How history can contribute to better economic education..

Coen Teulings of Cambridge joins the discussion on improving economics education. And takes the position most have been taking– teach more history.

He goes a bit further and says there is a need for a broad brush of history:

What I propose is different from economic history as it is usually taught. Economic history is practised as history, stressing the particularities at each stage. That is great and very informative, but the use of history that I propose is more broad-brushed. It ignores the residuals specific to each observation. Instead, it stresses the regression coefficient connecting these observations. It deals with the general laws of the evolution of human societies, ignoring many subtle details that may or may not explain why individual societies do not fit exactly to the regression line. I propose to use history as a device for teaching both the logic and the empirical relevance of economics.

What historical phenomena should be covered in such an economics programme? First of all, I would go into great depth on the consequences of the Neolithic Revolution – the transition from hunter-gatherer societies to agriculture. It has occurred several times at different places in human history. Each time, what happened was more or less the same – a huge increase in population density, the emergence of cities, a transformation of politics, and a rise in income inequality. In his splendid book on cities, Paul Bairoch (1988) provides a simple physical analysis showing why hunter-gatherer societies cannot sustain cities. The low population density in hunter-gatherer societies means that travel times are excessive for more than 100 people to convene at one place. The hundred-fold increase in population density due to agriculture is equivalent to a fall in transportation costs between two neighbours by a factor of ten.

Azar Gat’s (2006) book on war provides an analysis of the implications of this increase in density for warfare. Larger groups of people can meet more easily and coordinate their violence to subdue single individuals, families, or bands. An economist would say that the use of violence and the exercise of power exhibit strong economies of scale. Starting teaching economics from history would probably cure a main defect in current economic teaching – the little attention we pay to the economics of robbery and theft.

I would also teach the introduction of the rule of law. In his seminal books History of Government, S E Finer (1997) locates this transition at Moses’ descent from Mount Sinai carrying the Ten Commandments. The Egyptian pharaoh was god, king, lawmaker, and judge all at the same time. The Ten Commandments provided the people direct access to the law, independent from the king’s judgement. From now on, the king’s power was constrained by the Ten Commandments and Pharisees’ claim to be the guardians of these commandments. King Solomon had to face this new reality when he had an affair with a beautiful woman. All this is reflected in Daron Acemoglu (2012)’s great insight that politicians have limited ability to sign credible contracts since there is no superior power that can enforce them.

Finally, I would teach the Industrial Revolution and its demography. Paul Bairoch (1988) shows how the industrial revolution goes hand-in-hand with a rapid increase in urbanisation. First Belgium in the 15th century, and afterwards my home country, The Netherlands, in the 17th century were the first countries where more than 30% of the population lived in cities. In that sense, The Netherlands pre-empted the Industrial Revolution. For about 150 years, wages in The Netherlands were twice as high as elsewhere in Europe – a clear example of the economics of agglomeration.

Superb…One is just ignorant about so many things that lead to econ development. How the historical forces combine or hinder development. And then much of it keeps repeating/rhyming.

Keep the pressure on..

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