Three main elements make a study of the German economic tradition) particularly rewarding for development economists. First of all, German economics was born late and at a time when the nation was particularly backward, poor and ravaged by the Thirty Years’ War (1618– 48), which had cost the lives of up to 70 per cent of the civilian population in some areas. Therefore, from its very inception, German economics was that of a backward nation attempting to catch up with its wealthier neighbours. As opposed to English and American economics, whose philosophical base changed radically when the nations attained world economic power, the analytical base of German economics was not modified as the nation grew wealthier. Second, German economics has consistently, through the centuries, seen the economy from a different vantage point with different metaphors: essentially from the point of view of production rather than trade, and operating at a much lower level of abstraction than today's mainstream economics and its predecessors. Third, the scope of economics in the German tradition has been much wider than in the Anglo-Saxon mainstream. Factors such as geography and history, technology and technical change, government and governance, and social problems and their remedies, have all been central to the approach since its very inception.

A frequent theme in German historical writing is the idea of the country as a verspätete nation, a laggard nation, as compared to the rest of Europe. In such a situation, the state plays a very different role than in the more developed nations. As Keynes said, ‘the worse the situation, the less laissez-faire works.’ It was therefore only natural that other latecomers — in particular, the United States and Japan — built their economic theories and policies on the German model. During the nineteenth century, united in a common position against English economics, economics in Germany and the United States strongly influenced and fertilized each other. These catching-up nations formed a common theoretical front against England, a nation that not only made it politically clear that she saw it as a primary goal to prevent other nations from following the path of industrialization, but also — for the first time in the history of economics — possessed an economic theory that made this goal a legitimate one.