Are there ‘Grand Challenges’ in history (of economics)

big questions in history
Do we have any?

The great and good of economics have responded to an NSF call for ‘grand challenges‘ in economic research over the coming 20 years, and I can’t help wondering if the history of economics has any?  No out-and-out historian appears to have replied, and none of the other authors seem to include historical topics. So are there no grand challenges in history?

Off the cuff I can’t think of a BIG question which lies unanswered, and I wonder what everyone here thinks? My immediate response would be that historians of economics should engage in a project to gather and make publicly available historical data – as recorded in past records, not translated into 21st century definitions – so that better empirical work can be done on the past. I guess a second point is a fuller exploration of the recent crisis and comparisons with past crises, although I am not sure how far such an endeavor could go. If one had to respond to the NSF call – in retrospect – what do you think the grand challenges would be?

For inspiration about the scope, In the NSF response Esther Duflo outlines a research agenda for all of development economics, Dale Jorgenson talks of reforming the national accounts, Nordhaus discusses global public goods and Rogoff talks of three challenges to Macro… So it’s BIG thoughts as we enter the new year – do we historians (of economics) still think those?

[Clement makes a set of suggestions below, and I have tweaked this posts to put it on top. Hope that is ok]

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13 thoughts on “Are there ‘Grand Challenges’ in history (of economics)

  1. Did US tariffs in the 1800’s and early 1900’s hurt or encourage US industrialization? There are clearly mercantilist economic powers in the world today, powers whose economies are growing extremely fast. It seems economists need to better evaluate how redirecting industry — through tariffs and other price interventions — can leads to secular economic decline and secular economic growth across nations.

  2. Well, I guess Her Majesty the Queen’s question to her economists on why they missed the GFC unfolding is one, especially in the light of their stammering instead of a clear theoretical response with empirical justification.

  3. I don’t want to deny your question, but as is often my compulsion I tend to get distracted by the meta subject, in this case: what is this genre of “big challenges talk”?

    In the present context the “big challenges talk” is part and parcel of the AEA’s bid for increased funding at the NSF, now that the Division of Social and Economic Sciences is headed by an economist. Naturally, history of economics not being a partner in the AEA’s advocacy is not to be represented.

    As far as I understand it, “big challenges” talk is grant talk, bidding for support. That historians of economics don’t do it, only highlights that we do not act as a profession, coordinating our action with patrons. The second best would be to look at historians’ success at INET and its grant call.

    The harder question is whether it matters. Does “big challenges talk” shape a field? Patrons, most of them, not all, shape disciplines. But as far as I know the literature, the record is quite mixed, and mostly negative, when scientists do big thinking, telling others what to do.

    Not to deny that “research futures” are important, they might matter in the interaction with outside agencies more than as a regulator for a scholarly community.

  4. I agree with Edmund Mayfield. Despite the superiority of the Smith/Ricardo argument against their mercantilist opponents, there does appear to be some empirical support for the Hamilton/List/Clay view. This is uncomfortable for me to say since I’m a strong supporter of free trade in the present time.

    Other questions I have: Did the Homestead Act misallocate land toward farming as opposed to industrial development? What is the full value of the subsidy that has gone from the public to the rail companies over the year, with the grant of right-of-way to the rails.

  5. In terms of a running commentary, it strikes me that three themes are emerging from these comments and I think we can put them into a ‘grand challenge’ sort of framework – if one thinks of that as something which requires a concerted effort from a team or group of people:

    1. Empirically understand the effect that tariffs have had on domestic industry. Or more generally, how has trade distortions affected resource allocation. To me that seems a very valid line of inquiry, which will require a lot of data gathering, contextual understanding and yields the potential for analyzing not only the US in 19th & 20th century, but also provides lessons (at least in terms of method) to understand the Asian tigers, British colonialism and current issues.

    2. As Tom pointed out, and I mentioned above, understanding the recent crisis. Or perhaps, that is better understanding of economic crisis in general. (I’ve been binging on economic crisis literature, and there’s much yet to be done). Again I see a theme of data gathering, understanding the theoretical ideas prevalent at the time and the methods, and then doing some analysis.

    3. Clement’s point about doing history in an electronic world is one I agree with, and I see some of the answers to the above two points as coming from better data understanding, and bigger datasets taken from untraditional sources. There is a job for dealing with big datasets, just as there is in collecting them if we want to go back in history.

    Hmmm, I think that is a reasonable start, and wonder if you’d agree with my synopsis above – but surely there must be other issues out there? Are we, as Clement hinted below, and I would agree, interested in economic ‘paradigms’ (if they exist) and if so, how they shaped policy?

    1. I was suggesting economic/financial crisis in general as one of the great challenges as yet unmet satisfactorily. We are still having them, even after “The Great Moderation.” This has been an ongoing problem historically, and too little is understood about it. Minsky’s work on financial instability is a pointer, for instance. Subsequent Minskians have taken it further.

      For example, Michael Hudson has examined the historical phenomenon of debt, and Minsky has shown how debt/leverage is involved in the major crisis that are principally financial, like the GFC. Economic historians probably need to look closely at how finance interacts with economics in their search for the causes of major crises.

      Reinhart and Rogoff attempted a historical approach to the causality involved with debt, but their analysis largely failed owing to selectivity of data and failure to distinguish the effects of different monetary regimes, i.e., convertible/fixed rate and non-convertible/floating rate. See, for example, Bill Mitchell’s criticism in Hyperbole and outright lies. Historical work is important but it is not just a matter of comparing data, Conditions count, too.

      This is particularly significant now that globalization is proceeding apace and the world economy is becoming a closed system without centralized controls.

      Elsewhere, I have suggested approaching these questions by looking at the global economy as a closed one and asking what it would take to operate smoothly as an interactive system with lots of moving parts and different interests (motivators). For example, Minsky and the subsequent Minskians have done a lot of good work on financial instability within a national system. Is there anything like that internationally?

      On one hand, there are the free marketers that believe the invisible hand will take care of everything, and they have the upper hand at the moment. On the other, there those who think that an overarching order needs to be imposed with meta-national control levers in the hands of technocrats.

      It seems to me that the former is historically discredited or at least irrelevant because its modeling assumptions are unrealistic and impractical to achieve.

      The second is scary because it aggregates virtually all power in the hands of whom, chosen by whom? It is turning out, for example, that the Fed is the lender of last resort to the world. While the New World Order may be a far-fetched conspiracy theory, there is a disturbing element of truth to it, e.g., in the push for cb “independence” and the EZ/EMU as a trial balloon, which, to be frank, scares me.

      Viable solutions should ideally not be heavily intuitive, i.e, rest on mostly assumptions. They should be empirical and that means data-based. This requires looking to history as a guide but being careful to discount differences in conditions that potentially make a difference. What we should be looking for is causality.

  6. I know it’s not fashionable nowadays to argue that part of our jobs is to understand how people are “thinking”, but maybe understanding the current crisis better requires more research into the history of economics done/thought/ traded/ translated (yes, more slashes, Benjamin) outside the academia, at the FED, the CEA, international institutions such as the IMF, in trading rooms, in editorial rooms, in merryul Lynch and Morgan Stanley offices

  7. I would agree whole-heartedly with that comment Beatrice, and indeed with Tom’s comment above. I think we need to get away from studying past academic economists, and get into the surrounding institutions – plus as Tom says, the conditions that surrounded those institutions. I guess we all want to search for causality Tom, but depending on the circumstance and level of analysis, I suspect it is more likely – and more fruitful – if we can find reasons.

    Reasons for why actions were taken, which may be saying ‘causality’ backwards, but I think the spirit of the enquiry is different. It looks at the human element – not so much how people were/are thinking Beatrice, but how they reasoned their response and took action. For that we need to broaden our scope dramatically. I wonder if the discipline is up to that challenge?

    1. Searching for causes or reason depends on whether one is dong science or philosophy. Science seeks to find causes and it justification is empirical justification. Philosophy seeks for reasons and its justification is rational or intuitive. It can be argued that history stands on the bridge between them.

      I think that all three are involved in meeting the big challenges in a field like economics. Philosophy is concerned with the grand themes and big ideas. Science is interested in developing theories whose hypotheses can be tested empirically. History seeks to determine the facts of the past (data) and to identify trends.

      The reason I said “causality” rather than appealing for reasons is that the outcome of an investigation into big challenges ought to included ways of meeting them, and this is optimally effected by identifying causes that can be addressed specifically. Reasons are often too broad to offer much assistance in this regard.

      For example, Minsky offers reasons for financial instability in his theory, asa does Irving Fisher in his debt deflation theory of depression. What is needed now is to identify specifics involved in the present crisis and past crises that are similar to locate specific patterns of commission and omission that resulted in crisis. Then we would have good information about what needs to be done to prevent future crises arising from continuance these behaviors, incentives, etc.

  8. I side with Tiago on this one:
    what is meant by “grand challenge”? Every historical question is a “grand challenge” of its own. If some questions appears as grander challenges than others, it is because we/people/the press/the elites or whoever runs the show see them in this light. To me the whole “big issue/grand challenge” talk is part of marketing rhetorics that we need to get grants or first page cover for oneself or one’s research program.
    Let me just point out that history of economics is liable to get much less cover than other field – we do not, as one of my HE teachers once told our class, send rockets to the moon or (as I now add) save millions of (future) people from starving to death. We are stuck with small challenges, historical challenges.
    To answer Tom:
    “For example, Minsky offers reasons for financial instability in his theory, asa does Irving Fisher in his debt deflation theory of depression. What is needed now is to identify specifics involved in the present crisis and past crises that are similar to locate specific patterns of commission and omission that resulted in crisis. Then we would have good information about what needs to be done to prevent future crises arising from continuance these behaviors, incentives, etc.”
    I do not see that as the job of the historian of economics, maybe of an economic historian (last but one sentence), but what you say in your last sentence is a job for economists, I would say a policy specialist with an econometric training.

    1. I would agree that solving the problem of recurrent crisis is one chiefly for economists, Loic. I would also point out Mark Twain’s observation that while history does not repeat itself exactly, it rhymes. For example, it is probably not by accident that Ben Bernanke was appointed Fed chair when his specialty is the Great Depression. History does speak to the present. Minsky’s instability hypothesis is not intuitive. It is based on observation of previous cycles. Through this examination, he was able to distinguish the financial cycle from the business cycle in terms of different dynamics.

      A big reason I think history of economics is important today lies in the fact that most economists are focused on mathematical models that are assumption-laden. Often they lose sight of the big ideas. Moreover, their assumptions are just made up or received rather uncritically. For example, most New Classical economists have little idea of what Smith and the Classical economists were really up to, and they either misunderstand or misrepresent their predecessors.

      This is not my criticism btw. Some see it as a glaring problem. Historians can contribute to overcoming these obstacles.

      There is another reason to study the history of big challenges like crises closely. In many cases modern economists draw erroneous conclusions from the past owing to insufficient knowledge or just being wrong about history due to bias, e.g., assuming the case. I find Michael Hudson pointing this out frequently about what he calls “junk economics.”

      One of the frequently heard criticisms being heard now is that the contemporary economics curriculum does not contain enough history of economics. In fact, it is possible to a get PhD now without know much about the history of the subject at all. This is seen as resulting in a problem commonly called tunnel vision. Krugman is constantly pointing this out in his columns. Hard-won knowledge is now being overlooked by economists in influential positions, at great cost to the economy.

    2. Loic, I rather understood Benjamin’s question as an invitation to think about important questions that requires investigation as a community of historians whose aim is to write the history of this “economics” object, widely considered.

      And for our community, yes, let’s be totally judgmental, I think that some challenges are “greater” than others. I think that it is of greater importance to write the history of development economics than to write more phds on the mathematization of economics, although I’m aware that there is still much to research in that area and that any new Phd student may well come out with a brand new and revolutionary vision of mathematics within economics. In the same way, it’s a “greater” challenge for historians to be able to say “something” on economics done at the FED, at the IMF, at the CEA than to say “more” on Chicago economics. To work on Griliches’ vision of economics rather than to write a 76th paper on Friedman’s methodology, to research on the Modigliani-Miller theorems rather than on the Coase theorem.

      To use the kind of economic metaphor I usually find stupid, there are areas where marginal returns are much smaller than in others (f.i. Friedman), although this is likely to switch in the future (f.i.with the influx of new archival materials on Friedman after his death)

      And if I’m so assertive, it’s because not so long ago I was that one more phd student working on Friedman, producing nothing that could have been used in the kind of “summary-of-what-we’ve-done-together-in-the-past-twenty-years” Backhouse’s entry on postwar American economics in the Palgrave dictionary was.

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