Towards a Personal Knowledge of Economic History: Reflections on Our Intellectual Heritage from the Polanyi Brothers

I Introduction DURING THE 1950S AND 1960S the "new" economic history emerged to dominate historical scholarship in the United States. According to Douglass C. North, this new economic history consists of the use of quantitative analysis to test and to verify hypotheses concerning economic growth and economic welfare. The hypotheses are always drawn from economic theory; the verification always involves the use of statistical tests (North, 1966, 1-14). While the testing and verification of hypotheses may be useful in specific research situations, it is our opinion that this usefulness is extremely limited and that, therefore, the statistical testing of theoretical hypotheses lacks general applicability in historical scholarship. The "old" economic history seeks to achieve a broader purpose: to compile a broadly humanistic and insightfully interpretative record of past human experience in order to increase our understanding of the present and to secure greater control over the future course of human development for the purpose of enhancing human welfare. In short, the old economic history uses the past in the present for the purposes of the future, in order that humankind can achieve a better quality of life in the future than that which existed in the past. These more general, and therefore more important purposes, can be achieved only through the application of the old economic history to the course of human experience. Karl Polanyi, the older of the brilliantly insightful Polanyi brothers, has written one of the best of the old economic histories. In his classic book, The Great Transformation (1944), he traces the rise and fall of the politicoeconomic system which was based on the dogmatic belief in the infallibility of the self-regulating market. He elucidated the dangerously urgent problems which grew out of this system, and he explained how the efforts to solve these problems ultimately undermined the absolute acceptance of the self-regulating market. Michael Polanyi, the younger brother, was a distinguished scientist who became an even more distinguished philosopher. He formulated his broadly phenomenological and intensely anti-rationalistic post-critical philosophy of personal knowledge, which he offered as an alternative to secular rationalism, logical positivism, cultural relativism, and philosophical nihilism. Then, Michael Polanyi extended his system of thought to include a post-critical philosophy of history and historiography. His purpose in doing so was to justify and to authenticate the historical scholarship of his older brother, Karl Polanyi. Although The Great Transformation (1944) was published more than a decade before Michael Polanyi's major philosophical works, this chronology will be reversed in order to facilitate an easy and clear exposition of this subject matter. First, Michael Polanyi's post-critical philosophy will be offered as a model historiography for the writing of economic history; then, Karl Polanyi's masterpiece will be proposed as an excellent example of an economic history which conforms to this model. II The Post-Critical Philosophy and Historiography of Michael Polanyi MICHAEL POLANYI, the younger of the two brothers, was first a physician and a medical officer in the Austro-Hungarian army, then a distinguished physical chemist of international repute, and finally an even more distinguished philosopher who may be remembered as the greatest epistemologist of the twentieth century (M. Polanyi, 1966b, 91). His obsessive concern for freedom of thought led him to develop his post-critical philosophy of personal knowledge (M. Polanyi, 1946, 7-19). This philosophy was broadly phenomenological in the sense that he believed that no person could acquire a real knowledge of acquaintance of anything without experiencing that thing in a uniquely personal manner (M. Polanyi, 1966a; Farber, 1966, 11). Polanyi was intensely antirationalistic because he believed that secular rationalism had undermined the moral values, which are fundamental to Western Civilization (M. …