An Economist’s Guide to Economic History

Economic history is an interdisciplinary field that fuses economics with history, two disciplines that often misunderstand one another. This chapter bridges these two disciplines by discussing archetypical approaches and research strategies in each. The authors contrast the differences between deductive, inductive and abductive reasoning in scholarly enquiry. They conclude with a call for consideration to (historical) context when conducting research in economics and economic history.

There has been no progress in the modest interest in economic history in the top five economics journals since the 1970s. This is despite an apparent newfound enthusiasm for the field among economists. This chapter explains this contradiction by highlighting the differences between research in economic history and economics that exploits historical data. In so doing, the author defines what, in his view, constitutes good economic history research.

This chapter argues that the dismal science is in a dismal state. The problem is caused by the existence of very difficult methodologies, complicating the relationship between economic theorising and empirics. As part of a possible remedy, the author discusses how economic theorising could relate more productively to (economic) history. While analytic narratives can be used to explain the particular economic aspects of a historical episode, history can also provide insights about human economic endeavours that help formulate better general theories.

Politicians, and the officials who serve them, live in the present. But making good policy requires an understanding of the past. History is important when making economic policy, because economics has many regularities that can be understood, and which yield useful predictions. This chapter, written by a senior policy advisor to the UK government, argues that historical knowledge is of particular importance to prepare for large and uncommon events, and to assess whether or not “this time is different”.

This chapter discusses the interaction between contemporary economic policy, the history of economic thought and economic history. Reflecting on the works of Cairncross, Eichengreen, and Offer and Söderberg, the author argues that students suffer from a reduction in their economic literacy as a result of a curriculum that marginalises the past. This failure has wider social costs and may result in inferior policymaking. The chapter concludes by advocating a shift in economics towards a more policy-driven direction.

Economic historians speak the same language as economists. They share a common disciplinary core, and they employ similar research approaches to address related questions. The contribution of this chapter is to highlight how the similarities between economic history and other fields in economics can be used to enrich existing teaching materials and pedagogical concepts. Its author presents teaching ideas that use the material collected in this book.

This chapter asks why money and central banks exist. Its author makes a plea for a historical approach to monetary economics. Students need to understand the evolution of money and banking so they understand why our modern monetary systems are designed the way they are. The chapter concludes that money and central banking is not a purely technocratic issue; from their inception, sovereigns have been involved. Only through economic history can scholars understand the political economy of our mediums of exchange.

Trade policy has returned as an important issue in domestic politics around the world. This chapter provides a historical perspective on globalisation and trade, including views on its political economy, and its impact on well-being and economic development. It focuses on how history can help economists to address a number of important contemporary questions in international trade policy.

The increased importance of migration in many developed countries has sparked heated policy debates on its economic effects on immigrant-receiving countries. These debates, along with the increased demographic importance of migrants, have also fuelled academic interest. This chapter summarizes the core topics and debates in immigration economics, and then discusses how economic history informs them.

The financial services industry plays a major role in the economy by making it possible for households, companies and governments to access capital. Examining the characteristics and behaviours of financial institutions and markets in the past aids in understanding contemporary market changes, informs corporate policies and leads to better regulations. Long-run and historical analysis can also provide insights into a wide range of modern financial puzzles.

Since financial bubbles and crises are rare events, modern empirical evidence on these phenomena is very limited. Economic history has therefore been fundamental to the development of this field. Histories of financial crises traditionally address questions about individual incidents. Enquiry into the Great Depression has proved especially popular. This chapter explains how the traditional approach is now complemented by studies applying econometric techniques to long-run data.

The management of the national debt does not correspond to the rules for management of the personal debt of individuals, households, or business enterprises. This chapter argues that economic history is of vital importance in elucidating this difference. Economic historians explore past episodes of unusually large expansions of sovereign debt to uncover the economic consequences when taxes are raised or not, and when the money supply is increased or not. This chapter uncovers the economics of sovereign debt by surveying academic debates on a selection of such historical events, including the Mississippi and South Sea bubbles and the sovereign default of Spain.

Issues related to human and health capital formation are of particular importance because interventions on this front can have a direct impact on living standards, wellbeing, and economic development. Historical evidence can be especially valuable to understanding how human and health capital is formed, and how it contributes to development. Issues discussed in this chapter include water, sanitation and hygiene, maternal and child health, and climate and the environment.

In modern economies, more educated people typically earn more, live healthier lives, are less likely to be divorced, are more future-oriented, less likely to have children while teenagers and less likely to be ever arrested. This chapter discusses some of the drivers of education, its relationship to culture and virtues, as well as its impact on demography and economic development. Economic history is presented by its author as a means of answering the question of causality.

The infrequency of severe mortality crises and the low prevalence of famine and disease are characteristics of modern industrial and post-industrial societies. Understanding the processes leading to their decline, and the associated improvements in living standards and life expectancy, is a precondition for knowing what is needed to prevent their re-emergence. This chapter provides a historical perspective on famine and disease to help overcome the lack of knowledge on these rare events.

Feminist historians have long complained that women and children have been written out of mainstream history. Similar concerns on the absence of women are now being expressed by economists. This chapter introduces some of the recent economic history literature that addresses this gap. Key aspects discussed include workplaces and wages of children and women, and their roles in the context of economic development.

This chapter argues that modern-day discrimination against African Americans had roots in the racism that surrounded slavery in the United States. Deprivation suffered by slaves permanently stunted their physical and cognitive development. However, the generation of African Americans born after slavery had much improved cognitive abilities. The author argues that discrimination subsequent to abolition was a reaction to the arrival and maturation of this new generation, which challenged whites in the economic and social realms.

Crime is a relatively recent concept, a construction of an era that focuses more on the legality of a person’s actions than their morality. This chapter illustrates how economic history can help gain a new perspective on crime, and how crime and violence can be studied by looking at historical policy experiments and their consequences.

Understanding the relationship between the way business is owned and organised is crucial due to its effect on the performance of firms and economies. Optimising the form of ownership and organisation can increase the scale and scope of operations, while improving productivity, efficiency and the capacity for innovation. This chapter discusses the importance of the corporation, or the joint-stock company, in historical perspective.

The preservation of competitive markets is a major cornerstone of modern economic policy. Cartels and anti-competitive practices are restricted, and competition authorities control mergers to avoid the excessive accumulation of market power. This chapter demonstrates that historical evidence is important to understand why cartels arise and how they work. It argues that the study of historical cartels from periods before the introduction of effective competition laws is necessary to understand how competition affects innovation and growth in the long run.

Personnel economics is the study of contracts between workers and firms. The principal (the employer) hires an agent (the worker) to perform a series of tasks. However, the principal and agent share neither the same underlying objectives nor information sets. This chapter illustrates how research in economic history can help to address challenges relating the employment relationship, including hiring, training, job assignments, and compensation.

An explosion in wealth occurred in Western countries in the second half of the second millennium. Meanwhile, the economies of the rest of the world remained relatively stagnant. Understanding the causes of this divergence is one of the great tasks of economic history. This chapter discusses how warfare, institutions, and culture play pivotal roles in recent theories of global divergence.

The British Industrial Revolution is probably the most important event of the last 10,000 years. This chapter reviews some of the more recent literature on this topic. The focus is primarily on the timing and location of the Industrial Revolution. Contributing factors discussed include institutions, culture and human capital, factor prices, consumer goods and household work, female agency, finance, trade and geography.

Developed countries would need an economy three to four times their present size to provide the same outputs but with 1820 technology. This astounding technological advancement demands an explanation. This chapter contrasts three different approaches to the study of innovation across the long run: conceptual, direct and indirect. For each, its author provides important examples from the economics and economic history literatures.

Culture is the result of, and is itself expressed through, religion, language, institutions, and history. Culture is persistent but does change slowly over time. Religion is either one manifestation of culture or itself shapes that culture. This chapter discusses recent contributions to the economics of culture and religion, a literature which was instigated by economic historians and has long been dominated by their work. Its author especially focuses on the role of culture and religion in engendering industrial progress and institutional change.

It is only within the last decades that the rural population of the world was overtaken by that of the cities. Thus, any economist working on a topic in economic history needs to take agriculture seriously. This chapter discusses the significance of agriculture since its invention during the Neolithic Revolution, and highlights the role of agriculture in the course of economic development up to the present day.

This chapter provides a long-run perspective on environmental and resource economics. The issues discussed include resource depletion, pollution, climate change and the intergenerational relationship between sustainability and future well-being. Important lessons are drawn by comparing historical settings and contemporary development economics that together demonstrate fundamental environmental challenges.

Prehistory encompasses the period from the origins of human culture to the advent of the written record. This chapter discusses why prehistory should be important for economists and economic historians. Its author places an emphasis on hunter-gatherer economies, farming economies, craft specialisation and trade. The chapter concludes with a discussion of how, practically, economics can help scholars to better understand this period.

The world wars were the most destructive conflicts in human history, both in terms of the economic cost and the human misery they inflicted. This chapter discusses the origins, impact, and outcomes of these conflicts and why they did not occur before or after the twentieth century. Issues discussed broadly relate to defence economics and include economic warfare, mobilisation, demobilisation, resources, and military spending.

A great deal of economic history has been dedicated to questions concerning Western Europe. This chapter recommends a selection of works in this genre. The second part then sets out a pathway towards writing novel contributions to the economic history of this world region. The author advocates that scholars invert the typical approach and hold the rest of the world up as a mirror through which to explain European exceptionalism.

This chapter provides an overview of the economic history of Central and Eastern Europe. The focus is initially placed on the region’s first round of modernisation, between 1850 and 1914. Subsequently, the chapter discusses the introduction of socialism and central planning after World War II and its implications for the region’s economic growth and development. A key feature explored is that this region is in many respects similar to Western Europe but remains significantly poorer.

In 2000, sub-Saharan Africa was the poorest region in the world in terms of GDP per capita—and the home of the majority of the world’s poor. Issues discussed in this chapter include the roles of geography, institutions and historical legacies, and how these factors resulted in low productivity and low incomes. It includes a devastating criticism of the historical persistence literature. The author concludes by advising new scholars on conducting research on this region.

This chapter outlines two competing ways of studying the economic history of Pakistan, India, and Bangladesh. One of these starts from the premise that this is a geographically diverse landmass, home to an unequal and hierarchical society, ethnically very mixed, and an area that was never politically integrated until the late nineteenth century. The other says that no matter the diversity, scholars can still find an average to represent the whole region. The discussion concludes with advice on how not to study this world region.

During the second half of the twentieth century, world economic activities shifted from the trans-Atlantic world to the economies of East Asia. Demographic factors and human capital were major sources of this growth, which in turn was facilitated by the social capital embedded in the networks of businesses that underpin these economies. These two dimensions of East Asia’s past are the focus of this chapter.

Both Australia and New Zealand share similar historical characteristics, having European, typically British, settler origins. This chapter discusses the two original economic drivers of this world region: agriculture and mining. Differences between Australia and New Zealand discussed here include the enfranchisement of indigenous populations, land use and ownership structures, sources and nature of immigration and the management of natural resources.

North America is a large continent endowed with large amounts of fertile soil and natural resources. The economic histories of the USA, Canada, and Mexico offer contrasting examples that can illustrate multiple themes in world economic history. In particular, this chapter highlights differences in the institutional structures of these economies and argues that they are key to understanding the different development paths of these three nations.

Like the USA and Canada, Latin American countries were colonies of Western European empires. But despite similar European backgrounds and factor endowments, Latin America remains poorer than its northern neighbours. This chapter discusses the historical, geographic, and climatic conditions that are at the centre of the predominant theories relevant to understanding the divergence between North and Latin America.

Impact is the difference a piece of research makes to the theory and practice of an academic discipline. The potential for impact in economic history is broad because it deals with big questions that are at the forefront of social science and political economy. This chapter sets out how readers can plan their pathways to impact through effective communication.

Most scientific texts are written for the purpose of publication, and most authors prefer publication in prestigious peer-reviewed outlets. Written by the editor of a leading journal in economic history, this chapter discusses how a compelling question, clear analysis and description, original and persuasive insights, and efforts to relate the findings to existing and future research form the key elements of successful studies that are published well.

Archival research is required to acquire original source materials, both quantitative and qualitative. This chapter illustrates the value of cultivating a historical temperament in economic research and argues that nurturing archival interpretation is key to developing such a temperament. Examples demonstrate how newly acquired archival materials formed the basis of recently published studies in economic history.

Case study methods are used to research individual units, such as an entrepreneur, a firm, an industry or a country. This chapter introduces three types of case studies: exploratory case studies, unique cases and cases that allow for explicit testing of a theory or hypothesis. The authors illustrate how each of these approaches can be used in economic history research using a series of examples.

Analytic narratives are used to understand historical phenomena where the data required to employ econometrics is lacking. This methodological approach allows for the analysis of a historical setting using economic theory or arguments combined with historical evidence that can be diverse in nature. Analytic narratives offer interesting alternatives to general formal models which may not be suited to understanding a particular case study or historical institution. A series of examples illustrate potential areas of application in economic history.

Measuring variables that accurately reflect the desired effect is part of designing successful statistical and econometric studies. This chapter discusses challenges related to data compilation and how inadequate proxies, selection bias and measurement error can undermine empirical projects. Two examples illustrate how mismeasurement has been successfully exploited in recent studies in economic history.

Econometric identification is essential to distinguish cause, effect and correlation in econometric studies. This chapter discusses some of the most common econometric techniques used in economic history today, including a series of examples, areas of application, advantages and caveats. Techniques discussed include ordinary least squares regression, time series analysis, regression discontinuity designs, placebo regressions and instrumental variable approaches.

Historical national accounting helps to reconstruct productivity and income indicators for past periods. This chapter presents recent results of such a reconstruction for seven world regions. Strategies for both the pre-statistical age and more modern periods, in which national accounting data are more abundant, help to anticipate opportunities and challenges when constructing and interpreting historical income and productivity measures.

Since the late 1930s, economists have noted an increase in economic efficiency, leading to higher welfare levels and social savings. Key to understand this development is the quantification of the impact of innovations and new technologies. This chapter discusses growth accounting and allied methodologies and how they may help to quantify innovation-led increases in efficiency and welfare benefits.

A great deal of research in economics and business is devoted to the study of the efficiency of individuals, organisations or entire economies. This chapter introduces a family of innovative techniques that help in the analysis of efficiencies by comparing inputs and outputs to estimate an efficiency frontier. A series of examples from both macroeconomic history and microeconomic history illustrate common areas of application.

Geospatial Information Systems (GIS) allow datasets to be matched with (historical) spatial units of analysis. The visualisation, and subsequent analysis, of geographical patterns that emerge from the use of this methodology constitutes a powerful tool in the toolkit of a researcher. This chapter illustrates some of the main areas of application, such as the visualisation of events and the mapping of distances and travel routes in historical settings. The chapter concludes with tips on how to make first steps towards using GIS methods in economic history research.

Network analysis allows for the identification and analysis of linkages formed by the interaction, communication, and trade of individuals, families, and firms, as well as the spread of information and technologies. This chapter develops the notation sufficient to understand a discussion of networks. Its author reviews two analytical approaches to network structures and surveys some of the areas in which economic historians have deployed social network analysis.