Pursuit of Truthiness

my gut tells me I know economics

The Return of History

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These days economists do lots of abstract math but know little about history.  This wasn’t always the case; until the Depression, the history-heavy and math-light Institutionalists were the dominant school.  But as the Depression dragged on and the Institutionalists had no major new ideas to fix it, Keynes and the modelers took over both policy and economics.

Mathematical modeling has continued to be the dominant tool of economics until this day.  But with the not entirely satisfactory response of mathematical economics to the financial crisis and recession, it seems that people are once again turning to history.  I get the sense that Reinhart and Rogoff’s This Time Is Different: Eight Centuries of Financial Folly has been the book economists most took to heart in this crisis.

I am certain that at the margin economists do too much math and too little history.  I hope to do my own small part to address this misallocation, and I am glad to see that Reinhart and Rogoff have made such a big move with such success.

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Written by James Bailey

May 19, 2010 at 9:26 am

Posted in Economics, history, math

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