Introduction to Economic History: What Is the Point?

1
Introduction to Economic History What Is the
Point?

• J. Bradford DeLong
• U.C. Berkeley

2
Readings

• Robert M. Solow (1985), "Economic History and
  Economics", American Economic Review 752 (May),
  pp. 328-331 lthttp//www.jstor.org/stable/1805620gt
• Kenneth J. Arrow (1985), "Maine and Texas",
  American Economic Review 752 (May), pp. 320-323
  lthttp//www.jstor.org/stable/1805618gt
• Isaac Asimov (1953), Second Foundation (New York
  Gnome Press), chapter 8 lthttp//tinyurl.com/dl2014
  014bgt

3
Six Passages

• Solow You could drop a modern economist
• Asimov Do you recognize any portion?
• Solow Damon Runyons law that nothing between
  human beings is more than three-to-one
• Arrow The cultural differences are
  precipitates of past events
• Solow If the proper choice of a model depends
  on the institutional context
• Arrow There is a bias toward flattening out the
  peculiarities

4
Robert Solow You could drop a modern
economist

• You could drop a modern economist from a time
  machine--a helicopter, maybe, like the one that
  drops the money--at any time, in any place, along
  with his or her personal computer he or she
  could set up in business without even bothering
  to ask what time and which place. In a little
  while, the up-to-date economist will have
  maximized a familiar-looking present-value
  integral, made a few familiar log-linear
  approximations, and run the obligatory familiar
  regression. The familiar coefficients will be
  poorly determined, but about one-twentieth of
  them will be significant at the 5 percent level,
  and the other nineteen do not have to be
  published... the data are just barely consistent
  with your thesis adviser's hypothesis that money
  is neutral (or nonneutral, take your choice)
  everywhere and always, modulo an information
  asymmetry, any old information asymmetry, don't
  worry, you'll think of one. All right, so I
  exaggerate. You will recognize the kernel of
  truth.... Of course there are holdouts against
  this routine, bless their hearts....

5
Asimov Do you recognize any portion?

• They stood together in the light. Each wall was
  thirty feet long, and ten high. The writing was
  small and covered every inch. This is not the
  whole psychohistorical Plan, said the First
  Speaker. To get it all upon both walls, the
  individual equations would have to be reduced to
  microscopic sizebut that is not necessary. What
  you now see represents the main portions of the
  Plan till now. You have learned about this, have
  you not?
• Yes, Speaker, I have.
• Do you recognize any portion?
• A slow silence. The student pointed a finger....
  It, faltered the Student, is a Rigellian
  integral, using a planetary distribution of a
  bias indicating the presence of two chief
  economic classes on the planet, or maybe a
  Sector, plus an unstable emotional pattern.
• And what does it signify?
• It represents the limit of tension, since we
  have here... a converging series.

6
Robert Solow Damon Runyons law

• A... complicated system... cannot conduct
  controlled experiments... hypotheses are
  themselves complex... a social science... subject
  to Damon Runyon's Law that nothing between human
  beings is more than three to one... narrowly
  economic activity is embedded in a web of social
  institutions, customs, beliefs, and attitudes...
  affected by these background factors.... As soon
  as time-series get long enough to offer hope of
  discriminating among complex hypotheses, the
  likelihood that they remain stationary dwindles
  away, and the noise level gets correspondingly
  high. Under these circumstances, a little
  cleverness and persistence can get you almost any
  result you want.... If the project of turning
  economics into a hard science could succeed, it
  would surely be worth doing. No doubt some of us
  should keep trying.... The economic historian can
  ask whether this or that model-story rings true
  when applied in earlier times or other places,
  and, if not, why not.... Economic history can
  offer the economist a sense of the variety and
  flexibility of social arrangements... the
  interaction of economic behavior and other social
  institutions...

7
Kenneth Arrow cultural differences are
precipitates of past events

• What about the uses of history in the development
  of economic analysis?... Let me pick two... the
  use of economic history as a source of empirical
  evidence for testing theories and estimating
  relations.... A second use of history in the
  development of economic analysis is a definition
  of its historical conditioning.... Rostovtzeff
  found the early Roman Empire to be governed by
  modern economic institutions, mobility, profit
  seeking, and so forth. He has been ridiculed for
  this by the current leading authority, Moses
  Finley, who finds little evidence of rational
  economic behavior in the ancient world....
  Closely intertwined with historical conditioning
  of theory is national or cultural conditioning...
  even between such economically and culturally
  similar nations as the United States and
  Canada.... The cultural differences between
  nations, with all their implications for polity
  and economy, are precipitates of past events....
  It will always be true that practical
  understanding of the present will require
  knowledge of the past...

8
Robert Solow the proper choice of a model
depends on the institutional context

• If the proper choice of a model depends on the
  institutional context-and it should-then economic
  history performs the nice function of widening
  the range of observation... teaching something
  about the range of possibilities.... W.H.B.
  Court... on Coal
• Observers who found the conduct of the
  mineworkers puzzling assumed that... a man who
  finds himself faced with the possibilities of
  higher earnings will be prepared to put out extra
  effort to obtain them. An assumption about the
  conduct of an individual is... also an
  assumption... about the society in which he
  lives.... The individual's demand for income, his
  views upon the getting and spending of money, are
  usually formed by the part of society which he is
  most in touch with. For most men the social code,
  whatever it may be in their time and place, is
  something which they accept as given and take
  over with little demur or questioning. Before one
  can assume that a demand for additional income
  existed on the coalfields and could easily
  translate itself into extra work, one has to ask
  whether the mining community had those standards
  or those habits. If it did not, and if it was
  unable to develop them in a short time, then even
  a rapid rise of wage rates might bring about no
  appreciable change in the working habits of the
  industry.....
• An economic historian should be an "observer and
  re-creator of the codes, loyalties and
  organizations which men create and which are just
  as real to them as physical conditions." Add to
  that a command over two-stage least squares, and
  you have the kind of economic historian from whom
  theorists have most to learn, if only they are
  willing to try...

9
Kenneth Arrow There is a bias toward flattening
out the peculiarities

• The example of national income analysis does
  remind us of a danger in the use of economic
  theory in economic history. There is a bias
  towards flattening out the particularities of the
  past. The more one uses categories drawn from the
  need to generalize, the less marked is the
  difference among the instantiations....