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The Importance of Economic History to Contemporary Students

0 December 07 2016, 06:32 in Economic Essays

The Importance of Economic History to Contemporary Students

The academic and famous reviewer George Santayana once cautioned, "Those who cannot remember the past are condemned to repeat it.” It is for this reason that those who want to succeed in their current endeavors have to strictly consider the past so that they will not repeat the mistakes that have been committed several decades ago.

As we know it, history is the study of different occurences in the past. It analyzes every event and acknowledges patternsor similarities. On the other hand, economics is the reading of patterns. Economists search for resemblances, parallels, and relationships of diverse eventsand inquire whether or not they sustain a specific economic hypothesis or representation.

Thus, it is important for modern day students to know and understand the economics of years gone by, they need to be aware of the events that took place in those years and understand what triggered those events so that they can at least prepare for these and avoid the same mistakes to occur again.

A classic example would be the correlation between protectionism and growth. Many growth thinkers will say that the higher the level and intensity of protection that a state implements, the lower is its level of per capita income. If recent evidences are to be scrutinized, this is, without doubt, correct. However, prior to 1945, the connection is less precise and definite, and there is even a few inferences that tariffs triggered growth in the 1930s.

Apparently, knowing and understanding economic history urges students to recognize

the most important distabilities in economic performance and the economic policy systems that have taken place so many times in the past, and may, as a result, crop up again in the future. These distabilities have repeatedly overlapped with economic fiascos and financial debacles, which for that reason cannot be implied immediately as hypothetically not viable.

In recent years, global economists, as well as Nobel prize-winners, have highlighted the value and the consequence of studying economic history. The effort to comprehend a county’s economic past can help give details and shed light on how economies build up, evolve or what makes an economy to collapse but most important of all, it can recommend solutions to present-day problems.

Primary US economics departments such as Harvard, MIT, UCLA, Stanford, are reiterating the value of economic history in the instruction of students and in the training of professional economists. A major case in point to the useful application of economic history is the acknowledgement by Ben Bernanke, Governor of the US Federal Reserve, of the significance of his exploration on the 1930s Great Depression in understanding and in taking action to the country’s 2007/09 Great Recession. As it is. students of economics should understand that the study of the past can help them restrict the scale of the ‘unknown unknowns’ as they cast their net wider.

If one contemplates on the classical models of economics, why notable economic decisions and actions should have any bearing in the long run is far from evident. For instance, in the traditional Solow model, for a prearranged set of parameter values, there is a distinctive ‘steady-state’ level of capital and income for each worker. Any occurrence that upsets either capital or output only has a transitory effect. In the long run, the economy ultimately congregates back to an exclusive ‘steady-state’ stability. Analyzed in this perspective, why history should matter is vague. Nonetheless, once models with manifold equilibria are measured, then extraordinary happenings have enduring impacts if they trigger a movement from one symmetry to another.

As a final note, knowing and understand economic history is a grand technique of convincing and influencing students that the assumptions that they have been learning in their micro and macro classes are valuable in assisting them as they try to make sense of the real world.

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