Sunday, September 3, 2017

I Blame Foner

The author in New York Times  By the Book today was Jesmyn Ward, author of Sing, Unburied, Sing and Salvage the Bones
These are her answers to two of the questions:

What’s the last great book you read?
“The Half Has Never Been Told: Slavery and the Making of America Capitalism,” by Edward E. Baptist. It taught me so much about slavery and how slavery enabled America to become America. Every time I left my house after reading it, I saw the world differently. I saw the legacy of human misery underpinning it all.

What’s the most interesting thing you learned from a book recently?
From “The Half Has Never Been Told”: “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 U.S. population — who in that year toiled in labor camps on slavery’s frontier.”

In other words, the most interesting thing she has learned from a book recently is an inaccurate assessment of the role of slavery in the American economy that was concocted in Ed Baptist’s imagination and presented in one of the worst books by an academic historian that I have ever read.

I blame Eric Foner. Foner is not the only one to blame, but he certainly deserves a large share of the blame. Foner praised the book in The New York Times and did not point out that Baptist was imply making things up. Foner is a famous historian with a long record of impressive scholarship. It is not unreasonable for non-historians to place their faith in his assessments of work in American history. We all count on recognized experts to give us some guidance in areas that are beyond our personal expertise. Foner, however, failed them. He took a shot at economists, repeated Baptist’s misleading historiography, and failed to note the fundamental flaws in the book.

The flaws truly are fundamental. The claim that slavery was the driving force behind American economic development was central to Baptist’s book. I have seen the book cited on this point by numerous people. Yet Baptist did not actually estimate the importance of slavery; he did not even try. He made a up some numbers, added them up and compared them to an actual estimate of GDP. The way he added up the numbers did not make sense. He is clearly unfamiliar with the problem of double counting or the difference between the sales of newly produced goods and the sales of assets. Even if he had looked in a principles of economics textbook to learn the basics of national income accounting, however, it would not have solved the fundamental problem: he was just making up the numbers. Non-historians are likely say to themselves, “These numbers must be okay; it was reviewed by famous historians, like Eric Foner, and they did not say anything.”  Eric Foner, however, does not have that excuse. Nor do other historians who refused to call bullshit on Baptist. Foner owed the readers of the New York Times a critical reading of the book, and he let them down. Personally, I think this unwillingness to call bullshit on other historians, just because you like their conclusions, is a serious threat to the integrity of history.

As for me, as long as people keep citing his book, I will keep pointing out that Baptist is a charlatan.

Friday, September 1, 2017

Economic History to Read, Listen and Watch


Gregory Clark on Rationally Speaking on What Caused the Industrial Revolution? (and the why it is so difficult to answer that question)

Noel Johnson at the Economics Detective on The French Revolution, Property Rights and the Coase Theorem

Alan Taylor on credit booms and crises in economic history

Deirdre McCloskey on How we got rich

Tuesday, August 22, 2017

Business History and the Great Divergence

Luca Zan and Kent Deng “Micro Foundations in the Great Divergence Debate: Opening Up a New Perspective” LSE Department of Economic History Working Paper No. 256 Jan. 2017


Prevailing approaches in historical studies adopt a macro view and place an overwhelming emphasis on the Industrial Revolution as a major discontinuity in Western development. On the contrary, recent research in accounting, management and business history has suggested a different direction. When opting for a micro-level focus, crucial discontinuities in management and accounting in the West can be traced back to the Renaissance Period. The paper thus searches for ‘micro foundations’ in managing and accounting practices to address the on-going debate on the East-West divergence. Despite the obvious problems with source availability, we outline a new research agenda for the debate.

Geoffrey Jones Business History, the Great Divergence and the Great Convergence Harvard Business School Working Paper 18-004


This working paper provides a business history perspective on debates about the Great Divergence, the rise of the income gap between the West and the Rest, and the more recent Great Convergence, which has seen a narrowing of that gap. The literature on the timing and causes of the Great Divergence has focused on macro analysis. This working paper identifies the potential for more engagement at the micro level of business enterprises. While recognizing that the context of institutions, education, and culture plays a role in explanations of wealth and poverty, the paper calls for a closer engagement with the processes of how these factors translated into generating productive firms and entrepreneurs. The challenges of catching up were sufficiently great in the Rest that initially ethnic and religious minorities held significant advantages in raising capital and trust levels, which enabled them to flourish as entrepreneurs. Yet by the interwar years, there is evidence of a more general emergence of modern business enterprise in Asia, Latin America, and Africa. Many governmental policies after 1945 designed to facilitate catch-up ended up crippling such emergent business enterprises without putting effective alternatives in place. The second wave of globalization from the 1980s provided more opportunities for catch-up from the Rest. Firms from emerging markets had the opportunity to access the global networks that replaced large integrated firms. There were also new ways to access knowledge and capital, including through management consultancies and hiring graduates from business schools. The upshot was the rise to global prominence of firms based in the Rest, including Foxcomm, Huawei, HNA, Cemex, and TCS.

Tuesday, August 15, 2017

Steinbaum on Public Choice

Marshall Steinbaum has published a sort of review of NancyMacLean's Democracy in Chains in which describes “the racist origins of Public Choice theory” and suggests that everyone should read Democracy in Chains “despite its rhetorical shortcomings.”

Steinbaum seems to unquestioningly accept MacLean’s claim that Buchanan’s “study of how government officials make decisions became “public choice economics.”” (MacLean xxiii) In making public choice theory and Buchanan's though synonymous, Steinbaum and MacLean strip public choice of all context other than that related to Buchanan. Buchanan, however, was only one of a number of people attempting to apply economic methods (rational choice and models) to the analysis of both politics and political philosophy. Duncan Black’s work was published before Buchanan, and Ken Arrow, William Riker, Vincent Ostrom, Amartya Sen and others were working on this approach in the 1950s and 1960s at the same time as Buchanan. To the best of my knowledge, none of them appear in Democracy in Chains. They are not listed in the index. The point is that there were a lot of people interested in applying the economic approach to politics. Many of them did not have the same normative preferences as Buchanan. It is this broader approach to public choice that you will find in Mueller’s text on the subject. It is even what you will find here at the Library of Economics and Liberty. Public choice is more than James Buchanan.

By the way, this is more of a defense of public choice theory than it is of Buchanan,Virginia, or UVA. The University of Virginia was an avowedly racist and sexist place in the '50s and '60s? UVA was both all white and all male (until the 1970s). To the best of my knowledge neither Buchanan or anyone of his colleagues at the time made any effort to change that. Of course that could be said of most of the men at UVA and a lot of other universities at the time. The liberty they were most concerned with seemed to be the liberty of men like themselves. 

I'll also say that I have no intention of reading the whole book. If you want to say I have no right to criticize it until I have read the whole thing, go ahead. I don’t care. I don’t have enough time to waste on historians that I do not trust. This is particularly true for a subject that I do not regard as my area of expertise. If it is nineteenth or early twentieth century American economic history I can quickly identify inconsistencies and errors, but for other topics I need to have some faith in the historian. For me the bottom line on MacLean’s book is still that there are numerous instances where she did not honestly represent her sources. Misrepresenting your sources is more than a rhetorical shortcoming.

Tuesday, August 8, 2017

Trust Company Failures and Institutional Change in New York, 1875-1925

My paper "Trust Company Failures and Institutional Change in New York, 1875-1925" is now available under First View at Enterprise and Society.

Here are the first two paragraphs

The State of New York created the first trust company in 1822, when
it granted a corporate charter to the Farmers’ Fire Insurance and
Loan Company, later renamed Farmers’ Loan and Trust Company,
and authorized it to act as a trustee. As the name suggests, Farmers
and other early trust companies, like the New York Life Insurance
and Trust Company and the Massachusetts Hospital Life Insurance
Company, also sold insurance, and they provided trusts as an alternative
to insurance. Trust companies later used their trust powers
to facilitate the development of corporate finance by serving as registrars
and transfer agents for corporate securities and as trustees for
corporate mortgages. Trust companies also accepted deposits; by the
middle of the nineteenth century, some of these deposits could be withdrawn
on demand including by check. Thus, by the late nineteenth
century, trust companies in New York occupied a unique position in
the financial system by combining functions associated with banks
with functions associated with trustees.

Between 1875 and 1925, the number of trust companies in New York
State increased from ten to 110, and the total resources of trust companies
increased more rapidly than those of state banks or savings
banks. Trust companies have been characterized as early examples
of “shadow banks,” operating outside the laws and regulations that
applied to commercial banks. However, as with other financial institutions,
New York State trust companies rarely failed. Between 1875
and 1925, the superintendent of banks only intervened eleven times
to deal with troubled trust companies, and in several of these cases
the trust company reopened. Despite this rarity, these failures provide
a path to understanding the overall success of trust companies.
The path leads through institutions: failures played a leading role in
shaping the institutions that governed trust companies. Consequently,
failures shaped the expectations and actions of everyone involved
with trust companies: depositors, shareholders, and executives.

Friday, July 28, 2017

Some recent history and economic history

The latest issue of History Now from the Gilder Lehrman Institute is about the history of the blues and jazz. It has this nice list of links to music.

There has been a lot of discussion recently about state capacity and the evolution of norms. I think it is safe to say many economist historians regard both as essential to understanding long run economic performance.

On state capacity, here is Koyama on Salter on Johnson and Koyama. And here is Koyama on Political Decentralization and Innovation in early modern Europe and The Economist covers the work of Anderson, Johnson and Koyama on poor harvests and violence.

On the evolution of norms:

Pseudoerasmus “Where Do Pro-Social Institutions Come From?” originally published as a blog post but recently published on Evonomics.

Peter Turchin writes that

“Cultural Evolution is a new interdisciplinary field whose intellectual roots go back only to the 1970s (unless, of course, you count Charles Darwin; but in a sense any new development in evolutionary science can be traced to Darwin). In this new field, “culture” is defined as information, which can affect human behavior, that is socially transmitted—through books and manuals, by teaching, or simply by observing and imitation. Cultural variants are information packages that cause people to behave in alternative ways. Cultural Evolution, then, studies how and why frequencies of cultural variants change with time, just as biological evolution focuses on the changing frequencies of genetic variants.”
Of course North placed a great deal of emphasis on the importance of changing beliefs (especially in Structure and Change and later works) but this also reminds me of Veblen, who argued that “institutions are, in substance, prevalent habits of thought with respect to particular relations and to particular functions of the individual and of the community” and that "the evolution of society is substantially a process of mental adaption on the part of individuals under the stress of circumstances which will no longer tolerate habits of thought formed under and conforming to circumstances in the past." He argued that these prevalent habits of thoughts influenced both the objectives that people sought to achieve and the means that they perceived to achieve them. Consequently, their evolution should be the primary concern of economists.

In addition, Jared Rubin and Murat Iyigun have a paper on the Ideological Roots of Institutional Change

BTW there is actually a connection between the first link and the last link in this post.

Monday, July 17, 2017

The Importance of Honesty in Historical Research

I am not now, nor have I ever been a fellow at the Mercatus Institute or any other institute that receives funding from the Koch brothers. I have never received any funding from the Koch brothers. To be honest, I haven’t received much funding from anyone else either. I know several people at Mercatus (Mark Koyama, Noel Johnson, and John Nye), and I have been there a couple of times when the Washington Area Economic History Seminar was held there. I am not a libertarian, I have, in fact, written several blog posts critical of libertarians generally as well as specific people affiliated with Mercatus: Walter Williams, Arnold Kling, Bryan Caplan and Tyler Cowen. Finally, I never met James Buchanan and if I have ever cited him I can’t think of where it would be. I hope this establishes my bona fides as not just another shill for the Koch brothers.

Now that I have gotten that out of the way, I find the arguments that some historians are making in support of Nancy MacLean’s Democracy in Chains mindboggling.

MacLean quoting Cowen: “the weakening of checks and balances would increase the chance of a very good outcome.”

Cowen’s full quote: “While the weakening of checks and balances would increase the chance of a very good outcome, it also would increase the chance of a very bad outcome.”

This is scholarly malpractice. Are there really professors who would accept this from a student? It is indefensible, yet Andy Seal defends it:

Her critics see this as prima facie evidence of a bad faith effort to distort Cowen’s meaning to make him appear to be anti-democratic. I think that’s immediately debatable, however, because by her lights any open-minded contemplation of the possibility of weakening checks and balances is anti-democratic. And that’s what Cowen is doing here: entertaining the possibility that weakening checks and balances could produce a desirable outcome.
Let’s think about it this way. If I said, “While permitting five-year-olds to be employed in manual labor would increase the chance of a very good outcome, it also would increase the chance of a very bad outcome,” what could we conclude? That I was advocating child labor? No, that would be too much. But that I was open to the idea? Yes, that’s a fair reading of the sentence.

He claims that her version of the quote does not show bad faith “because by her lights any open-minded contemplation of the possibility of weakening checks and balances is anti-democratic.” But consider Seals’s example: “While permitting five-year-olds to be employed in manual labor would increase the chance of a very good outcome, it also would increase the chance of a very bad outcome.” Who believes that it would be acceptable to quote him as saying: “permitting five-year-olds to be employed in manual labor would increase the chance of a very good outcome”? What if I told you that it is okay because in my lights any open-minded contemplation of the possibility of child labor is supportive of child labor? Would it be okay then?

This is not a small matter. I can’t just brush this issue aside and look at her broader argument because I can't trust somone who does this. Her claims may very well be correct, but I am not going to be persuaded by her argument because I can’t trust the evidence that she puts forward in favor of them. I don’t care what a historian’s political leanings are, I need to be able to trust that they are honestly representing their sources. 

Friday, July 7, 2017

Internet Videos and Economic History

I frequently post videos related to economic history, usually recordings of presentations at seminars or conferences. For the most part I like being a professor at a liberal arts college, but I must admit I do miss the seminars of a research university. There were economic history and political economy seminars every week at Washington University when I was there. Now I even find it difficult to get to the Washington Area Economic History Seminar, which takes place once a month. Consequently, I really appreciate it when people record and post such presentations.  

There is another kind of economic history video: videos that are meant specifically for instruction. Some of these simply record the lectures that are presented in a regular economic history course. Two of these that are pretty good are Greg Clark’s World Economic History and Martha Olney’s American Economic History.

There is yet another category of videos: videos created which present interpretations of economic history created specifically for the internet. I have looked at two such series recently. Unfortunately both have serious problems of content and style.

One series is the videos associated with the EdX course on the history of capitalism created by Edward Baptist and Louis Hyman the other is a series of short videos presented at
Not surprisingly, the history of capitalism one is bar far the worse. Thanks to these videos anyone with an internet connection can be misinformed by Baptist for free. Take for instance his analysis of the Panic of 1837 in this video. There are so many things wrong with his presentation that I plan to do a later post specifically about the Panic of 1837, but for now just listen to the part that starts about 52 seconds in. He suggests that increases in cotton output caused cotton prices to fall (be early 1836 they were creeping down) and that this made cotton textile producers in England nervous. What? That’s right cotton textile producers were nervous because the costs of production were falling. If you are thinking that makes no sense, you are right. Not only does this story not make sense it is factually incorrect. Cotton prices did not start creeping down in early 1836; they were going up. Prices in New Orleans remained over 14 cents a pound into early 1837. See Gray, Lewis Cecil. "History of Agriculture in the Southern United States to 1860, 2 vols., New York, 1941, Vol. 2 page 1027 or the price data available here at the Center for International Price Research.) Prices plunged after the Panic, but that doesn’t fit Baptist’s story. Baptist wants overproduction of cotton to have caused the Panic.

Like Foghorn Leghorn, Baptist says “Don’t’ talk to me about facts, son. I’ve already made up my mind.” As I mentioned earlier I’ll deal with the rest of this story of the Panic later. In his book Baptist claimed that slaves accounted for 1/5th of the nation’s wealth; in the video on Northern and Southern Capitalism he ups it to 1/3 and adds the phrase “by law,” as if there were a law declaring the percentage of wealth that would be attributed of the value of slaves. In the video on Incentives and Slavery he again claims that enslaved people used the phrase “pushing system.” But the estimates about wealth are unfounded and the phrase pushing system was invented by Ed Baptist, not enslaved people. (Please search for papers by Olmstead and Rhode on the New History of Capitalism.)

The problem with the Learn Liberty videos is more a problem of emphasis. For instance, in the video on the Civil War it states that slavery was the cause of the War but spends 4 of the 5 minutes talking about tariffs and internal improvements. The video on the Great Depression doesn’t talk about the role of the gold standard. It really has too much some people think this and other people think that without any attempt to evaluate what they think, as if all opinions are equally valid.

Of course, the videos of seminar presentations that I like also do not provide all of the documentation of a book or paper, but they are directed at an audience of people that have expertise on the subject. Such an audience will be much more likely to detect obvious bullshit like Baptist’s.

I said that there were problems with both content and style. The problem with the style is that they do not make good use of the visual medium. They are primarily one person talking to a camera. Baptist and Hyman do, however, have a lot of books behind them: I guess they must know what they are talking about. The Learn Liberty videos make some use of visuals, but it is more eye candy to keep your attention than actual information. How some graphs, maps, and tables. If you are going to go the trouble to produce a video about economic history show us a how a spinning wheel and a spinning jenny worked. Show us reaping by hand and a  mechanical reaper. Show us what it is like to pick cotton, and how a cotton gin worked. I’ve never understood how someone can have a real sense of the industrial revolution without seeing some of these things. As they exist now these talking to the camera videos are far inferior to books which provide more illustrations and documentation or good podcasts, which provide interaction between author and interviewer.

Sunday, June 25, 2017

Nebraska, The Good Life

We spent the last week in Kearney, NE visiting family. Kearney is easy to find; it is at the bottom of where the Platte dips south. 

My parents were both from Nebraska. We lived in south central Nebraska until we moved to San Francisco when I was 10. My brother moved back after high school and my parents moved back after my dad retired from the Coast Guard.  I know many people consider Nebraska to be the middle of nowhere, which would make Kearney the middle of the middle of nowhere, but it is actually a great place to visit for anyone interested in American history.

This week Mary and I went to the Stuhr Museum of the Prairie Pioneer in Grand Island. I hadn’t been there since I was a kid. Some things I learned on this trip
1.       The first African American to play football at the University of Nebraska, George Flippin was the son of a former slave who had become a physician. George Flippin also became a physician and founded the first hospital in Stromsburg, NE.

2.       The first “successful” sugar beet processing plant in the U.S. was established in Grand Island in 1889.

3.       Plains Indians used old ledgers to create art. Here is a website with some examples

Here is a video that will give you an idea of how much there is to see at the Stuhr Museum.

If you are in the area you can also go about ten miles south of I 80 to Minden, NE and see Pioneer Village. Here is a video that gives a small sample of the things you can see at Pioneer Village.

If you are traveling through Nebraska either museum is worth the detour. 

If you are interested in the history of the Great Plains they are worth a trip.

P.S. the "Kear" in Kearney is pronounced like "car." 

The Golden Age of Economic History?

At Marginal Revolution Tyler Cowen responded to a reader:

C. inquires:
Why do we live in the golden age of economic history? Was there something identifiable that caused the subfield to grow in esteem? Some new technology that changed the costs of research (not that I can see)? Something else?
Mark Koyama should write a Medium essay on this, but in the meantime here are my thoughts:
1. We now know much, much more about the earlier economic histories of China, India, and some other locales.  The rise of more and better graduate students from the emerging economies, or for that matter from Europe, has been essential here.
2. Some of the turn toward economic history came with the financial crisis, and the search for longer-term parallels, which meant looking back in history, most of all to the Great Depression.
3. Although the advance of cliometrics started a long time ago, we are now finally at intergenerational margins where economic historians are as quantitatively well-equipped as most parts of the applied micro spectrum.
4. The stranger the time period, the more people will have to look to broader stretches of history for understanding.  Yes, this one is an uh-oh.
5. Some applied micro fields have become a little more boring, so that has helped a partial shift of status to economic history.  Public data sets have been exhausted, and a lot of economic history data sets are “weird or idiosyncratic” data sets, which now are “in” and I predict will stay “in” for a long while to come because they offer the possibilities of both new discoveries and moats.
6. An academic trend that hasn’t yet been exploited usually ends up exploited, sooner or later, once the right nudge comes along.
5b, 6b. In chess, the top players are opting for the Giuoco Piano once again.
7. Competing economic models are more “allowed” in the subfield — not everything must be neoclassical — which has opened economic historians to more wide-ranging questions.  Economic history remains a good place to pursue the questions about economics that initially interested many people as undergraduates.
8. Academic attention is more media-driven these days, and good economic history papers usually have a story of some kind, and perhaps also a historical personage, event, or institution of broader interest.

The post prompted a lot of discussion on Twitter. My initial response to the question is

1.       While I often argue that economic history is doing very well, I’m not sure that this is the golden age. There is a lot of great work going on in economic history. Economic historians are doing well at publishing in top journals, and many of the top econ programs have strong fields in economic history. On the other hand, there are still not a lot of economic history jobs in JOE. The problem with a golden age is that it seems to imply that this is as good as it gets. I would still like to see more jobs in economic history, more students studying economic history, and a wider audience for good economic history. I would like for economic history to be more widely regarded as central to the study of economics. At the very least, I would like to see Washington University, where I studied with Doug North and John Nye, have economic history as a field again.

2.       I think there has been an important technological change: the ability to take high quality digital photographs of archival documents. This change has benefited history generally, but economic history has probably benefited most. Archives used to be places where people scribbled notes (with pencils). You were limited by how much time you could afford to spend in the archive and how quickly you could scribble. Now, archives are places where people take pictures, which can at relatively low cost (thanks to software and the ability to offshore transcription) be converted into text or data that you can analyze. Creating useable data sets from primary sources is still difficult and time consuming, but less so than it used to be.

3.       I agree that the increase in the relative importance of empirical work in economics has benefited economic history. Donaldson’s Clark medal suggests a willingness to recognize good empirical work regardless of the time or place it examines.

4.       There is a lot of interest in questions that require us to look at history: long run growth, the productivity slow down, inequality, racism, and financial crises. Of course, these things can and should be analyzed with economic theory as well, but combined with the turn to empirical analysis they present an opportunity for economic history.

5.       There has been an increase in popular interest in economic history, but the work that has received the most attention (New History of Capitalism) has often done more to misinform than to educate. I hope an equivalent of Gresham’s law does not apply to economic history, but it remains to be seen.

Thursday, June 15, 2017

Treasure Island

The New York Times reports on attempts to redevelop my old home. We moved to Treasure Island (T.I.) in 1973, when I was 10, and lived there until 1980. It was a Navy base, but most of it was occupied by housing for the families of enlisted men, mostly Navy, but also Coast Guard and Marines. Officers families lived on Yerba Buena Island. Yerba Buena Island (YBI), while Treasure  built for the Golden Gate Exposition, a fair to celebrate the opening of the Golden Gate and Bay Bridges in 1939. TI was converted to a Navy base during the War. I don't remeber exactly when the base was decomissioned, but I think it was in the early '90s.

some interesting talks and a couple of articles

I’m surprised I had not come across these videos before. They are from a conference at Williams College on Historical Persistence in Comparative Development. This was the lineup for the conference

How Deep are the Roots of Economic Development?; Fertility and Modernity 
Enrico Spolaore, professor of economics at Tufts University and research associate at the National Bureau of Economic Research (NBER).
Forced Coexistence and Economic Development: Evidence from Native American Reservations
Christian Dippel, assistant professor of economics in the Global Economics and Management Group at the UCLA Anderson School of Management
4:30 p.m. Climate and the Slave Trade
James Fenske, associate professor in the Department of Economics and deputy director of the Centre for the Study of African Economies at the University of Oxford
8 p.m. Keynote Address: The Global Spatial Distribution of Population and Economic Activity: Effects of Nature, History, and Agglomeration
David Weil, James and Meryl Tisch Professor of Economics at Brown University and research associate of the NBER
Engineers, Entrepreneurs, and Development in the Americas
William Maloney, lead economist in the World Bank’s Development Economic Research Group, former professor of economics at the University of Illinois, Urbana-Champaign
The Effect of the TseTse Fly on African Development
Marcella Alsan, assistant professor of medicine at the Stanford University School of Medicine, core faculty member at Stanford’s Center for Health Policy/Primary Care and Outcomes Research
Malthusian Dynamics and the Rise of the Poor Megacity
Dietrich Vollrath, associate professor of economics at the University of Houston
 “Unfinished Business”: Historic Complementaries, Political Competition, and Ethnic Violence in Gujarat
Saumitra Jha, associate professor of political economy at the Stanford University Graduate School of Business
The European Origins of Comparative Development
Ross Levine, Willis H. Booth Chair in Banking and Finance at the Haas School of Business at the University of California, Berkeley
Bowling for Fascism: Social Capital and the Rise of the Nazi Party
Nico Voigtländer, assistant professor of economics in the Global Economics and Management group at UCLA Anderson School of Management
The Long-Run Effects of the Scramble for Africa
Stelios Michalopoulous, assistant professor of economics at Brown University, faculty research fellow at the NBER, external research associate of the Centre for Competitive Advantage in the Global Economy at the University of Warwick
Intergenerational Mobility and Institutional Change in 20th Century China
Noam Yuchtman, assistant professor in the Business and Public Policy Group at the Haas School of Business at the University of California, Berkeley and faculty research fellow at the NBER

The videos of the talks can be found here on youtube.

Here is Slave Consumption in the Old South: A Double Edged Sword by Kathleen Hilliard at the American Historian

Erik Hilt’s Economic History, Historical Analysis, and the “New History of Capitalism” in the June Journal of Economic History can be accessed for free until the end of June

Friday, June 9, 2017

Some Recent Economic History


At the Economics Detective Jari Eloranta talks about war in economic history, Nuno Palma talks about money, trade, and economic growth, and Mark Koyama on State Capacity

At Econtalk Christy Ford Chapin talks to Roberts about the economic history of health care in the United States.


At Tim Hyde describes the research of Hornbeck and Keniston on "Creative Destruction: Barriers to Urban Growth and the Great Boston Fire of 1872." June 2017 American Economic Review, 107(6): 1365-98

The most recent Journal of Economic Literature contains a review by Stanley Engerman of Edward Baptist’s The Half Has Never Been Told and Clavin Schermerhorn’s the Business of Slavery and the Rise of Capitalism. Pseudoerasmus noted on Twitter that Engerman is largely repeating what some of us have been saying for more two years now. Unfortunately, it appears that we need to keep repeating it. Too many historians continue to not only turn a blind eye to the shoddy work in Baptist’s book but to actually present it as an exemplar of historical research.


At NEP-HIS Blog Kenneth Pomeranz responds in two parts to the work of Deng and O’Brien on measuring economic performance in Chinese history.

Andrew Batson blogs that "the divergence over the Great divergence is narrowing"; he also provides a link to an April 2017 updated version of Broadberry, Guan and Li “China, Europe and the Great Divergence: A Study in Historical National Accounting, 980-1850

Thursday, June 8, 2017

Private provision of public goods

Maybe I am writing this too early in the morning to see what I am missing here. I really mean that . I feel like I must be missing something. Alex Tabarok argues at Cato Unbound that he has a private solution to the problem of public goods. The setup for his example is that there is a bridge that will cost $800 to build and will provide $100 benefit to each of ten people.

Now consider a dominant assurance contract. An entrepreneur agrees to produce the public good if and only if each of 10 people pay $80. If fewer than 10 people donate, the contract is said to fail and the entrepreneur agrees to give a refund bonus of $5 to each of the donors. Now imagine that potential donor A thinks that potential donor B will not donate. In that case, it makes sense for A to donate, because by doing so he will earn $5 at no cost. Thus any donor who thinks that the contract will fail has an incentive to donate. Doing so earns free money. As a result, it cannot be an equilibrium for more than one person to fail to donate. We have only one more point to consider. What if donor A thinks that every other donor will donate? In this case, A knows that if he donates he won’t get the refund bonus, since the contract will succeed. But he also knows that if he doesn’t donate he won’t get anything, but if does donate he will pay $80 and get a public good which is worth $100 to him, for a net gain of $20. Thus, A always has an incentive to donate. If others do not donate, he earns free money. If others do donate, he gets the value of the public good. Thus donating is a win-win, and the public good problem is solved.

The first part makes sense. If you do not think that others will donate, then it is clear that you should donate and get the refund plus the bonus. My problem is the second part in which he seeks to show that a person always has an incentive to donate by arguing that he also knows that if he doesn’t donate he won’t get anything, but if does donate he will pay $80 and get a public good which is worth $100 to him, for a net gain of $20. Thus, A always has an incentive to donate. Economists generally define a public good as one that is non-rival and non-excludable. Non-rival means that your consumption does not diminish the benefit that I gain from the good. The non-excludable part means that once the public good is provided it is very costly to exclude people for consuming it. Fireworks displays provide a relatively obvious example.  The problem with Tabarrok’s argument is that if it is a public good A can use it even if he does not pay. If he believes enough others will contribute, his choice is between contribute $80 and get $100 benefit (net $20) or pay nothing and get $100 benefit (net $100).  If he does not get to use the bridge because he did not contribute that mean the good is excludable. Thus at least in this example the public good problem appears to be solved by assuming it away.

Thursday, June 1, 2017

McCurry on Slavery's Capitalism

Stephanie McCurry reviews Slavery’s Capitalism in the Times Literary Supplement. She raises interesting questions about the implications of the treatment of capitalism and slavery in the New History of Capitalism. I, however, find myself in pretty much complete disagreement with her about two of the essays.

She declares that

“Baptist's argument about enslaved labour in cotton "labor camps" as bodily torture is completely persuasive. Walter Johnson made a very similar case, also powerfully, in River of Dark Dreams (2012). There is nothing to argue with here. Neo-classical economic historians beg to differ and have taken Baptist to task, insisting that efficiencies were the result of the introduction of superior strains of cotton seed. That technical fight goes on, but it is largely beside the point.”

I can’t figure out what she could possibly mean by “beside the point.” Isn’t the point to create interpretations of the past based upon the available evidence? That is what “the Neo-classical economists” have done and Baptist has not. It has long been known that productivity in cotton production was increasing. Why? Olmstead and Rhode collected a large amount of evidence to try to answer the question. They concluded that slaveholders used violence to coerce maximum effort from slaves and then used innovation in seeds to increase the amount of cotton that could be produced from that maximum effort. McCurry seems to simply buy Baptist’s lie that Olmstead and Rhode, as well as other economists deny the role of violence in the system. I am not going to repeat all the elements of the argument here, but you can read my earlier blog post to see why I believe Baptist’s argument is about as far away from persuasive as an essay can get. The bottom line is that Baptistic history should never in anyway be encouraged. History needs a big sign that says “Do Not Feed the Baptist.”

McCurry also writes that

“Slaves were not compelled by the power of the dollar - that is to say of capital - but by the whip.”

The problem with this statement is that the first part is contradicted by a considerable amount of evidence. There is, of course, plenty of evidence that the second part it true: slaves were motivated by the whip. But there is also a lot of evidence rewards were used as well. I am sure that my saying this will be taken out of context by some people and used to show that economists don’t believe that slaves were tortured, but nothing could be further from the truth. Whipping and other forms of physical assault were obviously widely used. There is, however, plenty of evidence that rewards, including money, were used as well. See, for instance, Kathleen Hilliard’s Master, Slaves and Exchange. If I remember correctly A Slave No More also has an interesting description of an arrangement in which John Washington was hired out to a tobacco factory. His owner got a fixed payment, and Washington got a piece rate for everything that he produced above a specified amount. The point I am trying to make here is that, while we should never downplay the brutality of slavery, it is also a disservice to the history of African American people to deny the diversity of their experiences. Slave states occupied a very large territory with diverse environments. If you include the rest of the Americas the diversity is even greater. Slaves produced a wide array of crops, manufactured a variety of goods, and performed many different services. The one thing they all had in common is that they were not free. Even if they were well treated, continuing in that condition depended on the continuing goodwill of their master (not to mention his continuing good health and economic success).

McCurry finds Baptist persuasive, but when John Majewski asks

“why Republicans opposed the expansion of slavery if the South was as capitalist, modern, diversified, thriving and innovative as the North”

she finds that

The answer he offers is not only unpersuasive; it provides a good basis for the contrary view. The North, Majewski concludes, differed from even the most modern part of the South in one important respect: "the democratization of education and innovation". "Slavery created a political economy antithetical to long-term development", which explained why Northern Republicans fought the expansion of slavery into the territories. Far from securing the kind of material and ideological convergence that is crucial to slavery's capitalism, Majewski's argument, like Shankman's, seems to confirm that slavery could generate enormous profit for Northerners while retaining a distinct political economy that served as a brake on national capitalist development.

Majewski provides considerable evidence that even in areas along the border with very similar geography, slave states invested less in education and produced less innovation. He shows that Republicans were aware of these differences and regarded them negatively.
McCurry does not provide any evidence to contradict this argument. She declares that

the critical issue in 1860 was not that Republicans saw slavery as a problem, but that slaveholding Southerners saw free labour and industrial capitalism as an existential threat. The slaveholders had once called the shots in US politics. But by 1860 the slave South was not the leading edge of anything except pro-slavery nationalism. It seceded and provoked a civil war over the future of the nation and of slavery in it.

But wasn’t it both? If Republicans had not opposed the spread of slavery into new territories, would Southerners have viewed them as a threat to the existence of slavery?

Gavin Wright’s review for remains the most insightful review of Slavery’s Capitalism

Tuesday, May 30, 2017

Quick Take on Bankers and Empire

I just finished reading Peter James Hudson’s Bankers and Empire: How Wall Street Colonized the Caribbean  

Here is John Clegg interviewing Hudson for the Brooklyn Rail.

Here is a New Dawn podcast of Hudson talking to Michael Dawson about the book.

Hudson describes the activities of America’s most important financial firms in the Caribbean during the late nineteenth and early twentieth centuries. I have been looking forward to reading the book because he studies many of the same firms that I have studied in my work on trust companies. (Institutions, Entrepreneurs and American Economic History: How the Farmers Loan and Trust company Shaped the Laws  of Business: 1822-1929; “A Failure of Regulation?: Reinterpreting the Panic of 1907,” Business History Review October 2014; and “Trust Company Failures and Institutional Change in New York, 1875-1925,” Enterprise and Society forthcoming). He is also looking at roughly the same period that I do, but he asks very different questions.

Hudson wants to understand how the actions of these firms in the Caribbean were shaped by the combination of racism and the profit motive.  He writes about racial capitalism, but do not confuse this book book with Baptist and Beckert style New History of Capitalism. They make grand claims and portray their work as the result of intense archival research, but their overblown claims are constructed from a secondary literature that is either misrepresented or concealed, and the archival references are ornamental. Hudson, in contrast, tells a story that is built from the ground up using primary sources. It is a messy story, because that is the story that emerges from the wide array of primary sources that he uses. I thought this quote from the interview with Clegg provided a nice description of my impression of the book:

I think it has helped me to understand that the project of “U.S. imperialism” was contingent, marked by an incomplete hegemony, often notable for its confusion, experimentation, and failure, defined through competing interests, and rarely triumphalist. This is not to say that it didn’t exist—or that its effects in the Caribbean, and elsewhere, were not palpable, bloody, or real. But there was always pushback and, while the U.S. state often served as the intermediary for U.S. capital in the Caribbean, oftentimes government officials tried to be a brake on the activities of banks if they felt they were not in the strategic and economic interests of the state. Before I began this project I don’t think I was aware of the role of law and regulation in mediating the relation between banking and imperialism. More often than not, banking expansion was an attempt to evade, erode, or re-write the federal regulations governing banking activity. 

The bankers in the book both compete and cooperate. They see the potential for profit, but ignorance and prejudice often leave them stumbling around trying to get hold of it. There are profits, but there are also failures. They try to use both U.S. and foreign governments to their advantage, but not always successfully. They see themselves as constrained by the law, while also trying to change the law and take advantage of operating under multiple legal regimes. The book reminded me of the end of E.P. Thompson’s Whigs and Hunters, where he describes sitting in his office, surrounded by piles of papers, trying to figure out what it all meant, because the story he had found did not fit into existing narratives about the role of law.

I’ll admit that the economist in me sometimes wanted a little more about the quantitative significance of the firms’ actions. In addition, although the references to the secondary literature, including business history, are extensive, Hudson does not address more social science oriented history. There has been a lot of recent work on institutions and financial development in history, including Latin America and the Caribbean (especially work by Haber and his students), and I’ll have to give more thought to how Hudson’s story relates to this work.

Those issues aside, however, the book tells an interesting story, and I love Hudson’s commitment to building a stories from the primary sources. Moreover, as someone who has written about the same characters, the stories rang true to me. I have tried to tell very different stories about these firms, but his descriptions of them and the people who ran them sounded like the firms and the people that I found in the sources. 

Friday, May 26, 2017

Loan Sharks

The Exchange, the blog of the Business History Conference, posted a list of new books of interest, and I noticed Loan Sharks: The Birth of Predatory Lending by Charles Geisst, published by the Brookings Institution. I hadn’t heard about the book before, but I was curious since there has been a lot of interesting work on loan sharks in the last decade or so. I was particularly interested to see if he cited my work with Mary Eschelbach Hansen ("The evolution of garnishment and wage assignment law in Illinois." Essays in Economic & Business History 32 (2014): 19-46). I looked Geisst’s book up on Google books and did a quick search. Our paper did not show up in the search.

I assumed he must cite Anne Fleming ("The borrower's tale: a history of poor debtors in Lochner Era New York City." Law and History Review 30, no. 04 (2012): 1053-1098 or "City of Debtors: Law, Loan Sharks, and the Shadow Economy of Urban Poverty, 1900–1970." Enterprise & Society 17, no. 4 (2016): 734-740.)  But she did not show up in the search either.

Michael Easterly ("Your Job is Your Credit: Creating a Market for Loans to Salaried Employees in New York City, 1885-1920." The Journal of Economic History 70, no. 2 (2010): 463-468).

Bruce Carruthers, Timothy Guinnane and Yoonseuk Lee ("Bringing “honest capital” to poor borrowers: The passage of the US Uniform Small Loan Law, 1907–1930." Journal of Interdisciplinary History 42, no. 3 (2012): 393-418).

I couldn’t find any mention of any of them.

I was beginning to think that the search function must not be working, then I searched for Geisst and there were numerous hits.

Perhaps the search in Google books is flawed. I hope that is the case. Maybe it only finds the name of the author. If the search is not flawed, I am puzzled how someone can write a book that does not cite any of the recent research on the topic. I assume from the low price that the book is aimed at something wider than a purely academic audience, but I’m not asking for a detailed historiography, just some references to relevant work.

Monday, May 8, 2017

Two Awards and Two Conferences

Between end of the semester grading and trying to work on the book on the history of bankruptcy that Mary Eschelbach Hansen and I are writing I haven't found much time to blog lately, but here are a few economic history things worth noting. 

Two Awards

Dave Donaldson won the John Bates Clark Medal. Although the prize committee’s statement does not refer to him as an economic historian, it emphasizes important work that he has done on historical topics. Most of his papers are available here at his website. Here is a Q &A with the Wall Street Journal

Naomi Lamoreaux was awarded the Lifetime Achievement Award from the Business History Conference.

Two Conferences

The program for the annual meeting of the Economic and Business History Society.

The program the NBER Summer Institute 2017 Development of the American Economy. Be sure to check back later because only two papers are linked right now,

Now back to the history of bankruptcy.

Sunday, April 30, 2017

Runaway Slave Ads

I am putting up this link to a blogpost from last year because of an article in the Washington Post about Ed Baptist's project to digitize runaway slave ads. The article quotes Baptist and, not surprisingly, does not mention that several people have already done what he claims to be doing.

Fugitive Slave Ads and the Runaway New History of Capitalism

Credit Relationships and Business Bankruptcy during the Great Depression

here is an interesting new paper by my favorite economic historian, Mary Eschelbach Hansen, and her co-author Nicholas Ziebarth.

Hansen, Mary Eschelbach and Nicolas L. Ziebarth. 2017. "Credit Relationships and Business Bankruptcy during the Great Depression." American Economic Journal: Macroeconomics, 9(2): 228-55.


“Credit relationships are sticky. Stickiness makes relationships beneficial to borrowers in times of their own distress but makes them potentially problematic when lenders themselves face hardship. To examine the role of credit relationships during a financial crisis, we exploit a natural experiment in Mississippi during the Great Depression that generated plausibly exogenous differences in financial distress for banks. Using new data drawn from the publications of the credit rating agency Dun & Bradstreet and from original bankruptcy filings, we show that financial distress increased business exit but did not increase the bankruptcy rate. Financial distress caused both banks and trade creditors to recalibrate their collections strategies, which is revealed by changes in the geographical distribution of the creditors of bankrupt businesses.”

Thursday, April 13, 2017

Public Education and the Libertarian Nirvana Fallacy

Art Carden tweeted a link to Arnold Kling’s blogpost What I Believe About Education
This is what Kling believes (in bold)

1. The U.S. leads the world in health care spending per person, but not in health care outcomes. Many people look at that and say that health care costs too much in the U.S., and we should be able to get the same our better outcomes by sending less. Maybe that is correct, maybe not. That is not the point here. But–
2. the U.S. leads the world in K-12 education spending per student, but not in student outcomes. Yet nobody, says that education costs too much and that we should spend less. Except–
3. me. I believe that we spend way too much on K-12 education.
4. We spend as much as we do on education in part because it is a sacred cow. We want to show that we care about children. (Yes, “showing that you care” is also Robin Hanson’s explanation for health care spending.)
5. We also spend as much as we do because of teachers’ unions. They engage in featherbedding, adding all sorts of non-teaching staff to school payrolls (and adding more union members in the process). In Montgomery`County, last time I looked, there was one person on the payroll for every 6 students, but there were more than 25 students per classroom teacher. That is why I do not think that cost disease, as discussed recently by Scott Alexander, is the full story. It’s not just that it’s hard to raise productivity in teaching. It’s that teachers’ unions cut down on productivity by continually getting schools to add non-teaching staff.
6. If I could have my way, the government would get out of the schooling business.
7. If we wish to subsidize education, we should do it through vouchers. Note that this could be done on a progressive basis, with the size of the voucher a declining function of parent’s income.
8. I do not expect educational outcomes to be any better under a voucher system. That is because I believe in the Null Hypothesis, which is that educational interventions do not make a difference.
9. However, a competitive market in education would drive down costs, so that the U.S. would get the same outcomes with much less spending.
A few additional notes:
10. When parents seek out schools with good reputations, they are going after schools where most of the students come from affluent families. The schools themselves do not do much.
11. Even within income-diverse school districts, affluent parents figure out a way to keep their kids from being surrounded by poor children.
12. I have grown increasingly uncomfortable with the leftist ideology preached in government schools.

At the risk of offending Art, and probably some other people, I do not agree with most of what Kling believes. Actually, there isn’t much in it I can find to agree with. Kling’s statement isn’t an argument. It is a creed, with statements like “I believe we spend way too much on K-12 education.”

Even the premise isn’t consistent with the available evidence. These numbers from the OECD show that U.S. does not lead in spending on K-12. As a percentage of public spending the U.S. is right around the OECD average. The results of that spending are more difficult to compare. The usual rankings based on test score comparisons are really not very informative, because many of the differences in scores do not reflect statistically significant differences. The Brown Center Report shows that relatively few countries have scores that are significantly higher those of the U.S. In other words, the United States spending is near the upper end but not at the very top, and the results are at the upper end but not at the top. The story that American public education is outrageously expensive and appallingly ineffective is simply not supported by the evidence.

Moreover, you would only expect spending the most money to get you the best education, or best health care, if you think that spending is the only determinant of educational or health performance. I don’t know anyone who believes this. In addition, evidence of relative cost and performance is only evidence against public education generally if the countries that perform better are ones that do not rely on public education. I don’t know of any evidence to that effect.

There is, on the other hand, more than a little evidence that education matters for both individual earnings and economic growth.Measured outputs of education are associated with economic growth. To the extent that inputs do not improve outcomes they are not associated with economic growth. People with more knowledge about how to produce things produce more things, if producing things is rewarded.
Easterlin, Richard A. "Why isn't the whole world developed?." The Journal of Economic History 41, no. 01 (1981): 1-17.
David Mitch Education and Growth a EH.Net Encyclopedia
Race based differences in educational quality have also contributed to differences in earnings between blacks and whites in the United States. See

Or you can watch Marianne Wanamaker present the research here

Education matters and public education has, at the very least, been consistent with long run economic growth. If recent elections are any indication, public schools do, however, appear to be failing at preaching leftist ideology.

Kling’s creed about getting government out of education is an example of libertarian Nirvana fallacy. The Nirvana fallacy is generally used in economics to refer to a situation in which people compare an imperfect market with a perfect (Nirvana) government solution that has never actually existed. It, however, makes no more sense to compare an imperfect government action to an idealized market outcome that has never actually existed.

Taken to the extreme libertarian Nirvana fallacy produces things like Rothbard’s Power and Market

“Let us, then, examine in a little more detail what a free-market defense system might look like. It is, we must realize, impossible to blueprint the exact institutional conditions of any market in advance, just as it would have been impossible 50 years ago to predict the exact structure of the television industry today. However, we can postulate some of the workings of a freely competitive, marketable system of police and judicial services. Most likely, such services would be sold on an advance subscription basis, with premiums paid regularly and services to be supplied on call. Many competitors would undoubtedly arise, each attempting, by earning a reputation for efficiency and probity, to win a consumer market for its services. Of course, it is possible that in some areas a single agency would outcompete all others, but this does not seem likely when we realize that there is no territorial monopoly and that efficient firms would be able to open branches in other geographical areas. It seems likely, also, that supplies of police and judicial service would be provided by insurance companies, because it would be to their direct advantage to reduce the amount of crime as much as possible.”

This isn’t economics; it is speculative fiction. This is what you are able to do when you free yourself from the onerous constraint of evidence. You can state with certainty that we can get rid of government support for education, law enforcement, or even national defense, which have been associated with long periods of rapid economic growth, becauseyou just know that a better private solution will emerge. By the way, Rothbard does suggest that people underestimate the private provision of law in history but see Edwards and Ogilvie and Ogivlie and Carus argument that people actually underestimate the role of the state in the examples that Rothbard provides.

On a personal note, I have nothing against private schools. My family has used both public and private schools. My wife went to Catholic schools in St. Louis, our youngest son goes to a private school here in Fredericksburg. Our two older children went to public schools in Fredericksburg. I went to a lot of public schools: Longfellow Elementary (Hastings, NE); Holstein Elementary (Holstein, NE); Minden Elementary (Minden, NE); Sherman Elementary, Potrero Hill Junior High, Galileo High School (all in San Francisco); and senior year at Port Angeles High School in Washington. 

Tuesday, April 4, 2017

Some big economic history

Elis, Haber and Horrillo attempt to explain why different patterns of political and economic development since about 1750 appear to be geographically clustered Climate, Geography, and Political and Economic Development 

Thursday, March 30, 2017

two meetings, a list, and review

Business History Conference and the Economic History Society are meeting. Both have programs posted, with links to some abstracts and papers. Naomi Lamoreaux’s paper on Culture and Business History for the opening plenary session at BHC is available.

A List:
Pseudoerasmus has posted a great list of economic history papers and blogposts. The list is a great resource for anyone interested in economic history, which should be everyone. Most of the papers in the U.S. section are ones that I have used in my economic history class. In addition to presenting important arguments, many of the papers are very accessible. You do not need a Ph.D. in economics to read the papers by Wright, Meyer, or Temin.
Pseudoerasmus notes that the list is a work in progress. Some papers I would consider adding

Rousseau, Peter L., and Richard Sylla. "Emerging financial markets and early US growth." Explorations in Economic History 42, no. 1 (2005): 1-26.

Hanes, Christopher, and Paul W. Rhode. "Harvests and financial crises in gold standard America." The Journal of Economic History 73, no. 01 (2013): 201-246

And, even though it is quite old, I still like
Goodrich, Carter. "The revulsion against internal improvements." The Journal of Economic History 10, no. 02 (1950): 145-169.

A Book Review:

EH.Net has a review by Gavin Wright of Slavery’s Capitalism edited by Sven Beckert and Seth Rockman. Here is my take on the book. Thanks to Tom Maloney for bringing the EH.Net review to my attention.