Why economics needs economic history

This post was written by Kevin O’Rourke

The beauty of the internet is that sometimes you come across papers like this one that you might otherwise have missed (H/T Greg Mankiw). As you would expect, I agree with Temin that economic history has a fundamental role to play in economic education, and MIT is a great example. To repeat a point I have made on the blog before, several superstars who have emerged from that department have a historical sensibility that has made them much better economists. Obstfeld and Rogoff are best known for their path-breaking work in open economy macro, but both have written important books on economic history (Obstfeld with Taylor, and Rogoff with Reinhart), and I don’t think it’s a coincidence that Obstfeld-Rogoff style open economy macro tends to be far more grounded in the real world than some closed economy equivalents. Paul Krugman regularly displays an interest in and knowledge of history, which he uses to good effect; don’t even get me started on Ron Findlay; and so on.

There are many reasons to think that we need more history on the economics curriculum, not less. The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.

Strikingly, many employers and policy makers are also arguing that knowledge of economic history might be particularly useful. For example, Stephen King, Group Chief Economist at HSBC, argues that “Too few economists newly arriving in the financial world have any real knowledge of events that, while sometimes in the distant past, may have tremendous relevance for current affairs…The global financial crisis can be more easily interpreted and understood by someone who has prior knowledge about the 1929 crash, the Great Depression and, for that matter, the 1907 crash” (Coyle 2012, p. 22). Andrew Haldane, Executive Director for Financial Stability at the Bank of England, has written that “financial history should have caused us to take credit cycles seriously,” and that the disappearance of subfields such as economic and financial history, as well as money, banking and finance, from the core curriculum contributed to the neglect of such factors among policy makers, a mistake that “now needs to be corrected” (Coyle 2012, pp. 135-6). In a recent Humanitas Lecture in Oxford, Stan Fischer (another MIT graduate) said that “I think I’ve learned as much from studying the history of central banking as I have from knowing the theory of central banking and I advise all of you who want to be central bankers to read the history books” (http://www.youtube.com/watch?v=5Y-ZhFbw2H4, 43.48 minutes in).

Knowledge of economic and financial history is crucial in thinking about the economy in several ways. Most obviously, it forces students to recognize that major discontinuities in economic performance and economic policy regimes have occurred many times in the past, and may therefore occur again in the future. These discontinuities have often coincided with economic and financial crises, which therefore cannot be assumed away as theoretically impossible. A historical training would immunize students from the complacency that characterized the “Great Moderation”. Zoom out, and that swan may not seem so black after all.

A second, related point is that economic history teaches students the importance of context. As Robert Solow (yes, that department again, although a Harvard PhD) points out, “the proper choice of a model depends on the institutional context” (Solow 1985, p. 329), and this is also true of the proper choice of policies. Furthermore, the “right” institution may itself depend on context. History is replete with examples of institutions which developed to solve the problems of one era, but which later became problems in their own right.

Third, economic history is an unapologetically empirical field. Doing economic history forces students to add to the technical rigor of their programs an extra dimension of rigor: asking whether their explanations for historical events actually fit the facts or not. Which emphatically does not mean cherry-picking selected facts that fit your thesis and ignoring all the ones that don’t: the world is a complicated place, and economists should be trained to recognise this. An exposure to economic history leads to an empirical frame of mind, and a willingness to admit that one’s particular theoretical framework may not always work in explaining the real world. These are essential mental habits for young economists wishing to apply their skills in the work environment, and, I would argue, in academia as well.

Fourth, even once the current economic and financial crisis has passed, the major long run challenges facing the world will still remain. Among these is the question of how to rescue billions of our fellow human beings from poverty that would seem intolerable to those of us living in the OECD. And yet such poverty has been the lot of the vast majority of mankind over the vast majority of history: what is surprising is not the fact that “they are so poor”, but the fact that “we are so rich”. In order to understand the latter puzzle, we have to turn to the historical record. What gave rise to modern economic growth is the question that prompted the birth of economic history in the first place, and it remains as relevant today as it was in the late nineteenth century. Apart from issues such as the rise of Asia and the relative decline of the West, other long run issues that would benefit from being framed in a long-term perspective include global warming, the future of globalization, and the question of how rapidly we can expect the technological frontier to advance in the decades ahead.

Fifth, economic theory itself has been emphasizing – for well over twenty years now – that path dependence is ubiquitous.

Finally, and perhaps most importantly from the perspective of an undergraduate economics instructor, economic history is a great way of convincing undergraduates that the theory they are learning in their micro and macro classes is useful in helping them make sense of the real world. Far from being seen as a “soft” alternative to theory, economic history should be seen as an essential pedagogical complement. From experience, I know that there is nothing as satisfying as seeing undergraduates realize that a little bit of simple theory can help them understand complicated real world phenomena. Think of Obstfeld and Taylor’s use of the Mundell-Fleming trilemma to frame students’ understanding of the history of international capital market integration over the last 150 years; or Ronald Rogowski’s use of Heckscher-Ohlin theory to discuss political cleavages the world around in the late nineteenth century. The Domar thesis that Temin refers to in his paper is a great way to talk to students about what drives diminishing returns to labour. Economic history is replete with such opportunities for instructors trying to motivate their students.

Coyle, D., ed. (2012), What’s the Use of Economics?: Teaching the Dismal Science After the Crisis, London Publishing Partnership.

Solow, R. (1985), “Economic History and Economics,” American Economic Review 75, 328-31.

89 Responses to “Why economics needs economic history”

  1. Richard Fedigan Says:

    @Kevin

    Excellent Post. Deserves serious debate. Bravo!

  2. Georg R. Baumann Says:

    Hi Kevin,

    in that context, allow me the liberty to make a literature recommendation. Personally I only stumbled across the name by reading a Chomsky article here:

    http://www.huffingtonpost.com/noam-chomsky/plutonomy-and-the-precari_b_1499246.html

    Robert Brenner, and in particular his book:

    “The Economics of Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long Downturn, 1945–2005″.

    http://www.history.ucla.edu/people/faculty?lid=37

  3. Georg R. Baumann Says:

    quote by http://people.umass.edu/crotty/:

    …The key point is this: the incorporation of Brenner’s theory of destructive competition into RA-based explanations of the long-term nature of the present global crisis significantly enhances their explanatory power….

    His review of Brenner’s above mentioned book here:

    http://people.umass.edu/crotty/BR-chllge-ult.pdf

  4. Gregory Connor Says:

    A compelling argument — the Dublin economics doctoral consortium (UCD, TCD and NUIM) should perhaps think about this or respond individually. I do not think that there is an economic history requirement for doctoral students in any of the Dublin-area programs (not sure about the others on this island).

  5. brian lucey (@brianmlucey) Says:

    Its a serious problem Kevin - see the work by the St Paul trust (http://brianmlucey.wordpress.com/2011/12/28/down-the-memory-hole-why-we-should-give-more-priority-to-economic-and-financial-history/)
    Gregory the issue is not at the doctoral level - business and economic history should be a core for all business and econ students. Its not, anywhere I know of. I have argued for years to no avail to even have an optional module on our Msc Finance on this to be met with blank looks.
    http://www.youtube.com/watch?v=ExWfh6sGyso

  6. rf Says:

    “to be met with blank looks.”

    I read this initially as ‘ to be met with bank notes’

  7. David Madden Says:

    UCD has an undergrad module in economic history, previously given by Corma O Grada, now given by Morgan Kelly. Other undergrad modules on the Irish and European economies cover recent economic history, well the boom and bust periods anyway.

    It would be nice to have courses at graduate level, but is the expertise there? With Cormac retired and Kevin in Oxford, the two most celebrated economic historians are no longer available to provide such courses. Maybe there are other names I am missing here, but I can’t think of many economic history specialists around Dublin at the moment.

  8. David Madden Says:

    By the way, I agree with the broad gist of Kevin’s post, that history is under-represented on economics programmes.

  9. Richard Fedigan Says:

    Don’t wish to undermine a potentially valuable debate on the role of ( a knowledge of) economic history in the teaching of economics as that relates to the employabilty of economists themselves but certainly such knowledge would be a distinct advantage for all young graduates entering both private and public sectors increasingly at the intersection between business/capitalism and public policy.

    Your example of Krugman, whether one agrees with him or not, is a good One

    At the very least, he has succeed in ‘popularising’ intelligent discussion about this business/public policy intersection, critical to the ’survival’ of both capitalism and liberal democracy around the world.

    You would probably not be surprised at the level of ignorance, even at very senior levels of management in global companies, of what you call ‘context’, the inability to distinguish ‘normal’ business cycles from ‘Black Swans’ and the concomitant difficulties in spotting opportunity, anticipating clear trends already under way and developing business strategies to deal with, for example, millions of people emerging from poverty and global warming.

    So, of course you’re right about the importance of economic history for economists, but I would suggest that both for global consumer-citizens and those ’serving’ them business or policy ’solutions’, lack of knowledge of the subject borders on illiteracy.

  10. Shay Begorrah Says:

    This is a serious topic and the Internet’s finest news source touched on the usefulness of historical comparison in an US context quite recently:

    Historians Politely Remind Nation To Check What’s Happened In Past Before Making Any Big Decisions

    You would imagine that if economics aspires to be a science that one of areas it would be most focused on would be the results of previous economic experiments. It does not seem to have worked like that in the EU recently.

  11. Aidan Kane Says:

    I’ve had the privilege of teaching an undergrad course in Irish economic history at NUI Galway for a number of years, and I try to integrate some related material, particularly on historical perspectives on economic globalisation, not least that pioneered by KOR and Williamson, in another course mainly about the contemporary Irish economy in a global context. Integrating in that way i.e., as a part of a course–I’m thinking esp at masters level—can be one route around this, especially given the hiring constraints all fields face. I’ve even been known to run a few hundred years price data by the 1st year macro students, to perhaps some puzzlement :)

    One hopeful development is that as more and more (especially cross-country and macro) historical data sets become available, new researchers, who may not have thought of themselves as economic historians per se can find many interesting research trajectories and challenges. Perhaps some will surface at the IESH conference in November: call for papers here http://www.eshsi.org/

  12. Richard Fedigan Says:

    Once again at the risk of butting into an ( important) debate among economists I’m not sure I agree ( with Kevin) that economic history is ‘an unapologetically empirical field’ (not even really sure I know what that means!) I DO think the discipline’s reputation ( and attractiveness?) would be enhanced by the wide communication of an agreed, basic, layman-friendly vocabulary.

    I’m distinguishing here between financial and ‘economic’ vocabulary.

    While I’ve been impressed on recent relatively rare visits to Ireland by the (pub) articulacy of ordinary citizens on financial matters, basic economics vocab. is bandied about ambiguously and willy nilly.

    A ‘marketing’ job to be done by the ‘profession’ and an opportunity?

  13. seafóid Says:

    “Why economics needs economic history”

    Surely this is selbstverständlich, as they say in Germany. How can anyone understand what is happening now without understanding what drove previous crashes ? Power and greed and overstretch. Same brain structures going back to prehistory.

    Anyone who ever says “this time is different” probably works in the sales business and should be taken out and shot.

    The economic system is fundamentally unstable.
    http://www.ft.com/intl/cms/s/0/f2e4dbb0-4caa-11df-9977-00144feab49a.html

    Most of the models used are crap. Of course, the more complicated they are, the more they are revered.

    And we have climate change coming down the line.

  14. rf Says:

    Are there not schools of economic thought that do take history seriously though? Such as institutional economics, evolutionary economics, sociological economics, even, at a push, various schools of political economy..
    So what we’re really talking about is the dominant paradigm (neo classical economics) making room for history?

  15. Brian Lucey Says:

    Bank notes would be nice. The MSc in finance was at one stage to have had modules in banking, finance history, real estate, distressed debt, and finance and development. These got axed when bureaucrats took over (academics but not related to the field). Sure why would we need those modules anyhow, even as options. So it’s a general narrowing of the minds.

  16. Richard Fedigan Says:

    @Brian Lucey
    +1

    Have v. bright nephew, finished MSc. Fin. in v. pretigious, v. expensive London school in June, now with Int. ( US) bank in the City, nothing on course about Economics, much less economic history. Nothing!

  17. Cormac O Grada Says:

    Everybody seems to agree on this. Kevin’s plea is one of the best, but it is in a tradition that goes back three or four decades now [I'm afraid I'm old enough to remember].

    The next question then is why don’t others see the light. Why have economic historians been so long on the back foot, endlessly trying to justify themselves?

    Although Morgan Kelly is a great addition to the ranks of economic historians in Ireland (see e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2289094 or http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2037773), the place of the subject in TCD and UCD is precarious–in both history and economics departments.

  18. Enda Hargaden Says:

    My understanding is that there are very few openings for economic historians on the job market. If universities were more willing/able to hire in that field, an increase in the supply of undergraduate courses would quickly follow.

  19. seafóid Says:

    “Employers are increasingly complaining that young economists don’t understand how the financial system actually works”

    Sounds like the crisis in psychiatry …

    http://www.nybooks.com/articles/archives/2011/jul/14/illusions-of-psychiatry/

    “Not only did the DSM become the bible of psychiatry, but like the real Bible, it depended a lot on something akin to revelation. There are no citations of scientific studies to support its decisions. That is an astonishing omission, because in all medical publications, whether journal articles or textbooks, statements of fact are supposed to be supported by citations of published scientific studies. (There are four separate “sourcebooks” for the current edition of the DSM that present the rationale for some decisions, along with references, but that is not the same thing as specific references.) It may be of much interest for a group of experts to get together and offer their opinions, but unless these opinions can be buttressed by evidence, they do not warrant the extraordinary deference shown to the DSM”

    Anyway, at least in economics there are the Marxists. Their creed may take up too many evenings but IMO it’s the best analysis of how the system really works.

    http://monthlyreview.org/2013/07/01/the-cultural-apparatus-of-monopoly-capital

  20. Dearg Doom Says:

    Sadly, I don’t think that undergraduates believe that they have any to learn from history. Everything is different now, don’t you know.

  21. seafóid Says:

    “As Robert Solow (yes, that department again, although a Harvard PhD) points out, “the proper choice of a model depends on the institutional context””

    Samuel Karlin, the renowned maths professor, once said: “The purpose of models is not to fit the data but to sharpen the questions”

  22. Frank Galton Says:

    Given the legitimate point about the shortage of qualified economic historians to teach these courses, wouldn’t another option be to bring in history department lecturers and have the course driven by a joint applied econ perspective of the lecturer and students? For example, there are some basic episodes in 19th century British and Irish economic history (famine, corn laws, land revolt, “romantic Ireland is dead and gone”) that are impossible to elucidate without some economics.

  23. Mickey Hickey Says:

    One shortcoming in Ireland is that it is not an economic hub. In Frankfurt, Paris and London economists versed in all aspects of the trade are rubbing shoulders with each other weekly. This occurs on the job and after hours. I know a few groupings in Frankfurt that meet weekly or monthly for lunch. They also visit each others houses across a wide range of cities, add Basel, Brussels and Zurich to the three above.

    Some of these economists have experienced 2 centuries rolled into two decades in places like Argentina. Get twenty together and collectively they have experienced a few hundred years. Economics tends to be faddish pursuing the popular response to the most recent breakdown of models.

    In the present circumstances history began with the introduction of main frame computing in the 1960s. With microsecond by microsecond tracking of transactions across a wide spectrum from supermarkets to ATMs and cash flows in all directions domestically and internationally we are now in world that neither Keynes, Smith or Marx could have foreseen.

    Swift whose transactions are now being monitored by security agencies for evidence of “terrorist activity” is an open book to a dozen governments. Granted the Vatican bank with 8 billion in assets does not seem to have access to Swift, hence the need to load bills on a plane.

    History is a wide ranging subject both in terms of time, geography and ideology. It is all useful, the problem is to pick out what is essential and can be taught in two semesters. I would suggest a second language with some study and work abroad would be useful. Widen yer horizons beyond Dublin, London and NY.

  24. Mickey Hickey Says:

    The Independent is on a roll. The first order of gov’t business is to devise tactics to throttle the Indo.

    http://www.independent.ie/business/irish/anglo/diarmaid-ferriter-history-will-ask-how-we-could-be-so-docile-in-face-of-such-betrayal-29385047.html

  25. francis Says:

    Another case, where history seems to follow a typical script

    http://www.ft.com/intl/cms/s/0/31759188-e40d-11e2-91a3-00144feabdc0.html#axzz2Xtv2au8v

    @ Frank Galton

    What I see as important, that people look at things like taxes paid, and what fraction of national income was used by the government, income distributions, etc.

    And these are things which were pretty alien to my history teachers. So I am not sure, what place “history” folks could have in this effort.

  26. Michael Hennigan - Finfacts Says:

    Yes, economic history is important but absent the clarity of victors and vanquished in general history, there is more room for debate and disagreement in economics.

    Adam Smith’s Wealth of Nations (1776) is possibly best known for the invisible hand metaphor and the argument on self-interest.

    However, contrary to what some critics have claimed, his emphasis was that you serve your own self-interest by serving the self-interest of others.

    Edward Glaeser, a Harvard economist, wrote in The New York Times in 2009: “Adam Smith made the case for selfishness when he wrote that ‘it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.’”

    Smith in fact made the case for progressive taxation (”It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.”), warned against ‘combinations’ of masters to keep wages down while calling on the law to crush combinations off workers; supported universal government-financed education as he saw that the division of labour destined people to perform monotonous mind-numbing tasks that eroded their intelligence (he foresaw the world’s fastest growing occupation: security guard work!). He said: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

    Smith was wrong on the benefits of a union of Ireland with Great Britain, outside the North-East at least.

    When I was growing up in Bandon, once known as the Londonderry of the South, its industrial glory days were long past and are today symbolised by the extensive ruins of the Overton Cotton Mills (off the Bandon-Clonakilty road, heading for Timoleague and Courtmacsherry) which was built in the early 1800s and for a time had hundreds of workers employed but was converted to a workhouse during the Famine.

    Locally, we are indebted to Louis Cullen and George O’Brien for their economic histories and internationally to Angus Maddison.

    Maddison is renowned for his work in quantifying historical economic growth levels and his focus on the origins of growth.

    An unusual independent report funded by Enterprise Ireland and published on Friday, focuses on a problem that will not be solved by another laundry list of incentives.

    The report is unusual as it is spin-free and starkly portrays the poor state of entrepreneurship in Ireland.

    http://www.finfacts.ie/irishfinancenews/article_1026243.shtml

    There is a half century of a subpar indigenous performance to inform credible solutions. However, is there an appetite for bitter facts?

  27. Richard Fedigan Says:

    @MH

    ‘…. half century of subpar indigenous performance. However, is there an appetite for bitter facts?’

    Yes. a remarkably ’spin free’ EI report apart from the obligatory smattering of ‘world class’ this and that.

    How about a Campaign for a Revolution in Indigenous Performance/ Industrial Policy (CRIP).

    At least worth a pilot project? And the initials could be easily adapted if and when we arrive at the ‘Activation’ stage!

  28. seafóid Says:

    Young economists should meditate these phrases for at least an hour a day

    http://www.ft.com/cms/s/0/847d9284-df1e-11e2-881f-00144feab7de.html

    “Many countries also have issues of their own. In recent years, many have shifted towards ensuring that wealth is spread more fairly. In the long term this is a good idea, but it is not in the short-term interests of international investors.”

    Here is the video with an accompanying you-just-couldn’t-make-it-up advertisement

    http://video.ft.com/v/2525732036001/Trouble-ahead-for-Turkey

  29. francis Says:

    Reading up a little more on the Temin paper (the first link)

    what I find truly remarkable, is that this old guy uses repeatedly the phrase ” failed state” in connection with the US, pushing it solidly from the temple place a lot more american economists seemed to see it on.

    What I found also worth to remark, is a recent statement from Ronald Coase
    http://hbr.org/2012/12/saving-economics-from-the-economists

    which I want to underwrite wholeheartedly, that the disconnect between
    Betriebswirtschaft (business / MBA) and Volkswirtschaft (economics) is worrying.

    I had this strange experience here recently, that nobody could value a plain vanilla bond, and what that means, how Europe is actually helping Ireland.

    Finally, I have an entry
    http://www.irisheconomy.ie/index.php/2013/07/01/el-erian-on-ireland-and-austerity/#comment-437560

    with an excessive number of links, therefore predictably waiting in moderation : - ) which might mostly only be relevant for people with some interest in the german floods.

  30. DOCM Says:

    @ All

    To the outside observer, what seems obvious is that what economics needs as a discipline is a return to the basic understanding that the study of it cannot be divorced from politics.

    An example is this commentary from the German press.

    http://www.tagesspiegel.de/meinung/eurokrise-ezb-setzt-angela-merkel-ein-ultimatum/8457292.html

  31. DOCM Says:

    @ All

    John Authers of the FT on the background.

    http://www.ft.com/intl/cms/s/0/700dd844-e4bf-11e2-875b-00144feabdc0.html#axzz2YIVp3eMG

  32. seafóid Says:

    Regarding the technological frontier, I really liked this piece

    http://www.nybooks.com/articles/archives/2013/mar/21/homunculism/?page=2

    “The computer engineer gets back to his main field of competence in the penultimate chapter, which restates his earlier published views about the future of information technology. His “futurist” thesis is that computing power doubles every year—information technology improves exponentially, not linearly (he calls this the Law of Accelerating Returns). He boasts that this prediction has been borne out every year since 1890 (the year of the first automated US census), and there does seem to be an empirical basis for it. But is it a law of nature and if so of what kind? What exactly is the reason for it? Technology does not in general improve exponentially, so what is it about information technology that makes this putative law hold? Is it somehow inherent in information itself? That seems hard to understand. Perhaps it is just the way things have contingently been so far, so that the rate of growth may slow down at any minute.

    Kurzweil acknowledges that there are physical limits on the “law,” imposed by the structure of the atom and its possible states; it is not that computing power will double every year for all eternity! So the “law” doesn’t seem much like other scientific laws, such as the law of gravity or even the law of supply and demand. What seems to me worth noting is that the growth of information technology does not depend on the nature of the material substrate in which information exists (such as silicon chips), because new substrates keep being invented. Once the information capacity of one medium has been exhausted, engineers come up with a new medium, with even more potential states and yet more tightly packed. But then the “law” depends on a prediction about human ingenuity—that we will keep inventing ever more powerful physical systems for computation.

    It is therefore ultimately a psychological law: to the effect that human creativity in the field of information technology improves exponentially. And that doesn’t look like a natural law at all, but just a fortunate historical fact about the twentieth century. Thus Kurzweil’s “law” is more likely to be fortuitous than genuinely law-like: there is no necessity that information technology improves exponentially over (all?) time. It is just an accidental, though interesting, historical fact, not written into the basic workings of the cosmos. As philosophers say, the generalization lacks nomological necessity.”

  33. Mickey Hickey Says:

    An interesting article on recent economic history. A mention of Hayek qualifies it as history in my eyes.

    http://www.newstatesman.com/economics/economics/2013/04/creative-destruction

  34. Michael Hennigan - Finfacts Says:

    We may be ruled by political Lilliputians compared with the giants of past times while procrastination has been a common feature in decision making during the crisis.

    Some lessons have been learned from the Depression period and in 1933, more than 3 years into the crisis, the new Roosevelt Administration was improvising rather than implementing a grand plan.

    The president’s first budget request to Congress was to slash the federal budget by 20% — its was proposed to cut veteran benefits by 25%, an extraordinary move less than a year after General Douglas MacArthur, the Army chief of staff, personally led the routing of World War 1 army veterans from Washington DC, who were seeking early payment of their war pensions.

    http://www.youtube.com/watch?v=dWvCCxOUsM8#at=121

    Heroism or recklessness (when bold plans do not work out) may be the option when there are no other alternatives.

    In Europe, Angela Merkel, the leading politician, has the style dreamed of by the political framers of the postwar German constitution which enshrined distributed power.

    In the US, Barack Obama may have marginally more success with Congress if he was more inclined to massage the egos of members.

    However, times have changed and Morris Fiorina, Stanford University political scientist, in his book “Disconnect: The Breakdown of Representation in American Politics,” said “the great irony” of American politics is that the more Americans participate in their political system, the angrier and more disillusioned they become.

    Interest in politics is a minority one and the partisans at grassroots level are now in control.

    “Against all natural expectations,” he wrote, “Americans liked their government better, trusted their leaders more, and voted in higher numbers in the bad old days when party bosses chose nominees in smoke-filled rooms; when several dozen old white men (mostly Southerners) ran Congress, when big business, big labor and big agriculture dominated the interest group universe; and when politicians didn’t have the tools to figure out what their constituents wanted. Why?”

    On leadership, what can be learned when for example, Henry Ford was both a brilliant businessman and a failure?

    Different skills may be required for different tasks.

    Prof. John Kay wrote in his Financial Times column in Oct 2008 that John Sculley was chief executive of Apple from 1983 to 1993. He gave an extended account of his experiences to Fortune magazine, which posed the question: “Sculley – chump or champ?”

    Sculley’s tenure included a period of great success - - Apple’s graphical user interface brought the present computer within the capabilities of everyone; and a period of serious failure — Microsoft achieved almost complete dominance of the industry. How could one man have been both so right and so wrong?

    Prof. Kay said the analysis overlooked the obvious answer - - that neither Apple’s success nor its failure had much to do with Sculley, an able corporate bureaucrat who rode the roller-coaster of high technology.

    He said by describing Napoleon’s Russian campaign through the eyes of individual participants, Leo Tolstoy rejected the notion of history as the lives of great men.

    Of the battle of Borodino, Tolstoy wrote: “It was not Napoleon who directed the course of the battle, for none of his orders was carried out and during the battle he did not know what was going on.”

  35. Brian Woods Snr: Says:

    @ Seafóid: Exponential growth - in any physical system, has limits imposed by laws of physics, chemistry and mathematical rules. That’s it. The thing may be graphed. Its a sigmoid - (like our not-so-recent property bubble!) - and …. Nature rules, KO!

    You can pack a lot of electrons onto a pinhead. But electrons are pesky fellows. Need a lot of space they do. Ditto for atoms - they contain electrons too! The PR spin is good though (that’s a Freudian). Electrons have ’spin’. 8-)

    @ DOCM: “To the outside observer, what seems obvious is that what economics needs as a discipline is a return to the basic understanding that the study of it cannot be divorced from politics.”

    I genuinely doubt that there are many ‘outside observers’ - except maybe around here. Ordinary folk haven’t a clue. As a scientist, my experiences with economics have led me to form the opinion that it is NOT a science at all. Economics was originally highly political, but became separated from its parent - in late 19th cent. It might be possible to re-unite these two, but I have my doubts. No harm in trying though.

    The so-called ‘laws’ of economics are not laws at all, but are self-referential, logical axioms, which are then dressed up in mathematical language to provide ‘gravitas’. There is no General Equilibrium - its as near to the legend of the Holy Grail as makes no difference. Free Markets: an obscenity of truly biblical proportions. Supply + Demand set ‘the price’: that’s a bad joke. There’s more!

    Some economists have caused a great deal of social and political mischief to be visited upon countless millions. And I do not I see many apologies or retractions about. Persons who perpetrate Crimes Against Humanity get thrown in the slammer! Right? Yeah, I thought so.

    I’m not saying its too late for the Economists to save themselves from themselves. Actually, I might cautiously advise against such action. The occasional journal paper on the matter may be interesting, but that’s it. We’re stuck with it for the moment.

    Since the original post was about Economic History: Its history. Now history needs a lot of reading. Like a lot. And you have to write a lot as well. Like many, many term papers. It probably takes at least three years - or more likely four, of undergraduate study to develop a meaningful understanding of a subject like Economic History. Apart from the reading and the ‘riting - you need to thing about it! Twelve-week semester modules and two-hour exams simple do no cut it!

  36. DOCM Says:

    @ Mickey Hickey

    Thanks for the link. A fascinating article!

    The opening paragraphs;

    “Is it to the wrong ideas of economists or to the interests of the power-holders that we should turn to explain the “Great Contraction” of 2008-2009? John Maynard Keynes believed that the Great Depression of 1929-32 was caused by the wrong theory of how the economy worked in the minds of policymakers – the remedy for which was to equip them with the right theory. But this ignored one thing: that the reigning ideas are, more often than not, the product of the dominant power structures.

    Economics, therefore, needs to be supplemented by political economy – the study of how power affects the choice of ideas and policies and the distribution of income; in short, Keynes plus J A Hobson and Karl Marx.”

    @ Brian Woods Sn

    I was referring to observers outside the formal discipline of economics. As to the point that you make with regard to economics not being a science comparable to the physical sciences, not even practitioners make such claim. The field of economics cannot IMHO therefore be simply dismissed out of hand on this ground.

    @ Michael Hennigan

    The irony of the form of government decided by the Allies for Germany is
    that it seems to have given excessive power to the centre in the person of the Chancellor as the tone setter. A great idea when the incumbents are up to the job; not so much when they are not.

  37. seafóid Says:

    https://twitter.com/JoyceCarolOates/status/353275967311060992

    @JoyceCarolOates As temperatures climb toward 100 degree F., ever less urgent the question, What is this all for?

  38. Brian Woods Snr: Says:

    @ DOCM: “The field of economics cannot IMHO therefore be simply dismissed out of hand on this ground.”

    Correct. I’m not dissing Economics. I’m dissing the so-called theoretical basis on which some quite dodgy public economic policy has been/is being made.

    There is sufficient empirical evidence available - though it may be difficult to collect and even more difficult to verify, for economists to probably explain the observations in terms of policy decisions enacted - not in terms of some non-existent (how do you prove this!) theory. Its maddening!

  39. John Gallaher Says:

    Interesting view,but history can also be a burden and impediment to moving on.Utilizing the dramatization off the famine and historic evictions by vested interests to prevent the normalization of the housing mkt. in Ireland is but one example.
    Why you think most traders are “young” who wants listen to an oul fella waxing lyrically about back in the day…while the music is playing ya gotta get up and dance!
    As an aside I would think anyone who expects to make a living and have a fulfilling career in their chosen field would aspire to being an “expert”.Which stating the bleeding obvious,here involves extensive and enjoyable reading around their topic,including trips down memory lane.

  40. francis Says:

    Political Economy & the importance of the capital (city)

    DOCM made the very important point, that you can not and should not divorce economics from politics.

    I broadly subscribe to what Brian Woods says about NOT Science and general equilibrium as a fata morgana.

    The Chancellor of Germany is certainly not as powerful as a president of the US or France.

    She is not elected directly, and can be removed within one day by a majority of the Bundestag, if she would not longer reflect the will of the German people.

    One of my nephews will make his Abitur, keeping all options open, but he will do a summer internship on the farm of a distant relative, who now offers apprenticeships for folks, who can not learn it from their fathers. For some of you that might look like a social downstep, for me, with a PhD and and MBA, NOT so.

    I bike the fields and meadows of my Heimat, 2000 km so far this year, observing and talking with my people, and today I saw the first reaping after the flood, and it looks like some of it could still be used somewhat. And my heart is filled with joy, and it is good.

    This is in stark contrast to DOCM’s Tagesspiegel.

    It sells at 120k daily, and claims a 335k readership, very focus in the 3 Mio people Berlin market, very similar to the “Berliner Zeitung”, this becomes important later in this post. That may sound impressive to some of you but this is about 0.4 – 0.6% of the German market.

    The only thing I remember this piece “Tagesspiegel” for, is the vicious slander Sabine Rennefanz had there for the honorable judge Heisig, after she died in a murky “suicide” after publishing “Das Ende der Geduld” (The end of patience, LOL this might become relevant here also).
    I followed up on this with a certain person, who repeated the slander, and confronted her with detailed refutation. After the response, it was the last time this person has set her foot into my house.

    In summary, both producers and readers of “Tagesspiegel” represent a tiny 0.6% minority, who think they are the capitals intellectual crème de la crème, but the other 99% have for what swims at that kind of top another word: sc..

    So you should read the deluded nonsense the linked article had, in this light. Zero insight, and completely irrelevant blather.

    Together with Brian Lucey here earlier this week, asking for non-irish pressure for investigation of the Anglo-Irish bank crime, I wonder whether you have already given up completely to act as an independent, sovereign, adult nation, somehow expecting that the German Mama should fix your problems.

    Do you want to become a protectorate, where an outside high commissioner cuts the excessive public wages and pensions to the appropriate level, and jails the criminals? Or do you still have some self respect? Any ESM program would make very sure, that your budget gets balanced.
    It is not Merke
    l or Germany who have failed, at all, but the “elites” of the trouble states.

    The more interesting it makes her recent book “Eisenkinder” (Children of Iron) and I find this reception http://www.tagesspiegel.de/kultur/buchkritik-eisenkinder-von-sabine-rennefanz-ellenbogen-aus-stahl/8199032.html very appropriate. Blaming western Germany for the NSU murderers, because giving 300% GDP is not good enough, that takes really a lot of shameless chuzpe.

    DOCM, and some others here, you are simply deluded, if you believe, that this stuff or “Spiegel international” represents some kind of German mainstream, and not just tiny extremist minorities.

    Sorry for going into some detail here, but it should also make some things clear, how I look at other political / economic stuff, more closely related to the head topic here.

  41. Fiatluxjnr Says:

    Do Germans really subscribe to austerity…or is that only for the rest of us?

    http://www.nytimes.com/2013/07/07/business/austerity-wont-work-if-the-roof-is-leaking.html?ref=business

  42. Dorothy Jones Says:

    http://www.sueddeutsche.de/wirtschaft/wirtschaft-und-sprache-oekonomisierung-des-duden-1.1714665
    5,000 words in the new edition of he German dictionary : many of the to do with economy :)
    SZ takes 8….

  43. francis Says:

    To make things a little clearer, before I have some more text in 2 or 3 hours,
    please consider the following:

    In many countries a lot of activity is concentrated in and around the capital,

    Dublin 1.8 out of 4.5 Mio people
    London 15 out of 40 Mio Englanders, or how you want to cut it : - )
    Paris 15 out of 55
    Cairo 19 out of 84

    it is not only administration, but industry, finance, representing often some 30 - 50 % of the voting and 50% of the purchasing power, most the times generating surplus, distributed to the rest of the land.

    These people might feel that they are kind of representing the Volonte Generale

    Berlin is 3.3 out of 81 Mio, 4%, and it is substantially poorer, and heavily subsidized, a hodgepodge of draft dodgers, asylum fudgers, “helper industry” administration, and not to forget the hip rich spoilt brats of Germany and from around the world. People with bad character, Tagesspiegel readers : - ).

    The people of Brandenburg (formerly Prussia) actually refused to unite with them in a 1996 plebiscite, although from an administrative point of view that would have been extremely obvious.

    Now, what does that mean, how influential the mob in the streets and offices of the various capitals is ?

  44. DOCM Says:

    @ francis

    All very entertaining but irrelevant to the point that I was trying to make. I find the argument advanced by Carsten Broenstrup of Der Tagesspiegel to be persuasive. The ECB (and the Bank of England under its new governor) can hardly reverse engines on “forward guidance”.

    This item linked to on another thread by Philip Lane is relevant.

    http://europa.eu/rapid/press-release_MEMO-13-635_en.htm

    I would recommend a reading of the item by Robert Skidelsky (award winning biographer, if I am not mistaken, of Keynes) in the New Statesman linked to by Mickey Hickey above.

    Notably this extract;

    “He [Keynes] thought moderate globalisation was potentially beneficial but it needed to be underpinned by monetary “rules of the game” which would prevent surplus countries from “hoarding” their surpluses and thus impose austerity on the debtor countries. In his International Clearing Union, which he proposed in 1941, the reserves of persistent creditor countries would be taxed and the proceeds redistributed to the debtor countries. But no such mechanism was established by the Bretton Woods Agreement of 1944, and the problem of adjustment of trade balances between creditor and debtor countries plagues not just the eurozone but US-China relations, threatening a descent into currency wars and protectionism.”

    Plus ca change!

    As to Merkel, I referred to the role of the Chancellor as “trendsetter”. Unfortunately, it is of enormous importance in the present context because Germany, whether by accident or design, is back in the decisive role. Merkel’s record is one of indecision and procrastination. I am not the one making this point. The entire opposition in Germany is doing so.

    As to whether “economics needs economic history”, there are few who would would not think that it is a sine qua non for any useful contribution by economists. That is, however, a minor point relative to the wider one on which we are in agreement; the need to factor in the role of politics i.e. the exercise of power!

  45. DOCM Says:

    @ All

    FYI

    Back to the future!

    http://www.ft.com/intl/cms/s/0/2dfccce6-e58f-11e2-ad1a-00144feabdc0.html#axzz2YOUpCA3K

  46. francis Says:

    DOCM,

    Most of my post was not meant to be in relation to your irrelevant Carsten.

    what part of 0.4% = completely irrelevant do you still not understand?

    That these Tagesspiegel folks are somewhat dreaming to have any influence on German politics, like some Napoleon in the insane asylum, and that the political game is run by the statutes of the trotskyte party statute?

    wiki/Bundestagswahl_2009 shows 12 groups, most of whom you never heard of, to have that kind of weight.

    Several countries in Europe have massive character problems balancing their budgets, some since many years.

    When the US rates go up, and somewhat later too low EU rates would induce inflation, ECB rates will go up, because that is the sole mandate of the ECB. Ireland can cut by herself now, or will be cut more drastically then by the markets. Your choice.

    Merkel has taken all decisions in a very timely matter, the nuclear was actually a little fast for me.

    “To look into merits and risks” of things, is good practice. It is not a decision.

    Banking union will also come from 2018 on, after a solid asset quality review : - )

    The FT link shows, that even US banks consider the nationalist Kansas Hoenig as not very productive. Giving them a copy of the Barnier “retaliation” letter was efficient : - )

    @ Fiat
    In general I am a big fan of Hanlon’s razor:
    Never attribute to malice that which is adequately explained by stupidity.

    But with this Cornell Robert Frank I have actually significant problems to believe, how somebody of what was sometimes in the past worth to be considered Ivy league, can be that stupid.

    That the EU was filled up with infrastructure in the last 20 years, due to 90% plus, subsidises, he might not know, but should, if he want to utter words about Europe.

    To not look up, that all German government investment is a) presently done at a balanced budget, and b) this country is just running hot on all 5 cylinders, just shows, that this guy has lost contact to the real world economics.

    In contrast to the expert economist Frank, most 5-year olds here around know, that they can spend the money they have, but for any serious credit they need to get agreement by their lender of last resort: Mom : - )

  47. Aidan R Says:

    Great post. I agree entirely. But I would add an important caveat. One of the core problems (or advantage) of economics is that it has become more isolated from the broader political and social sciences. This is a direct outcome of its intense specialisation in more and more compliated econometrics. In international and comparative political economy there are two methodological traditions: statistical-econometric variable oriented research and historical-empirical case oriented research. I identify with the latter.

    In this field one of the core assumptions is that economics and politics takes place in time. Research questions usually focus on diachronic change over time and therefore compelled to take history seriously. Theoretical models must fit the empirical reality and identfiy causal mechanisms that lead to variance (such as why some countries evolve into wage-led or profit-led growth models). Inevitable in this tradition great emphasis has been given to politics, institutions and path dependence. But since the crisis kaleckian reactions and the concentration of power and wealth are back n vogue.

    I personally think that to advance political economy we should be seeking to have more interdisciplinary dialogue, research and teaching across the core social science departments (and scholars) in Irish universities.

  48. Mickey Hickey Says:

    Some of you may have carried on to Robert Skidelsky’s web site.
    The first article “Economics of Despair” agrees with some of my closely held prejudices.

    http://www.skidelskyr.com/site/article/the-economics-of-despair/

  49. Paul Ferguson Says:

    Excellent post. I admire the line;

    ‘Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.’

    There are so many economists and economics graduates I talk to who have such a poor handle on the ‘mechanics’ of the monetary system. Many simply don’t understand how directly banks create money in line with debt and yet this simple process goes a long way to explaining why economies are overindebted. Very few understand that money is extinguished through loan repayments also.

    My understanding of the nuts and bolts of the monetary system is available at the link below.

    http://sensiblemoney.ie/data/documents/How-Money-Is-Created-And-Destroyed.pdf

  50. Mickey Hickey Says:

    This one is on topic, particularly wrt history.

    http://www.skidelskyr.com/site/article/is-economics-bunk/

    This is what exposure does to one. He comes from Russia via China and Japan to GB.

  51. OMF Says:

    There are so many economists and economics graduates I talk to who have such a poor handle on the ‘mechanics’ of the monetary system.

    To be fair to young economists, no-one understands the mechanics of the monetary system — bankers and central bankers least of all.

  52. Mickey Hickey Says:

    Skidelsky was a mother lode. Robert Searle’s Transfinancial Economics, the financial system as a huge global IT system. This deals with the future which is as relevant as Plato was in the previous comment.

  53. Nevemindme Says:

    ‘Together with Brian Lucey here earlier this week, asking for non-irish pressure for investigation of the Anglo-Irish bank crime’

    I share Brians concerns and welcome any and all pressure that will end the rot, name names and hopefully assist in jailing some criminals.

    Also, lest we not forget that as well as poor governance we suffered from some poor research in ‘the boom’ too.

    http://dublinopinion.com/2011/01/26/dr-brian-lucey-2006-there-is-little-risk-of-a-catastrophic-fall-in-house-prices/

  54. Brian Woods Snr: Says:

    The implicit question posed by the title of this thread, is (maybe), ‘Do economists need to understand the historical (and very political) embedding of their subject?’. Perhaps. Perhaps not. Long piece of string, as they say.

    Maybe some modest form of economics should be taught in the upper-level primary curriculum, and be carried on into second level. Though the current Leaving Cert programme is really dreadful (its what you get if you let a Committee select the content and insist on O and H levels).

    As far as third-level is concerned, there are three types of academics (at least): subject scholars (of which there are too few); researchers (of which there are many); and administrators (of which there are too many). Only the first of these three categories, Subject Scholars, should be involved in undergraduate teaching of a subject. And the other unfortunate intellectual fact is that undergrads take a long time (four years) to develop a consistently mature way of thinking about, and understanding their subjects - especially in a subject such as Political Economy.

    Economic activity occurs in a finite, physical world and is subject to the immutable laws of Nature and the whimsical behaviour of politicians. It just might be useful if economics education alluded to the real, physical limits (non-expanding margins) of physical systems - and to the fact that human folk (both individually and collectively) are a tad quirky in their psychology departments.

    @ PF: Teaching kids about ‘money’ would be a good place to start. They are both inquisitive and receptive. Forget the adults. Damage has been done.

  55. The unfinished business of global governance | The Enlightened Economist Says:

    [...] The book goes on to finger the role of economists in this process, and specifically its turn away from history and institutions into the realms of abstraction. “Most of the economists in the IMF had little interest in history, nor in the other social sciences. Its staffers were mostly male, and almost entirely economists trained in American and English universities. Entering the IMF and the World Bank in the 1980s, they were rational-expectations revolutionaries who based their prescriptions on in-house templates couched in the language of highly formalized mathematical models…. they existed in a state of more or less total ignorance of the cultures, languages, or institutions of the countries they had been told to cure, having been trained, as many economists still are, to believe that this ignorance did not matter.” Anybody who quibbles about this should read Kevin O’Rourke’s marvellous post on why history matters in economics. [...]

  56. DOCM Says:

    @ All

    Munchau introduces “backwards guidance”.

    http://www.ft.com/intl/cms/s/0/827ca972-e4d5-11e2-875b-00144feabdc0.html#axzz2YOUpCA3K

    It has certainly given the euro and Sterling a bit of a jolt.

  57. Brian Woods Snr: Says:

    @ Enlightened Economist: “Its staffers were mostly male, and almost entirely economists trained in American and English universities. Entering the IMF and the World Bank in the 1980s, they were rational-expectations revolutionaries who based their prescriptions on in-house templates couched in the language of highly formalized mathematical models…. they existed in a state of more or less total ignorance …”

    Now these would not be the same gentlemen who ordered their men ‘over-the-top’ in July 1916 (the Somme)?? Reads very close.

    Maybe these IMF economists should be indicted for Crimes against Humanity. They sure caused a lot of bad mischief to countless folk. If you or I mistreated a family pet in a similar manner we might fetch up with a court appearance and a hefty fine. So, does this mean that in economics, human folk are not human - they’re merely virtual objects?

  58. John Gallaher Says:

    @Nevemindme a bit off a churlish link beneath the cloak of an anominity.
    If that’s your contribution on here to an excellent post by KOR I for one can do w/o it…the burden of history once again preventing small minded people from moving on and addressing real issues!

  59. Shay Begorrah Says:

    @John Gallaher

    a bit off a churlish link beneath the cloak of an anonymity.

    I wonder if, just possibly, the person reminding us of Brian Lucey’s previous errors was for him when he was wrong but now against him when he is right, if you know what I mean.

    If only more people had the integrity to change their minds when the evidence changed.

  60. John Gallaher Says:

    Hi Shay I clicked smallminded’’s link,some creepy chap cut out a newspaper article and underlined it…..i need take a shower.
    WTF looks like the posters hand was shaking a bit too….yikes rabbit boiler terroriy.

  61. Paul Ferguson Says:

    @ Brian Woods Snr.

    I agree with you that the damage has been done. I meet so many people who, after a lifetime of thinking the central bank prints all money, struggle to get their heads around the fact that actually, it’s the commercial banks which create it in line with debts.

    Try explaining that a loan repayment destroys a deposit too and see the indoctrination breath a sigh of disbelief.

    It seems the systemic inevitability of loan defaults is far too complex a concept too.

  62. Ronan L Says:

    Great to see a good discussion on the importance of economic history, particularly as I’m a part-economic historian (part-urban economist) starting an academic post in Dublin in September!

    I don’t think I’m revealing any state secrets when I say that the Economics Department at Trinity is conscious of and working to plug the economic history gap there. At the risk of a shameless plug, for any students interested, I’ll be taking a somewhat revised World Economy course - originally (c) one Kevin O’Rourke - in the new academic year. Once settled in, I’ll also be looking to supervise students at all levels interested in economic history.

  63. francis Says:

    @ Fiat,

    there is actually an interesting twist to that.

    As Mark A. Sadowski http://economistsview.typepad.com/economistsview/2013/07/austerity-wont-work-if-the-roof-is-leaking.html July 06, 2013 at 06:30 PM shows,

    there is no such thing as a German construction orgy, not at all.

    This guy is in general, on many topcis, together with anne there making interesting analysis, which is much better than what you get from an ivy league professor in the “respected” NYT.

    And when I read the NYT piece again, could it be that the guy is actually trying to pull the trick: “the Germans are doing it, it must be good, lets do the same in the US”

    And where I looked primarily on the perceived hypocrisy slander aspect, one could also see this in a much more positive light. Do I overinterpret?

    @ John Gallagher
    I found the link to Brian Lucey’s old statement interesting, towards the question what were these people thinking at this time.

  64. john gallaher Says:

    @francis its hardly breaking news now is it,that old horse has been taken out numerous times and flogged to death,time to move on.In case rabbit or bunny bolier is a bit NY/Yank its urban slang derived from the movie fatal attraction..
    Dont want stray off topic too much,oh i have never met BL-just think its a reflection on that rather pathetic irish trait off staring in the rear view mirror whilst rapidly approaching a cliff.
    If he had a crystal ball or some incredible insight he would be sitting by a beach or waxing his board this morning,like some people who did call the market-but make a living doing it:)

  65. Fungus the photo Says:

    History shows us what we are going to live through, until we take Jefferson’s warnings seriously.

    Fictional Reserve Banking is a Ponzi scheme, and like that, it always runs out of fools, eventually.

    Pyramid schemes are not difficult to spot, but dismantling safeguards for the sole purpose of running a Ponzi may have reached the point that even Irish politicians can spot the danger? John Law was deliberately unleashed upon the French, allowing the British Empire to flourish.

    Cui Bono?

  66. Fungus the photo Says:

    The Leaving Cert once had Economic History as a subject…..

  67. Liam Delaney Says:

    On the off-chance that any of the commentators are wealthy alumni, an endowed chair in Economic history in one or both of TCD and UCD is essential to keep one of the finest intellectual traditions in Irish universities alive for another generation. Textbook economics can provide useful tools but in the absence of historical awareness and (I would argue) psychological realism, such tools run away from their makers. Teaching students a more behaviourally grounded, data-driven, analytical economics with a heavy background in history of economic thought and economic history has to be the goal of economics teaching in the next decade. INET are doing a good job at promoting this as an agenda. I think it would not harm student attendances either.

    If anyone wants a summer reading recommendation, Jon Elster one of the closest to bridging institutional and historical work with behavioural work. If I had a free hand, I would design a full undergraduate degree around his “nuts and bolts” books.

    http://en.wikipedia.org/wiki/Jon_Elster

  68. Liam Delaney Says:

    The Scottish programme that I am involved in co-ordinating has Economic history as an option for both MSc and PhD students. It is done as a “topics” course with several contributors.

    http://www.staging.sgpe.ed.ac.uk/prospective-students/structure/msc-economics-options/

  69. Necermindme Says:

    @ John Gallagher
    @ Shay

    Gentlemen I have no agenda I assure you. I am ‘a nobody’ a concerned Irish citizen is all I am. Calling me small minded is a bit much. Generalising ‘Irish traits’ is certainly too far. My comment was addressed @ Francis. My intention was to inform him of one of the commentators economic record. I see nothing wrong with it.

  70. rf Says:

    Necermindme. Bit obnoxious though, in fairness

  71. seafóid Says:

    @ Liam Delaney

    “Textbook economics can provide useful tools but in the absence of historical awareness and (I would argue) psychological realism, such tools run away from their makers.”

    Well said

    Psychological laws such as that equities will always outgrow bonds have real life consequences

    http://www.rte.ie/news/business/2013/0708/461225-pensions-crisis/

    I like Aidan R’s call for more interdisciplinary work but how would that fly in practice?

    It also looks like we need more understanding of how the brain works and drives boom behavior.

    There’s a feature in Arabic music where the singer repeats “a single line or stance over and over, subtly altering the emotive emphasis and intensity and exploring one or various musical modal scales .. each time to bring … audiences into a euphoric and ecstatic state known in Arabic as “tarab” طرب”
    http://en.wikipedia.org/wiki/Umm_Kulthum_(singer)

    This process ratchets up the emotional energy between the singer and the audience and it’s similar to what happens in economic booms between banks and punters with economists providing the sheet music …

    And we always fall for it. It would be good to understand it better.

    Martin Hayes, the fiddle player , is very interesting on the subject of speed in music and the need to control “letting it all go “

  72. francis Says:

    it was a useful reminder, that Brian Lucey talks a lot, very quickly.

    But even I knew about the Unicredit Risk manager April 2007 event, the government coverup, just not with the bank name, back in 2010. This is not just about a few tricky bankers.

    Sooooo, I think, that there are much juicer tapes out there, and that we will not hear them.

    The solution is the european bank supervision, not only for Ireland.

  73. Kevin Denny Says:

    A natural way of bolstering economics in the universities would be joint appointments in economics & history departments. However joint appointments are rare - or unknown- in Irish universities. In the US they are much more common. There are other areas of economics where joint appointments could be beneficial. I was assured by a senior person in UCD that it could never be made to work for organisational reasons largely financial.

  74. John Gallaher Says:

    @Necermindme,to start with it was ad hominem and an Irish newspaper article clipped out and shakily underlined….perhaps link the report itself given the ehm “quality” of irish reporting during this period.

    “The figure below shows this for the Irish Times, Ireland’s newspaper of record. It can be seen that before 2008-2009, there were comparatively few articles that even mentioned that the market might be in bubble territory. On average, the newspaper had 5.5 times more articles on the bubble per year in 2008–2011 than in 1996–2007″
    http://www.social-europe.eu/2013/04/the-role-of-the-media-in-propping-up-irelands-housing-bubble/

    Regarding “criminals” why bother at all with due process,just round “them” up and trow away the key,there is no law against hubris and stupidity.

    @seafoid this was/is the book most people over here read at least once in their career.
    Extraordinary Popular Delusions and the Madness of Crowds
    Charles Mackay
    https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

  75. seafóid Says:

    @ JG

    Another one for the list

    Stanley Cohen - Folk Devils and Moral Panics

    I think trotting out some Luceyism from 2006 is pointless at this stage.
    How are we dealing with the latest dangers? Not very well.

  76. seafóid Says:

    One of the lessons of economic history is the danger in having vast cohorts of unemployed younger people with no stake in the system.

    There was an article in the Guardian recently about the state of the jobs market for younger people- like one of those TV talent shows with one winner with access to the works and the rest who get nothing.

    Incredible the potency of cheap music. Listen to the following on a Saturday night and then no job on the Monday and every day is like Sunday.

    http://www.youtube.com/watch?v=2zNSgSzhBfM

    “Chasing dreams since I was 14 with the four track bussing halfway cross that city with the backpack, fat cat, crushing

    Here we go back, this is the moment
    Tonight is the night, we’ll fight ’til it’s over
    So we put our hands up like the ceiling can’t hold us
    Like the ceiling can’t hold us”

    In reality of course there are ceilings everywhere staffed by the generation that went before them…

  77. Michael Hennigan - Finfacts Says:

    Stephen Haggard of the Peterson Institute of International Economics, a Washington DC think-tank, writes today on famine in North Korea and he refers to a recent visit to Ireland and book on the Irish Famine by Ruan O’Donnell and Cormac Ó Gráda’s Black ’47 and Beyond.

    http://www.piie.com/blogs/nk/?p=10817

  78. Yields or Bust Says:

    @Paul Ferguson

    Can you answer a basic question for me - whats the accounting entry for the process you describe as commercial banks creating money by way of loans

    i.e. Debit Loans Receivable
    Credit ???

    If the credit is ‘deposits’ or an equivalent liability - then surely the auditor would want to see to whom the liability is owed to and the name on the liability - without such a liability I find it hard to understand how the auditor can sign off on the true state of the liabilities of the bank??

  79. veronica Says:

    @John Gallagher,

    You’re quite right to call out mean spiritedness which does not advance any argument, potentially may hurt someone’s feelings, no matter how self-confident or thick skinned they may be, and generally just acts as a distraction. But it also points to the unreal expectation that exists that, somehow, economists are the modern equivalent of the oracle, whose function was to read the chicken’s entrails and accurately predict events to come. I’m not sure that, anymore than any other body of social theory, economics can predict anything in a complex globalised economy with any degree of certainty. This raises the issue of the adequacy of conventional economic theory beyond its limited capacity to serve as a guide to the questions it might inspire among practitioners about our immediate problems. Kevin’s post is timely and the responses are heartening in their recognition that economics training must change and that a multidisciplinary approach is the way forward and that things are already happening in this regard in some of our institutions. Obviously, for a variety of reasons, it’s going to take a long time to effect educational change in this way; but the time is ripe to plant the seeds of change now. Further, economics is not exceptional. I think there’s a very serious challenge across all the social sciences about what’s been taught, and how, and the need to consider new approaches both in theoretical frameworks and the assumptions that underpin much empirical research.

  80. Brian Lucey Says:

    Meanwhile, back on the issue,..
    We need root and branch reviewing of what we teach undergrad econ major or minors. Much less math, much more social, psychological, historical, ethical and logical analysis. Those that want to do graduate level econ can take some math refreshers in the summer. I’d suspect 1-% or less of those who do a major or sole econ degree do a phd in same. And then there’s the vast uneducated bulk of business graduates who know SFA about the historical, social etc context of the technical subjects they follow courses in.
    But, this change isn’t going to happen as universities and other third leve have become outsourced skills certifiers for industry.

  81. rf Says:

    How about a history of capitalism rather than just economic history?

    http://symposium-magazine.com/why-write-the-history-of-capitalism-louis-hyman/

  82. DOCM Says:

    @ All

    FYI

    (Courtesy of the wonders of the modern information age).

    “We should realize that, if [Socrates] demanded that the wisest men should rule, he clearly stressed that he did not mean the learned men; in fact, he was skeptical of all professional learnedness, whether it was that of the philosophers or of the learned men of his own generation, the Sophists. The wisdom he meant was of a different kind. It was simply the realization: how little do I know! Those who did not know this, he taught, knew nothing at all. This is the true scientific spirit.”

    ― Karl R. Popper

  83. Brian Woods Snr: Says:

    @ BL: “We need root and branch reviewing of what we teach undergrad econ major or minors.”

    Yes. But, ‘how’ will this be done?

    “Much less math, much more social, psychological, historical, ethical and logical analysis.”

    This would be good.

    @ rf: That comment you referred to is quite interesting. Got me wondering.

    We have Left-hand drive vehicles and Right-hand vehicles. But both are just vehicles! So this Right/Left economic thingy appears to be quite dopey. Its the vehicle we need to concentrate on. What are the attributes of this vehicle? Etc., etc., skip all definitions - they are too argumentative. Just describe what you observe. Something is either present or absent.

    The principle difficulty is to attempt to separate away the political from the non-political - at least far enough to get a reasonable view of both. And, try to avoid obsessing about ‘western’ economics. I believe there is an Oriental area on the other side of our globe.

    Actually, the correct term is Permagrowth (the vehicle!). Capitalism and Socialism merely tell you which side of the roadway the vehicle is being driven on - and the political ideology of the operator. So, its actually the History of Permagrowth we need to study.

  84. john gallaher Says:

    @veronica by no means an expert on the current curriculum at irish uni’s. so really cant comment on the required changes.But based on a very informal survey-my daughter and her friends who are seniors-have no interest in attending a irish uni-Edinburg yes.

    Over here the biggest challenge in education is student loans and default rates,linked a article with an interesting paper embedded.
    http://www.takepart.com/article/2013/07/08/student-loan-default-rates-rise-graduation-rates

    The Milken institute recently published a report there is also video roundtable discussion to go with it-probably a bit yank but worth a read if you are writing a few checks soon or as a comp.
    “The Future of Higher Education and How America Will Pay For It”

    Back to the topic Simon Wren-Lewis,has some good comments and a recent post on this.
    http://mainlymacro.blogspot.com/

  85. rf Says:

    “So, its actually the History of Permagrowth we need to study”

    Try get that one past the administrators BWS ! ; )

    I agree with you though (and, generally, greatly appreciate your economic musing)

  86. Brian Lucey Says:

    BWS
    How..no idea. Who.. Well I doubt the present crop of academic bureaucrats will do it. I might organise a symposium kick some ideas round. I’ll offer burlap sacks for the anonotrolls that infest discussions, they can sit at the back on a ditch and snigger.

  87. john gallaher Says:

    A little off topic but regarding the future of education,the New Yorker had an article recently about MOCC’s…

    “This spring, however, enrollment in Nagy’s course exceeds thirty-one thousand. “Concepts of the Hero,” redubbed “CB22x: The Ancient Greek Hero,” is one of Harvard’s first massive open online courses, or moocs—a new type of college class based on Internet lecture videos.”

    http://www.newyorker.com/reporting/2013/05/20/130520fa_fact_heller

    here is the course sign up.
    https://www.edx.org/course/harvard-university/cb22x/ancient-greek-hero/563

    I was unable to find a “lap-dancing” course for your TD’s perhaps The Pink Pony or The Gold Club will offer one soon:)

  88. Brian Woods Snr: Says:

    @ BL + rf: Thanks for your comments. Appreciated.

    The academic situation is like an active tar pit. Once you’re in, your stuck! Best avoided.

    I meant to include a mention in my last comment about Cuba. We know the Soviet-style economic paradigm has ‘failed’ - well, it failed to succeed.

    But the US-GB-EU economic paradigm has not succeeded - at present its teetering on the edge - again! [How many times is that?] It may yet succeed in failing.

    So, how about economics Cuba-style? I believe they are near enough to ’sustainability’. Suitable case for study? There must be some lessons to learn.

  89. Get ready for the next mega banking crisis – sometime around 2040 by my reckoning – Telegraph Blogs Says:

    [...] O’Rourke, professor of Economics at All Souls, Oxford, has a good piece on the virtues of studying economic history if you want to be a serious economist. As a non economist who writes about economics, but studied history at college, I’m bound to agree [...]

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