New eBook: The Long Economic and Political Shadow of History

Stelios Michalopoulos, Elias Papaioannou

23 January 2017

a

A

Study the past if you would define the future.

Confucius

 

The classical economists of the 18th and 19th centuries who shaped economic thought (David Ricardo, Adam Smith, Karl Marx, John Stuart Mill), in company with such early 20th century scholars as John Maynard Keynes and Joseph Schumpeter, believed in the blending of core economic ideas (value maximisation, incentives, market laws) with history. Political economy — as economics was referred to up until the early 20th century — was a discipline that combined elements from a wide array of social sciences and interpreted them with its new tools. Yet, efforts to draw insights from history and related disciplines with which to shed light on economic questions lost steam during the latter part of the 20th century.

The neoclassical approach would leave little room for a deeper understanding of important historical events in the growth process such as colonisation, institutional changes, and geographic and cultural traits that most people would instinctively see as fundamental drivers of comparative development. Not modelling explicitly the role of history, geography-ecology, and culture (religion, beliefs, family ties, norms) led to these features being viewed empirically as a ‘residual’ of the growth process driven by capital deepening, either in the physical sense of tools and machines or in the human sense of education and health. Moreover, economists’ disregard for history was not confined to the economic growth literature or macroeconomics. The total number of economic history papers published in ‘top’ general interest journals declined as economists moved from relatively simple, intuitive theories and applied methods to more complex, often esoteric, mathematical models and elaborate quantitative econometric empirical approaches. 

However, since the late 1990s there has been a revival; a ‘new economic history’ literature has emerged that studies important historical episodes, with the goal of tracing their consequences for contemporary outcomes. The three volumes of a new Vox eBook ask a truly remarkable range of questions. Do the roots of development go back to pre-industrial times and the Neolithic Revolution? How do the legal systems, colonial institutions, and practices transplanted by Europeans, or the presence of colonisers themselves and early colonial investments influence contemporary comparative development? What is the legacy of Africa’s slave trades and the artificial drawing of borders? What are the drivers of the divergent development paths of South and North America, states in India, and of North and South Italy? How have the Enlightenment and the Protestant Reformation shaped European development? How deep is anti-Semitism in Europe? And what is the aftermath of the Holocaust in Russia? Do Nazi occupation and communism still matter? And, if so, in what ways? How did the US benefit from the influx of Jewish scientists who fled Nazi Germany? Are there long-run consequences of environmental features and disasters?


Download the first volume using the following link:

The Long Economic and Political Shadow of History, Volume 1


The e-book summarises recent research tackling these and similar fascinating questions. Some works stress the role of colonial institutions, others the importance of legal origins, other the role of deep geographic features, while others focus on religion, beliefs, and other cultural traits. Naturally there is debate on the deep origins of comparative development that appears quite persistent.  Despite their sweeping focus, the e-book’s contributions share many similarities.

  • First, there is the inter-disciplinary approach. 

Many entries, for example, investigate the economic and cultural consequences of historical events and rigorously test influential conjectures put forward by political scientists and sociologists. Going over the chapters of this eBook, the reader learns not only about the economics, but also about the context, the protagonists, and the key issues at stake.

  • Second, in the quest to quantify the imprint of history on contemporary performance, researchers have dramatically expanded the toolset of economics.

Historical archives, anthropological, linguistic, and archaeological maps, genetic evidence, satellite images, and a wealth of geographic endowments constructed by earth scientists are blended with econometric techniques and theoretical models to tackle highly controversial issues.

  • Third, the works in this e-book share an important feature: they are ambitious.

They aim to understand the consequences of landmark events whose importance is attested to by the thousands of pages of excellent work in the areas of history, political science and sociology, along with a plethora of qualitative studies. To this corpus of excellence, economists bring along formal theorising and econometric tools, complementing and building upon the existing research. Naturally, ambition is at the same time a strength and a shortcoming. It is impossible to perfectly explain and trace the legacy of history. And there are important details that economists abstract from in their empirical analysis or economic theorising. Yet, economists have been open to critique and, in many instances, going back to the original archival data, they have re-examined and re-codified the entries, improving upon their findings. Continuing and strengthening the ongoing cross-pollination between economists and scholars in other disciplines can only prove beneficial to the cause of understanding whether, how, and why history matters for shaping the observed variation in outcomes today across regions.

  • Fourth, as the revival of the ‘new economic history’ coincided with the ‘credibility revolution in empirical economics’, many of the chapters rely on modern, state-of-the art econometric methods, such as difference-in-difference estimation, ‘matching’ methods, regression discontinuity, instrumental variables, and ‘natural experiments’.

These methods — while not perfect — attempt to account for unobserved or hard-to-measure confounding factors, or to exploit some form of ‘quasi-random’ variation in the historical record.

While the chapters in this e-book all reveal considerable persistence, they do not imply that development is entirely determinist; leadership and policies promoting investment and human capital accumulation or policies and technologies enabling trade integration do matter. So, while on the surface there may seem to be a tension between studies uncovering the shadow of history and the ability of policy to affect development, the chapters can be viewed as showing that important policy decisions, occurring in ‘critical’ times, do have long-lasting effects (that subsequent policymakers find hard to reverse). They also carry an obvious, yet often neglected, lesson. The success of any policy implemented crucially depends on the underlying institutional and cultural heritage of a given society; therefore, it is vital for policymakers, development actors, and investors to understand the historical context so as to model incentives and design effective interventions.

The literature has bundled the potential explanations of persistence and divergence into four broad (and quite often interrelated) categories related to:

  • Historical institutions, such as colonial extractive rules, pre-colonial political legacies, and enslavement;
  • Culture, related to religion, trust, family ties, beliefs, and norms; 
  • Geography-ecology, such as the impact of floods, temperature shocks, terrain ruggedness and isolation and soil variability; and
  • Historical accidents, such as the artificial drawing of colonial borders in Africa.

These features interact and often they re-enforce each other — it is hard to perfectly distinguish them. A key insight of the contributions to this eBook is how much related institutional and informal/cultural norms or how environmental and geographic features shape politics, economic organisation, culture, and institutions. 

Volume 1 of the e-book starts with our more detailed discussion of the recent literature on economic history that aims to explain the considerable persistence in economic and political development. It also includes some additional introductory chapters that review works on the spatial distribution of development, as depicted in satellite images on light density at night, summaries of fascinating new papers on the macrogenoeconomics of comparative development, and studies on environmental economic history. Next, it includes chapters which explore watershed events that have global repercussions, such as colonisation, the role of the Enlightenment on the Industrial Revolution, and the spur of commerce during the first era of globalisation.

The chapters in Volume 2 (forthcoming) feature research on the deep origins of African development and works on the legacy of colonial practices in India, China, and Australia. They cover a diverse set of major historical issues, such as the impact of the slave trades, colonial divide-and-rule policies and investments in infrastructure and human capital, the legacy of British direct and indirect rule in India, the long-lasting effect of convict resettlement in Australia, and the role of colonial ports in China. 

Volume 3 (also forthcoming) focuses on Latin and North America and Europe. The chapters on the Americas cover a plethora of colonisation-related events, such as the legacy of the mita (forced labour system in Peru), the role of Christian missions, the resettlement of indigenous communities in reserves in North America, and many more. The chapters on Europe discuss, among other topics, the role of the Protestant Reformation on industrialisation and the legacy of the Holocaust, Nazi occupation, and communism on social structure, politics, and norms. They also cover research tracing beliefs, trust and norms related to trust and social capital to the medieval times.

Authors’ note: This column summarises our more detailed review of this e-book in Volume I, Chapter 1, where we provide references and review evidence on persistence. We would like to express our gratitude to the authors of all chapters of this eBook.

References

Michalopoulos, S and E Papaioannou (2017), The Long Economic and Political Shadow of History, Volume 1, CEPR Press.

a

A

Topics:  Development Economic history Environment Europe's nations and regions Frontiers of economic research Global economy Institutions and economics Migration

Tags:  economic history, development, slave trade, colonialism, economic theory, unified growth theory, trade, geography

Associate Professor of Economics, Brown University; Research Affiliate, CEPR

Professor of Economics, London Business School; CEPR Research Affiliate

Events