Reply To: QUESTION: FEAR as a sort of multiplier


Economic theory concerns the logic structure of human action. It seeks to find the universal, causal laws of human action. The law of demand, for example, states that at a lower price for a good, the quantity demanded would have been at least as large as it actually was at the actual price at which the good was traded.

Economic history adds to economic-theoretical knowledge, knowledge of contingent features of human action. Economic-theoretical knowledge is necessarily true while contingent knowledge is true in some cases but not in others. Fear is the latter. Sometimes human action is driven by fear, sometimes it is not. Some people are paralyzed by uncertainty, others thrive on it. Blending theoretical and contingent knowledge together into a full explanation of human action is economic history.

An excellent example of economic history is Bob Higg’s insight about regime uncertainty in explaining the length of the Great Depression.