Why Study Economic History

1. Why study economic history?

It is important to study economic history for a number of reasons, those which I will discuss in my answer include the fact that the study of economic history is fascinating and it tells us who we are, in addition to the fact that history gives perspective, and finally I will give a short account of how history tests theory.

To begin, the study of economic history is fascinating, and when it is valued on the grounds of its intrinsic worth, it is very valuable indeed. I believe that it is both intriguing, and crucial that the citizens of Ireland have an understanding of the economic history of this country. It is very interesting to study the fluctuations in our economy – for example, from bust in the 1950s to boom in the 1960s, and it is fascinating to learn about the rural disaster in the 1800s – for instance population decline and the famine and the influence that this had on the Irish psyche. I think that having the knowledge of this is not only relevant to academics, but it is also hugely important, and interesting to understand the kind of eras that our ancestors lived in. I feel that this understanding of our roots and backgrounds tells us who we are, as it gives us an idea of the hard times that our ancestors lived in. It provides us with a detailed account of the struggles and the hardship of those eras. On a personal level, having this knowledge of the horrendously hard times my ancestors lived in gives me a sense of appreciation for all that I have today. It is this understanding of the booms and busts that I think is fascinating because we are the descendents of those who experienced it, and so a little bit of this history is inbuilt in all of this, and this is what I believe is truly fascinating indeed.

Additionally, the study of economic history gives perspective which I feel is crucial. Imagine if the downturn in the global economy today was the first ever to occur – it would be disastrous. It would be virtually impossible to reach recovery as the economists would have nothing to compare the downturn too, nor would they have any knowledge from previous downturns on how to reverse this. Thankfully economic history acts as a very useful resource as it tells us that there have been major fluctuations in the Irish economy, and also the world economy before, and that recessions are reversible. In relation to recessions, depressions and downturns, the study of economic history provides us with an abundance of information regarding the techniques that countries used to regain economic growth. For instance during the 1980s in Ireland, a period of deep recession the Government at the time felt the most appropriate way to make up for the country’s deficits and borrowings was to increase taxes, which had an adverse effect as it reduced peoples’ income, which then led to a reduction in spending. These increases also made Ireland unattractive for foreign investment as Multi-National Corporations were discouraged to locate in Ireland because of the phenomenally high corporation tax rates and personal tax rates at the time, for example at the beginning of the 1980s, corporation tax rates was approximately 50%, and personal income tax rates in the higher bracket was the high 50s. As a result of people utilising such avenues as economic history, economists and such like are now able to advise our Government and bankers as to the correct ways to address the current downturn in the economy, for example we have not encountered or witnessed any increases in taxes similar to that in the 1980s. Thus I conclude in saying that economic history is vital as it helps us learn from the mistakes of the past and ensure that these mistakes are not repeated. This is why it is crucial to study economic history.

Furthermore, it is very important to study economic history as it tests, with concrete empirical evidence the validity and applicability of economic theory. For instance, economic history tests the propositions of economic theory, and tells us whether or not these theories are accurate in their assumptions and conclusions, or if they are a fallacy. Let me take Malthus’ proposition that population growth would eventually outstrip food supply. From Irish experience, even during the Great Famine, it suggests the contrary, that population growth does not outstrip food supply.