Tuesday, 2 August 2016

Those who don't know history...

Richard Grossman's book, Wrong: Nine Economic Policy Disasters and What We Can Learn From Them*, is a worthwhile read.

The nine disasters are Britain's loss of the American colonies, the Irish Famine, America's lack of a permanent central bank pre 1913, German reparations after World War One, inter-war protectionism, Britain's return to the gold standard in 1925, Japan's 'lost decade' in the 1990s, the GFC, and the euro. Grossman's take is that they were typically the result of "commitment to outdated or fundamentally flawed economic ideologies", "the outsized influence of private interests", and "efforts to shift costs onto foreigners", and were also "frequently compounded by excessive delay".

We've got better at some of these - reparations are probably a permanent goner (though you could say Trump's Mexican wall is a variant), and trade barriers are much lower than they used to be despite the best efforts of the nutters and the rent-seekers - but some of the underlying drivers of big mistakes are still alive and well. Grossman has a range of suggestions to counter them, and particularly the groupthink that can set in around an ideological (or indeed any) settled way of doing things. While it's never going to be easy to know "when changes in circumstances render a previously sound economic ideology obsolete", he says that
Theoretical and empirical models combine current understanding about the relationships between various elements in the economy and can help predict the consequences of proposed policies. Cost-benefit analysis weighs the hypothesized expenditures associated with a policy against its anticipated payoff. And historical and comparative studies can provide useful analogies adopted at other times and in other places. These tools have proven their worth, although none is perfect...Using these tools to subject proposed initiatives to vigorous testing is far more likely to yield sensible policy prescriptions than blind adherence to ideology or precedent (p183)
All very sensible. But the reference to the value of "historical and comparative studies" reminded me that I've had a vague feeling for a while that economic history isn't in fact being taught to New Zealand economics students. So I went and had a fossick around the websites of all the universities to see what's being offered or required as part of an economics major bachelor degree. My vague feeling was completely right. Here are the results, in alphabetical order (the links go to the source info I used).
Auckland - nothing specific though ECON232, 'Development of the International Economy', has some, mostly focussed on the 20th century
AUT - nothing specific**
Canterbury - aha! The good news is that 300-level ECON342, 'Economic History', is bang on the money and says "We study the causes and consequences of the Three Great Transformations: language, agriculture, and the commercial and industrial revolutions that began in the 16th century". The bad news is it was last offered in 2014, and is not currently on the menu
Lincoln - doesn't seem to offer a straight-up economics major
Massey - nothing specific. You get some local political history in 148.205, 'New Zealand Politics Since 1890'
Otago - nothing specific
Victoria - nothing specific
Waikato - nothing specific. There might be a bit in ECON336-17A, 'Comparative Economics in Global Perspective', but the paper summary is blank, so you can't tell
Not that my own alma mater is any better. I took my degree in economics and political science at Trinity College Dublin in 1969-73: from memory, economic history was compulsory at the time but in any event was well attended (our lecturer was Prof Louis Cullen). The same degree has morphed over the years into today's 'Philosophy, Political Science, Economics and Sociology' (PPES): the good news is you can drop Sociology after the first year, but the bad news is that Trinity has also dropped economic history from the economics options (though there are still 'history of thought' options in both philosophy and politics).

This is a shame from many perspectives. Economics is part of the wider humanities, and any humanities course should involve some commitment to being a well-informed citizen of the world. It's not right that it should implode into a self-absorbed cult of its own. And even if today's students don't give a toss about the history of the world around them and are only after vocational skills and a credentialed meal ticket, economic history has its own utilitarian value. You never know when something like the history of currency unions won't suddenly be the hottest skill in demand when a Grexit comes along. Ask Ben Bernanke: his academic study of the Depression made him an excellent choice to chair the post-GFC Fed.

If I was John McDermott at our own Reserve Bank, and I was looking to hire a new staff economist, given the ceteris paribus choice between someone who'd taken a personal intellectual interest in the history of bank crises and another automaton off the assembly line who can crank the handle on a DSGE model, I know who I'd pick.

*Oxford University Press 2013, ISBN 978-0-19-932219-0

** Happy postscript August 3: AUT's Geoff Brooke tells me that "we will be offering an advanced undergraduate paper in global economic history at AUT from next year (it is currently timetabled for semester 2). The paper descriptor reads: An introduction to the history of long-run economic growth and related changes in population, social and economic institutions. Theories of economic and social organisation, economic growth, and business cycles are examined and evaluated against the historical record. Methodological debates around the relationship between economic history and economics and history are explored". 

1 comment:

  1. Even more bad news is that, I'm guessing, ECON342 is not likely to be offered anytime soon. This is sad since an understanding of econ history would help give students a perspective on economics that most just don't have. Today student don't even get why the 1980s reforms in NZ were needed and important.