[jmherbener]

Economic history requires the economist to make judgments whereas applied economics does not, it is a theoretical exercise.

Take the recent housing boom and bust to illustrate the difference.

Economic history requires the economist to make a judgment about the importance of the different causal factors in producing the event. Which was more important, the credit expansion or Fannie Mae and Freddie Mac propping up MBS or various government regulations on mortgage issuers and so on.

Applied economics tries to isolate the effect of each cause, given the other circumstances of the event. Given the circumstances of the American economy in 2000, what would be the effect of a credit expansion.