Lecture for Moshtagh on Historical Method
Economics is Policy Science.
Ask a question you think is interesting. If you find it interesting, this usually means you already have some preconceptions about the subject. Committed pursuit of objectivity while admitting the difficulty of its attainment.
Limitations of Method and Complexity of the Subject
The study of the economy is difficult because its operation unfolds in real time.
Can not clone the world. No opportunity to repeat experiments or have double blind tests.
Do not have access to long time series under perfectly stable conditions.
Subject matter is conceptual, difficult to define and measure. Under these conditions, individuals are likely to hold to their pre-analytic vision- what they believe to be the pertinent theoretical relationships, the things they know to be true.
Researchers have pre-analytic vision.
The researcher is not an objective bystander, but is interested in outcomes.
Theoretical understanding of economy result of repeated observation under varying conditions.
Multiple Theories: Schools of thought, sets of assumptions about economy.
Disputes linger.
Difficult for economics to progress as natural science because ultimate proof is not attainable. Still in Philosophy stage of development, schools of thought, sets of theoretical assumptions. Analyst must recognize blindspots associated with theoretical preconceptions.
Allow yourself to become familiar with the range of debate. Read until stories repeat. Search for gaps in theory, understanding, models.
The economic historian uses many tools: statistical analysis, case study, multiple sources of information to inform discussion. Argumentative narrative.
Economic Historians utilize theory, trying to determine causal relationships between variables over time. The complexity of historical development makes it difficult to determine relevance of supposed links.
Keynes: what is an economist.
Difference between Correlation Vs. Causation
Theory, just because two variables move in a particular way does not mean they have a causal relationship, or that a description of their behavior is useful.
Inductive vs. Deductive
Specific to general: Historical method, usually, but can not be without theory
General to specific
Historical method focuses on evolution of economy over time, specific historical episodes. Economy is constructed through policy and so changes over time.
Economists do not always collect data. rely on existing data sets.
Economic historians more frequently collect their own data. Not always statistical data.
Problem of historical method is also a strength. While a generalized theory of deductive and permanent laws can not be established from the study of specific historical episodes, a more concrete set of solutions and analyses can be developed that recognizes the pertinent historical context.
Historical vs. Speculative Method
Where should Theory come from? Economic historians typically argue theory should emerge from the study the evolution of the society/economy rather than speculation about origins
Evolution of money in exchange. Assumption of barter economy and double coincidence of wants presupposes division of labor and specialization of task common to monetized economy. This historical scenario essentially assumes market economy without money, then by adding money notes it lubricates trade. Not historically accurate, and misses some interesting elements of the origins of money (in primitive economies market activity usually constrained by moral codes, use of money and accumulation of wealth threatening to static hierarchy.)
Major theories employed in my work:
Thorstein Veblen’s theory of industrial/pecuniary dichotomy
Thorstein Veblen's theory of the credit economy
Alfred Chandler's theory of the rise of the modern corporation
Adolf Berle and Gardiner Mean's theory of corporate governance
Karl Polanyi's Double Movement
Primary assumptions of economic activity:
Economy is constantly evolving and is influenced by economic policy. There is no single "natural" economy where all others are "bastardized" economies.
Interest groups compete to influence outcomes of policy. Self interest does not equilibrate into social interest.
No tendency to full employment/full capacity equilibrium, rather, we have had a series of capitalisms. The economy of early 20th century distinct from the Post WWII economy, and the economy of 1970-2003 distinct from 1945-1970.
Primary papers:
The rise of the corporation in the United States, role of legal and financial changes
The changing structure of industrial ownership (corporate governance) during Slovak Privatization
The Third Wave of Czech Privatization, where banks consolidated ownership.
Transformation and Social Backlash in Transitional Economies
The changing accounting and financial practices of the dot-com bubble (new sources of goodwill)
The consolidation of the meatpacking industry, use of financial techniques to consolidated ownership over retail and wholesale markets. example of industrialization.
Accounting for Profits at Enron: The impact of stock-options on management incentives
The Appearance of Impairment: Veblen and Goodwill Financed Mergers