Barry Eichengreen - Why Economics Needs History

we're here today with Professor Barry Eichengreen who's a professor of economics at the University of California at Berkeley and also one of our inaugural grantees for a very ambitious project to increase the number of students going through rigorous training in economic history something he calls the Berkeley economics history lab but first of all Barry could you tell us about this peculiar you you that this you say this is Berkeley School and there's this particular strategy you have that's different from other economic history kind of training I think at Berkeley economic history is more integral to the training of PhD economists than almost anywhere else so what is distinctive and different about Berkeley economic historians is they speak not only to dedicated economic historians but they speak to the economics profession as a whole often I think in our program it's hard to quite know who is an economic historian and who is a macro economist or who is an economic historian and who is a labor economists because the audience's overlap dissertation may have a historical chapter and other chapters that are either theoretical or use very modern data so the lines between economic history and the economics profession more broadly are fuzzier at Berkeley and I think that's a good thing and what is the origin of this Berkeley school how did it come to be that this was this particular tradition came came to be it's it's a hard question to answer once upon a time long long ago before your time yeah Berkeley was very far from policymaking centers it was time-consuming and expensive to fly to Washington DC and testify on Capitol Hill what the Berkeley Economics Department did so well was economic theory gerard debreu and others built a very famous and and top-notch theory program and economic history historians also traditionally not being involved in policy although that has changed and and at one level in the good old days theorists and economic historians at least in my department would work very smoothly together they saw one another as true scholars and they appreciated what the other group in fact did and so that attracted you there you were you were at other institutions before there and this this was a this was a strong magnet for you in your own work yeah it was so when I was thinking about what to do when I grew up where to settle down at the end of my peripatetic academic life being somewhere with a critical mass of economic historians with a thriving active seminar and importantly with a critical mass of graduate students tuned economic history was important to me also to this day I think we have more graduate students working in economic history and use in economic history and in their PhD research them than virtually anywhere else in your grant proposal you are asking and we're helping you build out this program ramped up this program you use the phrase and you see this as a response to the global financial crisis how's that many people would acknowledge that historical research institutional research was neglected to an extent by the mainstream of the economics profession and in the wake of the crisis that should change my view & the Pips that I made successfully to inet was if you're serious about changing that you have to change the way people are trained and and and helped to produce a new generation of scholars who are more historically literate and who use historical evidence and methods and in more systematic ways so that's what we're trying to do but what does that kind of background bring you that the that the standard economics does not you know that the global financial crisis is an indictment of economics that's a sort of standard around here at inet okay but isn't it an indictment of economic history also well I think what economic history can add number one is a better understanding of what aspects of current problems are new and novel and which ones are not so my argument would not be that we've seen it all before rather than but that a deep knowledge of history enables you to better identify what has been seen before and what hasn't secondly economic historians have a different attitude toward data they are more into source criticism where did these data come from what are their limitations sometimes uncritical use of data by economists is something that that we need to think about as a profession and where a historical sensibility can help and finally institutions so everybody talks about the importance of economists analyzing institutions and hardly anyone does anything you know you have to have variation in the relevant institutions over time in order to be able to analyze them seriously where do you go to find that answer history now your own work is largely in the international monetary area is that right yeah so I have worked overtime on the gold standard the Bretton Woods system the Euro three very different monetary regimes over the last century and a half mm-hmm and you have a recent book I believe thank you very much for mentioning that yes called exorbitant privilege the rise and fall of the dollar and the future of the international monetary system and it's about how the dollar became not only America America's currency but the world's and what the implications would be were that no longer crew in in the future mm-hmm now you mentioned this business about historical sensibility so you're using these are examples of historical sensibility and how do they and how do they connect up with current policy debates that was the whole point right right so one question I asked in the book is how did the dollar become the world's currency what did we in the United States now connecting up with some of your work Perry how did we in the United States create a central bank to be a market maker of last resort provide liquidity to markets and in dollar denominated securities and make make it attractive for people in other countries to do their business in our currency you can use that history to ask and I think understand better what challenges China will have to surmount in order to make its currency true international currency the history shows that we in the United States move from a point where the dollar was not used internationally at all in before World War one for world ro1 in 1914 to where the dollar was already the leading global currency in 1924 we did it in ten years the history suggests to me if the Chinese pursued the same goal single-mindedly they can do the same hmm one of the things that we learned in this global financial crisis is about the international role of the dollar which has sort of been hidden from the discussion of the dollar inside you know inside the US and everyone is shocked shocked shocked okay that the Fed was lending to European banks whereas if they had read your book or had some knowledge of history that would not have been shocked at all and so it shows that that'll put the level of knowledge about the institution's the basic facts that have been true as you say since 1924 even okay is our scarce on the ground and could be a useful input into policy debates so how can I disagree I would only add I do think we were fortunate to have it at the helm of the Federal Reserve scholar Ben Bernanke who did know that history and did did understand along with his colleagues that the dollar played a global role and that when Lehman Brothers failed the Fed had to inject liquidity not only into US financial markets but had to provide a hundred and twenty billion dollars of loans for foreign central banks I think that was important for stabilizing the global economy it it caused the Fed to come under under a lot of criticism from people who didn't know the history as you say or understand fully what the stakes were mm-hmm well we wish you very good luck in your project to widen that's the the range of people who do to do understand that and teach it and and bring this into our culture and bring and widen the conversation and meanwhile thank you for a very stimulating conversation and welcome to the stable of inet economists

Channel: New Economic Thinking

Views: 8,474

Rating: 4.9428573 out of 5

Keywords: Barry Eichengreen, INET, economic history, Berkeley

Id: 8uBQ1bV8nXc

Length: 10min 4sec (604 seconds)

Published: Mon Jul 11 2011