Reading: Barry Eichengreen (2011): Economic History and Economic Policy
Barry Eichengreen (2011): Economic History and Economic Policy http://eml.berkeley.edu//~eichengr/EHA_Pres_Add_9-9-11.pdf
As you read, formulate your answers to the following questions:
What does Eichengreen think are the uses of history, as shown in the use of history in trying to understand the macroeconomic crisis that began in 2008?
What does Eichengreen think are the abuses of history, as shown in the use of history in trying to understand the macroeconomic crisis that began in 2008?
What rules and approaches does Eichengreen arrive it for future people trying to use history better?
Do you agree with his rules and approaches?
Barry Eichengreen (2011): Economic History and Economic Policy: "This has been a good crisis for economic history...
...Journalists, market participants, and policy makers all turned to history for guidance on how to react to this skein of otherwise unfathomable events.... References to the Great Depression became widespread. References to articles referring to the Great Depression became widespread. The analogy legitimated certain responses to the collapse of economic and financial activity while delegitimating others. It legitimized the notion that the Fed should respond aggressively.... In addition. it was not just policy makers but also market participants who viewed current events through the lens of history.... The analogy with the Great Depression was a powerful intellectual shortcut. It provided a ready diagnosis and an implied set of do‘s and don‘ts....
Where for political scientists the danger with historical analogy is that policy makers will use it injudiciously... economic historians will recognize an additional issue: the existence of multiple interpretations.... Insofar as this was the case, the historical analogy to the Great Depression offered less guidance to policy. Did we need a new Neal Deal? Well, that depended on whether you sided with historians who argue that the New Deal helped to end the Depression or only prolonged it. Did we need a jolt to the exchange rate to vanquish deflationary expectations? The answer depended on whether your view was that Roosevelt‘s decision to take the U.S. off the gold standard in 1933 was the critical decision that transformed expectations and ended deflation or whether you thought it was a sideshow....
How the 2008-9 crisis will influence historical scholarship[?] This is the other dimension of historical analogy: not only does the base case shape perceptions of the target case, but mechanism operates also in reverse. It is likely that there will now be less Whig history of the Great Depression. The mainstream narrative is that the experience of the Depression led to a series of institutional and policy innovations making it less likely that something similar thing would happen again.... We now have had a graphic reminder that we have less than fully succeeded.... The recent crisis also reminds us that the policy response is as much a matter of ideology and politics as it is a matter of economics. In 2010-11, the debate over a second stimulus seemed to be governed less by evidence on the size of the multiplier than by the analyst‘s ideology and by political backlash.... Accounts explaining the failure of the authorities to intervene more effectively in the 1930s mainly as a matter of bad economics are now likely to be revised...
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