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GETTING HISTORY INTO THE EQUATION Why Economics Needs to Lock Back

GETTING HISTORY INTO THE EQUATION Why Economics Needs to Lock Back. Stefan Hedlund Centre for Russian and Eurasian Studies Uppsala University. Things that Matter. History matters Historical economics Historical institutionalism Mainstream economics unimpressed Culture matters

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GETTING HISTORY INTO THE EQUATION Why Economics Needs to Lock Back

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  1. GETTING HISTORY INTO THE EQUATION Why Economics Needs to Lock Back Stefan Hedlund Centre for Russian and Eurasian Studies Uppsala University

  2. Things that Matter • History matters • Historical economics • Historical institutionalism • Mainstream economics unimpressed • Culture matters • Underdevelopment a state of mind? • Deal with specificity, uniqueness • Mainstream economics unimpressed • Institutions matter • Failure of agency, transition • Look for institutions ... without history?

  3. Correlations over Time • Inglehart et al. • Quality of economic performance • Orthodox, Catholic, Protestant traditions • Causality? • LaPorta et al. • Quality of government • Common, civil, socialist law • Causality? • Core problem • Striking correlations, not be be ignored • Looking for explanations • Not all relations are causal relations

  4. (In)visible Hands • Scottish enlightenment • Uncoordinated actions of the many ... • Smith, Hume, Ferguson • Kant, Mandeville ... surprise • What determines choice • Opportunity and self-interest • Value adding or redistributive? • Awareness of ethics (Arrow, Buchanan, North ...) • Limits to agency • Visible hand of the state • Manipulate rules • Fallacy of norms

  5. Neglect of the Market • Neoclassical theory • Forward looking, instrumentally rational • History and culture do not matter • Power of prediction • Transactions, core of the market • Dense cultural environment • Habits, customs, beliefs, values, norms, trust ... • Collapsed into a price • Sociology • Economic man is pure fiction • Motives for action are “embedded” • Polanyi contradicted himself

  6. Deductive Modeling • Queen of social science • Sociology v. economics • Predictive power, Nobel Prizes • Sociology has surrendered the market • Price of success • Economics an ahistoric science • Hirschman: hands tied, not able to decode • Cause of systemic failures • Inductive approach • History the carrier of institutions • If institutions matter ... • Map out role of norms ...

  7. Microfoundations • Marginal revolution • Methodological individualism • Trivially true (Elster) • Capstone of economics (Arrow) • ”Great Experiments” • Systemic change, dislocations • Rules suspended • Beliefs, expectations ... • Methodological holism • Embeddedness • Whole larger than sum of the parts? • Collective memories and norms

  8. Social Capital • Challenge • Opportunity and self-interest • Actions deviate from ”economic man” • Self-interest seeking with guile • Outcomes that are byproducts • Norms as explanation • Origins, functions, changeability • Rooted in past actions, experiences • When is uniqueness relevant? • Deconstruct • Set up experiments • Discriminate between types of norms • Change vs. be changed • Serious agency implications

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