Theme economic-social history
Lecture 1
(Drukker page 38-52, 79-102, 140-147)
1. The relation between economic and history
2. Economic growth and welfare: rich and poor
3. Crises, business cycles and continuity
The relation between economic and history
Overview:
Economic science
Historical school; ‘methodenstreit’
Traditional economic history
Neoclassic, Keynesians and econometrics
New economic history
Historical national accounts; measuring the GDP in the long run.
Economic history compromises in the history of (I):
The economics of countries provinces regions cities and villages In specific periods.
Very broad
History of organizations; VOC, Shell, Campina
Institutional history; water boards, governmental departments
History of governmental departments; organizing the land
History of industries; Banks, textile industry, agriculture
History of technology (how machines change over time)
History of consumption, advertising f.ex food (both advertising and consuming)
Economic history compromises in the history of (II):
Economic governmental policies of a country- crisis policy, environmental policy etc.-
and policy of transport and infrastructure)
A specific economic aspects, (credit, housing, human capital-education)
Economic behavior of people on an individual level ( motives to work, choices,
strategies) (gender- economical aspects, division of gender tasks in past societies-
woman have much less change to become wealthy?)
Labour ( task, working hours, wages- now 8 hour working day- before 12 hours a day,
6 days a week)
standard of living, prosperity, well being
f.ex. Aardappel eters- van Gogh- shows what they ate – medieval painting, where do the
clothes come from. – all economics.
,Economics
How-while having only limited (scare) resources at disposal- to satisfy unlimited needs and
want people have.
What is produced?
How is it produced?
How is production divided among the population?
How to get as much sources as possible -medieval period, roman period – work harder
produce more- only limited time and land- not enough money.
Economics is the study of scarcity and the decision you make. so what is produced?
How is it produced? hand vs. machine (machinery changes production manners – less
people needed) so
How is production divided among the population?
(limited amount of people production is still the case now a days, lot of people working for
us. Production is not divided evenly/ equally.
Micro level/ macro level
Economic method
descriptive, but above all explanatory (why..? )
positivism; objective knowledge is possible (method originating from natural
sciences) – general rules, with objectivity of economy.
General laws – not interested in unique and individual cases (economy).
General laws of higher prices lower consumption for example.
Model based approach (model is simplification of reality) abstract but simple, want
to create general laws. Reality is very complicated- models simplify the world
limited variables in these models, searching in the generals.
Deductive method: using assumptions to come to conclusions. conclusion using
general laws, with logical reasoning, so the outcome must be true. Problem is in th e
assumption (simplification of reality) – if they are not true to conclusion is not true
Economic assumption
Homo economicus:
Everybody is rational
Self-interested, only interested in own self and happiness. Happiness of your
child, child = happy you =happy
Unlimited materialistic wants and needs and limited resources
We need these assumption to come to conclusions.
,Ceteris paribus clause: all variable which are not included (exogenous) are assumed to be
constant (not change) but they do change why many economic predictions are not right.
Very helpful price increase – people buy less. Wages outside model (exogenous) increase
—people buy more due to more income. Breaks the economic law!
According to Adam smith (before industrial revolution);
In a free market, and invisible hand takes care of perfect coordination of supply and demand
(production and consumption)
What Is the invisible hand: price meganism – forces supply and demand to become equal.
Price to high – people don’t buy—less production—leads again to less supply and so higher
prices and thus less production.
Economic history is not based on history but on economic- birth of economic history
Methodenstriet
Second half of the 19th century;
Neoclassical economics (Marshall. Menger) view themselves as successors of the classical
economics (smith, Malthus, Ricardo)
Become very important in Second half of the 19th century
Positivism (Objective knowledge)
Deductive
General laws
Development of theoretical models
Historical school (list, Schmoller)
Influence of industrialization- higher production of agricultural products- higher position
than inferior industrialized countries. Why should we produce our self if we can get it for
cheaper in England. – want to protect own market but it goes against the free market theory
of Neoclassical economics. – so come up with..
Historicism (knowledge is subjective)
Inductive
Searching for general patterns in the past
General laws are bound to time and place
Roots of economic history
(tariffs on trade, making foreign products more expensive so that people buy local
producst.)
, Winners -- Neoclassical economics!
Still very relevant now a days.
Traditional economic history
Collecting information and facts
Focus on the narrative (description) of historical events and developments.
Explanations are often found outside the economy (culture, politics – bad economy-
must be because of bad culture. Dutch= Calvinism- save much, work hard can pay
ships- VOC) (1st half of 19th century- high investment in steam engines- good
economic reasons (wages, prices etc.) to not invest. – 1950 changes economic
reasons bettered and investment became more popular)
No model based approach
Numbers are usually only used as an illustration of the story.
Economic history was to descriptive and definitions were problematic.
Neoclassical perspective on economics (1)
‘Market’ works perfectly. Supply and demand adjust via price mechanism resulting in
an optimal equilibrium (no government intervention is best)
All actors only focus on self-interest profit maximization for forms and
maximization or utility/benefits for consumers.
Unemployment leads through a lowering of wages , to an increasing for labour
(under the condition of a flexible labour market)
Neoclassical perspective on economics (2)
When the economy slows down, the price-level decreases due to a surplus of supply,
and consequently the quantity of the goods demanded increase again; movement to
equilibrium.
An economic crisis will ‘solve’ itself if you do not intervene in the market (laissez
faire)
The most important function of the government is the protection of public order,
property rights, and contracts (providing a reliable well-functioning legal system)
Neoclassics I
Free market Only the 'best' (most productive/efficient) firms survive providing the
lowest possible prices [NB: Not in the case of guilds or traditional succession].
Darwinian "survival of the fittest process". The costs are low and the production is
high in an economy
Survival of the strongest – best firms will survive
Competition is good- best firms will survive.
The cost are low and the production is high in an economy
