Lecture 1 - Why Economic History?

Question 1

Why economic history?

Answer 1

1) Natural experiments
2) Rare events & long cycles
3) Path dependency

Question 2

1) Natural experiments

Answer 2

In many sciences controlled experiments important for causal relationships

=> Often not possible in economics

Question 3

Example of Natural Experiment

Answer 3

15th century to 18th century: Spain exported silver from the America

Money supply is subject to the vagaries of the sea

More than 30 maritime disasters with substantial silver money
losses occurred

⇒ Repeated natural experiment allows for measurement of the effects of money supply changes

Question 4

Caveats Natural Experiments

Answer 4

External validity may not always apply

=> Do these results apply to other countries too

Question 5

2) Rare events & long cycles

Answer 5

Rare events: Many important economic phenomena occur only rarely (eg. pandemics, wars, financial crises)

Long cycles: Many economic variables exhibit long cycles (inequality, debt/gdp ratio, capital market integration)

Question 6

3) Path dependency

Answer 6

Past events and initial conditions can have lasting effects.