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Examining Economic History: Industrial Revolution & Financial Market's Role in Fluctuation, Exams of Economics

A field exam from the university of california, berkeley's department of economics, focusing on economic history. It includes questions related to the start date of the industrial revolution, the role of property rights and law in long-distance trade, the analysis of the great depression, and the impact of financial market imperfections and deregulation on the u.s. Economy. Students are required to answer one question from each part of the exam.

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2011/2012

Uploaded on 12/04/2012

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Department of Ecnonomics
University of California
Berkeley, CA 94720-3880
January 2006 Economic History Field Exam
Please answer one question from Part A, one question from Part B, and one question from Part C
(three questions in all). Remember that a premium will be placed on the legibility of
handwriting when your professors grade your answers.
Part A
1. Sociologists who study the British Industrial Revolution typically say that it started in 1840.
Historians of technology like David Landes typically say that it started in 1740. Now Greg Clark
has just published an article in the Journal of Political Economy saying that the key date is 1640.
Why do these groups have such divergent views? Why is it important (or is it important) to adopt
one rather than the other date for the industrial revolution?
2. How, in the course of economic history, has it been possible to have large-scale long-distance
trade without an overarching system of property rights and courts to settle contract disputes?
How can we have trade without law?
Part B
1. The Great Depression of the 1930s is a topic that continues to generate extensive research.
Are there aspects of the analysis of this crucial event where you feel the evidence is relatively
solid? Describe them and explain why you find the evidence convincing. What are the areas
where additional evidence and analysis are most needed? Again, describe how the existing
analysis is lacking and explain the type of additional work that is needed.
2. Friedman and Schwartz’s A Monetary History of the United States has been described as one
of the finest books in economic history and macroeconomics. Yet, almost any scholarly work
can be improved upon. If Friedman and Schwartz were willing to embark upon a major revision,
what aspects of the book would you encourage them to change? Be as specific and substantive
as possible.
Part C
1. Financial market imperfections are often cited as a key factor in short-run fluctuations in the
United States from the late 1800s to today. Do you think this emphasis is appropriate? What is
the evidence that financial market imperfections have been important? Be sure to discuss the
role of financial market imperfections both as an independent source of shocks and as a
propagation mechanism for other disturbances affecting the economy.
2. A recent working paper argues that one important reason for the remarkable stability of the
U.S. economy over the past twenty years is financial innovation and financial deregulation. One
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Department of Ecnonomics University of California Berkeley, CA 94720- January 2006 Economic History Field Exam

Please answer one question from Part A, one question from Part B, and one question from Part C (three questions in all). Remember that a premium will be placed on the legibility of handwriting when your professors grade your answers.

Part A

  1. Sociologists who study the British Industrial Revolution typically say that it started in 1840. Historians of technology like David Landes typically say that it started in 1740. Now Greg Clark has just published an article in the Journal of Political Economy saying that the key date is 1640. Why do these groups have such divergent views? Why is it important (or is it important) to adopt one rather than the other date for the industrial revolution?
  2. How, in the course of economic history, has it been possible to have large-scale long-distance trade without an overarching system of property rights and courts to settle contract disputes? How can we have trade without law?

Part B

  1. The Great Depression of the 1930s is a topic that continues to generate extensive research. Are there aspects of the analysis of this crucial event where you feel the evidence is relatively solid? Describe them and explain why you find the evidence convincing. What are the areas where additional evidence and analysis are most needed? Again, describe how the existing analysis is lacking and explain the type of additional work that is needed.
  2. Friedman and Schwartz’s A Monetary History of the United States has been described as one of the finest books in economic history and macroeconomics. Yet, almost any scholarly work can be improved upon. If Friedman and Schwartz were willing to embark upon a major revision, what aspects of the book would you encourage them to change? Be as specific and substantive as possible.

Part C

  1. Financial market imperfections are often cited as a key factor in short-run fluctuations in the United States from the late 1800s to today. Do you think this emphasis is appropriate? What is the evidence that financial market imperfections have been important? Be sure to discuss the role of financial market imperfections both as an independent source of shocks and as a propagation mechanism for other disturbances affecting the economy.
  2. A recent working paper argues that one important reason for the remarkable stability of the U.S. economy over the past twenty years is financial innovation and financial deregulation. One

piece of evidence that the paper cites in support of this view is that a simple regression of consumption growth on the growth of disposable income yields a much smaller coefficient on income growth over the sample period is 1985-2004 than over the sample period 1965-1984. The paper suggests that the reason for this change is that households are now better able to borrow to smooth out income fluctuations, and that this has made the economy less responsive to shocks. (a) Can you think of alternative explanations of these findings? That is, are there other possible reasons for the lower coefficient in the more recent sample period than better functioning financial markets (or reasons that a smaller responsiveness of the consumption to income might not make the economy more stable)? (b) Propose one or two additional ways of testing the hypothesis that financial changes have contributed to the recent stability of the U.S. economy.