Friday, May 20, 2011

Economics and the Historian

Followers of the BHC, which as an organization embraces scholars in both history and economics departments (as well as those in business schools, public policy venues, and many others), may find  interesting a post and follow-up discussion by David Bernstein, a law professor at George Mason University, over at the Legal History Blog. In the original post, titled "How Historians Can Benefit from Economics," Bernstein wrote,
. . . 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. . . . 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 . . .  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.
The follow-up post responds to comments and takes up the issue of "company towns" more specifically.