I have written many posts on this issue. But somehow it is never enough.
Nicholas Crafts of LSE writes a super short paper on the topic:
This paper considers the future of economic history in the context of its relationship with economics. It is argued that there are strong synergies between the two disciplines and that awareness of the economic past is an important resource for today’s economists. Examples are given that illustrate these points. It is clear that the past has useful economics but the potential value of economic history to economics will only be realized if economic historians are fluent in economics and organize the presentation of their research findings with a view to addressing questions that matter from a policy perspective.
First how econ history helps:
Economic history is under threat but still has a great deal to offer. This is as true today as it has been throughout my career. In this short essay, I aim both to show why the study of economic history is more valuable than is often recognized and also to propose a survival strategy for the discipline. In so doing, I shall concentrate on the relationship of economic history with economics. This is, of course, not the only academic subject with which economic history can and should interact fruitfully but it is vitally important and it is the area on which I am best qualified to write.
However, the general line of argument that I wish to make is applicable more generally, as follows. First, economic history is a small discipline. Like the citizens of a small country, its practitioners are well advised to be fluent in the language of their big neighbours including economics and history. When we have a conversation with these other disciplines, it should be on the basis that we have things to teach as well as to learn. Second, economic historians study matters of great policy relevance for today’s world. It is important that opinion-formers and policymakers know this and are made aware of the results of our research and their significance for the big issues. This is not only a duty but also a way to justify and to obtain research funding. Third, this implies that the weight of effort should tilt somewhat more towards policy-menu-driven questions and a bit away from a preoccupation with the pursuit of research motivated by engaging with the historiography. We need to be willing and able to discuss the lessons of history and debunk the myths.
Crafts gives many examples to show how econ history helps develop better perspectives:
It is straightforward to illustrate these points with examples based on famous episodes. For example, it is well-known that the Soviet command economy ultimately failed to deliver a satisfactory growth performance. This has been well documented by economic historians (Allen, 2003; Ofer, 1987) and it is clear that this reflects poor TFP growth reflecting incentive-structure problems that stifled innovation (Berliner, 1976). But, in addition, archival work has developed real expertise in the way in which planning was carried out and the insuperable problems that it encountered (Gregory and Harrison, 2005).
Similarly, it is generally accepted that the Marshall Plan was good for early postwar European growth and new ‘Marshall Plans’ are frequently demanded. However, it is probably not generally realized that the Marshall Plan worked as a structural adjustment program rather than through donation of large amounts of unconditional aid (De Long and Eichengreen, 1993) and that it shares much in common with the proposals that comprised the original Washington Consensus (Crafts, 2011).
A classic example of a myth that seemingly refuses to go away but is important continually to refute is that the British Industrial Revolution and transition to modern economic growth was based on the gains from imperialistic exploitation in general and African slavery in particular (Frank, 1998; Inikori, 2002). Mainstream economic historians have repeatedly shown that the numbers do not add up to sustain these claims – the trade volumes, markets and profits were too small (Harley, 2004). The key to the industrial revolution was technological change not relaxing a savings constraint for which in any case, as O’Brien put it, “the periphery was peripheral“ (1982, p. 18).
Recent events have once again shown the importance of scholarship on the American Great Depression of the 1930s. This is, of course, commonly attributed to the 1929 Wall Street Crash. Economic historians would disagree but would say that financial crisis in the form of bank failures was the heart of the matter. Over time, a massive amount of detail has been provided that allows us to understand why this crisis occurred, why it had such devastating effects on the level of economic activity, what could have been done to prevent it, or to respond more effectively once it was under way (Calomiris and Mason, 2003; Calomiris and Wilson, 2004; Mitchener, 2007; Richardson and Troost, 2009).
He even lists areas where econ history could be very useful. This could be the scope for future agenda..
Superb reading. Great reference list as well..
