Modeling for Economic Historians

Lecture by Professor Oliver Volckart, London School of Economics.

Abstract

The paper discusses how non-mathematical models can be employed in economic history and how elements of New Institutional Economics (NIE) can be used in this context.

Its argument starts out from the insight that events and developments in economic history cannot be explained in the nomological-deductive fashion common in economics.

As NIE, being a branch of micro-economics, aims at formulating explanations of this type, economic historians who employ elements of institutionalist theory face an obvious problem: Their hypotheses can always be criticised on the grounds that they are based on inadmissible premises. The paper argues that this problem can be solved by constructing models.

A model being no more than an experiment of thought, within it premises of the kind used in NIE  are admissible. The model can then be used to clarify what causal factors determine developments in its context, and to generate testable hypotheses about similar factors that may have played a role in actual history.