Economics versus history – is this the right debate?

Over the past few days, Tim Harford has been engaging in a debate with Gideon Rachman (along with a few other bloggers) regarding Rachman’s contention that economists should be swept from their throne and historians given greater due.

A debate like this is always going to be at cross purposes. Both history and economics are large fields with differing schools of thought (and battles within). To tar all of economics with the same brush is to ignore the breadth of economics. Paul Krugman’s characterisation of saltwater and freshwater economists is a case in point. The strongest and most coherent critics are generally on the inside.

Similarly, history has a variety of schools of thought. Which historian is representative? Niall Ferguson, for example, has built his career on controversial and counter-intuitive ideas. If he is wrong, should that be a black mark on all historians? Or are historians his strongest critics and counterbalance? And of course, Ferguson is constantly making predictions, the very crime that Rachman accuses economists (but not historians) of committing.

My two cents worth is that Rachman is right the influence of economics should be tempered. In his Nobel Banquet speech, Freidrich Hayek stated that he would not have created the “Bank of Sweden Prize”. He stated:

… I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it. … the Nobel Prize confers on an individual an authority which in economics no man ought to possess. This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.

In his prize speech, Hayek also touched on the mess made by economists and the “scientistic” approach which may lead to error.

Hayek’s message that economics is full of fashion and pretends to be a harder science than it should be still holds today. But at the same time, there are pockets of theory and thought that have stood the test of time (read Adam Smith). The innovative uses of microeconomics continue to astound, with examination of incentives providing a framework for predictions. Amongst the problems, mistakes and unfortunate influence, there is value. But since there are internal differences, we should be careful about the extent of the influence and power of any one individual or school of thought.

And in that sense, it is probably no different to history.

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