It's Time to Take Time Into Account: Economic History in the 1990's and Beyond

36 Pages·5.749 MB·English

by  Graeme Donald Snooks

Working Papers
in
History
Economic
IT'S TIME TO TAKE TIME INTO ACCOUNT:
ECONOMIC HISTORY IN THE 1990s AND
BEYOND
G.D. Snooks
Working Paper
No. 143
October 1990
THE AUSTRALIAN NATIONAL UNIVERSITY
PO Box 4, Canberra 2600, Australia
Working Papers in Economic History are issued for the purpose of
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Working Paper No. 143
ITSTIME TO TAKE TIME INTO ACCOUNT:
ECONOMIC HISTORY IN THE AND BEYOND
1990S
G.D.
S.n*ooks
Department of Economic History
Research School of Social Sciences
Australian National University
C
WESTPAC Lecture, H
Australian Historical Association Conference, -
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IT'S TIME TOTAKETIME INTO ACCOUNT:
ECONOMIC HISTORY IN THE 1990s AND BEYOND”
G. D. Snooks
A conference on the role ofhistory in modern economy and society is both important and
timely. There hasprobably never been another age in which a sense of the past hasplayed
such aminor role ininforming corporate and governmentpolicy-making. Policy has become
the captive of an overly self-confident economics profession, which is not only highly
abstract and mathematical, but is also disdainfully ahistorical. Surprisingly, the
self-confidence of the economics profession, and the economic dependence of policy
makers, are seemingly little affected by the current economic crisis in which we face
unprecedentedly high interest rates, relatively high rates of unemployment and inflation,
dangerously large deficits on currentaccount,aheavydependence upon overseas capital and
technology, an excessive degree of speculation, imprudent investment activities by some
financial institutions, an economy that has lost direction through policies of'protection all
round', and an environment increasingly under threat from short-sighted, exploitive
attitudes.
This has not always been so. Before the turn of the century, economics at both
Oxford and Cambridge was firmlyembedded inthe all-embracing discipline ofhistory." It
was not until the early yearsofthiscentury that Alfred Marshall 'liberated economics from
history by establishing a new economics tripos, and in the process left economic history at
Cambridge 'inthe care ofhistory'. Thereafter the separate development ofthe economics
discipline proceeded rapidly, particularly following the academic and popular success of
Keynes' General Theory, the effective role played by economists nwartime planning and
i
post-war reconstruction, and the long boom ofthe 1950s and 1960s—the 'golden age' for
developed countries—which was wrongly taken to beproof ofthe final victory ofeconomics
asthe premier social science and policy instrument. Curiously the pervasive economic
problems since the mid 1970s have not yet seriously challenged thisstatus.
y
The position taken nthis paper sthat the difficulties being faced bthe economics
i i
profession incoming togrips with current real world problems are due inlarge part to its
ahistorical stance. The understanding ofreality byeconomics islimited by the refusal to
view the present, and indeed the future, as anoutcome ofthe past. Ineconomics, the
*These ideas have benefited from intermittent discussionswithLoma Snooks overaperiod oftime that is
rapidly approachingthe longrun. Ialso wish tothank WESTPAC and the conference organisers (Professor
G.C. Bolton and Dr L.Launitz-Schurer) for the opportunity topresent this personalview (in the tradition of
inaugural lectures) ofthe role ofeconomichistory.
"See Kadish, Historians.
questions posed,the analytical conclusions reached, and the policy prescriptions offered, are
based upon those ahistorical models that are flavour ofthe month, andwhich are given only
limited empirical 'rationalisation'. This process of empirical rationalisation is generally
based upon historically disembodied data that may,fortuitously, stretch back adecadeor so
into the past. The length of the time-series data is largely determined by the number of
observations needed to satisfy the technical requirements of econometrics, rather than a
desire to understand how the past has influenced the present. If monthly data or, even
better, cross-sectional data are available, the distasteful necessity ofpushing back into the
past isconveniently avoided.
Most economists, who appear to feel uncomfortable delving back beyond the last
decade or so, seem to regard the period since the Second World War as the 'longrun', the
period since the turn ofthe century (or possibly the mid-nineteenth century) as the 'very
longrun', and anything before that time as the concern only of eccentrics andantiquarians.
Apart from a number of notable exceptions,” relatively few economists regard earlier
economic experience as relevantto the problems ofthe present. This short-sighted approach
to the longrun has led, for example, to the mistaken notion that the growth and stability
achieved during the 1950s and 1960s in western economies were in some sense normal—a
benchmark against which to compare the economic performance of the 1990s. But as
quantitativeeconomic historians have shown—by measuring economic growth since 1700–
the two decades after the Second World War were a period of atypical growth and
prosperity. This mistaken notion still leads economists to see the present in a distorted
fashion againstthe highlighted background ofthe historically atypical post-war years.3 Yet
even when economists do look further back in time, they usually see only those variables
suggested by their simple models and overlook the complexities ofhistorical—shading—into–
current relationships. History, in this approach, is merely a source of time-series data
needed to illustrate (rather than demonstrate) the validity offavoured economic models, and
historians are useful, ifeccentric, research assistants.
The point I wish to make is notthat economics should be dismissed, but that awider
and more relevant profession of economic studies has much to gain from a closer
relationship with economic history. Ifthis is not done the economics profession may well
lose the high ground of policy advice—it is currently being strongly challenged by the
environmentalists who are growing rapidly in power and influence. The thrust ofwhat I am
2Thesenotable exceptions includethe Nobel Prize winnersKenneth Arrow andRobert Solow. See Parker,
Economic history.
3For example, the recent work by economists on the role ofsaving in external imbalance and growth is
distorted by usingdata that extends back only to 1960. Adifferentpictureemerges when the longrun—the
last 100 years orso—is examined.
arguing is that history really does matter, and that it should play a greater role not only in
informing the present and providing a sounder basis forpolicy advice, but also in training
economists, businessmen, bureaucrats, and policy makers. It's time to take time into
account.
II Economic History: tsNature and Role
I
Time isthe concern ofhistory. And within that wideranging subject are many separate
approaches. My focus inthis lecture is oneconomic history. To evaluate the role of
economic history inthe 1990s and beyond, itisessential to beclear as towhat it is. No
doubtifIcirculated aquestionnaire amongyou now,Iwould receiveavariety ofanswers to
the seemingly simple question: what seconomic history? Thissbecause economic history
i i
has amulti-disciplinary background—it draws heavily upon itstwo parents, history and
economics. Accordingly, one's view ofthe discipline will depend upon one's training as
well asone's inclination. My training was ineconomics, althoughIincluded asmuch
history inmy undergraduate work asthe Bachelor ofEconomics degree atthe University of
Western Australia would allow. ThisIsupposewas firmly inthe tradition developed atthe
University ofWestern Australia by Edward Shann, who for many years was Professor of
both Economics and History.
To my mind the only robust basis for determining the boundaries ofacademic
disciplines, asopposed to general areas ofstudy, is on methodological rather than
institutional grounds. Itisnot sufficient tosay that economic history iswhat economic
historians do. This merely begs the methodological question. Ifeconomic history is tohave
aseparate and worthwhile identity itmusthaveaseparate methodology. Inother words, to
claim itsplace inthe sun, economic history must be anintellectual endeavour that could not
beundertaken within the conventional methodological framework ofeither history or
economics.
Not allacademic work that claims to beeconomic history, orallacademics who claim
to beeconomic historians, would beencompassed bythismethodological definition. Clearly
methodological distinctions are not translated precisely into institutional terms—there are
overlapping areas between disciplines. This can beseen inFigure 1,which isintroduced
merely toassist inthe exposition and isnot meant torepresent amodel orlaw. The triangles
labelled history and economics circumscribe the work ofthose disciplines asdefined in
methodological terms. The offspring ofthese two disciplines, economic history, is
represented, atleast ininstitutional terms, bythe middle triangle. Inthis case, however, itis
necessary todistinguish between the contribution ofthe parents and the child. The diamond
labelled "TypeIeconomic history' represents the contribution that arises from amethodology
that sdistinctly different from the methodologies ofhistory and economics, while the two
i
small triangles labelled "Type II economic history' represents work that is called economic
history but which is undertaken by employing the conventional methodologies ofeither
history or economics—a form ofparental colonialism ifyou like. I am making a distinction
here between a methodologically defined economic history (Type I)—perhaps it could be
called analytical economic history—on the onehand, andeconomists' history and historians'
political economy (bothType II)onthe other.
ECONOMIC
HISTORY .. .. Econon-Tics
HistorY.
... ..
Figure 1: Overlapping discipline areas: History, Economic History, and Economics
TypeIEconomic History (or Analytical Economic History)
What doImean byType I, oranalytical, economic history? What isthe methodology
ofeconomic history that distinguishes tfrom both history and economics? Economic
i
y
history methodologically defined employs the theory and empirical techniquesdeveloped b
the economics discipline, together with the general historical methods ofthe history
discipline toreconstruct the past. This reconstruction ismore subtle, complex, and more