The Past Speaks

Prof. Simon Ville has published an interesting op-ed on why economic history needs to be taught. The opinion piece appears the World Economic Forum website.

Michael Pettis, economic theorist, Wall Street veteran, merchant banker, equities trader and entrepreneur, exclaimed:

“Economic history should be at the heart of economics instruction.”

Just rhetoric? Written in the wake of the crisis, Carmen Reinhart and Kenneth Rogoff’s ironically titled This Time Is Different saw common patterns across hundreds of financial crises of many nations over nearly a millennium. How did so many well-paid bankers and public officials miss what was happening?

I am, of course, sympathetic to what Prof. Ville is saying here. However, I thought that it was odd that such a distinguished economic historian would make very bold predictions of the sort that appear in his piece. He writes:

Casting forwards, Australia has set foot in the Asian century, when Asian nations, especially China, will dominate development. Given the geographic closeness and trade complementarity, yet cultural and political differences, Australia faces a specific set of challenges in coming decades. If the recent past resonates with resilience, the near future speaks of potential frailties.

One of the things I’ve learned from studying business history is that we need to be very tentative in extrapolating recent trends into the future and in making predictions. Business and economic history are littered with examples of predictions that didn’t work out. Remember the late 1980s, when people were talking about Japan overtaking the United States?

Ok. I guess I need to get to marking my students’ reviews of Lant Pritchett and Lawrence H. Summers, Asiaphoria meets regression to the mean. No. w20573. National Bureau of Economic Research, 2014.