Economists Need to Add a Little History to Their Tool Kit

Back in 2011, as the U.S. and other countries debated what to do about a recession that was stretching on much longer than expected, economists Brad DeLong and Larry Summers bemoaned what they considered a major gap in their fellow economists’ toolkit. Economists, they noted, learn a lot of mathematical models and empirical facts about the present, but not much history. If graduate programs taught more economic history, DeLong and Summers argued, they wouldn't have been so blindsided by the financial crisis or the long, grinding recession that followed.

DeLong and Summers are right to say that economic history is underemphasized. Neither graduate nor undergraduate programs generally require the subject. It’s not a prestigious field; economic historians don’t tend to win Nobel Prizes, and not many professors get hired to work in the area. But there are several reasons why history is extremely useful for understanding not just economics, but society itself.

One reason is that economic history focuses economists on real events rather than allowing them to live in theoretical fantasy worlds of their own creation. Suppose you’re a macroeconomist trying to understand and model inflation and monetary policy. It helps to know a lot of facts about how inflation developed in the past, and what kind of monetary policy prevailed at the time. You therefore might want to crack open a copy of Milton Friedman and Anna Schwartz’s book “A Monetary History of the United States, 1867-1960” -- as well as competing accounts that might emphasize different events.