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March 16, 2013

Why Should We Care about Economic History?

While I search around for stuff to post, a reminder of why it was a mistake to eliminate economic history from many economic programs:
Why Should We Care?: Saturday Twentieth Century Economic History Weblogging, by Brad DeLong: Why should you care about how our history and the history of our parents and grandparents and great-grandparents--the history of the long twentieth century, 1870-2010--will appear to people five and more centuries into the future?
First of all, it makes a very good story. ... We are gossiping animals. ... And the best stories to tell and listen to are the real stories, about real people: they have a depth and an import that fiction cannot reach.
Second, you never know what parts of history may turn out to be useful and very important. Ten years ago I thought that my curiosity about and interest in the Great Depression was an antiquarian diversion from my day job of understanding the interaction of economic institutions, economic policies, and economic outcomes. The fact that we had gone through the Great Depression, had learned lessons from it, and had incorporated those lessons into our institutions and policy processes meant that there was little practical use to going over it once again. Boy, was I wrong. History may not repeat itself, but it certainly does rhyme—and nothing made an economist better-prepared and better-positioned to understand what happened to the world economy between 2007 and 2013 than a deep and comprehensive knowledge of the history of the Great Depression.
And there are likely to be other nuggets in the economic history of the past that will turn out to be vitally important for understanding the future, we just do not know which nuggets they will be. So it is best to be prepared ... by studying as many nuggets as possible.
Third, you should focus on economic history not just because it is the key axis of the twentieth century in particular but because economic history is the real history. ...
And, fourth, we do need to search for and keep searching for the “lessons” of the past for the present. Today, at least where I write, our principal concerns are with the creation and maintenance of liberty and prosperity, and with understanding what our (comparative) liberty and (relative) prosperity has transformed us. Other audiences in other places and other times have had different concerns...
Yet the major theme has to be that the history of the twentieth century was—all in all—glorious. The history has an extremely depressing middle, but the ending is much more happy than tragic. Certainly this is the case when we use a relative yardstick, and compare the end of the twentieth century to all previous centuries. Yes, forms of religious strife and terror that we thought we had left behind several centuries ago are back. Yes, failures of economic policy that land countries in depression that we thought we had learned how to resolve decades ago are back. Yes, nuclear weapons and global warming pose dangers for the future of a magnitude that humanity has never before confronted. Nevertheless, all in all the North Atlantic today is a (relatively) free and prosperous region, and the rest of the world is if not free and prosperous at least closer to being so than at any time in the past.
Of course, the explosion of material wealth and liberty we have seen in the twentieth century has not solved our human problems is obvious. That the likely spread of ample material plenty and, if we are lucky, increasing democracy and freedom to much of the rest of the globe that the twenty-first century may see will not solve our human problems is obvious as well. We have little confidence today that we know how to achieve successful economic development in the world... The twenty-first century problems of global environmental management have not yet been addressed. Wars of religion are, if not back, on the horizon. And modern North Atlantic liberal democracy is not the end of history. And there is the fact that the utopia toward which we have seemed to be progressing—a prosperous, liberal, democratic one—is not to everyone’s taste, as the terror-bombers who destroyed the World Trade Center and killed 3000 people on September 11, 2001 and subsequent military-political attempts to spread or contain a new set of wars of religion have made clear.
A naive individual of a century or two ago would wonder at the events, patterns, and problems that brought the twentieth century to its end. The world at the end of the twentieth century has enough wealth to give everyone on the globe what they would regard as a rich upper-middle class style of life. Why does such a rich and powerful world still have problems? It is not at all clear that we will recognize our destination when we arrive at it, or that many of us will like it when we get there.
We must remember that we are, at best, but slouching towards utopia. ...
I'll just add that if you don't know where you've been, it's a lot harder to figure out where you are going. Economic history helps you understand why some issues come to prominence while others are ignored, and the likely direction that society will go in pursuit of solutions. Can we fully understand macroeconomic policy in Europe today, or give the best indication of where it will be tomorrow, the next day, and the day after that without understanding the economic ghosts (e.g. hyperinflation) that haunt the discussions of economic policy?

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