Monday, January 19, 2015

New Books in Business History

From the Exchange

If you are working on a book you might want to think about how to put capitalism in the title.

In his keynote address to the Economic and Business History Society when it met in Baltimore Lou Galambos discussed the success of history of capitalism as a brand.

Saturday, January 17, 2015

New Stuff on the History of Bankruptcy

Mary O’Sullivan “A Fine Failure: Relationship Lending, Moses Taylor, and the Joliet Iron and Steel Company, 1860-1888,” Business History Review (Winter 2014) examines how one industrial failure actually played out under the 1867 Bankruptcy Act. I found particularly interesting the discussion of conflicts over jurisdiction and the attempts of local courts to protect local interests, including employees and local merchants.


M. Susan Murnane, Bankruptcy in an Industrial Society: A History of the Bankruptcy Court for the Northern District of Ohio. (University of Akron Press) provides a detailed study of how bankruptcy courts actually operated over a long period of time. I learned a lot about how referees were selected and how they operated.

Forecasting Recessions

Robert Shiller recently wrote about on the value of economics. I agree with most of what he says, but he also seems to perpetuate a myth about the inability of economists to forecast downturns in the economy.


Shiiler states that “Indeed, economists failed to forecast most of the major crises in the last century, including the severe 1920-21 slump, the 1980-82 back-to-back recessions, and the worst of them all, the Great Depression after the 1929 stock-market crash.”

I am not going to address all of these recessions, but it is relatively easy to look back to 1980. In the New York Times I find this

“the April decline in the composite index was the fourth in the last six months and comes at a time when many private economists are predicting a mild recession during the last half of 1979.” New York Times June 1, 1979 pg. D1.

And this

“Summarizing the latest Data Resources forecast, Miss Mosser said that “the economy will at best slow down and at worst we’ll see a double dip come the first of this year.” New York Times Dec. 2 1980 pg. A1.

Not all economists agreed, but it is certainly not the case that no one saw it coming.

Forecasting recessions with a reasonable degree of accuracy is actually one of the easier things to do in economics. The yield curve, for instance, is an easy to use and pretty reliable tool. If it is upward sloping the chances of a recession in the near future are small. If it flattens out or slopes downward the chances of a recession are pretty good. Anyone paying attention to the yield curve should not have been surprised by our most recent recession.

It is harder to forecast the severity of recession, but Shiller was one of a number of economists that expressed concerns about the underlying strength of the economy in the time leading up to the most recent financial crisis, suggesting that next recession could be severe because of problems in financial markets.  

Monday, January 5, 2015

Economics needs better critics

The Washington Post describes protests at the ASSA.

They suggest that students ask their economics professors

How does climate change factor into our study of economics?
Why is there nothing about Islamic economics in our curriculum?
Should we slow down fast money with a Robin Hood Tax?

The first question is odd because the discussion of market failures, such as degradation of the environment, is a prominent part of mainstream economics. Austrian economists think that mainstream economists talk about almost nothing but market failures. One of the people they targeted was Greg Mankiw. Mankiw is one of the most prominent supporters of increased taxes on negative externalities.

Why are they concerned about Islamic economics but not Catholic social theory? Are they also concerned that natural scientists teach theories based on religious beliefs?

I have no idea what it means to slow down fast money.

I am not what most people would regard as a traditional mainstream economist. I would like to see less attention to formal mathemtical models, and more attention to institutions, to history, and to narrative forms of explanation.  But these people do not appear to have even a basic understanding of economics.

The Benefits of Doing Historical Research

Anthony Grafton and James Grossman in The American Scholar
"The best defense for research, however, is that it’s in the archive where one forms a scholarly self—a self that, when all goes well, is intolerant of weak arguments and loose citation and all other forms of shoddy craftsmanship; a self that doesn’t accept a thesis without asking what assumptions and evidence it rests on; a self that doesn’t have a lot of patience with simpleminded formulas and knows an observation from an opinion and an opinion from an argument."
In other words, doing history develops skills that all college graduates need.