Wednesday, May 18, 2011

How Historians Can Benefit from Economics

I’ve noticed over the years that many historians, including legal historians, are hostile to economics. Indeed, I’ve experienced this hostility personally, as a couple of times my “George Mason University School of Law” i.d. tag has attracted venomous comments from ASLH attendees (GMUSL is known for its focus on law and economics).

[UPDATE: For example, at my first ASLH meeting as a GMUSL professor, an attendee looked at my name tag, saw George Mason, and said, in a disgusted voice, something like: "GEORGE MASON! I hope you law and economics people are not going to try to do legal history what you've done to other fields! The last thing legal history needs is economics." I politely responded that I while I'm not an economist, I don't see why economics should be considered a threat to legal history. The individual in question then just walked away.

Also, it's been suggested in the comments that I'm "characterizing an entire field." I apologize if it came off that way, but I didn't say that "all" or even "most" historians are hostile to economics, I said "many." On reflection, perhaps a bigger problem is that even among historians who aren't actively hostile to economics, there is a widespread perception that engaging with economic thought is not useful for historians. And if you don't think it's economics is likely to be useful, and "many" of your colleagues will look unkindly at it, it's obviously unlikely that you will pursue it.

And let me reiterate that, as suggested immediately below, economists have their own issues with history, so the problem goes both ways.]

I can understand why historians are suspicious of economics. First, economists sometimes decide to interpret history to ensure that it coincides with their preexisted understanding of what economics says “must have” occurred, without engaging in objective historical research. Second, economists with an empirical bent are too prone to attributing causation (1) based on necessarily incomplete data sets, so long as they can get a “statistically significant” result, while (2) sometimes forgetting that in any event, statistically significant correlation does not necessarily equal causation. And, third, it doesn’t help that economics is perceived as “conservative” by the more lefty historical community.

Nevertheless, I think historians could benefit from economics in two ways. First, economists are very good at defining their terms, something that seems to me to be a weakness among many historians. I could give numerous examples, but one that I’ve noticed over the years from attending ASLH is that historians will casually refer to certain groups (especially nineteenth century workers) as “exploited”, without defining what “exploited” means. These, in my experience, are almost always historians from history departments, not law schools; at most law schools, one wouldn’t get past 5 minutes of the q & a without someone asking what the author means by “exploited.” A lack of precision isn’t conducive to good history writing.

Second, economics can help historians find interesting topics to research. Consider “company towns.” Standard histories assert that large mining and other companies exploited (there’s that word again) workers by forcing them to live in company housing and buy from company stores. But when an economist reads about company towns, an obvious question arises: if the companies were simply out to exploit their workers, who lacked the bargaining power to resist, why not just pay them less? A mining company has no particular expertise in running a housing market, or a store; it would be much easier, and more profitable, to simply offer lower wages and let the workers fend for themselves.

But economics teaches us that companies aren’t likely to do something that’s contrary to self-interest, so that leaves several possibilities to be investigated by historians: For example, (1) The companies were pulling a bait and switch. They advertised high wages, but only when the employees reached the town, and became dependent on employment there, did they realize that the wages were only high because the company extracted profit from monopoly housing and grocery fees; (2) The companies benefited from controlling housing and shopping because they could control the workers that way. A union leader could not just be fired, but evicted from the town. The company could extract more productivity from its workers by prohibiting the sale or use of alcohol in town; and (3) Perhaps some workers preferred company towns precisely because of the social control the company enforced. If so, the company could actually offer lower total compensation. I once caught a few minutes of a documentary about a company town. The narrator was interviewing and elderly woman who had resided in a company town. She was asked whether she resented the control the company had over every day life. To the contrary, she said, she and her husband specifically sought out this town, because most steel town were full of drunk, rowdy men who made the town unfit for family life. She and her husband wanted to live in a town where “troublemakers” were expelled, and good Christian morality was enforced.

Any or all of these alternatives might explain any given company town, but any such detail is far richer and, if done well, more accurate that simply asserting that company towns existed because of workers' lack of bargaining power (again, why not just pay them less).