History is the study of events. Economics is the study of patterns. Economics can be defined in a many diverse ways. It’s the study of how people use resources and respond to incentives, the study of scarcity, or the study of decision-making. Economics is a wide-ranging discipline that aids us comprehend historical trends, interpret existing world economic situation, and make predictions about the approaching years. Economic history seeks to try to understand historical events by appealing to our knowledge of economic processes.
A chief reason for studying economic history is that it enriches our understanding of contemporary economic thought. An appreciation of how modern economic theory and policy evolved – partly in response to the policy interests and theoretical problems of our predecessors and partly as a consequence of the internal evolutionary dynamics of economic theory itself – is essential to a full and rich understanding of the subject.
Learning or studying economic history is basically moving from the known to the unknown. Many years back life in Europe focused on agriculture and followed barter system to exchange it. The industrial revolution was a cultural and economic shift from a cottage industry, traditional agricultural, manual labour to a system of factory-based manufacturing that included complex machinery.
Industrial revolution began in Britain where series of inventions increase the production of manufactured goods. In 1804 Richard developed the first working steam power locomotive.
Another change occurred in the production of iron. During the early 18th century, a new method of smelting iron by using coke was introduced.
Industrial revolution is very important event of economic history because it is responsible for everything that works today. How we acquire portable water, process food, make modern clothing, gadgets, etc. These all are the results of industrial revolution.
During industrial revolution cities expanded rapidly and new cities emerged near factories. Economic history helps us to understand various effect of new policies i.e. how they affect any economy.
Thus, industrial revolution is important to know because its one of the major reason for why our world functions today the way it does.
TRADE IN ECONOMIC HISTORY
One of the most important components in the economy of any and every country is trade. Trade at all stages of development of a country has held a key position, when we talk about the importance of economic history trade there has been few incidents that are worth looking at.
THE RECIPROCAL ACT OF 1934
President Franklin D. Roosevelt signed the reciprocal tariff act into law in 1934 RTAA gave the president power to negotiate, bilateral reciprocal trade agreements with other countries. At that stage of time the domestic political situation in the United States of America determined the level of tariffs, the republican controlled congress would impose higher while a democrat controlled would prefer lower tariffs. The Reciprocal tariff act enabled the United States to avail reduction in with international partners while lowering their own tariffs. It approved the tariffs with simple majority as opposed to the prerequisite of two-third majority, also giving the president the authority to negotiate terms and it would take supermajority to repeal a tariff rate once imposed. RESULTS
• Global market was liberalised
• World trade was liberalised
• System of bilateral trade agreement was popularised
• Beginning of elimination of the beggar-thy-neighbor policy
It is an economic policy through which one country attempts to remedy its economic problems by means which worsen the economic problems of other countries, indicating the start of trade cooperation
THE COLLATERAL OF TODAY
Today Donald John Trump wants to bring back the reciprocal factor because of the effects of the North American Free Trade Agreement (NAFTA) according to which Mexico-Canada-United States of America entered into a pact where bilateral tariffs were eliminated progressively and quantitative restrictions with the exception of few agriculture products for Mexico. There has been no concrete steps taken yet for the implementation of the idea but there has been talk and there are other countries which trump claims charge higher tariffs against their fair rates and states that he is in favour of free but fair trade The goal of trump being reducing the trade deficit – This is one of the policies that being a concrete part of the history has inspired a change for an existing situation of an economy. This is one of the major reasons to study economic history because incidents of the past can Facilitate actions of today and help in better understanding.
American Economic Association
Journal of Economic and Social Policy (Volume 6)
Content- Ammy, Sakshi, Geetansh
Video- Steffin, Naveen, Meenal