Economic history

Based on Wikipedia: Economic history

The Argument That Changed How We Study the Past

In the nineteenth century, a British historian named Arnold Toynbee made an observation that still reverberates through universities today. Economics, he complained, had become "too dissociated from history." The founding thinkers—Adam Smith, Thomas Malthus—had understood that you cannot separate how people make their living from the stories of their lives. But somewhere along the way, economists had retreated into abstract formulas, forgetting that real humans in real places made the choices their equations described.

Toynbee wasn't just complaining. He was proposing a marriage.

What if we combined the rigor of economic thinking with the richness of historical investigation? What if we studied the Industrial Revolution not just as a sequence of events, but as a transformation in how millions of people worked, traded, and survived? This was the birth of economic history as a distinct way of understanding the world—and the debates Toynbee sparked have never really stopped.

Two Ways of Knowing

Economic history sits at an uncomfortable intersection. On one side stand the historians, with their archives and their attention to context, their insistence that every event is unique. On the other stand the economists, with their mathematical models and their search for universal laws, their belief that human behavior follows predictable patterns.

Can these two approaches ever truly merge?

The tension is productive, but it's real. Historians worry that economists will impose modern assumptions onto past societies, reading medieval peasants as if they were rational actors maximizing utility in a marketplace. Economists worry that historians will drown in particulars, unable to draw conclusions that apply beyond a single time and place.

Toynbee thought the combination would improve both disciplines. Economics, he argued, gives you the right questions to ask when reading history. When you encounter a medieval king introducing a new currency, economic training helps you understand what's at stake. Meanwhile, history gives economic theories a reality check. Abstract propositions "become more vivid and truthful" when you see them operating in actual human societies.

There's a third benefit he emphasized, one that might seem old-fashioned but remains relevant: economics teaches careful deductive reasoning. "The habits of mind it instils," Toynbee wrote, "are even more valuable than the knowledge of principles it gives." Without that discipline, students of history can be overwhelmed by the sheer mass of facts.

The German School and the Rejection of Universal Laws

Not everyone agreed that economics should provide the framework for historical study. In late-nineteenth-century Germany, a group of scholars led by Gustav von Schmoller developed what became known as the historical school of economics. Their central claim was radical: there are no universal economic truths.

Think about what this means. The economists of their era were searching for laws of human behavior that would apply everywhere and always—in ancient Rome, in industrial Manchester, in rural China. The German historical school said this was a fantasy. Every economy is embedded in a particular culture, shaped by specific institutions, driven by unique historical forces. You cannot abstract away from context.

This wasn't anti-intellectualism. Schmoller and his followers still believed in rigorous analysis. They simply thought that analysis had to begin with careful observation of particular societies rather than with universal assumptions about human nature. Their approach dominated German and French scholarship for most of the twentieth century.

The school included some remarkable thinkers. Max Weber, the sociologist who explored how Protestant religious beliefs shaped the development of capitalism. Joseph Schumpeter, who argued that capitalism's dynamism comes from entrepreneurs who constantly destroy old ways of doing things to create new ones. These weren't historians in the narrow sense—they were attempting to understand how economies actually work by studying how they actually developed.

The approach crossed the English Channel through William Ashley at Oxford and came to dominate British economic history as well. Britain's first professor of economic history, George Unwin at the University of Manchester, carried this tradition forward.

The French Exception

In France, economic history took yet another turn. Beginning in the early twentieth century, the Annales School revolutionized historical study by focusing on long-term structures rather than dramatic events.

Traditional history—the kind you might have learned in school—concentrates on kings and battles, treaties and revolutions. The Annales historians asked different questions. What was daily life like for ordinary people? How did climate patterns affect agricultural productivity over centuries? What beliefs and mental frameworks shaped how people understood their world?

This approach, named after the journal Annales: Histoire, Sciences Sociales, spread worldwide. It pushed economic history toward what we might call total history—an attempt to understand all dimensions of human experience as interconnected. You cannot understand medieval trade without understanding medieval religion, medieval family structures, medieval technology.

The Annales influence persists today. When economic historians study not just prices and production but also culture, psychology, and social organization, they're working in a tradition that the French pioneered.

The British Battle

Should economic history be its own discipline, or is it simply economics applied to the past?

This question sparked genuine academic warfare in Britain during the years between the two World Wars. At the University of Cambridge, economists believed their subject naturally encompassed historical study. Pure economics, they insisted, already included an economic history component. The two were inseparable—why create artificial divisions?

At the London School of Economics, scholars took the opposite view. Economic history, they argued, required its own courses, its own research agenda, its own professors. It was a distinct intellectual enterprise that would be stunted if subordinated to theoretical economics.

The London School of Economics won this particular battle. In 1926, the Economic History Society was founded there. Universities across Britain developed independent programs in economic history. Cambridge eventually established its own economic history program, essentially conceding the point.

But winning a battle isn't the same as winning a war. The relationship between economic history and its parent disciplines has continued to shift, and the trends of recent decades haven't always favored the discipline's independence.

The Cliometric Revolution

In the 1960s, something happened in American universities that transformed economic history—and not everyone thinks it was for the better.

A new approach emerged, called cliometrics. The name comes from Clio, the Greek muse of history and heroic poetry, combined with "metrics"—measurement. The term was coined by two economists, Jonathan R. T. Hughes and Stanley Reiter, and it described something genuinely new: the systematic application of economic theory and statistical techniques to historical questions.

What did this look like in practice? Cliometricians didn't just describe what happened in the past. They built mathematical models, gathered quantitative data, and tested hypotheses with the same statistical methods economists used to analyze contemporary economies. They asked counterfactual questions—what would have happened if the railroads had never been built? What was the economic efficiency of slavery?

This was not your grandfather's economic history.

The most famous practitioner was Douglass North, who later won the Nobel Memorial Prize in Economics. North argued that economic history's task was to "elucidate the historical dimensions of economies through time"—and that this required the tools of modern economics. Without theory, he believed, you couldn't write solid economic history. You'd be lost in a sea of facts without any way to determine which facts mattered.

Historians, unsurprisingly, often disagreed. They warned that imposing modern economic theory on past societies risked anachronism—reading contemporary assumptions into contexts where they didn't apply. Medieval peasants weren't making the same calculations as modern consumers. Eighteenth-century merchants didn't think about risk the way Wall Street traders do.

What Happened to Economic History?

The cliometric revolution had an unexpected consequence. In the United States, economic history was largely absorbed into other fields of economics. It became seen as applied economics—a particular application of general tools—rather than a discipline with its own identity.

There has never been a specialist graduate program in economic history at any American university. Students interested in the field study it as a component of economics doctoral programs at places like Berkeley, Harvard, Northwestern, Princeton, Chicago, and Yale. It's a specialty, not a discipline.

Britain went a different direction, but ended up in a similar place. For decades, British universities maintained separate economic history departments. But over the past thirty years, most of these have closed. The discipline has been folded into either history departments or economics departments.

Only the London School of Economics still maintains a separate economic history department with its own undergraduate and graduate programs. Cambridge, Glasgow, Oxford, and a handful of other universities train economic historians, but they do so within history or economics degrees. The independent discipline is vanishing.

Many practitioners are pessimistic. But the story isn't entirely one of decline.

A Quiet Resurgence

Something curious has happened since the year 2000. Economic history has experienced what might be called a resurgence—not in the old institutional forms, but in new intellectual energy.

Part of this comes from continental Europe. Universities in Germany, France, and elsewhere have maintained stronger traditions of historical economics, and research conducted there has reinvigorated the field globally. Estimates suggest there are roughly 10,400 economic historians worldwide, with significant concentrations in Japan and China as well as Britain and the United States.

The field's growth is also driven by renewed interest in big questions that matter for policy today. Why do some countries grow rich while others remain poor? How do institutions shape economic development? What causes financial crises, and how can we prevent them?

These aren't purely historical questions. They're questions about the present that can only be answered by understanding the past.

The Development Question

Consider the puzzle of economic growth. Some countries have achieved extraordinary prosperity. Others, with seemingly similar resources and opportunities, have remained trapped in poverty. Why?

This question obsessed economists throughout the twentieth century, and it remains urgent today. But you cannot answer it without studying history. As MIT economist Peter Temin noted, development economics is "intricately connected with economic history" because it explores how economies with different technologies, innovations, and institutions evolve over time.

Some of the most influential attempts to answer the development question have come from economic historians. In 1971, Walt Whitman Rostow published The Stages of Economic Growth, which described development as a series of hurdles that economies must overcome—moving from traditional society through preconditions for takeoff, into takeoff itself, toward maturity, and finally to an age of mass consumption.

Rostow's book had an explicitly political subtitle: A Non-Communist Manifesto. He was offering an alternative to Marxist theories of history, arguing that capitalism could deliver prosperity through predictable stages rather than requiring revolutionary transformation.

Alexander Gerschenkron complicated this picture. Studying countries that industrialized after Britain—Germany, Russia, Japan—he found that late developers didn't simply follow the same path as early ones. They leapfrogged stages, adopted different institutional arrangements, and developed in ways that Rostow's model couldn't easily accommodate. Economic backwardness, paradoxically, could be an advantage.

More recently, Daron Acemoglu and James Robinson's Why Nations Fail (2012) pioneered what researchers call "persistence studies." Their argument centers on institutions: countries with inclusive political and economic institutions—those that spread power broadly and allow many people to participate in economic life—grow rich. Countries with extractive institutions—those that concentrate power and wealth in the hands of a few—stay poor.

The twist is that these institutional patterns persist over centuries. Colonial policies implemented hundreds of years ago continue to shape economic outcomes today. History casts a very long shadow.

The Great Divergence

One of the most debated questions in economic history concerns what happened around the year 1800. For most of human history, living standards across different regions of the world were remarkably similar. People in China, India, Western Europe, and the Middle East lived lives of roughly comparable material conditions—mostly poor by modern standards, but not dramatically different from one another.

Then something changed. Northwestern Europe, and later North America, experienced explosive economic growth. Living standards began doubling, then doubling again, at rates unprecedented in human history. Meanwhile, other regions that had been equally prosperous fell behind.

Kenneth Pomeranz's The Great Divergence (2000) tackled this puzzle directly. Why Europe? Why then? Pomeranz argued that as late as 1750, the most advanced regions of China were as economically developed as the most advanced regions of Europe. The divergence came from contingent factors—access to coal in convenient locations, the exploitation of the Americas—rather than any fundamental superiority of European culture or institutions.

David Landes's The Wealth and Poverty of Nations (1998) took a different view, emphasizing cultural factors: attitudes toward work, education, innovation, and governance that gave Europeans advantages in the modern era.

These debates remain unresolved. But they illustrate why economic history matters. Understanding why some societies prospered while others struggled isn't merely academic. It has implications for policy today, for how we think about development assistance, international trade, and institutional reform.

After the Financial Crisis

The global financial crisis of 2008 changed something in how economists think about their discipline. The crisis was, among other things, a failure of prediction. The mathematical models that were supposed to capture how financial markets work didn't see it coming. The experts were blindsided.

In the aftermath, scholars began looking backward. If contemporary theory had failed, perhaps history could provide insight. A new kind of economic history emerged—what some call the "new new economic history"—that moved beyond narrow quantitative studies toward institutional, social, and cultural history.

This newer approach often focuses on persistence. How do events in the distant past continue to shape outcomes in the present? How do institutions evolve over time, and why do some prove so resistant to change?

Columbia University economist Charles Calomiris characterized this new field as showing "how historical, path-dependent processes governed changes in institutions and markets." Once you start down a particular path—developing certain kinds of banks, certain regulatory structures, certain relationships between government and business—you can't easily switch to a different path. History constrains the present.

Not everyone is enthusiastic about this development. The economic historian Francesco Boldizzoni has criticized it as a form of economic imperialism—extending the assumptions and methods of mainstream economics into domains where they don't belong, treating all of social life as if it were just an extension of market behavior.

Piketty and the Return of Inequality

In 2013, a French economist published a book that became an unlikely phenomenon. Thomas Piketty's Capital in the Twenty-First Century was dense, data-heavy, and over 700 pages long. It spent weeks on the New York Times bestseller list.

Piketty's argument was historical. Drawing on centuries of data about wealth and income, he showed that inequality had risen dramatically since the eighteenth century, fallen during the mid-twentieth century (largely due to world wars and deliberate policy choices), and was now rising again. His central claim: when the return on capital exceeds the rate of economic growth, wealth inevitably concentrates in fewer and fewer hands.

This wasn't just academic theorizing. Piketty was making an argument about the present by studying the past. And he was proposing solutions—most controversially, a global wealth tax that would redistribute concentrated fortunes.

The book provoked enormous debate. Major economists like Paul Krugman, Robert Solow, and Ben Bernanke engaged seriously with its arguments. It spawned books in response—After Piketty, Anti-Piketty, Pocket Piketty. One economist called it "Nobel-Prize worthy."

Whatever you think of Piketty's specific conclusions, his method illustrates something important about economic history's contemporary relevance. The past isn't just interesting. It's useful. Historical data can illuminate current problems in ways that purely theoretical approaches cannot.

The Marxist Alternative

Throughout the development of economic history as a discipline, there has always been an alternative tradition rooted in the work of Karl Marx.

Marx himself was deeply historical. He saw history as driven by class conflict—struggles between those who owned the means of production and those who worked for them. He studied how one economic system transformed into another: how feudalism gave way to capitalism, and why he believed capitalism would eventually give way to something else.

Marx debated with the economists of his era—Adam Smith, David Ricardo, and others he called the "classical" economists (a term he invented). His legacy in economic history has been to challenge the assumptions of mainstream economics, to insist that economic relationships are always also relationships of power.

This tradition raises important questions. Is economic history primarily a story of efficiency and growth, or is it primarily a story of exploitation and conflict? When we study the transition from feudalism to capitalism, are we studying progress, or are we studying the replacement of one system of domination with another?

These debates became particularly intense in what scholars call the "Brenner debate," named after historian Robert Brenner. At issue was a seemingly simple question: why did feudalism decline? Maurice Dobb had argued that feudalism collapsed because of peasant resistance and the system's growing inefficiency. Paul Sweezy, a Marxist economist, challenged this interpretation, arguing for a different understanding of what feudalism even was.

The debate might seem esoteric, but its implications are profound. How you understand the transition to capitalism shapes how you understand capitalism itself—its origins, its nature, its possible futures.

The History of Capitalism

Since about the year 2000, a new field has emerged in American universities that goes by the name "history of capitalism." It's housed primarily in history departments rather than economics departments, and it represents something of a return to the humanistic roots of economic history.

Scholars in this field study the topics traditionally associated with economic history—banking, insurance, regulation, labor—but they approach them as historians rather than as economists applying theory to the past. They're interested in how people understood and experienced economic life, how capitalism shaped culture and politics, how it spread across the globe.

This is economic history with the economics somewhat decentered. It's more likely to draw on cultural history, political history, and social history than on econometrics. It asks questions about meaning and experience alongside questions about efficiency and growth.

Whether this represents a healthy diversification or a fragmenting of the field depends on whom you ask. But it suggests that economic history's identity remains contested—and perhaps that's as it should be. The questions economic historians ask are too important to be owned by any single discipline.

Why It Matters

Economic history is not merely academic. The questions it addresses—why some countries are rich and others poor, how financial systems fail, whether inequality is inevitable—have immediate policy implications. The methods it develops—combining quantitative rigor with historical sensitivity—offer tools for understanding a world where past and present are always entangled.

When policymakers debate how to prevent the next financial crisis, they draw on studies of past crises. When development economists design programs to reduce poverty, they rely on historical research about what has worked and what hasn't. When citizens argue about inequality and redistribution, they invoke historical narratives about how we got here.

Arnold Toynbee was right. Economics divorced from history becomes abstract and sterile. History without economic understanding becomes incomprehensible. The marriage he proposed remains essential.

The institutional forms may shift. Departments may merge or close. But the intellectual project—understanding how economies develop, transform, and shape human life—will continue. It has to. The present is always becoming the past, and the past never stops shaping the future.