New History of Capitalism meets the History of Economic Thought

Jonathan Levy has a paper forthcoming in Business History Review, “Capital as Process and the History of Capitalism.” If you have access to the journal it is available on First View. He attempts to develop a definition of capital that is useful for the study of capitalism. I should be grading papers right now so I will make this quick.

Unfortunately, it bears many of the hallmarks of some of the most celebrated work in the new history of capitalism.

1. Misunderstanding basic economics: Here for, for instance, is his description of the problems associated with thinking of capital as a produced means of production

And yet, because it equates capital with a produced physical factor of production, the materialist conception is a highly restrictive definition of capital. For the writing of history, there are chiefly three almost natural consequences of the materialist restriction. First, because of its emphasis on a produced factor of physical production, capital becomes almost synonymous with industrial machinery and equipment. Second, likewise the materialist capital concept abstracts from money—treating monetary and financial dynamics as extrinsic to both capital and the “real economy” in general. Third, for reasons to be explained later, the materialist capital concept is a temporally static concept. Thus, in addition to money it also abstracts from historical time—or at least, in pursuit of analytical clarity, it abstracts from the many eventful historical processes that are extrinsic from the point of view of the physical characteristics of the masses of objects that materialists define as capital.

Reference to a principles of economics textbook would have made clear that capital is not synonymous with industrial machinery and equipment.

2. Use of sources that can at best be described as sloppy. I have been interested in Veblen since I was an undergraduate. Levy seems interested in Veblen as well. When I checked the places where Levy specifically quotes Veblen this is what I found. Levy is in bold  

“At the most abstract level, capital, in this line of thought, is what Thorstein Veblen once called a “pecuniary magnet.”^{11 (Levy page 5)}

^“11 Thorstein B. Veblen, “On the Nature of Capital II: Investment, Intangible Assets, and the

Pecuniary Magnate,” Quarterly Journal of Economics 23, no. 1 (1908): 104–36.”

One might think that Veblen used the phrase “pecuniary magnet” in this paper. He did not. He did use the phrase “pecuniary magnate.” But a magnate is not a magnet. Veblen is referring to people, “captains of industry,” not capital. If Veblen ever referred to capital as a pecuniary magnet it was not in the cited paper.

Oddly enough, Berch Berberoglu made this same mistake earlier this year. Since neither references the other one has to conclude that they made the mistake independently.

“By becoming the exclusive legal owners of capitalized goods, capitalists over time had politically and legally “cornered” the market in immaterial “technological expedients.”⁴²” (Levy page 14)

“⁴² Thorstein B. Veblen, “Fisher’s Capital and Income,” Political Science Quarterly 23, no. 1 (1908): 117.”

Again, one might think that the quoted phrases appear on page 117; they do not. Like “pecuniary magnet” they do not appear anywhere in the paper.

 “Addressing culture, Veblen argued that capital was merely one economic “method of

doing things” in the world among others.⁴⁴” (Levy page 14)

“⁴⁴ Thorstein B. Veblen, “Why Is Economics Not an Evolutionary Science?” Quarterly Journal of Economics 12, no. 4 (1898): 389.”

Levy is at least in the ballpark this time. Veblen uses the phrase “methods of doing things.” He does not, however, use it on page 389. Page 389 is devoted to his critique of the hedonistic conception of man, not an argument that capital was merely one economic method of doing things.

“If capital has no fixed, authentic value, the question becomes, as Veblen put it, “Whose imputation of value is to be accepted?”⁷¹ (Levy page 20)

“⁷¹ Veblen, “Fisher’s Capital and Income,” 120.”

This time Levy almost nailed it. The quote is in the paper, and he only missed the citation by 5 pages; its on page 125.

At what point does putting quotation marks around things that were not a actually said by the person they are attributed to become a problem in historical scholarship.

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 simply 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.

Economic History to Read, Listen and Watch

Read:

Mark Koyama on the rise of religious liberty

Victoria Bateman on Why bigger states are more progressive

Listen:

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

Watch:

Alan Taylor on credit booms and crises in economic history

Deirdre McCloskey on How we got rich