Hi Dr. Herbener, after watching the first lecture, I’m having some trouble understanding the distinction between the fields of economic history and applied economics.
You say that economic history is a blend of theory with specific knowledge of human action. The history adds to the knowledge of economic theory. Later you state that applied economics is economic theory tailored to a particular case with its particular circumstances.
When we discuss historical instances, aren’t we examining history with economic theory? In your example with the law of demand and the computer industry, aren’t we applying the economics of the law of demand to the particular case of the computer industry, choosing relevant facts that help explain it? Or is the difference that economic history is like empirical evidence backing up our particular theory, while applied economics is applying the theory to a particular case?
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.
Thanks, those examples help me see the difference more clearly. Just to be absolutely sure, would books such as Thomas Woods’s Meltdown and Murray Rothbard’s America’s Great Depression be examples of both economic history and applied economics then? Since they both use judgment to pick causes that led to certain events, and also analyze those causes using economic theory to show what effects they each have?