Should capitalization be preserved in loanwords?

Solution 1:

In English, only proper nouns and (most of the) adjectives derived from proper nouns are capitalized.

This question is similar to the one asking if diacritics of loan-words should be kept the same as in the original language. There are some who write deja vu, others who write déjà vu. Some write gestalt, and others write Gestalt.

As more time passes from the moment the word was introduced, the more probable it is the word is written how an English word is written.

Solution 2:

As noted, it is related to whether loanwords from latin script languages should keep their diacritics when used in English. The answer is actually rather similar, too: as usage increase, and the word will be considered more and more “standard” to use in English, capitalization will diminue.

However, I think that non-capitalization is even more favoured than not using diacritics, as it disrupts the normal flow of text even more. For example, in your example, if I were to read “the law of prägnanz”, I'd look the term up as being of foreign origin. If it were “the law of Prägnanz”, I'd simply assume it's the name of a place (city, province, Land^[1], …).

To give some numbers to back this up: over the first 60 hits of schadenfreude returned by the Corpus of Contemporary American English, 16 have the noun capitalized, and the remaining 44 have it lowercase. This is almost a 3:1 ratio, exhibiting a clear trend.

1 This is funny, because it's actually one case where I would keep the capitalization as all cost. If you say “the regulation is specific to this Land”, losing the upercase L would make things very different, as ‘land’ is a word in its own right in English!