ABSTRACT
During Gustav Schmoller's active life he witnessed the growth and concentration of German industry in large-firm organizations covering many branches of industry, although the small firm remained an important and considerable section of economic life. Schmoller was, in fact, concerned to find an alternative position to both the free-enterprise notions of the Manchester liberals and the notions of the socialists that were growing in popularity. His arguments against liberal ideas were based on denying the relationship that was meant to exist between free enterprise and economic development. A major point of Schmoller's historical national economics was to explode the myth that the economy of a country was simply the sum of its individual enterprises. Schmoller's point, however, is to illustrate and emphasize how the division of labor, property concepts, social classes, and the structure of prices dictate the behavior of individuals. The behavior of businesses, thus, must also be explained in terms of institutions that lay outside the businesses themselves.
