History, Not Economics

The global recession has resulted in more than lost jobs and falling housing prices. The Guardian recently reported figures indicating a surge in applications to study economics at both the secondary and university levels. Apparently young people are not the apathetic, lackadaisical yobs the media so often portrays. Perhaps the credit crunch was the wake up call needed for a generation (myself included) brought up in the post-cold war era of prosperity. Surely such intellectual curiosity can only be a good thing? Under most circumstances I fear this is not the case.

Economics 101 – usually microeconomics or a hybrid course of mico and macro – teaches economics according the classical model that is in much disrepute as of late. Realities are assumed away – people are always rational and self-interested? – and complex mathematics begin to work their way into fundamentally flawed models of human behaviour . Such models assume universal modes of decision-making in the absence of culture, and so long as economics does not address these dreamy fantasies, I fear we are bound to repeat our mistakes.

In the absence of epistemological studies – kudos to the International Baccalaureate programme for this – most students this day in age are remarkably malleable to the status quo in academic studies. Students today buy into the existing disciplinary discourses, which often exist in a vacuum, and fail to question current constructs and methodologies that can then lead to repeating the mistakes of the past. This is the fault of our existing pedagogical system and will be difficult to change anytime soon. In the absence of an upheaval in education and academic values, which is out of scope of this essay, what can solve this quagmire?

History, despite all its disciplinary politics and cultural constructions, remains the best mainstream tool to combat epistemological apathy. Understanding why we know what we know can be informed by a broad understanding of history. Indeed, economic history would be a better place to start for students wishing to gain greater comprehension of the economic forces currently at work. History rarely repeats itself, but it does weave patterns and everyone once in a while these patterns shift into a new pattern – a paradigm shift of the Focaultian sort. Are we in such as a shift now? It would seem so, given our existing social and institutional structures have lagged behind the rapid changes in technology and media. The ‘crowd’ effect – whereby people react to the behaviours and patterns of others around them – has only magnified by contemporary media and is a good example of this disequilibrium. Looking to past examples where institutional structures lagged the economic and philosophical zeitgeist, such as the end of the 18th Century, could instil a sense of caution in the upcoming generation of economists.

The younger generations of today should be applauded for engaging in their world in a way that hasn’t been seen for some time. That the current economic situation frustrates this generation is a positive antidote to the apathy building for sometime in society at large. Yet in their quest for economic knowledge, they are likely to be led astray by the same old economic and financial discourse that has been present for many years now. Sadly behavioural finance is rarely taught at the undergraduate level. Taking stock in historical examples of previous crises would prove useful to a profession that often seems to be little more than fortunetelling with mathematical models. As the ever wise political economist Susan Strange remarked ‘History, including economic history, is the essential corrective for intellectual hubris. Economists, please take note.’ Well done.