The Future of Economic History

1. The Future of Economic History Stephen Broadberry (Nuffield College, Oxford) September 2016

2. 1. INTRODUCTION • One of the advantages of being an economic historian is that under normal circumstances you are not called upon to predict the future • Sadly today I cannot restrict myself to predicting the past • I recently had to evaluate long run predictions made by economists concerning the future, and uncovered some interesting examples of people being spectacularly wrong

3. Forecast failures • Irving Fisher famously claimed in 1929 that the stock market had reached a “permanently high plateau” • Paul Samuelson: 1967 edition of Economics: An Introductory Analysis, forecast that USSR would overtake US in terms of real GNP between 1977 and 1995. • Each subsequent edition moved the date forward in time until comparison dropped in 1985

4. Forecast failures • Many others expected Japan and leading West European economies to overtake US and were proved equally wrong • Bob Fogel (Foreign Policy, January 2010) predicted Chinese GDP of $123 trillion in 2040, with a per capita income of $85,000, twice the level of France • Often, errors seem to have come from projecting recent trends into future

5. My strategy • In an attempt to minimise risk of an equally spectacular forecast failure, I decided that I would consult with other economic historians • Results of this survey will be reported in a moment • But first, let me begin with general outlook for the subject

6. 2. GENERAL OUTLOOK • Many of you have probably been present at “camp-fire” talks where economic historians say they are unloved and worried about the future of the discipline • Recently, however, there has been a more optimistic mood • Barry Eichengreen: “economic history has had a good crisis”

7. 2. General outlook • But even before crisis, there was a renewed interest in a number of areas, some of which I shall set out later • So right now, economic history is in better shape than it has been for as long as I can remember • But what will it look like in 10 or 20 years’ time? • Let me return to my survey of the opinions of colleagues to answer that question

8. 3. TOPICS • The first question I asked was “What do you think will be the most important topic in 10 years’ time?” • I can now report that there was complete agreement on this, with everybody giving exactly the same answer

9. The next big thing • Everybody said that the next big thing will be the topic on which they are currently working • Perhaps not so surprising: people work on what they think is most interesting • If that topic isn’t popular now, it must just be because other people haven’t yet realised how interesting it really is. So it is just a matter of time • I will try to guard against this “own-topic” bias, but you have been warned!

10. My list of hot topics • FINANCIAL CRISES • I have already mentioned Barry Eichengreen’s quip about economic history having a good crisis. • But EHR had special issue on financial history in 2010, where editors pointed out that financial history had been a growth area even before crisis had broken • So maybe economic historians are good forecasters after all!

11. THE GREAT DIVERGENCE DEBATE • This has had a phenomenal effect on Europe-Asia comparisons • But economic history of Asia now a major growth area in its own right, and this likely to continue as Asia continues to grow rapidly • AHES launched in Beijing in May 2010, mirroring EHES,established in early 1990s, which has done so much to stimulate European economic history over last quarter century

12. NEW INSTITUTIONAL ECONOMIC HISTORY • This has had a phenomenal impact on the discipline in the last quarter century or so, and continues to exercise a strong influence • Douglass North winning Nobel Prize in Economics was a tremendous boost, and there are now many strands • This is one way in which economic history has had a major impact on economics

13. ANTHROPOMETRIC HISTORY • This has also been phenomenally successful • Has enabled quantitative analysis of living standards in societies where previously only speculation was possible • Has also provided alternative interpretations of economic history in more established areas

14. HISTORICAL NATIONAL ACCOUNTING • This has begun to provide a framework for comparing societies over a much longer time period than used to be the case • Data now reach back to C13th for some western economies, and work is in hand for a number of Asian economies over a similar time scale

15. ENVIRONMENTAL HISTORY • The environment has always been studied at least implicitly by agricultural historians • But environmental history is now being treated much more seriously by economic historians • Obviously taps into contemporary concerns in wider society

16. INEQUALITY • Inequality has always been an important topic in economic history • But recently, the dramatic success of Piketty’s (2014) Capital in the Twenty-First Century has made long term trends in inequality a topic of wide general interest

17. Topics • You might want to apply the “own-topic discount factor” to some of these areas • But they can’t all be dismissed on those grounds

18. 4. METHODOLOGY • One issue which has generated a lot of controversy over the years is methodology, and whether economic history should be located in Economics or History. • I always think the tension between the 2 approaches was best put by Schumpeter in his History of Economic Analysis.

19. Schumpeter (1954: 815) • “There are such things as historical and theoretical temperaments. That is to say, there are types of minds that take delight in all the colors of historical processes and of individual cultural patterns. There are other types that prefer a neat theorem to everything else. We have use for both. But they were not made to appreciate one another.”

20. Methodology • I agree with Schumpeter that we have need for both, and the outlook seems to be better now than for a long time in both Economics and History Departments • Many economists perceive need for economic history after crisis of 2008, not least those working in central banks, left high and dry by theoretical models which didn’t even include a banking sector

21. Methodology • Governor of the Bank of England was shocked to see people queuing outside Northern Rock in 2007, and to realise that last bank run in England had occurred in 1878 • What had seemed arcane historical knowledge suddenly became a crucial gap in economists’ education

22. Methodology • Rudely awakened by the intrusion of material reality, many historians recognised the limits of the cultural turn • Recent work on the new history of capitalism has much in common with radical strands of economic history

23. Methodology • In addition, many economic historians have been employed in business schools and in other parts of academia • E.g. there are many distinguished historians of technology in science departments and historical sociologists in sociology departments • We should embrace economic historians from diverse backgrounds and celebrate that diversity

24. Current methodological controversy • Current methodological controversy surrounds work produced by economists and economic historians focusing on “persistence” • Typically, cross-sectional variation in economic outcomes today is shown to be highly correlated with cross-sectional variation in something that happened a long time ago • Causal relationship is then identified using IV methods

25. Persistence • Examples: • Acemoglu, Johnson and Robinson on the colonial origins of comparative development • Nathan Nunn on the long-term effects of Africa’s slave trades • Melissa Dell on persistent effects of Peru’s mining mita • More exotic examples might be described as “freakonomic history”

26. Controversial aspects • Compression of history: • Something that happened 500 years ago determines outcomes today, without saying anything about the intervening 500 years • Why are some things persistent and others not? • Not terribly helpful if cannot explain the difference • Techniques of identification • IV just the latest latest fad in economics? • Like cointegration, Granger causality or subgame perfect equilibrium?

27. Should we worry? • “New economic history” was controversial in 1970s • Keeps economists focused on economic history

28. 5. GLOBAL VS LOCAL • At start of my career, most economic historians in UK universities were British and most courses were on Britain • As student body at UK universities became more international, and as faculty also internationalised, focus became more global • But important that with this globalisation we do not lose a traditional strength of economic history, deep specific knowledge of local economies

29. Global vs local • I first tackled this issue in a 2001 essay, “British and International Economic History”, published in a volume edited for the EHS by Pat Hudson, Living Economic and Social History. • We have to write economic history of particular economies, but within a framework that enables international comparisons

30. Global vs local • We have to be able to fit experience of a particular economy within global economy • Example: protectionism in 1930s • Individual country studies often praise protectionist policies as helping to lower unemployment • But if you consider all these economies together, difficult to avoid conclusion that protectionism raised unemployment

31. Global vs local • While people wrote local economic history, often in their own languages, easy to miss the global perspective • Some of you may have read the recent 2 volume Cambridge Economic History of Modern Europe, edited by myself and Kevin O’Rourke

33. Global vs local • More of you have probably written it. • Example of attempting to combine local and global perspectives • Aim is to look at European economic history thematically rather than by country • But to retain detailed country knowledge we recruited typically 3 authors for each chapter, covering northwest Europe, southern Europe and central & eastern Europe

34. Global vs local • Cambridge Economic History of the Modern World is now in preparation, edited by myself and Kyoji Fukao • Planned publication date is 2019

35. 6. RE-INTEGRATING ECONOMIC HISTORY • Something which I think contributed to decline of economic history and those camp-fire talks was excessive specialisation • Greg Clark wrote in a review on EH.Net in 1997: ‘No one has published a paper yet entitled "The Heights of Norwegians Inferred from a Sample of 23 File Clerks, 1906-1908: A Quantile Bend Estimate," but given enough time they will.’

36. Re-integrating economic history • One problem with this excessive specialisation was that nobody could put together advances being made in particular regions or periods without getting their heads chopped off (often by Greg Clark, of course)  • This unsatisfactory situation tempted some economists to write on historical themes such as long run growth and development but without making much reference to economic history literature (e.g. Acemoglu and Robinson; Oded Galor) 

37. Re-integrating economic history • I don’t say this to criticise those authors • In fact, I have found this literature very useful in recruiting students to economic history options while working in Economics Departments at Warwick and Oxford • The lesson is that if we get so specialised that we no longer seem to address the big issues, then someone else will

38. Re-integrating economic history • However, at least partly in response to those developments, economic historians have also begun to work on economic growth and development over longer periods • Much work now stretches across medieval, early modern and modern periods and into classical era • There is also plenty of engagement between theory and history in this work 

39. 7. CONCLUDING COMMENTS • There was once a king who decided that it was time for his daughter to marry • The princess was beautiful, so had many suitors • The king decided that any young man who wanted to marry the princess would have to paint a picture of the king • The picture needed to be accurate but also make the king look attractive

40. Conclusion • Problem: the king had a badly twisted leg and had lost an eye in battle • The court artist was sure that he could use his artistic skills to win the hand of the princess and painted a picture • At first sight, the king was flattered to see a picture of an extremely attractive man with 2 straight legs and 2 fully functioning eyes • But he quickly became angry as he realised that the painting was not at all accurate.

41. Conclusion • “Off with his head” said the king and the court artist was led away and executed • The court physician then thought that he could use his medical knowledge to paint a very accurate picture of the king • The king looked at his picture and saw a man with a twisted leg and one eye • He noted that it was accurate but was annoyed that he didn’t look at all attractive

42. Conclusion • “Off with his head” said the king and the court physician was led away and executed • Then one day, a previously anonymous young man put himself forward • His painting showed the king in a shooting party with a rifle. He was kneeling on one leg, so that his twisted leg was not visible, and he had one eye closed as he was looking along the barrel of the rifle, taking aim

43. Conclusion • The king looked very attractive in this sporting pose, and he had to admit that it was physically accurate • The young man had succeeded in painting a picture that was both accurate and attractive, so the king had to allow him to marry the princess • The king then asked the young man: “what is your profession?”

44. Conclusion • “I’m an economic historian” replied the young man • “How did you know how to paint a picture that was both accurate and attractive?” asked the king  

45. Conclusion • “Well that is what we economic historians have to do all the time”, said the young man • So I leave you with this message • If economic history is to thrive in the future, we have to describe economies in ways that are both accurate and attractive