answers changes in the world, "with the obstinacy of a character that is always the same and with the silence of who stands alone and bows before no man" (Hegel 1995 [ed. or. 1807], p. 465).

    This attitude seems to be confirmed by this bitter comment by Vilfredo Pareto on the destiny of liberalism in Europe:

    This attitude of Ferrara’s was shared by a significant part of Italian liberalism, which refused to consider the economic, social political and institutional transformations produced by the "German model" and also refused to discuss the radical transformations that were taking place in Italy. Having in mind the English model of development exactly as it was formalized on a theoretical level, they expected reality to conform to it and continued to indicate the "agriculturalist" model (as it was called in discussions at the time) as the only possible means for the Italian economic development.

    This attitude was in contrast with another of the same liberal camp, which, setting out to justify all cases of intervention by the state, tended to evaluate economic policies only in the short term. Thus, on the one hand, an object of study was created that was impervious to history, while on the other, historical-descriptive research and empirical analyses were begun, which, though they at times revealed great sensibility to historical changes and to socio-economic transformations, were carried out without an acceptable frame of reference (Avagliano 1965; Macchioro 1970a; Are 1974; Gherardi 1988; Faucci 1995, p. 269). This juxtaposition therefore had a paralysing effect at a scientific level on the whole of Italian liberalism and led both groups to evade the theoretical dimension of the problems posed by the historical school of economics in Germany.

    7. One of the most uncertain elements in the definition of the object of research proposed by Ferrara concerned, as we have said, the state and the relation between the state and the economy. On this point the German economists represented a challenge from two angles: from the point of view of political economy and from that of public finance science. As far as political economy was concerned, their Staatswirtschaft clearly offered from the outset an object of research whose structure was determined by a marked integration between the public and the private economy. As for public finance science, Germany is universally acknowledged for its innovative drive in this field, which Wagner explained both by referring to the fact that modern science of public finance recuperated the positive aspects of the old cameralistic tradition (Wagner 1960, pp. 11-2) and also by referring to the capacity to adapt quickly to the needs arising from the "transformations in neighbouring fields" (ibid., pp. 12-13), first of all in political economy.

    The proximity of the two fields of study and the partial overlapping of the object of study also brought the Italo-German debate into the new-born field of public finance science in Italy. On the other hand, this was the direction in which Ferrara’s analysis had headed and the way in which he had faced the issue of the state.

    As we know, Ferrara justifies the role of the state on an economic level both by referring to the inevitable effects of the division of labour, and by referring to the need to guarantee safety and order in society. From this point of view even individuals’ economic sacrifice in the form of taxes seems justifiable. It is not "a sacrifice in the real meaning of the term, nor a form of violence exercised on those who must pay forced by a higher power", but rather "a price, a very small price, for all the great advantages that the organized state, the society, offers to each of us" (Ferrara 1934, pp. 551-2). So on the economic level taxes are easily explained as "merely exchanges of utility".

    This justification seems to be acceptable to Ferrara on the "philosophical" or "abstract" plane, but, in his opinion, it becomes less convincing when one passes from the "philosophical to the historical concept". In fact in reality things take on the opposite meaning:

    Before going on to look at the consequences of this argument for science of public finance, I think it may be useful to point out the singular way Ferrara proceeds in his polemic with the German economists. When he has to demonstrate the existence of natural laws in the economy, he chooses to rely on the "theoretical" and philosophical approach, since it enables him to arrive at "metaphysical truths". In this case, he sharply denies the validity of the historical approach: history does not reveal such truths; it may perhaps find them through the free actions of individuals. When, on the other hand, he has to deal with the problem of the state and its relation with the economy, he prefers the historical approach, since he finds the philosophical approach insignificant and scientifically unacceptable. In the first case he attacks the German economists (and their Italian followers) for the relativism used to question science, in the second he attacks them for their idealist, "absolutist" and abstract vision which ignores historical reality.

    But let us return to the consequences of this argument for the science of public finance. Ferrara outlines two models of state-economy relations: with the first (on the philosophical level) Ferrara hypothesizes an economic reduction of all the functions of the state. The system of freedom in the modern world is defined exclusively from the starting point of the freedom of the individual-owner, who in this universe seems to be the only fully-fledged citizen (Romani 1990, p. 89). The market establishes the boundary-line of a sort of direct democracy, since in the market, relations between individuals are by definition relations among equals and, above all, the state-individual relationship seems transparent at an economic level in that it is a mere exchange of utility; with the second (on the historical level), Ferrara reveals the irreconcilable difference of the two worlds, the economic one governed by natural laws and by the principle of rationality that they imply, and the political one, determined by the "wish for power". This presupposes a permanent contrast between the aims of the state and the aims of private economies and makes it necessary to use different analytic models to analyse them. Given the constancy of relations and the rationality of economic behaviour, the economy can be analysed by economics and its set of categories. The world of politics, however, with its prevalence of extra-economic factors and its high degree of non-rational behaviours, presupposes the use of analytic instruments of a sociological type.

    In Ferrara these two orientations are not separate, but in later work they would give rise to two different – although not necessarily alternatives – approaches within the "Italian tradition" in public finance science. From this point of view R. Faucci is right when he traces back to Ferrara the roots both of the "economic" orientation (Pantaleoni, Graziani, Einaudi, ecc.) and of the sociological orientation (Pareto, Borgatta, Sensini, ecc) in Italian science of public finance (Faucci 1985, p. 109).

    8. In the context of this heated debate with the German economists in the field of public finance, there also emerges, with G. Ricca Salerno, the attempt to understand the composite nature of the phenomenon of finance. In outlining this analytical view, Ricca Salerno, a follower of Cossa and Wagner, certainly gets his initial inspiration from the German historical school, placing top priority on a relation between theory and historical facts. However, when he examines the state-economy relationship, he explicitly distances himself from Wagner and from those who advocated an expansion of state power over the economy.

    Ricca Salerno underlines that the limits on state intervention in the economy must be clear from the outset, particularly as regards the distribution of wealth. The state cannot and must not change "the natural distribution of wealth" and the "relative economic position of the contributors" (Ricca Salerno 1878a, p. 175). Instead, considering "the legitimate aims" and the "needs of the different social classes", the state must guarantee that they retain "their economic position" (ibid., p. 198). Otherwise we would be assigning the state – as Wagner and the other German economists tend to do– a task which does not belong to it: that of "correcting the defects of society’s economic order" (ibid., p. 181). But following this path there would be a radical transformation of the very nature of public finance, which would become "an expedient used for ulterior plans in politics and social economy" (ibid., p. 177; see also Ricca Salerno 1877).

    However, underlines Ricca Salerno, this should not lead us into the opposite mistake: that of considering the state to be immediately comparable with private economies and the economic activity of the state as an equivalent to these activities. Such an economic reduction of the state and its functions would prevent its "social nature" from being identified, the fact that it offers goods and services whose "social utility, the social welfare" is easy to define, but for which it is difficult to "determine the particular advantage for the individual members" (Ricca Salerno 1878a, p. 188). On the other hand, this is connected to the composite nature of the object of research in public finance and brings us back to the need to understand it through the multiplicity of its facets: from "law to general politics […] to the economy" (ibid., p. 260).

    He therefore criticises the purely economic definition because it equates "the relations of the State with society" to those "of the State with private individuals" and superimposes the relations of public finance with "private economies" on the "normal relations of public finance with the national economy" (ibid., p.188).

    As we know, Ricca Salerno developed this approach further. He accentuated his distance from Wagner and from the German historical school (also in methodology) and, influenced by Die Grundlegung der theoretischen Staatswissenschaft (1887) by Sax, brought out the logical priority of the economic dimension in the phenomenon of finance. However, this emphasis on the logical priority of the economic element in the phenomenon of public finance did not make him give up his idea of the composite nature of it (Griziotti 1960, p. 201).

    9. The debate between the three views mentioned went on for about fifty years in Italian science of public finance, making considerable analytical contributions, but also providing constant reflection on the definition of the object of research and on the nature of the phenomenon of public finance. The coexistence of this thematic dualism emerges in authors like Ricca Salerno, Pantaleoni, Pareto, De Viti De Marco, Mazzola, Loria, Graziani, Puviani, Einaudi, Griziotti (just to mention a few) and it was picked up by Buchanan, who seems to blame "Italian tradition" on this field for a persistent "philosophical" dimension, a tendency to keep bringing up questions about the "nature of problems", instead of concentrating on identifying "operative propositions in the scientifically modern sense" (Buchanan 1980 [ed. or. 1960], pp. 212 and 215).

    Still, despite this "philosophical" dimension that strikes Buchanan as pre-scientific and pre-modern, the period in question represents a stage of great vitality in Italian science of public finance (Bellanca 1993, p. 257). The acceptance of the anglo-saxon model and the marginalist approach does not prevent debate with other analytical approaches. So Italian science of public finance through the confrontation with Wagner, Marx and the theoreticians of socialism, Sax, Wicksell etc., shows great scientific open-mindedness, trying to bring contributions from different sources into its own explicative models in an original manner.

    This "pluralism" in research programmes seems to me to have had a beneficial effect on Italian science of public finance since – in contrast with the rigid convictions of the economists at the time – it did not lead to scientific sterility, nor did it give rise to such methodological and procedural heterogeneity as to cast doubt on the contacts between the different views. The methodological and procedural differences, which certainly existed, did not therefore hamper the establishment and the consolidation of a common ground which enabled the results obtained to be compared and, to a certain extent, verified.

    This pluralism also established, at the analytical level, a context of reference that was so broad that it expanded the set of scientifically significant questions, maintaining a permanent interest in interdisciplinary discussions (above all between political economy, law, political science and sociology) which proved to be very fruitful for research. The development of Italian science of public finance was thus characterized by a difficult balance between its nature as a social science, interested in explaining a phenomenon that was complex and not easy to reduce to one of its typical components, and its technical nature, aiming to control the phenomena analysed. Ultimately, commented Griziotti, the science of public finance has to acquire methods of research and systems of explanation which, having established the composite nature of finance, continue to achieve this double aim, arriving at a "synthesis of financial policies, financial law, financial economics and of financial procedure".

    10. This particular development in Italian science of public finance seems to have had one of its decisive turning points during the debate between Benvenuto Griziotti and Luigi Einaudi about the nature of public finance and the best way of studying it. This exchange was inspired, as we know, by the criticisms Einaudi had levelled at the school of public finance of Pavia. Einaudi criticised, in particular, the tendency to propagate the concept of public finance as a composite phenomenon and insisted on the scientific value of regarding it as purely economic phenomenon. The scientific division of labour, the methods of abstraction and the procedures of analysis we use, according to Einaudi, do not allow the mental reproduction of the phenomenon of public finance as a unitary phenomenon and force us to separate the juridical field from the politico-sociological field and from the economic one. For the present, insists Einaudi, we will have to be satisfied with "an economic theory", a "juridical theory" and a "political theory", at least until such time as "a genius arrives and fuses them all together" (Einaudi 1932, p. 685).

    Griziotti answers this approach obviously not by questioning the advantages of the division of labour in the scientific field, but by insisting on the fact that public finance is naturally a juridical, political and economic phenomenon (Griziotti and Einaudi 1933, p. 194) and that neglecting this "threefold enquiry" can have negative scientific effects. If this is the situation, then we certainly cannot wait for "a genius" to solve problems posed by a distorted vision of public finance, nor can the whole issue be put off for "future generations". If we did this we would pay serious consequences both from the point of view of knowledge and on a practical level, since restricted knowledge would have repercussions on the formulation of correct "political principles for the management of public finance" (ibidem)

    But Griziotti also puts forward a significant methodological objection to Einaudi’s approach. Because of the division of labour in the scientific field and the models of scientific explanation that it requires, we will never be able to move towards a unification of the fields of enquiry, but rather towards a greater distance between them. If we consider the evolution of science realistically, it appears hard to believe that scholars – specialists of separate sectors or of particular segments of a sector – could suddenly be invited to deal with the enquiry and conclusions of other sectors, in order to achieve a global vision of the phenomenon under study. Obviously what prevents such an outcome is not the lack of scientific curiosity, but rather the lack of instruments and categories to make it possible to understand the significance of research carried out in other sectors. Referring yet again to what happened in German science of public finance, Griziottti asks if it is not true that "pure economists of finance are ignorant of or perhaps are incapable of using the juridical literature in the field of public finance, which though it may be scarce, already exists, especially in Germany" (ibid., p. 195).

    It is interesting to note Einaudi’s reply, brilliant but evasive. He recalls again the merits of the division of labour and of sectorial analysis (which however were not being questioned), attacking "the idol of completeness" which, according to him, produces attitudes that are analytically inadequate and even anti-scientific (ibid., p. 199). In the end, without discussing the problems posed, he repeats that science follows the motto: "cobbler, stick to your trade", since the only duty "of the scientist is that of using the logical tools that he knows, or believes he knows, and not to mess around with the tools of others" (ibid., p. 198). With this line of argument Einaudi on the one hand confirms Griziotti’s pessimism, implicitly confessing that the idea of the genius who can reconstruct a global vision of the public finance phenomenon is a mere rhetorical expedient; on the other hand, he explicitly drops the idea of understanding it as a composite phenomenon and, remembering Croce’s lesson once more, he puts forward the same criticism that he had levelled at Pareto as sociologist and at his attempt to recover the relation between theory and historical reality, which was impossible on the basis of the presuppositions and analytic procedures of pure economics (Einaudi 1980, pp. 95 and 114). With these conclusions Einaudi also shows that he accepts the logic implied in Croce’s advice: the social sciences are only techniques and it is not their task to produce knowledge of the phenomena they analyse. This knowledge is the task only of philosophy conceived as the science of history.

    Perhaps it is not unimportant to remember that this position coincides with Buchanan’s, since the elimination of the "philosophical" features is simply a reduction of the cognitive function of public finance science in favour of its technical and controlling function, of the need to define adequate "operative propositions".

    11. While the debate with the German world had gone ahead in a contradictory fashion in liberal circles, giving rise to those radical contrasts we have mentioned, the exchanges within the socialist camp were carried out in a less traumatic way. This was not because the methods and the results of Marxian analysis were accepted unanimously, but because it was generally accepted that on the subject of socialism Marx was the inescapable reference point. This was so clearly acknowledged that R. Michels in 1907 could write that in Italy the influence of Marx had been deeply felt not only in "socialist literature" or in literature "which simply sympathised with that order of ideas", but also in writings that were openly "opposed to socialism" (Michels 1909, p.11). In fact, continues Michels, in "no country of the civilised world, including Germany itself, did Marxist ideas have such an influence as in Italy on all the field of study of the social sciences" (ibid., p.12), having even penetrated "the country’s official academic science" (ibidem).

    Recent studies have been generally centred on the relations between the developments in socialist thinking in Germany and in Italy and also on the strong relations that were built up between the Italian socialist movement and the German socialdemocratic party (Ragionieri 1968). The slow and difficult spread of Marx and Engels’ works in Italy was also studied (Bravo 1974) and, in another direction, the entry of Marxist thought into academic and scientific environments (Gerratana 1979). Obviously this penetration did not take place in a cultural vacuum, but in a context that was strongly influenced by the spiritualist and idealist cultural tradition and by the later spread of positivism (Macchioro 1970b).

    In these cultural contexts the materialist conception of history became a new philosophy of history, indeed – as Gentile said – a "realization" of Hegel’s view (Gentile 1959 [ed. or. 1899], p. 89) or an "interpretative canon" of capitalist society, under very restrictive hypotheses (Croce 1927 [V ed.], pp.15ff and pp.80-93) or a recurrent element of evolutionist views of history whose cultural matrix was in Spencer and, to a lesser extent, in Comte (Moretti 1988, p. 60).

    In view of this use of historical materialism, it is no surprise that Antonio Labriola, one of the great mediators in the relations between Italian and German culture, found it necessary to question this dual interpretation of historical materialism. In order to give epistemological autonomy back to the Marxist view, he reconstructed the theoretical context in which Marx’s work had developed, and highlighted the effort the founder of socialism had made to provide not a general conception of history but rather an original method of economic and sociological analysis.

    In this way Labriola believed he could avoid both the "facile criticism" and "mockery of dabblers in scientific innovations, and of other layabouts", as well as slipshod positivist use of the concept of historical materialism. "Neophytes of evolutionism" can talk "with proud disdain of the Schellings and the Hegels" since they are unable to understand that the "soup they are concocting is exactly like that bread reheated; only it is cooked badly and seasoned even worse" (Labriola 1968b, p. 76).

    This also served Labriola’s criticism of the neo-idealist readings of Marx, whose "doctrine cannot aim to represent all of history in a single view, albeit with perspective and unity, repeating mutatis mutandis, aprioristic pictures in terms of philosophy of history as had been done from St. Augustine to Hegel" (ibid., p. 98).

    Antonio Labriola’s interpretation had, as we know, little influence (at least in the short term) on Italian culture (Potier 1995, p. 154). It failed above all to restrain the positivist-style evolutionary determinism that characterized large sectors of Italian socialist culture. This was partly due to the complexity of Labriola’s approach, partly to the anti-determinist and anti-economicist reading that he had tried to propound and that was not in step with the cultural mood of the time; partly also because he did not realise that certain views did not predominate only in Italian culture because of some chronic defect, but that they also prevailed in the interpretations of Marx that circulated in Germany and even in Engels’ reading of Marx: for instance too little importance was placed on the influence of the positivist simplifications of historical materialism found in a work like The origin of the family, property and the State (which in fact was a great success and was translated into Italian in 1885, before Das Kapital and other works by Marx) or found in the Kautsky’s works (Procacci 1959, pp. XIIIff; Amato 1984, pp.103-32).

    But another reason Labriola’s interpretation did not succeed was because his "philosophical" reading of Marx, however fascinating and effective it was, neglected to reckon with the theoretical contradictions within the Marxian economic system and, above all, with the criticisms of the validity of Marx’s scientific approach that were levelled by the marginalists. It could not be regarded as unimportant that one way in which the debate with Marx and the German culture of the time was carried on in Italy was through discussion of the revision of Marxism and the attempt to reconcile Marx’s analysis with that of the marginalists. These aspects of the debate have already been extensively examined. It will suffice here to recall that Antonio Graziadei published La produzione capitalistica in 1899 (the same year that Bernstein published Die Voraussetzungen des Sozialismus), bringing to the forefront the theoretical contradictions of Das Kapital and prompting the revisionist process with arguments analogous to those put forward by Bernstein. In fact, the latter, notes Michels, willingly agreed to share "the paternity of socialdemocratic revisionism with the young Italian economist" (Michels 1909, p.112).

    We can also think of the revisionist attempt of E.Leone, who tried to create a synthesis between the marginalist and the Marxist positions, between the optimizing effects of a general economic equilibrium and the idea of fair division of resources of the socialist approach (Gioia 1983). Nor should we forget Arturo Labriola’s long study, which, starting from some shortcomings in Marx’s economic analysis, praises the theoretical content especially for its ability to "unmask" ideologies and to provide the analytic tools for the critical examination of capitalist society (Bellanca 1997, p. 99).

    The other great mediator between German and Italian culture within the socialist movement, was certainly Achille Loria. This role was based not only on Loria’s international fame, but also on his untiring scientific curiosity, which made him a reference point for those wondering about developments in German economic thought. Apart from his critical discussion of Marx and Marxism, suffice it to think of his well documented evaluations of the German historical school of economics, of his criticism of the theoretical approach of the "Austrian school" and of his evaluations on German sociology (Loria 1890; 1904). Now, while it is easy to acknowledge Loria’s role as a mediator between the two cultures, it is rather difficult to call him an interpreter of Marx. And this is not only because of his criticism of many aspects of Marx’s economic theory, but because the problems on which Loria’s work concentrates are far removed from those on which the founder of socialism had worked. If one goes beyond the surface terminology which he in part borrows from Marx, the issues Loria works on, as regards economic analysis, can be traced to Ricardo (and to a lesser extent to Stuart Mill), while his general conception of history derives from Spencer’s positivism (Favilli 1995, p. 85).

    The fact that this picture of Loria as a socialist and interpreter of Marx holds something artificial and, in a sense, surprising, is an interesting subject for analysis in order to reconstruct the way in which Marxism was received within the Italian socialist movement (Macchioro 1970b, esp. pp. 500-18). We will not dwell on Croce and Antonio Labriola’s well-known, caustic opinions of Loria or on Gramsci’s later comments, transforming "Lorianism" into an general interpretative category of several "national vices" (superficial, acritical eclecticism, "moral weakness", the tendency to compromise at all costs) (Gramsci 1975, p. 2325), but perhaps we should remember the evaluation of a more detached observer like R. Michels.

    Michels found the "worship" of Italian socialists for Loria incomprehensible and he attributed it "mainly" to "insufficient knowledge" of his work, which – he pointed out – "has almost always, and above all where it deals explicitly with Marx, used such harsh language and such implacable criticism regarding the man’s doctrine [...] it would not seem right to place him among Marx’s continuers, but rather among his destroyers" (Michels 1909, p. 109).

    This brings us back to an element that has often surfaced in reconstructions of the history of the socialist movement or of the spread of Marxism in Italy: the "theory deficit" of the Italian working class movement. This shortcoming has from time to time been blamed on an inadequate knowledge of Marx’s work and on the role that theorists like Loria played in its diffusion, on the lack of original contributions from Italian socialists, on the gap between intellectuals and the rank and file of the socialist movement, and so on and so forth. Naturally we cannot look at the many issues opened up by these attempted explanations. What we can briefly say is that the fortunes of a political movement do not necessarily depend on profound scientific debate. In Italy there was ample serious discussion on significant aspects of Marx’s work and original contributions were made about these not only in the Marxist camp but also outside it. At the same time, it is difficult to state that this immediately contributed to the political growth of the socialist movement or that those intense discussions helped – through the use of Marxist interpretative categories – to bring the political, economic and social analysis in Italy at that time up to date.

    If we evaluate Italian and German socialist thought from this point of view, the gap between the two is extremely large. In fact, not only did German socialism produce works in defence of Marxian orthodoxy, but it also produced analyses which still have a great deal to say on the transformation of the capitalism of the time, on the peculiarities of the German capitalist model, on its institutional transformations, and lastly, on the causes and development of colonialism. In other words, in Italy we do not find works like Kautzky’s Agrafrage, or R. Luxemburg’s Die Akkumulation des Kapitals or Hilferding’s Das Finanzkapital or even like Die Voraussetzungen des Sozialismus by Bernstein, which besides questioning Marx’s work, was a significant attempt at an economic-sociological analysis of the transformation of firms, of the emergence of widespread share-holding and of the increase in working class consumption.

    Italy lacks a systematic analysis of the transformations of Italian capitalism. As far as the analysis of Italian capitalism is concerned, the socialist movement seems to be indebted to work done in the liberal camp and constructed with the analytic tools of Francesco Ferrara and Tullio Martello, of Pantaleoni and Pareto (Santarelli 1977, p. 15; Zangheri 1995, pp. 599-619). In other words, it was indebted to analyses that tried to show on the one hand the backwardness of Italian capitalism and the defects in its process of industrialization: and on the other, the impossibility of forming a modern socialist movement like those that had developed in France and Germany.

    This interpretative approach, which reminds us of the debate on the impossibility of capitalism which in the same period had developed in Russia and had involved the young Lenin, emerges in the analyses of many socialists. Antonio Labriola, for instance, had already underlined Italy’s inability to develop the "full form of modern production" and to keep up with the more advanced countries (Labriola 1968a, p. 48). Convinced of this, he had pointed out that the clash characterising the Italian economy was not between capitalists and a modern proletariat (since neither one existed in its modern form), but between a modern state, modelled on the experience of more advanced countries, and an archaic economic structure, typical of "a society that is almost exclusively agricultural, and it is mainly old-style agriculture" (ibidem).

    This interpretation, highlighting the shortcomings of a modern industrial development and the lack of a "typical proletariat" was passed on through the correspondence with Labriola, Turati and other Italian correspondents, to Engels, Kautstky, Bernstein and to the Neue Zeit, becoming a constant element in the vision that the German socialdemocrats had of Italy’s social and economic situation It would not be until Gramsci that we were to have systematic, original analysis of the vices and virtues of Italian capitalism.

    12. The twenties, as we know, saw the triggering of an intense phase of scientific development that in less than two decades produced those fundamental theoretical innovations that were to "completely modify the orientation and the character of economics" (Shackle 1984 [ed. or. 1967], p. 9). Study of the cognitive limits of the theory of general economic equilibrium and of static analysis brought to the forefront the problem of modifying the economist’s tool-box and of adapting economic theory "to the anarchy and unceasing unrest of the real world" (ibidem). In this context, crises, disequilibrium, and economic fluctuations, once marginal issues in economic studies, became more and more significant, especially since they seemed to hold out new analytic perspectives.

    The limited Italian contribution to this process of renewal has already been looked at (Faucci 1990, p.197), but returning briefly to some elements that emerged in this period in Italian economics concerning Italo-German relations may help to remind us that even during this process of profound renewal, these relations played an important role and, oriented almost exclusively towards Konjunkturforschung, they helped to facilitate the movement from crisis and cycle theories to dynamics.

    If we compare the state of research in German and in Italy in the period in question we immediately notice a great difference in the approach to the problems of crisis and economic fluctuations present in the two countries. In Germany, since the mid-nineteenth century, study of crisis and fluctuations had had a significant role in scientific analysis and in economic discussions. Stress on the importance of disequilibrium within the capitalist economy, had been placed from two different angles, for radically different theoretical purposes: the socialist angle and that of the German historical school.

    In the socialist arena, discussion of the crisis as a memento mori of capital – to use Kautsky’s famous expression – was part of the Zusammenbruchstheorie, aiming at demonstrating the inevitability of socialism. It is pointless here to establish how much of Marx there was in this idea of the crash, but crisis and business cycle interpretation carried on in the Marxist sphere had a significant role in the debate of the time (and not only in Marxist circles) (Bergmann 1895; Loewe 1925, p. 333; Spiethoff 1955, pp. 148-70; Hagemann 1996, p. 176).

    In the sphere of the German historical school, study of the shortcomings of laissez faire and on the inevitability of disequilibrium in capitalism had already emerged in Roscher who through his criticism of Say’s law and his evaluation of the role of money, had come to focus on the inevitable recurrence of crises (Roscher 1857, p. 297). This interest in the issue of economic fluctuations was to be constantly present in the evolution of the German historical school and would be developed in two different ways, which were not in contrast with each other: the first, on an analytical plane, tried to find the causes of the cyclical movement (Roscher, Schmoller, Spiethoff, Sombart); the second, with a theoretical-practical orientation, aimed at outlining a more appropriate theory of the institutions and at defining economic policies that could, if not avoid crises, at least prevent their devastating social effects (Hildebrand, Schmoller, Wagner, Brentano).

    In other words, from the second half of the nineteenth century Germany developed on the one hand a series of interesting theoretical perspectives with which to examine capitalism from a dynamic point of view, as we would later say, and on the other hand, a "growing number of so-called barometers of economic trends", whose purpose was the understanding and control of the causes of fluctuations (Loewe 1925, p. 333). This extraordinary German debate has only recently been rediscovered, although I believe that analyses of it have been confined to reconstructing parts of it, without defining the rich context in which it developed and the many different standpoints that characterized it (Kromphardt 1989; Gioia 1996; Hagemann-Landesmann-M. 1996; Hagemann 1996). But what is surprising is that today there is an approach that still tries to propound, also for Germany, the old idea of a mainly historical-descriptive vision of crises, with little serious theoretical content. This approach rehashes in exactly the same terms the approach of S. Kuznets’ famous essay, Equilibrium Economics and Business-Cycle Theory (1930), which insisted, also with reference to the German experience, on the "cleavage between economic theorists on one hand and the investigators of business cycles on the other" and on the fact that a theoretically acceptable approach was also in Germany "of recent appearance", being linked to dissatisfaction with the theory of general economic equilibrium (Kuznets 1930). Such a view is certainly true if we consider the evolution of the neo-classical tradition, but it is not true if we evaluate other theoretical approaches in economics and if we avoid identifying sic et simpliciter theory in economics with the standard neo-classical theory.

    That which, in my opinion, does not apply to Germany, does apply to Italy. The great number of studies here on the problem of crises and of fluctuations had generally been historical-descriptive or they were collocated within a theoretical perspective that considered equilibrium as the "normal" state, and crisis as the "pathological" element (Supino 1907, pp.1-14). The great mass of studies on crises and on cycles had been based on the common conviction that "there is in reality only the tendency of the system towards equilibrium" and that while crises and fluctuations have a practical significance, they are unimportant on a purely theoretical plane (Gobello 1937, p.198). As proof of this, look at Augusto Graziani’s 1908 manual, Istituzioni di economia politica, where only 8 pages out of 745 were devoted to this subject with no reference to the issue of the business cycle. On the other hand in a specific study of the issue of crises – Le crisi economiche (1907) – Supino, restating the theoretical importance of the theory of economic equilibrium, disagreed not only with Werner Sombart, who wanted to interpret capitalism using the crises as his starting point, – that is, starting from the pathological phenomenon in order to grasp the normal physiology of it (Supino 1907, p. 3-4), – but also with Pareto, who in his Cours had considered as "normal" "the undulatory movement" (ibidem).

    This approach had been also implicitly confirmed by those who, through the influence of the German historical school, had examined the disequilibrium, or at least the non-optimal effects, of laissez faire and had highlighted the contradictions between individual action and public welfare, emphasising the growing distance between strong and weak classes and the market’s inability to close this gap. These studies, in fact, had never set out to question the theoretical importance of general economic equilibrium or to update the analytic tools of economics, but rather to justify the intervention of the state in the economy or to support specific measures in economic policy.

    Even in Marxist analysis, as we have mentioned, the study of crises had often developed with more reference to the theory of general economic equilibrium and to the marginalist approach, than to the theory of growth and the business cycle formulated by Marx in Das Kapital. In view of all this, we can understand why at that stage the appeal for economic dynamics launched by Pantaleoni in his 1909 essay went unanswered (Bini 1995, p. 18) and why the theoretical originality and the innovative value of a work like La teoria dello sviluppo economico (1912) by Schumpeter received hardly any attention (Augello 1984; Finoia 1985). For this reason the numerous references in the Italian literature of the period to Spiethoff’s analysis of the business cycle were also made in a radically different context from that in which the German economist had presented them. Therefore while Spiethoff insisted on the need to consider "disequilibrium" as a central element in economic analysis, in order to work out an explanation of the development of capitalism as a cyclical movement (Spiethoff 1953, p.77; Gioia 1996; 1997), in Italy his appeals were interpreted simply as an encouragement to study crises more systematically and to expand the number of empirical case-histories observed in the context of economic equilibrium (Supino 1907, pp. IX-X).

    At any rate, in this scenario crisis and business cycle theory took on growing importance and became the central element in the studies of those economists – M. Fanno, Costantino Bresciani Turroni, Francesco Vito, Gustavo del Vecchio and, later, Giovanni Demaria – who helped to bring Italian economics into line with the prevailing orientations at an international level (Faucci 1990, pp. 187-8, 203).

    The space available will not allow us to come back in detailed terms to the contribution of these authors and to the considerable methodological and analytic differences between them. What we want to emphasise here is the fact that the scientific evolution of thought of the above mentioned economists had the benefit of continuous contact with – though obviously not only with – German economic culture. A good example is Bresciani Turroni, with his training and long stays in Germany, his scientific collaboration with German periodicals, his thorough knowledge of the German economy which all came together in "his monumental study of the German inflation" (Hayek 1935 [or. ed. 1931], p. 131). But we could also recall the wide circulation in Germany and in German-speaking countries of the work of Marco Fanno and of Francesco Vito.

    But independently of these aspects, it seems significant that in connection with business cycle theory, there was an expansion and a consolidation of relations between Italian economists and the Austrian school, not only with reference to the general vision of the economy and economic relations, but also with reference to certain explanations of the business cycle.

    It was Hayek himself, for instance, who looked at the Austrian component of Bresciani-Turroni’s cycle theory, identified because of the use of Boehm-Bawerk’s theory of capital. (Bini 1992, p.171). In Marco Fanno’s theories the effects of long exchanges with the Austrian school are evident, although – as has been pointed out – his work benefits from the contribution of instruments and explanations taken from different approaches and is characterized by the aspiration to create a general synthesis capable of understanding the cycle as a typical phenomenon of a growing economy, in the scenario of macro-economic equilibrium.

    Francesco Vito also tries to explain the cyclical movement through the role of "forced saving", although – as Haberler pointed out –, it would be more correct to talk about "corporate saving", i.e. of the level of saving resulting by the fact that "business firm or company fails to distribute its entire profits to the shareholders". What is important is the fact that this type of saving, which Vito defines simply "forced saving", can determine "the same troubles as the type envisaged" by Hayek (Haberler 1955, pp.44-5).

    While the role played by the Austrian school in this phase is clear, even from such brief comments, and while it is easy to reconstruct the discussions with Schumpeter from the mid twenties and also the debate about the crisis and business cycle with Marx, directly and indirectly, (for instance with reference to the work of Tugan Baranowsky), it is not so simple to reconstruct the relations with the German historical school. The reasons for this difficulty are straightforward: the German historical school in the twenties, especially after Schmoller’s death (1917), lost the attraction it had exerted before; the unsatisfactory results – at least concerning the degree of theoretical formalization – obtained by Schmoller in his Grundriß and the conclusions of Methodenstreit had not worked in favour of a revival of his scientific programme. Moreover, as far as Italy is concerned, after Ferrara’s criticisms, the liberal economists had acquired a radical anti-historicism that also influenced the theorists we are considering here.

    Bresciani Turroni, for instance, distanced himself from the German historical school, accepting the idea that it was hostile to theory and that it carried out, in Menger’s words, only "historical micrography", (Menger). However, if we examine his work, we are struck by the fact that his comments sprang from the constant effort to compare theory and reality, producing a great variety of procedural devices and analytical techniques, making a sort of empirical basis of economic theories possible. It is clear that his work on the business cycle was triggered by generalizations that he drew from a historical study (Le vicende del marco tedesco) and it is well known that he was interested in statistics with scientific aims that remind us of Hildebrand, Schmoller or Spiethoff. All this reminds us that Bresciani Turroni, in his attempt to attain a satisfactory relation between theory and economic facts, seems not only to have assimilated the lessons of the German historical school, but also to have been able to use them within a different theoretical context (Bini 1986, p.14).

    A similar attitude is found in Gustavo Del Vecchio (1956a; 1956b; 1956c), critical of the German historical school, but at the same time aware that neo-classical theory could not solve the problem that the historical school had posed. It would be a "big mistake – he says – to think that the battle against history has been won for ever with the victory over the historical school" (Del Vecchio 1956a, p. 591), since while it is true that it underestimated the role of theory, it is equally true that later developments in economics have progressively lost the way that takes theories towards history, forgetting that science is ultimately the explanation of the world and that theory must "originate in history and return to history without melting into it" (ibidem).

    On this basis, therefore, Del Vecchio criticises the formalist blinkers of economics and the "professional illusion" of economists, who feel satisfied with "purely formal […] results", since they make no attempt to "grasp the slippery reality and force it into theoretical formulae" (Del Vecchio 1956b, pp. 123ff; 1956c, p. 379). The construction of dynamics is thus conceived as the way to go beyond this state of affairs and to construct a "scientific system [that is] open" to reality, even running the risk of some "fragmentation" of the scientific discourse (Gioia 1990a; 1990b; Steve 1997). But by so doing, Del Vecchio is unaware that he has taken a position not unlike that of Schmoller or of Spiethoff, who, in their research for a "historical theory", do not contest pure economics and the heuristic effectiveness of its constructs, but rather the "eccentricities"– to use Spiethoff’s expression – which reduce every possible form of scientific explanation to the formalized typologies of pure theory or that try, with no mediation, to change the theorems of pure economics from "essential heuristic devices" into "representation of the real world" (Spiethoff 1932).

    That the lessons of the German historical school can be used not only negatively, but as an important contribution along the path taking Italian economists towards dynamics (economia scientifica esplicitamente dinamica) was stated by Giovanni Demaria. It is quite singular that no attention has been paid to this important passage in Demaria’s work, which anticipates by several decades the revision of the interpretation of the historical school and of the epistemological limitations that the results of Methodenstreit had led to. Demaria particularly stresses the significant result that historicism made possible against all superficial naturalistic attitudes in the field of economic and sociological analysis and against the forms of logical apriorism that accompany these attitudes. But, he continues, without the creation of a object of research that has economic change as its focal point, within a continuous relationship between theory and historical facts, neither scientific naturalism nor logical apriorism can be considered really obsolete. It is precisely on this plane that the lessons of historicism can be useful, on condition that we overcome the "incompleteness" that characterized it (ibid., p. 58), and that prevented it from achieving satisfactory results both at the methodological level and on an analytical plane.

    It is no surprise that Demaria, like Del Vecchio and like the representatives of the German historical school, stresses the fact that dynamics presupposes first of all the need to redefine the object of research, to reconsider what he calls the "economic givenness" (datità economica), or "the certain number of data" that "are either believed to be known on the basis of the previous system, or are assumed hypothetically to be true on the basis of a more or less explicit convention, very often implied or suggested by the analytical intention" (Demaria 1988, p. 379). It is this frame of reference that orients analysis, the choice of legitimate questions and of usable procedures. If the starting point remains statics – points out Demaria – it will be simply impossible to construct a correct relation between theory and reality and it will be impossible to avoid the surprising result (for a social science as economics continues to be) achieved by the neo-classical approach which is forced to programmatically avoid confrontation with history as if the explanation of history "were the task of another discipline" (ibid., p. 390).

    This approach changes radically, as we can see, the results of Ferrara’s attempt to build an object of research independent from history and grounded on "natural laws". Economics brings to the forefront the problem of creating categories and scientific devices which enable us to understand history and historical changes. Scientific relativism becomes not only a possible scientific pathway, but a theoretical necessity.

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