What do Economic Historians do?

 

On 20th April 2016, Meghnad Desai Academy of Economics invited Dr. Tirthankar Roy, Professor of Economic History at London School of Economics and Political Science, to speak about the discipline of economic history. He began the talk by briefly explaining the different research methodologies that academicians use in the field.

Economic history is essentially the history of material life, that is, the history of production, consumption, market exchange, rules that governed the market etc. Economic historians study the subject to find answers to the growth question: “Why are some countries rich and why are some countries poor?” by trying to derive useful lessons for countries that are still poor in an analytical way that is not common in traditional policy-making. Historical GDP data shows that a divergence began in the 1800s when western countries grew faster than other countries. Simon Kuznets termed this phenomenon as “modern economic growth.” The key feature here was that growth occurred due to acceleration in productivity, knowledge, skills and technology.

There are two ways of studying this: Economists usually test single-variable causal model, often by means of cross-country regressions whereas Historians do case-studies that allow for some openness about the model and how the causal variables are interrelated.  Naturally, the results of these two methodologies are varied and provide different explanations for the growth question. Explanations under the single variable approach dates back to Adam Smith, who claimed that divergence was caused by productivity differences, which was a result of market integration and trade specialization. Robert Solow, in his growth model, confirmed Smith’s findings but neither economist explained why the gains from trade were unequal.  Marxist theory, on the other hand, argued that trade was just exploitation of poorer regions by richer ones which caused the inequality. Two more theories, suggested by Douglas North and Paul Romer, didn’t discard trade and identified the cause of divergence to be differences in institutions that mitigate transaction cost and growth of knowledge, respectively.

A Historian’s way of answering this question is different. They argue that one variable cannot cause one outcome in the long-run; it is important to factor in feedback loops and interaction of other variables to obtain a more holistic result. For example, the demographic transition model, which refers to the transition from high birth and death rates to low birth and death rates in countries, is an integral part of an economic growth story. However, the model provides a global common story but no explanation regarding cultural factors. Cultural factors can be a determinant of birth rate in societies, like how the prevalence of Hindu culture in India created the preference for male children. Therefore, the case study approach enables historians to observe the interplay of various factors.

Dr. Roy then discussed prominent books of economic history and explained how the explanations for growth differences transitioned over the last four decades. Between the 1980s and 2000s, Erik Jones and David Landes in their respective books used a “Eurocentric” approach and cited environmental and cultural factors in Europe as the reason for divergence. However, the “Eurocentric” approach was heavily criticized. James Blaut, in his book, termed it as “cultural racism” while Andre Gunder Frank argued that the rise of Europe is not necessarily caused by European exceptionalism, it could just be good fortune. This was proved by the fact that Europe had access to ancient Asian goods which allowed them to trade with other countries. However, all of these book restricted their analysis to trade and did not offer a global perspective. This changed in the 2000s.

In 2001, Kenneth Pomeranz, in his book “The Great Divergence”, used the method of reciprocal comparison to answer his question. The idea is to select two regions for comparison that homogenous geographically and demographically. Pomeranz compared Coastal China and England, both very agrarian economies.  He tested for similarities in standards of living, institutions and the revealed effects of political system, and found that these two regions were more similar than dissimilar. The implication of this study was that he was able pinpoint when the divergence began: Coastal China dealt with the Malthusian crisis where England escaped it due to its colonies.

Many critics questioned Pomeranz’s arguments and found it to be shaky, even wrong at times. However, the takeaway from his analysis is that comparing two similar regions can prove to be an effective methodology to isolate essential differences that were not cultural, which wasn’t possible through the European exceptionalism approach.

Finally, Dr. Roy spoke about this kind of research done for India. He remarked that answering the growth question using the case study approach for India as a whole is difficult because of vast cultural and institutional differences. Attempts by Prasannan Parthasarathi and Roman Studer showed that India did not progress as fast as the western countries due to high trade costs. Dr. Roy’s approach towards research for India is to conduct a “deep study” and see which results fit and don’t fit in the global context.

To see the detailed presentation please click here.

 


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Date/Time
Date(s) - 21/04/2016
4:00 pm - 6:00 pm

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