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,

Eric Chaney on Religion and the Rise and Fall of Islamic Science

Anderson on Inquisition and Scholarship

Jared Rubin’s forthcoming book

Anderson, Johnson, and Koyama Jewish persecution and weather shocks

Johnson and Koyama Jewish communities and city growth

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.

See Jane Humphries and Benjamin Schneider

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.

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.

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.

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.

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, 2^nd 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.

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.  

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. 

Economic History Update

Eric Hilt has a new paper on “Economic History, Historical Analysis and the "New History of Capitalism."  He is presenting the paper at the Penn Economic History Forum. The paper reviews eleven books that have figured prominently in the New History of Capitalism. It summarizes many of the complaints that economic historians have made about these works but still makes a plea for increased dialogue between economic historians and historians of capitalism.

The Annual Meeting of the American Economic Association will have a session on Cliometrics in Historical Perspective: In Remembrance of  Robert Fogel and Douglas North (follow the link for abstracts of the papers):

A Cliometric Counterfactual: What If There Had Been Neither Fogel nor North?

Claude Diebolt

France National Centre for Scientific Research and University of Strasbourg

Michael Haupert

University of Wisconsin-La Crosse

What Fogel and North Got (Spectacularly) Right, and What They Got (Modestly) Wrong

Deirdre McCloskey

University of Illinois-Chicago

Douglass North, Cliometrics, and the New Institutional Economics: Continuity or Divergence?

Lee Alston

Indiana University and NBER

Cliometrics and Econometrics

Robert Margo

Boston University and NBER

Here are a couple of links related to Joel Mokyr’s most recent book A Culture of Growth: the Origins of the Modern Economy:

Here is review by Brad De Long

Here is an interview with Mokyr

Recent Capitalism and Slavery Stuff

The Junto has been hosting a weeklong series of posts about Slavery’s Capitalism. I blogged about the book here back in August. Part of the discussion in the comments section at the Junto has considered the use of terms like “essential.”

Speaking of “essential”, yesterday Dartmouth hosted what should have been a very interesting debate “Was Slavery Essential to Capitalism?” Doug Irwin was the moderator. Unfortunately, you had to be at Dartmouth to see it, but I heard from Irwin that the Chronicle of Higher Education planned to cover the debate. The participants were Alan Olmstead, Caitlin Rosenthal, Sven Beckert and Trevon Logan.

Speaking of Trevon Logan, I was re-reading his paper A Time (Not) Apart: A Lesson in Economic History from Cotton Picking Books, which I had assigned to my Economic History  class. For what it’s worth, I highly recommend the paper to economists and historians, as well as to people who aren’t economists or historians.

History of Capitalism at AHA

Here is an interesting session scheduled for the meeting of the American Historical Association. Abstracts of each paper can be seen by clicking on the paper title. I have read the first two papers and like them a lot. The Lamoreaux and Wallis paper applies the North, Wallis and Weingast framework of movement from limited access orders to open access orders to the United states by examining changes at the state level during the antebellum period. If you wish to read the paper, it can be found quite easily by searching google scholar. The Rhode and Olmstead paper is a pretty devastating critique of the sloppy quantitative analysis of some of the most prominent “New Historians of Capitalism,” especially Baptist and Beckert. Similar arguments have been made online by me, Pseudoerasmus, and others, but the Rhode and Olmstead paper is very thorough. I haven’t read the Rosenthal paper, which seeks to provide a definition of capitalism that is consistent with both wage labor and slavery. I am somewhat skeptical that capitalism can be a useful analytical concept. The term carries too much baggage. Nevertheless I look forward to reading her paper at some point in the future.

Perspectives on the New History of Capitalism

AHA Session 321

Sunday, January 8, 2017: 11:00 AM-12:30 PM

Centennial Ballroom B (Hyatt Regency Denver, Third Floor)

Chair:

William Summerhill, University of California, Los Angeles

Papers:

The “New History of Capitalism,” Cotton, and Slavery
Paul W. Rhode, University of Michigan; Alan L. Olmstead, University of California, Davis

States, Not Nation: The Sources of Political and Economic Development in the Early United States
Naomi R. Lamoreaux, Yale University; John J. Wallis, University of Maryland, College Park

Slavery, Capitalism, and Commodification
Caitlin Rosenthal, University of California, Berkeley

Comment:

Eric Rauchway, University of California, Davis

Session Abstract

Research within what scholars have come to call the "New History of Capitalism" has revitalized interest in economic history among historians. This session provides an assessment of this work from diverse perspectives. One paper highlights significant problems in the interpretation of evidence in major studies within the New History of Capitalism that focus on slavery and the cotton economy. A second sheds new light on the critical role played by states in key changes that underpinned political and economic modernization in the antebellum era. And a third paper problematizes the scope of phenomena encompassed by capitalism, as the term is presently employed, in order to craft an operational definition that accommodates both wage labor and slavery in antebellum America. Taken together the papers identify pitfalls in both traditional and new interpretations of antebellum economy and polity, while pointing the way forward for historians who seek to undertake research on the fundamental economic and political issues of the era.

The 1894 Act to reduce taxation

Steven Weisman argues in the Washington Post that most people believe the tax rate they pay is fair, but worry that the rich don’t pay their fair share.  I just wanted to elaborate a bit on the history of the income tax.  Weisman writes about the introduction of an income tax during the Civil War and then states that

“The income tax disappeared when the war ended. But it returned on the eve of World War I, enabling President Woodrow Wilson to raise the marginal income tax rate to 70 percent. Wilson called paying taxes a “glorious privilege” and a way for the businesses profiting from military buildup to give back. Sen. Hiram Johnson of California even attacked “the skin-deep dollar patriotism” of those who favored war but opposed taxes on the wealthy.”

The tax did disappear when the war ended and did return on the eve of World War I, but that was the second time it had returned.  The first time was in the 1890s. I suspect it was an editorial decision to leave this episode out. Weisman has written a book about the history of the income tax and certainly knows about the events of the 1890s. Unlike him, I have no space constraint on my blog so I have room to recount the story of the Wilson-Gorman Act. If anyone wants the references for the information below see chapter seven of my book on the Farmers Loan and Trust Company.  

Generally referred to as the Wilson-Gorman Act, or simply the Wilson Act, the official name of the 1894 income tax legislation was "An act to reduce taxation, to provide revenue for the government, and for other purposes." The tax reduction referred to in the Act was a reduction in tariff rates. To make up for the reduction in tariff revenue, the Act imposed a two percent tax on incomes over $4,000. “The object,” the lawyer James C. Carter later explained, “was to redress in some degree the flagrant inequality by which the great mass of the people were made to furnish nearly all the revenue, and leave the very wealthy classes to furnish very little of it in comparison with their means.” 

In addition to being part of the wealthy classes, executives of trust, banking and insurance companies had additional reasons for opposing the new taxes. In addition to the individual income tax, the Act also imposed a two percent tax on the income of corporations. This tax alone would have raised considerable opposition, but the leaders of these particular financial firms were even more troubled that the Act exempted financial institutions organized on a mutual plan from the tax. They wanted to have the law ruled unconstitutional but, there were two obstacles to challenging the law in court. The first obstacle was that the Supreme Court had already rejected a challenge to the constitutionality of an income tax. The income tax imposed during the Civil War had been challenged and upheld.  The second obstacle was that §3224 of the United States Revised Statutes, declared that “No suit for restraining the assessment or collection of any tax shall be maintained in any court.”  Thus individuals and corporations subject to the tax could not directly oppose the collection of the tax through the courts. Only after they had paid the tax under protest could they mount a legal challenge.

William D. Guthrie, a partner in one of the most prominent legal firms in New York: Seward, Guthrie, Morawetz and Steele, believed that the first obstacle was really no obstacle at all. In his opinion, the previous decisions upholding income taxes were in error and, therefore, the Court was not bound by them. The second obstacle was a little more difficult, but Guthrie thought that there was a way around it as well. He believed that a “suit in equity, with the remedy of injunction, often affords the most prompt and satisfactory relief where property rights are involved.”  But to bring the case within equitable jurisdiction it was necessary to show that “there is no plain, adequate and complete remedy at law.”  An injunction could not be obtained simply by arguing the law was unconstitutional. “Before the aid of a court of equity can be invoked,” he explained, “it must appear that the enforcement of the tax would lead to a multiplicity of suits, or produce irreparable injury, or, where the property is real estate, would throw a cloud upon the title of the complaint, or that there is an element of fraud or breach of trust, or some other ground of equitable jurisdiction.”  He concluded that “if a trust company should be about to voluntarily comply with an unconstitutional tax law, and should decline to accede to the request of a shareholder asking the trustees to pay under protest and to contest the legality of the tax, a suit might be brought against the trustees to restrain them from violating their duty.”  The case would not technically be a case to prevent the collection of the tax but a case to prevent a corporation from violating its duty to its shareholders. Nevertheless, the Court would be forced to rule on the constitutionality of the tax.  Guthrie worked to initiate two cases based upon this plan, one with the Farmers’ Loan and Trust Company and the other with the Continental Trust Company.

The boards of trustees of both companies agreed to adopt a resolution “somewhat to the effect that while there is doubt about the constitutionality of the Act, they are not disposed to hamper the Government in collecting its revenue, and that they will, therefore, set aside from the profits of last year a sufficient amount to pay the income tax and will pay it when it becomes due.” After the announcement, Guthrie made a formal request on behalf of Charles Pollock that the company seek the advice of the courts or pay the tax under protest. Charles Pollock was a citizen of Boston and, since 1892, the owner of ten shares of stock in the Farmers’ Loan and Trust Company. The board of directors refused to comply with Pollock’s request and Guthrie filed a bill in equity on behalf of Pollock and all other similarly situated stockholders seeking to enjoin the Farmers’ Loan and Trust Company from paying the tax. The bill claimed that the tax was unconstitutional, that Farmers’ would violate its duty to its shareholders if it paid the tax voluntarily, and that great injustice would be done if the tax were paid. 

Newspapers throughout the country speculated as to who was ultimately footing the bill for the case: New York businessmen, the trust companies, or simply wealthy New Yorkers such as the Astors.  The speculations were largely correct.  Guthrie’s corporate clients were the ones funding the case. Essentially, the lawyers on both sides of the case were working for the trust companies.

Historians have tended to emphasize the personal income tax and the issue of whether or not it was a direct tax:  Article I, Section 8 of the Constitution requires that “Duties, Excises and Imposts, Shall be Uniform throughout the United States.”  Although the personal income tax has received the most attention, Guthrie and his team placed considerable emphasis on the tax on financial institutions and the issue of uniformity.  In Guthrie’s view, “Congress has no power, at the expense of others owning property of the same character, to foster and aid private trading corporations, such as building and loan associations, savings banks and mutual life, fire, marine, inland, and accident insurance companies or associations, which serve no national purpose or public interest whatsoever and which exist solely for the pecuniary profit of their members.” 

Justice Fuller delivered his opinion on April 8. The Court held the law to be invalid in so far as the tax on income from real estate was held to be a direct tax that was not apportioned among the states and the tax on municipal and state bonds impinged on the power of states to borrow. Fuller went on to observe, however, that many of the central issues of the case had not been settled. Justice Jackson had been absent and the remaining justices had not been able to arrive at a majority opinion on whether the entire income tax was unconstitutional. “Upon each of the other questions argued at the bar,” Justice Fuller noted, “the justices who heard the argument are equally divided, and, therefore, no opinion is expressed.”  Because of the importance of the unanswered questions, both sides asked for a rehearing before the full Court. In the meantime, Guthrie attempted to ready other challenges to the Act. Though he did not proceed with them after the application for a rehearing of the Pollock case was quickly accepted by the Court, and the rehearing was scheduled for May 6,7, and 8.

Counsel on both sides made essentially the same arguments they made at the original hearing. The decision of the Court was announced on May 20. The majority of the Court determined the income tax imposed in the law to be invalid. The vote was five to four with Fuller, Field, Brewer, Gray and Shiras in the majority and Harlan, Brown, Jackson and White dissenting  

The victory of the anti-tax forces in 1895 is generally regarded as a fleeting one. The Sixteenth Amendment (1913) allowed for direct taxes that were not apportioned among the states and Congress soon passed an income tax. But the view that Pollock v. Farmers’ Loan and Trust Co. lost its relevance with the passage of the Sixteenth Amendment arises from a tendency to focus solely on the second hearing of Pollock v. Farmers’ Loan and Trust Co. and the issue of the personal income tax. The opinions in both the first and the second hearing of the case contained other rulings on taxation. In both opinions, the Court ruled that the federal government could not tax the bonds of states and municipalities.

Some feared that the Sixteenth Amendment would overturn the exemption of state and municipal bonds. The wording of the Sixteenth Amendment was quite broad. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without any regard to enumeration.” But it only overturned the portions of the Pollock opinion dealing with income. The exemption of income from state and municipal bonds expressed in Pollock was not explicitly overturned by the Supreme Court until 1988 in South Carolina v Baker.  Even then the Court did not reject Fuller’s logic in the Pollock case. Instead, it declared that the case law regarding intergovernmental relations had evolved.  Justice Brennan explained that “under the intergovernmental tax immunity jurisprudence prevailing at the time, Pollock did not represent a unique immunity limited to income derived from state bonds. Rather, Pollock merely represented one application of the more general rule that neither the Federal nor the State Governments could tax income an individual directly derived from any contract with another government.”  The rule applied to an employee’s income and rental income from a state government as well as interest payments on its bonds. Brennan went on to explain that ruling in Pollock no longer applied because this underlying rule had since been rejected. “The rationale underlying Pollock and the general immunity for government contract income,” he declared, “has been thoroughly repudiated by modern intergovernmental immunity case law.”   

By the way, if you were wondering about the picture, it is photograph of Guthrie's Long Island estate.

Are You For Real

I just received an email asking me to sign a statement by "Economists Concerned About Hilary Clinton's Economic Policies." I'm thinking it must be a joke. At the bottom it states that its mailing address is 725 Fifth Avenue, which is the location of Rump Tower. Surely, it must be a joke.

If someone wanted me to sign a statement by "Human Beings Concerned by Pretty Much Every Word That Comes Out of Trumps Mouth" I would happily sign that.

I can't imagine how someone could listen to Trump and be concerned about Clinton's economic policies. Trump talks about defaulting on the national debt, like he has defaulted on so much of his own debt. Of course he can't do this for a while because he will need to borrow a lot to pay for his ridiculous tax and spending "plan."

I have to admit even if I thought his economic plans made sense, and even if I believed that a man who can't open his mouth without a lie coming out would follow through on them, I would not vote for him.

A man who says he will use torture should not be president.

A man who says he will kill the wives and children of suspected terrorists should not be president.

A man who says that he will discriminate against people based on their religion should not be president.

A man who says he will torture people should not be president.

A man who disrespects POWs and the families of people who gave their lives in service of their country should not be president.

A man who could only take the oath of office by lying should not be president.

These are the actions of an evil man. You con't elect an evil man and still be a good country.

How can you worry about Obamacare, or Clinton's tax policies when there is so much more at stake. Obamacare and higher taxes on the wealthy will not ruin the country. Trump will.

By the way, I did not sign the statement.

What Did Historians A Generation Ago Think About Slavery?

This post is an expanded version of a comment that I submitted over at The Junto in response to Benjamin Park’s review of Matthew Karp’s This Vast Southern Empire. The Introductory paragraph states that “A generation ago it was common for historians to talk about the “regressing” southern states in the decades preceding Civil War,” but that “scholarship from the past couple decades have put that myth to rest. Michael O’Brien demonstrated that southerners were intellectuals who contemplated the most sophisticated issues of modernity. Edward Baptist showed how the slave institution increased in strength as the financial staple in America’s capitalistic order. Walter Johnson and Sven Beckert displayed how slaveholders were at the forefront of an increasingly global economy.”

            My only concern in regard to this very informative and well written review is the introductory paragraph. I think the introduction buys into a false historiography of slavery that some authors, most notably Edward Baptist, have been trying to sell. I don’t believe that it accurately characterizes the state of history a generation ago.

            I suppose we could argue about what constitutes a generation ago, but I happened to have a copy of an undergraduate American History textbook from almost 30 years ago: George Brown Tindall’s America: A Narrative History Volume, 2^nd 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.

            Unlike Tindall, some more recent authors have tried to present a version of the historiography of slavery that has been stripped of a half century of research by economic historians, as well as the fact that much of that research had been incorporated into history texts.

            My comment ended at this point, but I will add some detail about the aspects of research in economic history that have been neglected in some recent work on the history of slavery.

            There are three areas of research that have been largely ignored in a number of recent works on the history of slavery:

1. Research on the economic nature of slavery. Beginning with the work of Conrad and Mayer in the 1950s and extending through the work of Fogel and Engerman in the 1970s and Fogel in the 1990s, economic historians had accumulated a mountain of evidence that slaveholders were profit maximizing capitalists, that they were able to generate increases in productivity over a long period of time, and that they were optimistic about the future of their economic system.  To the extent that recent historians have claimed credit for demonstrating that slavery in the American South was a dynamic capitalist system they are taking credit for something that had already been done.

2. Research on the role of slave produced goods, particularly cotton, in American economic development.  Recently, I noted that several authors in Slavery’s Capitalism rely upon Doug North’s theory of economic growth through interregional trade driven by the South’s specialization in cotton export production. Yet numerous economic historians had compiled evidence that North’s interpretation overestimated the role of interregional trade and underestimated the role of intraregional trade for economic development. The evidence did not support the conclusion that cotton was the driving force behind economic growth. Second, much of the work done on early industrialization has emphasized the role of intraregional trade. Much of early industrialization appears to have been directed at local demand not demand from the South or Europe. See Robert Gallman,"Self-sufficiency in the Cotton Economy of the Antebellum South." Agricultural History 44, no. 1 (1970): 5-23; Lawrence A. Herbst, "Interregional commodity trade from the North to the South and American economic development in the antebellum period." The Journal of Economic History 35, no. 01 (1975): 264-270; Colleen M. Callahan, and William K. Hutchinson. "Antebellum interregional trade in agricultural goods: preliminary results." The Journal of Economic History 40, no. 01 (1980): 25-31; Diane Lindstrom Economic Development in the Philadelphia Region  and, more recently, David Meyer Roots of American Industrialization or see his essay on Industrialization in EH.Net’s Encyclopedia.

            Ignoring the vast scholarship on the subject leads to things like Baptist’s attempt to quantify the relative importance of slave produced cotton, which should be regarded as one of the most embarrassing moments in the history of American history, as he spends two pages making up numbers and then summing them. See here.

3. Research on the negative consequences of slavery for long term economic development. Gavin Wright. "Old south, new south." NY: Basic Books (1986); Stanley Engerman and Kenneth L. Sokoloff. Economic development in the Americas since 1500: endowments and institutions. Cambridge University Press, 2012; Nathan Nunn. "Slavery, inequality, and economic development in the Americas." Institutions and economic performance (2008): 148-80. As Robert Wright has recently argued, the fact that enslavers grew rich does not necessarily imply that slavery enriched the economy as a whole.

While there is a lot of good work being done on the history of slavery, progress will be limited to the extent that new scholars buy this false historiography and fail to address the work done by economic historians over the last half century.

Don't People Read Solow Anymore?

Unlearning Economics had long blog post this morning, reviewing Dani Rodrik’s Economics Rules at Pieria. As one might guess from his name, Unlearning Economics thinks Rodrik is too attached to neoclassical economics and insufficiently supportive of pluralism. I generally, disagree with him. I am an economic historian and an institutional economist, but I am fundamentally a traditional economist. My favorite class to teach is Principles of Microeconomics. I like using very simple models to demonstrate things like the influence of barriers to entry and product differentiation on the performance of firms, or the influence of elasticity on who bears the burden of a tax. I often struggle to see the added value of, for instance, behavioral economics. But what struck me about the post was this passage.

“Though he doesn’t claim so himself, Rodrik’s methodological approach could be considered a more sophisticated restatement of Milton Friedman’s famous paper The Methodology of Positive Economics, which similarly sought to defend economic models from charges of unrealism and irrelevance. While Friedman argued that the unrealism of a theory’s assumptions does not matter as long as the theory makes correct predictions, Rodrik adds nuance to this by stating that while unrealistic assumptions are in general necessary and useful, some assumptions are so important that they must be amended to be more in line with reality. Rodrik calls these ‘critical assumptions’, stating that “an assumption is critical if its modification in an arguably more realistic direction would produce a substantive difference in the conclusion produced by the model.” By doing so he distinguishes his argument from the seeming ‘anything goes’ implications of Friedman’s essay.”

What struck me about the passage was that the author seemed unaware of Robert Solow’s work. I have not read Rodrik’s book yet, but I searched the book on line and was a little surprised that it did not appear to mention Solow either.

This is the introduction of Solow’s 1956 “A Contribution to the Theory of Economic Growth.”

In other words, you have to make simplifying assumptions, but that does not mean that you can assume anything you want. The first footnote is important as well.

 

What is or is not a crucial (or critical) assumption depends on what question you are trying to answer.

More Economic History

The program for the annual Meeting of the Economic History Association is available and has links to many of the papers that will be presented. This morning I read an interesting paper by Geoffrey Fain Williams on the role of the British Joint Stock Banking Acts in the Panic of 1837. 

David Beckworth continues to provide historical perspective on macroeconomic issues at his Macro Musings Podcast. This week he talks to Hugh Rockoff about U.S. monetary history. Previously he has talked to Doug Irwin about trade, Jason Taylor about the Great depression and World War II, and Brad DeLong about Hamiltonian political economy.