Economic history is dead; long live economic history?

Historians in the News
tags: economic history, economics

Two years ago, in a very interesting paper, Peter Temin bemoaned the decline of economic history as a research topic at universities. He took the example of what happened at the Massachusetts Institute of Technology (MIT) to prove his point. There, the subject reached its peak in the 1970s, when three members of the faculty taught economic history. But from then it declined until economic history vanished both from the faculty and the graduate programme around 2010.

But is economic history really dead? Last weekend, Britain's Economic History Society hosted its annual three-day conference in Telford, attempting to show the subject was still alive and kicking. The economic historians present at the gathering were bullish about the future. Although the subject's woes at MIT have been echoed across research universities in both America and Europe, since the financial crisis there has been something of a minor revival. One reason for this may be that, as we pointed out in 2013, it is widely believed amongst scholars, policy makers and the public that a better understanding of economic history would have helped to avoid the worst of the recent crisis.

However, renewed vigour can be most clearly seen in the debates economists are now having with each other. In particular, three big questions in economics over the past few years have become battles over economic history, rather than theory in its own right.

First, this can be seen in arguments about Carmen Reinhart and Kenneth Rogoff's recent work on the relationship between debt and growth. In 2010, using two centuries' worth of economic data around the world, the two economists from Harvard University argued that countries experience a sharp slowdown in growth when their public debt-to-GDP ratios hit 90%. Politicians immediately grasped their conclusions to justify austerity policies over the next few years. But that did not mean they necessarily got their history right. In 2013, three economists at University of Massachusetts Amherst found that spreadsheet errors had skewed the results, which in fact did not show a sharp slowdown around the 90% debt-to-GDP mark. And in 2014, research by economists at the International Monetary Fund noted that when anomalous periods, such as the second world war, were excluded from the data, the relationship between debt and growth that Ms Reinhart and Mr Rogoff identified could not be found.

Arguments over correlation and causation in relation to the historical patterns they identified are still ongoing between economists. It is not the only area where arguments over economic history are dominating economics. The recent debate between Thomas Piketty and Matthew Rognlie over whether rising wealth inequality in the rich world is due to rising returns on capital in general, or housing in particular, is a battle over economic history as much as it is economics. ...

Read entire article at The Economist

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