Economic history is the study of economic development over time and looks at how economic theories and methods of analysis have evolved. Economic history encompasses the history of labor, business history, and historical events. The changes in an economy reflect the state the country is in, as well as surrounding countries. Studying the history of economics demonstrates how certain historical events made a significant impact to an economy and an economy’s development. Furthermore studies in economic history allow for retroactive analyses. Economic history looks at historical events and through an economic perspective and asks questions such as what was the average level of income at that time, how much were production costs, and how much output was being produced. Adam Smith is a prominent name in economic history because he set the groundwork for what is studied in economics today¹. Economic historical analysis shows us what works in increasing productivity and quality of life and which actions and implementations deter this.
Economic history is made up of economic theories that are still studied today or remain in the past. Theories are constructs consisting of ideas or assertions about a particular topic or abstract. Economic theories therefore consist of ideas or assertions about the economy that are based on real life events or features in an economic system². The major components of economic theory are capital, investments, wage, and production. By studying economic theory, one can see the effect policy has on behaviour and therefore productivity. Through the development of economic theory, we know what variables are important to measure and the most effective ways of improving an economy. Methods of economic analysis have also formed and developed over time, paralleling the progression of economic thought. Economic theory branches off into different areas of economic thought, such as Keynesian economics, Marxist’s political economics, and Neoclassical economics².
1. Douglass C. North (1965). "The State of Economic History," American Economic Review, 55(1/2), pp. 86-91.
2. Charles P. Kindleberger (1990), Historical Economics: Art or Science?, University of California Press, Berkeley