Friday, December 30, 2016

Economic History in 2016

This is my subjective assessment of some of the major developments in economic history in the last year. Most of the papers I cite are from 2016 (or at least the versions I cite are from 2016) A few are from earlier, but you can just think of it as the long 2016. It seemed long. By the way, I intend to do a another post that focuses more on developments in American economic history.

Measuring Long Run Economic Performance
One of the most significant developments in economic history over the last several decades has been the work to improve our estimates of long run economic performance. Responding to challenges presented by Pomeranz’s Great Divergence and obvious weaknesses in Madison’s estimates, a number of economic historians have worked to develop better estimates of economic performance in Europe and Asia over the very long run. Economic historians continue these efforts but also recognize the limitations of what they have done and, possibly, what they can do.
Stephen Broadberry has done much of this work with a number of different co-authors.  For a recent example see Roger  Fouquet and Stephen Broadberry. "Seven centuries of European economic growth and decline." The Journal of Economic Perspectives 29, no. 4 (2015): 227-244.

Deng and O’Brien raise numerous questions about the usefulness of these estimates for Asia.
New estimates of long term economic performance have prompted new attempts to explain differences in long term economic performance. 

State Capacity and Economic Growth
Economic historians have long recognized that the countries that led the way in modern growth, England and Holland, also led the way in the development of state capacity (the ability to tax and borrow to spend on public goods.) But recent work has attempted to establish this relationship more generally and identify the specific mechanisms by which state capacity contributed to economic growth. Recent work has focused on the combination of state capacity and constraints on state action. The problem, of course, isn’t new: it is the fundamental Hobbesian problem, but economic historians are trying to understand how effective solutions evolved.
See the survey paper on state capacity by Noel Johnson and Mark Koyama (available through Noel’s website). The published version of Johnson and Koyama is "States and economic growth: capacity and constraints" Explorations in Economic History.

And this recent Economic Journal paper by Mark Dincecco and Gabriel Katz

Religion and Economic Growth
Related to the work on state capacity, economic historians have shed new light on the relationship between religion and early modern growth. The idea that there might be some connection between economic growth and religion has a long history. This connection was, for instance, central to the stories told by Max Weber and R.H. Tawney.  What is new is that economic historians have gathered evidence and employed techniques that enable them to identify specific mechanisms through which religious beliefs and institutions influenced economic performance.
See, for instance,
Jared Rubin’s forthcoming book
Anderson, Johnson, and Koyama Jewish persecution and weather shocks
This working paper  by Dittmar and Meisenzahl on the religion, politics and public goods in Germany during the Reformation

English Wages and Industrialization
Recent research on wages in England have challenged Robert Allen’s theory of the industrial revolution. Allen’s theory was attractive in its simplicity: relative prices drove the Industrial Revolution in England. People invested in machines because labor was expensive and coal was cheap. Several recent studies have, however, challenged the evidence of high wages in England.
And these great videos of Humphries describing the project.
See also Judy Stephenson’s work on the building trades and her blog post about the papers presented at a workshop on English wages.

You can also look at these blog posts for descriptions of the state of the debate Pseudoerasmus  and Vincent Geloso. By the way, based upon the volume of tweets, blog posts, papers, and working papers I am beginning to believe that Vincent Geloso must actually be the name of a consortium of economic historians.

Note: This post was edited on December 4, 2017 to add a link to he published version of the Johnson and Koyama paper on state capacity.

Thursday, December 22, 2016

My Response to Seth Rockman's Tweetstorm

I prefer blogging to tweeting. Below is my response to Seth Rockman’s tweetstorm. His tweets are in bold.

2. @BAllanHansen Your piece on counterfactuals makes good sense. I also like the one by Dietrich Vollrath

Thank you. I try to make good sense. I also like Vollrath’s post

4. But when the counterfactual is “pretend slavery didn’t happen,” then it gets bumpy.
Which economic historian has put forward this counterfactual? I don’t recall it from Fogel or Olmstead and Rhode. I believe that Robin Blackburn considered a counterfactual in which there was an early abolition of slavery, but he is an historian so I don’t think this is referring to him.

6. It is different from “pretend there were no railroads.” It isn’t merely “academic.”
The debate over railroads was not merely academic. I tried to make that point in my post yesterday. To the extent that Rostow’s theory influenced policy, the debate over whether dumping a lot of funds into some targeted leading sector could drive economic growth mattered. Robert Wright has argued that the current argument over slavery and economic development matters in a similar way: to the extent that you argue that slavery is a necessary, or even useful, means of promoting growth it can provide support for regimes that allow modern slavery to continue.

10. And although economists have known slavery was capitalistic since Fogel, it seems delusional to claim this is mainstream US knowledge

It is one thing to say that it is insufficiently recognized by the public. It is another thing entirely to suggest, as Baptist does, that economists and historians generally accepted that it was not capitalist.
11. Nor clear to me what work economists have done to make this “commonsensical” in American culture and politics... or in Econ 101.
Scholars like Fogel, and Wright have written numerous books, many of them accessible to a general audience. It is in every American Economic History textbook. Maybe economic historians need to take some marketing classes.

14. Especially when the haggling involves (a) pretending slavery didn’t actually happen
Saying something over and over again does not actually make it true.

15. or (b) privileging white testimony in problematic historical sources over black voices in other differently-problematic sources.

Again, who are you talking about? Olmstead and Rhode’s latest paper makes extensive use of slave narratives as well as plantation records. It is easy to find on google scholar. And I am pretty sure that Trevon Logan was not privileging white testimony here.

16. I’d be encouraged if I thought economic historians were also grappling with slavery’s archive by reading Saidiya Hartman, Jennifer Morgan
Good suggestions. At least listen to Jennifer Morgan on Liz Covart’s podcast Ben Franklin’s World. By the way, I would also recommend Kathleen Hilliard.

19. I will gladly read more econ.hist. when econ. historians are really grappling with race, power, & knowledge production—past and present.
You might try the literature on the negative consequences of slavery, beginning with Sokolof and Engerman, and more recently Nathan Nunn and others. You might also look at some of the recent work by Trevon Logan, Lisa Cook, and John Parman. You can find a lot of it at Logan’s website. Let me know if you want more suggestions.

Overall, my response to Professor Rockman’s tweetstorm is the same as my response to much of the work that Baptist et al have done: he continues to think that presenting a false picture of what economic historians have said is a legitimate form of argument. When I criticize Baptist or Beckert or Rockman I try to quote them. Rockman puts quotation marks around “pretend slavery didn’t happen,” but he does not tell me who actually said this.

Wednesday, December 21, 2016

Counterfactuals and the Study of History

This blogpost was prompted by Marc Parry’s Shackles and Dollars article in the Chronicle of Higher Education. Specifically, the idea attributed to Eric Foner that counterfactuals are a waste of time. There was extensive discussion of the issue on Twitter by Pseudoerasmus, Kevin O’Rourke, Leah Boustan, Vincent Geloso and others, which Brad DeLong collected, and a blogpost by Dietrich Vollrath.

What follows is my attempt to provide some background on the use of counterfactuals in historical analysis and my thoughts on the extent to which there is a methodological divide between historians and economists regarding counterfactuals.

For any reader of this blog who is not an economist, historian, philosopher, or science fiction fan, I would describe a counterfactual history as an interpretation of the past that intentionally departs from generally accepted evidence.  The Man in the High Castle, for instance, is a counterfactual. The generally accepted evidence is that Germany and Japan surrendered; they did not win the war.

Historians asking people to think about how things might have been is not new. Consider this example from G.D.H Cole’s Introduction to Economic History, 1750-1950 (first published in 1952):
“After delays caused by the difficulties of internal migration, the displaced villagers and their children provided the chief supply of labor for the new factories, and without this reservoir of dis-employed labor the revolution in industry would perforce have been greatly slowed down.”.
Cole is asking you to imagine what would have happened if there had not been an enclosure movement in England. Such statements about what might have been did not really attract much attention until a group of economic historians started to write about counterfactuals in the late 1950s and early 1960s.

To the best of my knowledge, Meyer and Conrad (1957) were the first  to introduce the explicit use of counterfactuals in economic history, making the argument that statemtns about causality always involved a counterfactual. Counterfactuals do not, however, seem to have attracted much attention until Robert Fogel used a counterfactual to estimate the extent to which economic growth was caused by railroads in the nineteenth century. He asked what would the economyhave looked like if there were no railroads in 1890. He concluded that railroads accounted for a relatively small part of the growth in the nineteenth century.

Fogel’s analysis prompted numerous critical responses. Some of the critical responses from economic historians focused on the details of Fogel’s counterfactual rather than the use of counterfactuals (David 1969). Some traditional historians completely dismissed the use of a counterfactuals. E.P. Thompson referred to it as Geschichtwissenschlopff. E.H. Carr called it a parlor game. David Hacket Fisher included the use of counterfactuals in his book on Historical Fallacies, referring to it as the fallacy of the fictional question. Fritz Redlich called them “figments.”

Albert Fishlow also used a counterfactual, in his analysis of the impact of railroads, but neither attracted as much critical attention as Fogel’s work.  Why did people respond so strongly to Fogel’s work? Part of the response was no doubt due to Fogel himself. He was not just an advocate for new methods, he was evangelist: Throw down your old methods, and follow me, and I will make you scientific historians. But Fogel’s counterfactual also required a much greater leap of the imagination than Fishlow’s. It is much easier to imagine a world without the less than 30,000 miles of track that existed in 1859 than it is to imagine a world in which more than 160,000 miles of track have been removed. Fogel compounded that leap of the imagination by asking you to imagine a world that had adapted to the lack of railroads by expanding roads and canals. Both used counterfactuals, but Fishlow only asked you to get rid of the railroads and look at the roads and canals that were actually there. Fogel is asking you to not just make a big leap of the imagination but a very explicit one. Fishlow’s was not as big or as explicit. It is very easy to slip into the notion of thinking of it as a parlor game, or now a computer game, like Robber Baron.

Fogel’s counterfactual required a large leap of the imagination, but it was not a parlor game. It is important to remember that Fogel’s argument was not just against historians like Kirkland, it was against the economist W. W. Rostow and his stages of growth theory, in which the take-off into self-sustaining growth is driven by a leading sector like railroads. Moreover, the dispute with Rostow mattered. Rostow had the ear of powerful people in the early 1960s, people capable of actually influencing development policy (see Easterly 200 , 31-33).  In order to challenge Rostow, Fogel needed to be able to estimate not just whether railroads mattered, but how much they mattered. Obviously many things were important to explaining economic growth in the United States in the nineteenth century. Fogel needed to be able to say to what extent, taking all those other things into consideration, railroads mattered.

Despite the negative responses to Fogel’s work, Foner’s continued aversion to counterfactuals seems like a bit of history itself. Some historians, such as Richard Evans, continue to oppose their use, but counterfactuals have become pretty mainstream. Gary Kornblith (2003) has used a counterfactual to examine the causes of the Civil War. Peter Coclanis and Stanley Engerman (2013) debate whether slavery would have survived in the absence of a Civil War. Niall Ferguson has edited a book of counterfactuals. Joe Crowley has edited two volumes of What If. Bunzl (2004) provided a guide to the use of counterfactual for readers of the American Historical Review. Rebecca Onion argues that more historians should consider the value of counterfactuals. Foner’s student Sven Beckert writes the following on page 97 of Empire of Cotton.

Even Foner is willing to discuss counterfactuals.

I do think there are differences in the way that economists and historians typically use counterfactuals. First, economists tend to use them like Fogel to answer the question “To what extent did x cause y?” Consequently, economists tend to focus on very precise counterfactuals that are embodied in economic models, which incorporate all the relevant explanatory factors. (See Tim Leunig’s survey of social savings studies for numerous examples.)

Second, historians are more likely to deal with questions where the answer to “What caused y?” is a story about a series of events. Consequently counterfactual tend to be like Kornblith's, describing a series of events beginning with Henry Clay winning the presidential election in 1844, events that he argues were not just possible but plausible and can shed light on the causes of the Civil War. Counterfactuals in this cases are less about the quantitative significance than they are about the role of contingency in history. The actions of one individual or the repercussions of one event can make a big difference in these counterfactuals. Any one individual is pretty much irrelevant in a Fogel style counterfactual.

In the end, although there are differences, I do not think that counterfactuals present a fundamental methodological divide between historians and economists. Not all historians oppose the use of counterfactuals, and some economists (McAfee 1983) seem to think they are silly.

Finally, the statement attributed to Foner was misleading in so far as it suggests that there is fundamental methodological divide between historians and economists over the use of counterfactuals.The statement  was also inaccurate because the economic historians that have challenged Baptist et al have not done so on the basis of counterfactuals. It is instead, Baptist et al who have created interpretations that are not based on actual evidence. One of the primary features of Baptist’s book is that he overtly and covertly makes things up. 

Bunzl, Martin. "Counterfactual history: a user's guide." The American historical review 109, no. 3 (2004): 845-858.
Coclanis, Peter A., and Stanley L. Engerman. "Would Slavery Have Survived Without the Civil War?: Economic Factors in the American South During the Antebellum and Postbellum Eras." Southern Cultures 19, no. 2 (2013): 66-90.
Conrad, Alfred H., and John R. Meyer. "The economics of slavery in the ante bellum South." The Journal of Political Economy (1958): 95-130.
David, Paul. “Transport Innovation and Economic Growth: Professor Fogel on and off the Rails” The Economic History Review, New Series, Vol. 22, No. 3 (Dec., 1969), pp. 506-525.
Easterly, W. The Elusive Quest for Growth (2001).
Fogel, Robert William. "A quantitative approach to the study of railroads in American economic growth: a report of some preliminary findings." Journal of Economic History (1962): 163-197.
Fogel, Robert W. "The new economic history." The Economic History Review 19, no. 3 (1966): 642-656.
Fogel, Robert William. "The specification problem in economic history." The Journal of Economic History 27, no. 03 (1967): 283-308.
Gary J. Kornblith. “Rethinking the Coming of the Civil War: A Counterfactual Exercise.” The Journal of American History, Vol. 90, No. 1 (Jun., 2003), pp. 76-105
McAfee, R. Preston. "American economic growth and the voyage of Columbus." The American Economic Review 73, no. 4 (1983): 735-740.
Meyer, John R., and Alfred H. Conrad. "Economic theory, statistical inference, and economic history." The Journal of Economic History 17.04 (1957): 524-544.

Redlich, Fritz. "New" and Traditional Approaches to Economic History and Their Interdependence.” The Journal of Economic History Vol. 25, No. 4 (Dec., 1965), pp. 480-495.

Tuesday, December 13, 2016

Post-factual history: Seth Rockman edition

Pseudoerasmus sent me a tweet by Seth Rockman.

The message refers to this article on The Other Slavery in the Chronicle of Higher Education and suggests that economic historians will argue that slavery never existed among Native Americans.
The Chronicle article notes that
The Other Slavery: The Uncovered Story of Indian Enslavement in America by Andrés Reséndez “offers a capacious but defensible definition, including peonage; rebels sentenced to servitude; orphans and vagrants bound to service; victims of the mita (a forced labor quota imposed on Indian villages); and ostensibly free wage laborers whose employers never paid them.”

This definition of slavery, which includes a variety of institutions that were used to coerce labor from Native Americans got me to wondering which economic historians Rockman will be the first to try to argue this away. Perhaps he thinks it will be my friend Tim Yeager author of "Encomienda or Slavery? The Spanish Crown's Choice of Labor Organization in Sixteenth-Century Spanish America." The Journal of Economic History 55, no. 04 (1995): 842-859. Wait, that article must be an aberration, economic historians wouldn’t let something like that or Ricardo D. Salvatore’s "Modes of Labor Control in Cattle-Ranching Economies: California, Southern Brazil, and Argentina, 1820-1860." The Journal of Economic History 51, no. 2 (1991): 441-51 into the Journal of Economic History. Maybe Rockman suspects that the firt one to try to argue it away will be Melissa Dell author of "The persistent effects of Peru's mining mita," Econometrica 78, no. 6 (2010): 1863-1903. Yes, Dell seems like a good choice, publishing in Econometrica is about as economist as you can get. Actually, I am a little surprised that Rockman had not at least heard of that paper. It has received a lot of attention. I thought it might be known to even someone who was adamant about preserving his ignorance of the work of economic historians.

Rockman’s own flexibility in interpreting the past can also be seen in his reactions to the recent Chronicle article about slavery and capitalism.

Last week the article highlighted the deficiencies of the economists

Today the Chronicle article was just one of three articles that tried to make slavery tangential to American economic development.

Such abrupt about faces would make my head spin. Moreover, nothing in any of the articles suggested that slavery was “tangential” to American economic development. Questioning claims that slavery was “the driving force” behind economic development or claims that it accounted for half of GDP are not even close to saying that slavery was tangential.

These guys are starting to make me feel like like Michael Palin in this Monty Python skit.

Saturday, December 10, 2016

Capitalism and Slavery Debate is not about differences in methodology

Marc Perry wrote about the ongoing argument over the relationship between slavery and the American economic development that is taking place between some economic historians (economists) and some new historians of capitalism (historians)  Some people, including the author of this essay at the Economist, view the argument as a controversy over differences in methodology between economists and historians. Several of the quotes by historians in Parry’s article seem consistent with this view. 

Personally, I do not view it as an argument about methods between historians and economists. The economists, including myself, who have criticized the work of Baptist and Beckert have focused more on their poor use of historical methods than their poor use economic methods.

There is no universally accepted description of appropriate research methods in history or economics. People within disciplines often argue about the appropriate methodology for the discipline. Nevertheless, I think that most historians would agree that good historical work presents an accurate historiography, so the reader understands the current state of the conversation on the topic, and builds an interpretation of the past based upon an honest and critical interpretation of the sources. Economic historians have criticized Baptist and his supporters for failing to follow these practices, for failing to do good history. I haven't criticized Baptist and his supporters  for not having a formal model or not doing econometric analysis. I have criticized them for misrepresenting what economists and historians have written and said about slavery. I have criticized them for creating interpretations of the past that are based upon made up stories and numbers rather than actual sources.

Misleading historiography.

One of the chief claims of Baptist and his supporters is that they have overturned a long held view of the slave economy of the South as stagnant and pre- or even anti- capitalist. This is one of the central claims of The Half. In Parry’s article, Edward Ayers echoes Baptist’s claim to novelty. “What’s exciting about that approach is the way it renders the slave South as a dynamic, changing society, in contrast to Genovese’s static, anti-capitalist vision, says Edward L. Ayers, a historian and former president of the University of Richmond. "To have that overturned so quickly," he says, "it looks more like the sciences than it does the humanities."” But these claims to have overturned long held views about slavery in the United States are based solely upon a misleading historiography.

It is simply a myth that Genovese’s view of the economics of slavery was held by the majority of economists or historians until Baptist and Beckert cam along. While I think it can safely be said that Genovese’s work on culture, such as Roll, Jordan, Roll remains relevant, his work on the economics of slavery, expressed in the Political Economy of Slavery has long been discounted by both economists and historians. Consider the interpretation of the South presented in an undergraduate text book three decades ago: George Brown Tindall’s America: A Narrative History Volume, 2nd edition (1988). Tindall wrote on page 371 that “More often than not the successful planter was a driving newcomer, bent on maximizing profits. While the profitability of slavery has been a long standing subject of controversy, in recent years, economic historians have reached the conclusion that the slaves on average supplied about a 10 percent return on their cost.” He went on to note that slaves were the most profitable investment available in the South, and that incomes in the South were not only comparable to the wealthiest countries in the World, but that in the newer cotton lands incomes were among the highest in the United States. The view that he presented to undergraduates almost 30 years ago was of a thriving and successful southern economy based on slave labor. There is no indication that he thought this was a controversial interpretation. 
Tindall was not an outlier, the interpretation in his textbook was the standard one among. In 1995, Robert Whaples surveyed a sample of both economists and historians who worked on economic history. He asked them whether they generally agreed, agreed with provisos, or generally disagreed with a series of statements. For the statement “Slavery was a system irrationally kept in existence by plantation owners who failed to perceive or were indifferent to their best economic interests,” ninety-three percent of economists and ninety percent of historians disagreed with the statement. For the statement “The slave system was economically moribund on the eve of the Civil War,” ninety-eight percent of economists and ninety-five percent of historians disagreed.

It is not just the claims about the nature of slavery in the American South that Baptist and his supporters misrepresent. I argued in another blogpost that Baptist’s entire argument against Rhode and Olmstead is about misrepresenting their argument. Beckert also claims an inordinate amount of novelty for his argument about the role of force (“war capitalism”) by choosing not to cite works like Findlay and O’Rourke’s Power and Plenty.

Creating interpretations of the past that are not based on evidence.

The claims about the size of the economic impact of slavery have not been based upon the available evidence. For instance, "The slave economy of the Southern states had ripple effects throughout the economy," Beckert wrote, "not just shaping but dominating it." Or according to Baptist “ All told more than $600 million, or almost half of the economic activity in the United States in 1836, derived directly or indirectly from cotton produced by the million odd slaves― 6 percent of the total US population―who in that year toiled in labor camps on slavery’s frontier.” Beckert makes the claim that slave produced cotton was the driving force based upon its predominant role among exports, and Baptist simply makes up the numbers that he uses to make his “estimate.”

In contrast, economic historians have noted that
1. Cotton was the largest export from the U.S., but exports were only about 9 % of GDP. Similarly, cotton accounted for about 23 % of income in the South, but the South accounted for only 26% of U.S. income. See D. A. Irwin, “The Optimal Tax on Antebellum U.S. Cotton Exports,” Journal of International Economics 60(2003):287) Ultimately, the value of cotton production was equal to about 6% of GDP.

2. The South had lower average incomes than the North; and per capita income was growing more slowly in the South even before the Civil War. See Unequal Gains by Lindert and Williamson Chapter 5. In addition, about twice as many people lived in the Union states.

3. The more important slavery was in a country or state the lower the level of income was in the future. Nathan Nunn “Slavery, Inequality and Economic Development in the Americas: An Examination of the Engerman-Sokoloff Argument (October 2007).

4. Slave states had lower levels of educational attainement and less innovation (measured by patents) than states without slavery. This was true even in the areas that were most like the North in geogrpahy and economic activity. See John Majewski "Why Did Northerners Oppose the Expansion of Slavery? Economic Developemnt and Education in the Limestone South" Chapter 14 in Slavery's Capitalsm.

Foner complains that for the economic historian history “is just a source of numbers, a source of data to throw into their equations." History is not just a source of numbers, but, if you are going to use numbers, shouldn’t they come from history, not the historian’s imagination? The current dispute is not about economic methods versus historical methods; it is about bad history. Because it is about bad history, it is all the more disappointing when historians like Foner, who know better, are willing to stand behind it. After his NYTimes review of Baptist's book I wrote a post titled "et tu Foner?"

Economic historians have criticized Baptist and his supporters because they are doing bad history. By the way, throughout this post I have used the phrase Baptist and his supporters not historians because I do not believe that they represent the discipline of history. There is far too much really good work being done to take the worst work as representative of the discipline. More than a few historians have questioned his historiography, his propensity to make things up, and his use of sources (see for instance this Historically Thinking podcast). After reading Slavery’s Capitalism I am not even convinced that Baptist and his supporters represent people who regard themselves as historians of capitalism.

Caitlin Rosenthal, for instance, said she would like to promote more cooperation between economists and historians (and I thought her paper in Slavery's Capitalism was consistent with this statment). Carlo Cipolla long ago noted that there are differences between economists and historians, but he argued these differences should complement not conflict with each other. Mary and I recently argued in the Journal of Institutional Economics that economists had much to gain by paying more attention to the historian’s craft. Finally, Kevin O’Rourke pointed out on twitter that the economic history department at Oxford has both economists and historians, and they seem to get along just fine.

Note: This post was edited on 11 December 2016 to add point number 4 in the list above and the reference to John Majewski's paper on the Limestone South.

Thursday, December 8, 2016

The New Post-Factual History

The Chronicle of Higher Education has published “Shackles and Dollars,” an article on the forum on slavery and capitalism that was held at Dartmouth. Dough Irwin moderated a discussion between Caitlin Rosenthal, Sven Beckert, Alan Olmstead and Trevon Logan. While reading the article, I realized that I had not really appreciated how revolutionary the work of Edward Baptist and his supporters is.  I had thought that it was just bad history: misleading historiography, misrepresenting the work of others, omitting evidence that is inconsistent with your claim, not providing evidence to support your claim, and simply making up evidence. Yes, it is true that in the past these things were regarded as characteristics of bad historical work, but that is the past. Baptist is on the cutting edge of bringing standards of historical scholarship in to line with a post-factual age. Baptist and his supporters are less interested in changing the questions that historians focus on than they are in changing the methods that historians use to answer questions. It is not the new history of capitalism; it is the new post-factual history.

Eric Foner is onboard. He tells us that the economic historians who point out that Baptist is just making stuff up are “champion nitpickers.” Foner declares that “I’m sure there are good, legitimate criticisms of the handling of economic data. But in some ways I think it’s almost irrelevant to the fundamental thrust of these works." The thrust of Baptist’s book (other than the style in which it is written) are the claim that unlike previous economists and historians he shows that the slave South was a capitalist system, the claim that slave grown cotton was the driving force behind economic growth, and the claim that the increases in cotton production were driven by ever more intense use of torture. The first claim is demonstrably false: The vast majority of economic historians, as well as many other historians, had long regraded slave owners as capitalists driven by profit motives (see this 1995 survey of economic historians conducted by Robert Whaples). Baptist’s only evidence to support the second claim is a series of numbers that he makes up and then proceeds to sum ; he does appear to be able to do at least some basic addition. (See Pseudoerasmus  for an extensive critique of the cotton driven growth argument, as well as pretty much everything else Baptist says; see also my blogpost.)  For the last claim Baptist provides no evidence in support of his argument and omits evidence that is inconsistent with his argument. When people challenge his argument his response is always the same: throw up a straw man and beat it to pieces. But, of course, all this is merely nitpicking. The critical evaluation of evidence is irrelevant to the fundamental thrust of the work.  
The article also notes that “For all the mudslinging, the slavery fight does not break cleanly along disciplinary lines. Historians under attack find support for their ideas in the writing of some economists, like Ronald Findlay and Kevin H. O’Rourke. What the article does not note is that Beckert’s book never mentions that Findlay and O’Rourke had made a similar argument six years earlier. As a matter of fact, Beckert does not cite Power and Plenty at all in his book. That is probably just more nitpicking.

The degree to which Baptist and his supporters seek a post-factual history was brought home to me again when I saw that Seth Rockman had tweeted that “new CHE article highlights economists thinking ahistorically and ahistoriographically.” Read the article and judge for yourself. I will, however, point out that the article notes that “Historians and economists criticize the new slavery scholarship on grounds that go beyond economics.” And it gives the last word to the economist Trevon Logan: “Like many others, Baptist "continues to see the enslaved as a vehicle for his own need to tell us something new, even when it is not," Logan writes. "That, I believe, is the true shame about the historiography of slavery."”

If you are a historian or simply someone interested in history. Read Beckert and Baptist, but also read Rhode and Olmstead, and Logan. Read them all carefully and critically. If you are persuaded by, for instance, Ed Baptist's calculation of the quantitative impact of slavery (page 321-22 of The Half), please tell me what you found persuasive about it.  

Friday, December 2, 2016

Pope Francis and Economics

The latest issue of the Independent Review is devoted to consideration of the relationship between Pope Francis and economics. The Introduction is by Robert Whaples. He is a good economic historian, and I hope that I am being fair to his argument.  That said, I do take issue with at least part of the argument. Specifically, he states that “It is clear that Pope Francis and many in the economics profession do not see eye to eye at a fundamental level.” He then proceeds to argue that Pope Francis’s views are inconsistent with fundamental assumptions of economic theory. To make the point clear he refers to the description of the assumptions about consumer behavior in Pindyck and Rubinfled’s microeconomics text :“[C]onsumers always prefer more of any good to less . . . [and] are never satisfied or satiated; more is always better, even if just a little better. (Pindyck and Rubinfeld 2005, 66)" He points out that this assumption is also known as “nonsatiation.”

Whaples then argues that the assumption of non-satiation gives rise to a fundamental difference between economists and Pope Francis:
“As shown earlier, Pope Francis’s view of the world is that one of these foundational assumptions is assuredly invalid. This simply isn’t how God made people. Christianity holds that God made man in His own image. In many cases, this relationship can make man capable of the rationality that goes into the first two assumptions about consumer choice—that preferences are complete and transitive—but the third assumption is fundamentally flawed, says Francis. More material possessions and greater consumption aren’t always or even generally better. A consumer who never feels satisfied with his material life—who always wants more—is not on the path to God.”

Whaples argument, however, misconstrues both what economists do and what Pope Francis is trying to do. First, notice the difference between what Pindyck and Rubinfled say and what Whaples says. Pindyck and Rubinfeld assume that “[C]onsumers always prefer more of any good to less . . . [and] are never satisfied or satiated.” Whaples suggests that Francis believes that “More material possessions and greater consumption aren’t always or even generally better.” Whaples switched from “goods” to “material possessions” and “consumption.” A “good” in economic is anything that a person derives satisfaction (utility) from. A good does not have to be a material possession or something that is generally described as consumption. Whaples is perpetuating one of the most common misconceptions about economics: the belief that economists think people are only interested in their own material well-being, narrowly conceived. People who believe that economists think this way have suggested that voting for interest is inconsistent with economic theory because your vote will not affect the outcome of an election, and therefore will not affect your material well-being. But voting is just as consistent with economic theory as buying a new car. Economic theory does not say what you will or will not get utility from. You can get utility from buying a car, or voting, or going out to dinner, or praying, or buying a diamond ring, or giving to charity, or even from eating this. The things that give people satisfaction are usually the result of culture, personal history, and individual tendencies.

No matter what your preferences, however, you still face the fundamental problem of choice in the face of scarcity. I tell my students it doesn’t matter whether you are Donald Trump or Mother Teresa you have to make choices about how to allocate the resources you have. By the way, I used the Donald in the example long before the election. Even if you only seek to serve God you have time make choices about how to allocate your limited resources, especially time. Francis himself has to choose between time spent in prayer, time hearing confession, time celebrating Mass, time spent on writing encyclicals, time spent meeting with Bishops, and time spent on his many administrative duties as the head of the church.

If economic theory does not say what people want, what does it do? Economic theory says that if people derive satisfaction from something they are likely to do it more if the cost of doing it decreases and likely to do it less if the cost of doing it increases. What economists get out of their models of consumer behavior is predictions about how people will respond to changes in the constraints (things like income and the costs of goods). In models of rational utility maximizing behavior, people respond in predictable ways to changes in the constraints they face. Do people in the real world maximize behavior? I don’t know. I don’t care? I can’t observe their utility. I can observe changes in constraints, and I can observe changes in behavior, and I can assess the degree to which the changes in behavior are consistent with the predictions of the model. I can’t say whether some person will think that voting is a good, but I can predict if the cost of voting increases they are less likely to do it.

As an economist I take people’s preferences as they are. Personally, I may find attendance at stock car race to be more bad than good, but as an economist it is not my business to tell other people that they should not get utility from it. The fundamental difference between economists and the Pope is that telling people what they should want is an essential part of his job as Pope. The Pope is not taking preferences as given and trying to make predictions about behavior. I stated before that people’s preferences tend to come from culture, personal history, and individual tendencies. The Pope, as well as other religious leaders and many secular leaders, do not take people’s preferences as given. They want to shape those preferences. They try to persuade us that we should get satisfaction from one thing rather than another. They try to persuade us that we will be happier if we consume more prayer and charity rather than more cars and marble counter tops.

Ultimately, economists have no more business complaining about the Pope trying to persuade people that they will gain more satisfaction from consuming prayer, penance, and charity than they do complaining about Apple trying to persuade people that they will gain more satisfaction from a Mac than a PC.