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ECON History - TUESDAY 01.18.2011 Introduction Economic...

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TUESDAY 01.18.2011 Introduction: Economic History, Cliometrics & the American Economy I. Why Study Economic History? “Without theory history becomes undisciplined and disorganized, shaping its material by whim, or purely by rhetoric. Without history, theory loses any grounding in the actual course of human events.” William Parker, 1986 a. History: collection of facts about stuff happened in the past Doesn’t mean much unless you organize it to be unified and make a coherent story Law of Demand Price goes up and Quantity Demanded goes down [Theories] For it to be meaningful we test it by historical facts b. * Public policy decisions “History is a vast body of information essential to making public policy decisions. Indeed, history is the testing grounds for economic theory and principles taught in economics classes….” (p. 8, Walton & Rockoff, 2009)
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II. The Development of Economic History as a Field of Study A. A relatively new field of economics B. 1958: The “Birth” of Economic History (?) A. Conrad and J. Meyer publish “The Economics of Slavery in the Antebellum South” Question: Was owning slaves a profitable investment in the 2 decades prior to the Civil War? o Variable definitions: P S = price of slave P C = price of cotton MP S = marginal product of a slave M = total maintenance cost of slave (food, clothing, shelter) r = discount rate Data: from cotton-producing states in southern US; 1840-1860 Slaves are profitable 1 st economist to question (historians have asked before) o Ulrich Phillips’ research & conclusion (1929) Historian Ps goes up Pc was fairly stable Philips’ conclusion : slave ownership in 1840-1860 was becoming increasingly unprofitable o Conrad & Meyer’s research & conclusion (1958) using an asset-pricing model Decision makers act rationally Business people maximize profit Asset pricing model - House, slave, etc.
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