The Financial Historian
The collision of economics and the past is not as boring as you might think
In my own research at the moment, I’m neck deep in evolutionary biology and cultural and economic theory. Depending on your perspective this might sound ridiculously boring, somewhat intriguing, or exceedingly interesting. Thankfully, I’m in the latter camp, otherwise this work would be challenging at the least and dreadful at best.
In my quest for answers about how institutions evolve over time — remember, I am a historian, so my beat is the longue durée — I stumbled across a YouTube channel called the Financial Historian. I can’t see exactly who is behind it, but after watching several videos and knowing the content they relay, I think it’s a pretty good site. These are clearly written and narrated historical tidbits that explain complex phenomena such as the history of how our economy and capitalist system works.
The videos provide historical context for some of our most perplexing and frustrating issues we face today. Take this one about the concept of “Creative Destruction” coined by the economist Joseph Schumpeter more than 80 years ago.
Whether you are a fan of capitalism or not, you live in a world that is defined by it, so it behooves you to understand a bit about how it works, and this video accomplishes a sliver of that. Lots of people praise or damn it, but few see (or saw) capitalism as Schumpeter did. It destroys and creates, he argued in his 1942 book Capitalism, Socialism and Democracy. Baked into the system is not equilibrium, like all those professors in your ECON 101 class told you, but rather instability. It’s a blessing and a curse. If you’re wondering why things feel the way they do in the world right now, this 11-minute video is worth your time.
And on that note, fast forward to 2013 and learn about the theory of economic inequality put forth by French economist, Thomas Piketty. The main argument in his book Capital in the Twenty-First Century is outlined in this similarly short video which is also worth your time:
The focus in this video is not capitalism per se, but the historical roots of economic inequality. We’ve all seen that the history of humanity seems to fluctuate between periods of equality and inequality, but which is the norm and why? Piketty showed that data matters when looking at the longer term. The wider the lens, the more clear the story becomes.
This reminds me of Peter Turchin’s book End Times that I’ve mentioned in another post. Over more than two decades his team has been collecting data about different polities throughout time and place, which is reminiscent of Piketty’s approach to economic data collection. Piketty speaks of equality and inequality, whereas Turchin speaks of integration versus disintegration, but they are both on the same track, namely the business of using data in the service of pattern recognition over time. Why does life often feel like a roller coaster with its ups and downs, booms and busts? Both Piketty and Turchin have great theories based in long-term data showing that feeling is not in your imagination — dichotomy is a solid part of what it means to be human.
To see what has happened before, especially if it has happened so much as to become predictable, can help us to more clearly see — and maybe prepare for — what’s coming. Or, at the very least, it can help us understand why the world feels as it does at any given moment by removing the myopia that makes us feel like we’re living in a unique moment, often crippling us in the process.
I found it fascinating on the financial insights Picketty (the role of government bonds in upper class incomes) was able to obtain about upper Georgian England from Victorian Novels of the time.
Check out anything by Rothbard or Von Mises