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Like other disciplines, economic history has evolved its own criteria of merit. As usual, merit in economic history principally involves craft, whether in the finding and skilful use of sources, in advancing ongoing debates in the literature, or in applying sophisticated techniques of measurement and analysis. Generally, therefore, the criteria are inward looking, aimed at impressing, perhaps persuading, one's colleagues in the discipline. My purpose in this essay is a different one. I seek to look at research from the point of view of outsiders, to ask, in other words, what makes economic history useful and how that objective can make a difference in practice.
Three criteria of usefulness occur to me. One is work that helps shape one of our two underlying disciplines; a second is a contribution to clear—even fresh—thinking about current, policy-related issues or ongoing scholarly debates about the historical past; finally, and perhaps least recognized, is work that penetrates the fuzzy realm of identity-shaping popular discourse. Whatever we may worry about as scholars and educators, today's wider society is by no means uninterested in history: the recent and ongoing fascination with the Founding Fathers or World War II alone should dispel that notion; but the way the past is constructed and used is another matter entirely. I will come back to this at the end, but we should not underestimate the importance of the images people hold of the past in their minds and hearts, nor of those that are peddled to advance some current agenda.
My thesis in approaching economic history from the point of view of usefulness is that because the past and the present are inextricably linked, we may as well as scholars accept and indeed take advantage of the linkage. The core of my argument is that through interaction with current concerns economic history can shed light on both the past and the present and so prove particularly useful. The present allows us to ask new questions of the past, whereas the past brings into relief features of the present we may take for granted. I also will suggest, more speculatively, that economic theory, and perhaps the field of history as well, may now be moving in directions where economic history will play a more central role than it has in the recent past.
Beyond the concern for a more helpful, honest, and nuanced view of the past, I am impelled by the realization, the plain fact, that our discipline is not exactly prospering and needs to keep proving its value in a competitive academic ecosystem. Why economic history is struggling (at least in North America) is no secret: the underlying disciplines of economics and history have diverged sharply. The mathematical formalism of academic economics and the verbal formalism of much of academic history keep bad company or none, and we are perforce, as enrolled members of one of them, hard put to keep our hold on the other. A lot of what has happened in economic history as well as to it results from efforts to adapt to the divergence.
In this respect, let me take the bull by the horns and say that I think cliometrics will ultimately prove to have been more nearly a defensive than a revolutionary development. You are welcome to sniff out a hint of sour grapes in this judgment, but I think I have paid for the right to make it. As I see it, a few people saw early on which way the wind was blowing in economics and propounded what its champions called a revolution. One clear result has been to keep economic history alive, if not central, in departments of economics and so to provide employment for its practitioners, though in relatively decreased numbers. Also, cliometrics has attracted and retained a lot of bright people who might well have opted to specialize in more fashionable fields of economics, an enormous gain for our discipline. And they have furnished their full crop of fine scholarly work. However, if one considers the broader impact of cliometric work and findings, the picture is less clear. How much has the general view of the past been changed by it? If you want a real counterfactual, imagine high-school textbooks in American History discussing the Great Kansas City to Sacramento Canal as a plausible alternative to the transcontinental railroad.Footnote 1 Similarly, I don't think the recent (pre–Gregory Clark) quantitative work on English growth rates and limited agricultural progress in the 1760–1830 period will be any more successful in wiping out the Industrial Revolution as a core concept than Rondo Cameron was with his attempt at rhetorical assassination some years back.Footnote 2
I have similar reservations about more recent strains of research, notably anthropometrics and the New Institutional Economic History. Though they open up exciting possibilities for overturning long-held views, it is unclear that they can live up to that anticipation. The use of heights to measure living standards appears quite solid, but where it leads to conclusions at odds with accepted patterns the latter have tended to prevail against the apparent new evidence.Footnote 3 Clearly, there are issues of sample representativeness: for example, when times are good volunteer armies will probably tend to attract the less fit and vice versa, imparting a countercyclical bias to inferred living standards. More generally, however, anthropometrics recalls an earlier current in quantitative history that did not live up to its exciting promise, namely the use of parish registers to reconstruct populations in the pre-statistical age.Footnote 4 In both cases, the new source of data was to overturn accepted views and, more importantly, point the way to a definitive picture of the past. Ultimately, while older interpretations were indeed called into question, the picture that emerged was so complex as to be rather muddier than before. In fact, the traditional historian's bias in favor of the uniqueness of each experience as against generalizations that apply over space and time emerged intact if not actually strengthened.
As for stressing the role of institutions, here too a number of questions arise with regard to their causal role in economic development.Footnote 5 Most salient is what I see as the absence of a real theory of institutional formation. Perhaps good institutions are as much the product as the facilitators of growth, or perhaps both result from some as yet unspecified factor (culture?). Moreover, we lack adequate ex ante measures of institutional quality: good ones are simply those that underpin well-functioning economies. In general, economists and economic historians conflate good institutions with those that promote markets; yet any society also requires ways to limit market forces and to compensate for their excesses, if only to forestall a more violent backlash. Finally, there are surely cases of adapting to awkward or apparently dysfunctional institutions: Britain managed to lead the world with an antiquated system of weights and measures as well as money. Who knows: perhaps the awkward arithmetic of everyday life fostered more widespread numeracy in the population, much as the use of ideograms instead of an alphabet may have fed respect for learning among the Chinese. And Britain also lagged in giving political representation to urban areas and in technical education.
In summary, I am skeptical of the notion that any methods or data can cut through the fog of history and illuminate our economic past once and for all. Many approaches, including traditional ones, remain worth pursuing; none are powerful enough to warrant scorning the others.
What I propose instead is to offer a few rather disparate and modest examples of how economic history can be useful in telling stories and asking questions. These vignettes are united by the fact that each involves a kind of back and forth between historical and current concerns: the past informs the present and the present raises intriguing questions about the past. What has changed, by how much, and why or why not? Is that not the very core of economic history? All are also worthy, I think, of more research.
USEFUL ECONOMIC HISTORY: ENRICHING SOME CONCEPTS
Let me get a few general points out of the way first. We should not ignore the obvious, and so I remind you that all empirical work is by its nature historical. Data obtained from observing the real world always concern the past, however recent. One by-product of the otherwise overrated process of aging is the realization that a good deal of what passes for history consists of things one lived through or learned as current events. Data and phenomena that not so long ago moved markets are now precedent and fodder for calibrating models. These developments therefore deserve critical analysis and contextualization that we are perhaps uniquely qualified to provide, bearing in mind that statistics share with sausages and legislation the property of being unappetizing to watch being made.
Beyond this most general point, I see three concepts or dimensions of economic life and thought where I believe economic historians have real and unique contributions to make. They are space, to which the 2007 meeting of the Economic History Association was largely, and I think most fruitfully, devoted; time, specifically the long run; and the demographic aspect, which I see as still failing to get its due from present-focused economists. Let me expand briefly on each of these, accepting the risk of remaining superficial.
Space is the dimension where economic history interfaces with geography, notably historical human geography. Inasmuch as that discipline has been sorely neglected, certainly in the United States, economic history and economics generally have also failed to give space its due. The most common way of eliding a fuller treatment is to reduce its effects to costs, transport costs in the study of trade and industrial organization, spillovers in environmental economics. But space plays other roles, giving shape to built environments and landscapes and defining units of intense interaction, for example. Importantly, spatial effects can be positive, for example providing amenity and pleasing land- or cityscapes as well as productive clustering of activities (agglomeration effects). It is telling that the recent upsurge in concern for space (I exclude regional science) owes some of its impetus to new technology, notably computer-based Geographic Information Systems.Footnote 6
As for time, it would seem that economics gives it adequate attention, though not the pride of place it has in history. But a closer look makes it clear that economists' time is mostly about degrees of freedom: what can the decision maker control and what is fixed. Hence the conventional short and long run. Actual calendar time enters only through the device of discounting, whereby the past and future are viewed through an inverted telescope. In popular discourse, on the other hand, even at supposedly sophisticated levels, the past becomes a mythic land to be contrasted with the present, and it often seems to extend back from a period one generation or so removed from the present. I return to this “made-up past” below.
Finally, there is the population and changes in its size and structure, as well as its location. What is extraordinary is that we tend to neglect or minimize the demographic dimension, despite the fact that the data are far better here, notably for forecasting, than for other variables. After all, we know pretty well today how many young people will (or could) be attending American high schools as much as fifteen years from now, though their location as well as the effects of future migration to and from the United States introduces some uncertainty. The same thing is true of the aging, and therefore of clients for social security and Medicare. Where else can we get that kind of advance warning?
I want to outline briefly an example of what attention to demographic change can do in the area of economic policy and even doctrine. It is commonly accepted that the failure in the 1970s of the macroeconomic “neoclassical consensus” (as Paul Samuelson's influential text had it in the 1960s), represented an intellectual defeat for Keynesian theory as well as a policy debacle. Yet if we look not at the usual measures of discomfort, namely inflation and unemployment, but instead at employment, the period looks rather different. Simply put, the economy was asked from about 1965 on to absorb an extraordinary number of workers and, despite valiant efforts by policymakers, could not quite do it. Eventually, the stimulative policies aimed at helping the task along led to stagflation. The sponge, as I like to think of it, was simply saturated. Qualitatively, the bulge in would-be members of the labor force consisted of the baby boomers plus the large number of women who decided to remain in the labor force or rejoin it. Quantitatively, the numbers strongly support the thesis: in the disappointing recoveries from recession of the 1970s employment increased by 12 percent from 1970 to 1974 and by 18 percent from 1975 to 1979 (trough to peak), compared to 9 percent from 1990 to 1995 and only 3 percent in the most recent recovery (2001–2006). Yet unemployment stood at 6 percent after the late 70s recovery compared to less than 5 percent in 2006.Footnote 7 In the 1980s, in contrast to earlier, the Fed's highly praised determination not to allow excessive monetary growth to fuel inflationary expectations got a lot of help from slowing growth in the potential labor force (as well as from falling world oil prices). And in the current century, even the labor force participation rate has declined, though the reasons appear not to have been examined. But let us return to our sheep, as Rabelais said.
TELLING STORIES AND ASKING QUESTIONS: THREE EXAMPLES
Working Conditions
Comparisons of living standards and material welfare over time are a staple of economics, and even of history: nominal and real GDP per capita, income distribution, wage rates, benefits such as paid holidays and insurance, relative prices, consumption patterns, market versus non-market work, etc. We also look at the growth (or not) of leisure time: hours per day of work, vacations and holidays, even commuting times and, of course, at the growth of human capital produced by education and training. What gets less attention, and yet is one of the most salient ways in which the world of work in postindustrial societies differs from and indeed improves on the past, is working conditions. Today, boredom is a greater hazard in many, perhaps most jobs than the risk of injury, disease, or abuse. Instances of the latter still exist of course, and are far from rare outside the industrialized world, but the point is precisely that we find them newsworthy here and shocking there. Also, work-related stress and even hours now seem positively correlated with responsibility and earnings, something graduate students might note. None of this stops complaints about work, but an employer who keeps tabs on your internet use is not quite the same thing as a machine that will take your hand off if your attention slips for a moment.
It is easy enough to document improvements in working conditions, but quantifying, aggregating, and valuing them is more difficult, which may explain why there is more folklore than research on the topic. On the other hand, the consequences of the improvement are far from trivial. I would argue that continuing high labor force participation—not least of women—in wealthy countries, which would seem to violate utility theory, owes a lot to working conditions that are usually good, in fact sometimes better than those at home. How it all happened strikes me as an institutional evolution worthy of study, with significant market and nonmarket, public and private aspects, and with drama aplenty as well as more systematic factors. Certainly, any discussion of the merits and limitations of unregulated markets and labor organization needs to take a close look at the history of improvement in working conditions.
A Story
For my second example, I want to tell a story. It is about the economy of a great world power that got itself in trouble. Despite the existence of a somewhat representative and supposedly independent legislative body, the country in question was essentially run by a leader who strongly favored one class, the one that controlled the commanding heights of the economy and drew the bulk of its income from the main nonlabor factor of production. The strategic factor and its owners were also more lightly taxed than were wages and popular consumption.
The bias in political influence and fiscal regime was buttressed by an ideology that many economists either actively propounded or at least viewed with sympathy. Its basic tenet was that the economy depended crucially on the prosperity of the productive system, notably its ability to generate surpluses and encourage investment. It was thus a bad idea to tax the crucial factor of production, even though the surpluses it earned accrued mainly to the wealthier element.
Though selectively hesitant to tax—and inefficient in collecting the taxes it levied—the regime was not reticent to spend. Subsidies to the favored element in society cemented the regime's political base, even as foreign military adventures ate up huge sums while failing to provide much of either security or material gain. Interestingly, the unimpressive leader harked back to a predecessor—not the most recent progenitor—who had established (in the religious sense) the dominant ideology. This more charismatic leader's image, stronger perhaps than the actual results he achieved, gave the current system political “legs.”
Recent developments aggravated the imbalances in the system. Rising commodity prices, a growing work force, and strong competition from a fast-rising economic rival across the water kept wages in line. Any efforts to reduce social disparities or achieve much-needed reforms were thwarted by both ideological resistance and fiscal stringency. The state, borrowing heavily, came to depend on foreign bankers to a worrisome degree.
How does the story develop from there? At some point, what cannot be sustained will not be. Do we know what happened? Not if you think that I have been describing George W. Bush's America, but I was in fact outlining the last days of the Ancien Régime in late-eighteenth-century France. The land-owning nobility, lightly taxed, benefited from rising prices and rents, while a growing population faced stagnant real wages and a glass (or class) ceiling. Physiocrats insisted that land formed the basis of wealth and should not be taxed. Having failed to right the ship, even with the help of Genevan bankers, Louis XVI had no option but to call the Estates General back into session in 1789 (for the first time since 1614!).
Let's not push it! Even if Iraq can play the role that the American colonies played then, I don't even want to think about Ahmed Chalabi as Ben Franklin! Beyond providing amusement, the point of the exercise is twofold: to look at the current story as it might appear in historical perspective and to focus on the nascent French Revolution with today's tools of political economy. In fact, the big convulsions are notoriously hard to predict, or rather are too easy. As Paul Samuelson once said, the stock market has predicted nine of the last five recessions. So this is an exercise, not a forecast.
A Sad Comedown and a Dream
Finally, let me change gears and talk about something usually unnoticed but to me equally worrisome. I refer to urban infrastructure. This topic brings together my interest in urbanization and cities with the fiftieth anniversary of a book, John Kenneth Galbraith's The Affluent Society, at a time when, despite Peter Lindert's magisterial work on the positive growth effects of public spending, it is still nearly taboo to juxtapose the words “public” and “investment.”Footnote 8 In fact, public investment is defended solely in terms of the number of jobs (in construction) involved and is commonly dismissed as pork, more recently earmarks.
Strangely, the taboo against speaking of public investment owes something to the Depression and the Keynesian revolution, which justified public spending in times of persistent high unemployment by arguing that it had zero—indeed negative—opportunity cost. This drew attention away from concern with the output of the public sector and its potential impact on productivity. The term “social overhead capital” was reserved for the study of development and had nothing to do with us. By the way, I brought up Galbraith's book, in its time coolly received in the economics profession but widely read, in part because it had a great influence on my own career decision to switch from engineering to economics.
A few pictures from my home town of Troy, New York and surroundings should help make the point that it was not always so. They show a few public and quasi-public buildings erected in the nineteenth or early twentieth century in these northeastern mill and factory towns, where the mass of people, largely immigrants and their children, labored for low wages in foundries and textile mills, making everything from church bells to detachable collars and cuffs for men's shirts. How did such poor communities finance such grand projects? What is certain is that the size, quality, and ornamentation in these buildings make clear how much civic pride was embodied in the social overhead capital of even the most gritty cities.
The images of past splendor are juxtaposed with current pictures of the nearby streets. Now everyone complains about potholes, which recur in northern climes during the freeze/thaw cycles every winter, but that is not the issue here. What you see is evidence of repeated breakdowns in the infrastructure, literally, and of holes frantically dug to get at whatever main, pipe, or cable has burst or failed. Note, however, that most of the wires carrying electric current, cable TV, and phone lines are out in the open, at the mercy of wind, ice, and lightning. In Troy, as indeed in every older city, the vital systems that keep us going are in a chronic state of obsolescence, disrepair, and inadequacy. Yet nothing but a quick patching seems even conceivable. How is it that with huge increases in income per head we are so much less able to pay for the most necessary infrastructure, to say nothing of the many amenities and embellishments that used to characterize cities? A final point: because pothole politics is serious business in these cities, the streets are regularly resurfaced, making it clear how frequent breakdowns in the infrastructure really are.
City Hall, Cohoes, NY
Troy Savings Bank Music Hall, Troy, NY
“Public” Library, Troy, NY (nonprofit association)
Troy Public Library, detail
Catholic Church, Cohoes, NY
Public School, Troy, NY
City streets, Troy, NY
Note: All the photos in this article were taken by the author.
The historical and economic genesis of both the grandeur and the misery are well worthy of close study. I will only offer one observation and a dream solution. The observation is that we certainly do not have less government than did our predecessors. Public spending is higher, absolutely and relatively. But we direct most of the civilian portion to relieving distress or compensating for lack of individual foresight. They, by contrast, tolerated much more neglect of people and allocated more of their limited resources, public as well as charitable, to building: everything from churches, libraries, and colleges to cout houses and city halls. Were they wiser than we or, like so many earlier builders of monuments—pyramids and temples, cathedrals and palaces—merely more inured to human misery?
How can we solve the street and utility problem? I have a recurring dream of a Marshall Plan for city streets, a kind of urban Interstate Highway program. It would involve an assembly-line system for rebuilding streets from the ground down and up, with modern conduits (including of course fiber optics), sensors for monitoring and directing traffic and levying congestion charges, and street furniture on rebuilt sidewalks, the whole job organized to minimize down time and take advantage of specialized processes and equipment. More like laying pipeline than the Boston Big Dig, if you will.
When I explain this dream, the part that most surprises people is my claim that the program also offers a way of dealing with the looming crisis in entitlements. Yet the economic reasoning is straightforward enough: to cope with unavoidable future increases in transfer payments and a higher dependency ratio, we need to obviate the need for other public spending down the road and to increase future productivity. Long-lived investments in social overhead capital are a uniquely good way to do this.
All this may sound more like a fairy tale than like hard-nosed political economics, but I hope it illustrates what one can do if one looks at the present as history in the making and at the past as if we were facing the issues of the time ourselves; and who can do this better than economic historians?
CONCLUSION
At the start, I attributed the difficulties under which economic history labors to the divergence of the underlying disciplines, after, I might add, a decade or two when quantification in the field of history and concern with long-run growth and development in economics had brought them closer to one another. Are there signs of a more constructive pattern evolving in the foreseeable future? I am not particularly qualified to forecast, certainly not in history and probably not even in economics, but I would hazard a cautious yes. As one English economic historian put it, the discipline of history may be emerging from its “linguistic turn.”Footnote 9 Toward what, I leave to others to say. Looking at one relatively hot field, world history, it is hard to imagine the concern with peoples and places long ignored, or treated as objects rather than subjects, proceeding very far without serious attention to modes of production and to the complex processes of encounter with, and integration into, larger economic systems.
As for economics, the signs are pretty clear that, alongside behavioral economics, a richer way of looking at things is beginning to gain ground in economic theory. In fact, economic historians have made important contributions to enriching a theoretical corpus that had, I think, given up too much for mathematical tractability. It seems to me that we are at the threshold of even bigger changes, with the development of evolutionary and systemic paradigms that approach the vision of organized complexity—a phrase I first remember hearing from the late Walt W. Rostow—that physicists and biologists are calling “emergence.” It seems intuitively clear to me that so information-driven a system as the economy is a natural candidate for analysis in terms of self-organization and growing complexity—an open system with falling entropy, if you will. As the concept of path dependence makes clear, there is no doubt that historical analysis will be crucial in these paradigms. Also, economists are finally reaching out to other disciplines, from ecology to psychology, so economic historians' long history of trafficking with historians and demographers may no longer be dismissed as dilettantism.
In the meantime, however, there is a more immediate task. As I suggested at the outset, the public problem today is not a failure to appeal to history but rather what I like to call the “made-up past.” While we moderns think of ourselves as having advanced beyond myth and fairy tale, too many people invest the defenseless past with whatever properties are convenient to make the rhetorical point at hand. Do we deplore the state of society today? It is tempting to fashion a past marked by traditional values, when family, faith, and community commanded respect and stability promoted virtue. More rarely, the past becomes the hell from which we escape thanks to deodorant soap, forensic science, or lower tax rates. So the job of economic—and other—historians is less to remind people that the past matters than to insist that it get the same respect for truth and accuracy that we expect for the present. As the great American humorist Will Rogers put it, “The trouble with most folks isn't what they don't know, but what they know that ain't so.”
