‘Every single piece of economic theory is ultimately a piece of crystallised history. And you have a much deeper and sophisticated form of knowledge if you know the history, the events, what happened … if you just do the theory, if you just do the crystallised history stuff, there is a sense in which your thought processes are on crack – you’re doing the crystal stuff rather than the lines.’‘ -Professor Brad DeLong, University of California at Berkley
History is the study of events. It looks at each event in turn, and while it might acknowledge patterns or similarities (‘history repeating itself’) the starting point is always the analysis of the case study, the particular passage of time.
Economics is the study of patterns. Economists look for the similarities of different events and ask whether or not they support a particular economic theory or model.
What then, is economic history? Simply put, economic history seeks to try to understand historical events by appealing to our knowledge of economic processes. Many current economic theories are supported by a set of ‘stylised facts’ – simple observations based on the real world. But how robust are these stylised facts?
A good example is the relationship between protectionism and growth: most growth theorists will tell you that the higher the level of protection that a country adopts, the lower its level of per capita income. If we look at recent evidence, this is indeed the case. But before 1945 the relationship is less clear cut – and there is even some suggestion that tariffs caused growth in the 1930s.
Of course, there are problems with going too far back in time – especially with regard to reliability of data. For this reason, most undergraduate economic history courses begin no earlier than 1750 – the start of the British Industrial Revolution. But after that, there is a wealth to discover: the rise of the industrial might of Britain, relative decline and the emergence of the United States and Germany, and, of course, the ‘defining moment’ of the Great Depression.
In general, anything prior to 1945 is considered to be ‘economic history’ and falls outside the purview of economics. This is a pity in some sense, as without a wide-ranging perspective we cannot know whether our theories are robust – and we cannot understand the important interplay between institutions and markets.
An economic history course will be much more reading intensive than most other options – and most questions will be in essay format. Unlike other disciplines, you will not be asked to solve for the Marshallian demand or compute some equilibrium. This is not to say formal analysis does not have its place – it certainly does. But in studying economic history you will learn to analyse and to argue, two skills sometimes lost in today’s economics. And what you learn might just help you question today’s economic theories: which can only impress an examiner.
Brad DeLong’s morning coffee on ‘why study economic history?‘