Teaching U.S. history can be daunting. I remember wondering at the end of some high school class periods whether my history students had understood or even attended to a word I had said. I felt at times that I might as well have been telling them fairy tales.

But despite my doubts about my own effectiveness, I never doubted the importance of U.S. history as a school subject. An American is not well educated unless he or she has developed some knowledge of the country's past, knowledge that can help to impart a sense of national identity among our country's diverse citizens. For all its importance, however, young people tend to regard U.S. history as remote and uninteresting, and few of them gain new insight from their coursework.

What to do? Staff our classrooms with clones of Mr. Kotter? Wait for legislators to drive the student-teacher ratio down to one-to-one? Because we can't all impart a knack for stand-up comedy, or hold out for utopia, I have taken an interest in a different possibility. It has to do with using economics in the teaching of U.S. history. Not economics as a long list of concepts embalmed in huge textbooks written for use in Econ 101 and 102. Instead, I suggest, history teachers try a new strategy by drawing upon a particular approach to inquiry as practiced by economists. Call it the economic way of thinking. It involves formulating "mysteries" and reasoning about them by means of a small set of powerful principles from economics.

Applying the Economic Way of Thinking to History
Here is an example of how the economic way of thinking might be used to help students gain fresh insights into a commonly taught topic in U.S. history—the American Revolution.

At first glance the Revolution seems to have been inevitable. A series of British initiatives—the Sugar Act in 1764, the Stamp Act in 1765, the Tea Act in 1773—touched off confrontations with England. But someone studying the events through the lens of economic analysis might wonder at the colonists' decision to rebel. At the onset of the Revolutionary War, nobody knew how things would turn out. The colonists could easily have been defeated and lost their independence several times before their victory in 1783.

Indeed, as the colonists looked toward the last quarter of the eighteenth century, they might have given serious thought to at least three powerful reasons not to fight: they were safe, prosperous, and free.

The Mystery
These three considerations raise a serious question. Economists assume that people strive to act in their own best interest. But how could this generalization apply in the case of the American colonists? As they approached 1776, the colonists were well off in nearly every way. They were protected by the English armed forces, which included protection of their shipping routes by the Royal Navy. They were prosperous, thanks to a built-in market for their goods in Britain. And, due to their remoteness and knack for self-government, the colonists enjoyed a measure of political freedom envied by others throughout the Western world. Under these favorable circumstances, why would the colonists—English citizens themselves—fight a revolution against Great Britain, one of the world's most powerful nations and, in many respects, the wellspring of their freedom and prosperity?

The Guide to Economic Reasoning
Having posed the mystery, how might we go about solving it? Scholars generally investigate problems from particular points of view, based on the assumptions and research techniques of their disciplines. Historians try to describe and explain events by establishing accurate, well-elaborated chronologies, while geographers emphasize the importance of place. Our economic approach involves applying one or more of six economic principles that we refer to as the Guide to Economic Reasoning. Let's see how these principles might cast new light on our mystery: Why did the American colonists choose to fight the Revolutionary War?

1. People choose.
This principle may seem to state the obvious, but it emphasizes two meanings that are not so obvious. First, economists claim that people manage their lives by making choices, even though they sometimes prefer to believe that they do not. Second, economists claim that, in making choices, people act rationally, seeking to obtain the best possible combination of costs and benefits available to them under the circumstances. Using economic reasoning, we hypothesize that American colonists approached the Revolution by making choices. They were not acting out of necessity or blindly, without regard for consequences. They decided that fighting the Revolution offered the best combination of benefits and costs they could attain.

2. People's choices involve costs.
Decisions come with costs. Always. The costs are obvious enough in the case of decisions to buy goods or services, but economists prefer to stress the importance of opportunity cost. Of all the possibilities, the opportunity cost is the second-best alternative, the alternative or set of alternatives someone would have chosen next.

Questions of cost loom large in decisions to fight wars. As colonial subjects, the colonists enjoyed several benefits, which they risked losing by choosing to fight. First, they risked losing a guaranteed market for the goods they produced. For example, England's restrictive trade policies embodied in the Navigation Acts provided that ships built in New England would be sold directly to buyers in Britain. Colonial ship builders thus enjoyed favored status against international competition. Second, England provided the colonists with direct subsidies for certain products. Bounties, for example, were paid to colonial producers of indigo and forest products including tar, pitch, and lumber. And third, the colonists received valuable military protection from British naval and land forces, paid for largely by taxpayers in Britain.

In thinking about costs, therefore, colonists on the eve of war might well have seen a big opportunity cost in losing British customers, losing income, and losing protection provided under the umbrella of the British Empire. Yet, at some point, the colonists decided that the benefits of fighting would outweigh the costs.

3. People respond to incentives in predictable ways.
Incentives are rewards that prompt people to make decisions and take action. Beginning in 1763, Britain imposed many new taxes and regulations and set about enforcing them more strictly. The new policies and enforcement procedures threatened to raise prices and reduce income among the colonists; they also marked a change in the climate of freedom to which the colonists had become accustomed. Almost every colonist thus felt a grievance: "debtors objected to the Currency Act; shippers and merchants to the Sugar Act; pioneers to the Quebec Act; politicians, printers, and gamblers to the Stamp Act; retailers and smugglers to the Tea Act.¹" The losses that the new acts implied—in material well being and autonomy—created an incentive for the colonists to fight. A successful revolution would enable them to secure rights and benefits to which they felt entitled.

4. People create economic systems that influence individual decisions.
Economic behavior occurs in a climate of rules, formal and informal. The "rules of the game" act as incentives and influence the choices people make in particular cases. For example, if a city government places a heavy tax on the width of buildings, tall, narrow buildings soon begin popping up.

How might the "rules of the game" have influenced the behavior of the colonists? Mercantilism refers to the idea that colonials have an obligation to assist the mother country in gaining wealth. For American colonists in the 1760s, this meant providing Britain with the raw materials it desired, and buying goods produced in Britain.

The Navigation Acts were originally enacted to enforce mercantilist policy by protecting British and colonial trade from competition. The acts insured that all imports from Europe were to be shipped through British ports, and that certain commodities called "enumerated goods" (including tobacco, sugar, cotton and naval stores) could be exported only to Britain. Until 1763, the number of enumerated products had grown slowly over time, and the acts were loosely enforced. The colonists would have bought most of their manufactured goods from Britain even without the Navigation Acts. But tighter enforcement of these acts changed everything. New restrictions meant that the colonists would pay higher prices for imports from outside the Empire, and for goods that could now only be purchased from Britain. And American exporters could anticipate paying higher prices to ship their products.

Then the British changed the rules again. The Townshend Acts (1767) placed new taxes on English manufactured goods entering America, including tea, glass, paper, and pigments for paint. The tax on tea was particularly offensive to the colonists, representing Britain's power to tax the colonies even though the colonies were not represented in Parliament. Moreover, the tea tax allowed the East India Company to ship tea directly to the colonies, cutting American merchants out of the trade. It looked like a bad precedent.

On top of that, in 1774, Britain passed the Quebec Act, which greatly enlarged the size of Quebec, and reduced western land areas available for settlement by American colonists. For many Americans, land ownership represented an opportunity for economic success in the future. As Britain took steps to prevent colonists from settling in lands to the West, the colonists feared that these lands would be sold instead to wealthy British subjects.

Taken together, these changes in the rules of the game created new incentives, shaping the decisions of individuals who eventually came to support the Revolutionary War.

5. People gain when they trade voluntarily.
Voluntarily here refers to lack of coercion. "Your money or your life!" does not describe an instance of voluntary trade. Purchasing a movie ticket, filling a car with gas, buying a stock—all involve voluntary trade in which people exchange something they value less for something they value more.

Colonial producers and shippers saw Britain's tightening of mercantile policy as an obstacle to voluntary trade, which it was. While British middle-men distributed tobacco and rice, for example, the colonists could buy manufactured goods only through Britain. Such restrictions increased the cost of doing business and reduced the standard of living on both sides of the Atlantic, enhancing the sense of grievance and the drive for self-governance among the colonists.

6. People's choices have consequences that lie in the future.
Despite messages from advertisers and self-help gurus urging us to "live for today," many people work hard at living for tomorrow, striving to make decisions today that will benefit them in the future. For example, people tend to care for the cars they own better than they care for cars they rent (in the history of the world, one economist has quipped, nobody ever washed a rented car), because maintenance bills and resale values are affected by the quality of care they provide.

From 1763 to 1775, the American colonists had to make decisions about which path would leave them better off in the future. Should they stay or should they go? Under British rule, the colonists faced what seemed to be diminishing prospects for continued growth in prosperity. Before 1763, they had been for the most part self-governing and free to pursue their own economic interests. After 1763, changing rules of the game threatened this freedom in matters of trade, taxation, and land ownership.

The Mystery Revisited
As British subjects accustomed to lives of safety, prosperity, and freedom under colonial rule, the New England colonists might seem to have acted irrationally in committing themselves to a highly risky revolution. They chose revolution nonetheless, seeking to secure prosperity and self-governance in their own time and for the future. The prospect of securing those benefits eventually outweighed everything else.

¹ Walton, G.M., and H. Rockoff. 2002. History of the American Economy (9th Ed.). Mason, Ohio: Thomson South-Western.