for the sake of argument: the evidence against the new history of capitalism

I was referred to the other day in a conversation on Twitter between Adam Ozimek and Marshall Steinbaum about economic history and the New History of Capitalism (NHC). I don’t know either of them, though I did like Ozimek’s Econ Talk with Russ Roberts. Steinbaum asserted that NHC is really the way to go, that NHC people are not playing fast and loose with evidence, and that “Economic history is constrained by methodological narrow-mindedness and thus circumscribed,” whereas “HoC actually entertains arguments that simply don't get a hearing in Econ, thanks to ideology,” He also claimed that the competence and honesty of econ is in question and that my response to Cowie is just more economist overreaction to “apt criticism.” Ozimek wanted someone to argue with Steinbaum. Twitter isn’t really well suited for argument; a real argument should have at least clear claims and evidence. Moreover, I haven’t seen any indication that the NHC people are interested in real argument.

In the interest of real argument, however, I will try to make clear the evidence behind my claims about NHC. The other day I claimed that “The primary features of the new history of capitalism seem to be hostility toward economics (including economic historians), ignorance or disregard of the work done by economic historians, and a willingness to play fast and loose with numbers.”

Perhaps someone can explain why these examples do not represent a problem with the NHC and then provide specific examples of how methodological narrow-mindedness and ideology are constraining economic historians. Later I’ll try to make the positive case for economic history.

Hostility Toward Economics:

Introduction, Zakim and Kornblith Capitalism Takes Command page 5: “The cliometric habits of economic historians are a case in point, for they consistently flatten the history of market society by “bracketing” whatever proves too difficult to integrate into a quantifiable universe of price series, wage averages, or productivity regressions. Long arcs of development resting on “data” retrofitted into axiomatic categories of growth or stagnation, invariably result in highly cogent patterns of secular change. The revolutionary disruptions essential to “capitalism” reorganization of society―conflicts over the very forms of capital and their legitimacy, or the political negotiation over the boundaries of property rights and contractual obligations, or concern over the effects of competition on the civic life of the polis―are then dismissed as exogenous to the organic logic of exchange, and so irrelevant to a history of the economy. That is why studies in economic history so often reproduce capitalist ideology itself, separating economic activity out from the murky realms of the unmeasureable and assigning it an autonomous operating principle.”

Baptist page 72 of Capitalism takes Command: “the evidence strongly suggests that –left to their own devices –neither economists nor the banking dynasts they often serve have learned the lessons of the past.”

And of course one can refer to Cowie’s essay. None of these claims are backed by specific cases.

Disregarding the Work of Economic Historians:

Baptist claims that economists and historians have accepted the claim that slavery was inefficient. One of his primary claims in Half Has Never is that he shows, contrary to what all these economists believe, that slave owners were profit seekers and slavery was dynamic capitalist system. Thanks to surveys conducted by Bob Whaples  it is demonstrably false that economic historians believed that slavery was an inefficient pre-capitalist system. Baptist can only make the claim by disregarding the mountain of work produced by economic historians, going back to Conrad and Meyer in 1958.

Beckert writes about slavery without referring to Fogel and about the use of force in spreading markets without citing Findlay and O’Rourke.

Hyman on p. 27 of Borrow cites Pete Daniel “Shadow of Slavery” that debt peonage trapped sharecroppers in “grueling oppressive lives” but does not cite the seminal work of Ransom and Sutch on debt peonage.

Playing Fast and Loose With Numbers:

 Julia Ott, When Wall Street Met Main Street, first page of the first chapter: "Severe financial panics in 1873 and 1893 punctuated a prolonged economic depression, as prices, profits, per capita output and productivity growth fell steadily from 1873 to 1896." Not true. If you don’t already know that this isn’t true see measuringworth.com

Louis Hyman page 18 Borrow: The American Way of Debt “Though a national bank was founded in 1791, its first incarnation lasted only forty years as Jacksonian populism triumphed over federalism.” There were two separate banks. You can see the physical evidence of this if you visit Philadelphia.

Here is Edward Baptist’s nonsense exercise in national income accounting:

“here’s a back- of- the –envelope accounting of cotton’s role in the US economy in the era of slavery expansion. In 1836, the total amount of economic activity―the value of all the goods and services produced―in the United States was about $1.5 billion. Of this, the value of the cotton crop itself, total pounds multiplied by average price per pound―$77 million―was about 5 percent of that entire gross domestic product. This percentage might seem small, but after subsistence agriculture, cotton sales were the largest single source of value in the American economy. Even this number, however, barely begins to measure the goods and services directly generated by cotton production. The freight of cotton to Liverpool by sea, insurance and interest paid on commercial credit―all would bring the total to more than $100 million (see Table 4.1).

                Next come the second- order effects that comprised the goods and services necessary to produce cotton. There was the purchase of slaves―perhaps $40 million in 1836 alone, a year that made many memories of long marches forced on stolen people. Then there was the purchase of land, the cost of credit for such purchases, the pork and the corn bought at the river landings, the axes that the slaves used to clear land and the cloth they wore, even the luxury goods and other spending by the slaveholding families. All of that probably added up to about $100 million more.

Third order effects, the hardest to calculate, included the money spent by millworkers and Illinois hog farmers, the wages paid to steamboat workers, and the revenues yielded by investments made with the profits of the merchants, manufacturers, and slave traders who derived some or all of their income either directly or indirectly from the southwestern fields. These third order effects would also include the dollars spent and spent again in communities where cotton related trades made a significant impact another category of these effects is the value of foreign goods imported on credit  sustained the opposite flow of cotton. All these goods and services might have added up to $200 million. Given the short term of most commercial credit in 1836, each dollar “imported” for cotton would be turned over about twice a year: $400 million. 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.”

Again, the biggest problem is not that he does not understand national income accounting (he obviously does not); the biggest problem is that he is just making up numbers.

Both Baptist and Beckert note that cotton was the majority of U.S. exports, but do not note that exports were a small part of the American economy.

Olmstead and Rhode presented extensive analysis of the NHC misuse of quantification in a paper presented at the Cliometric Society session at ASSA. Anyone really interested in the topic should contact them about their working paper on the topic.

In the end, my problem with the new history of capitalism isn’t so much the bad economics as it is the bad history. What makes for good history? There are actually a lot of things that go into making good history, but I think that the most essential is a critical approach to sources, both primary and secondary. History majors at University of Mary Washington take a two course sequence in historical methods. The first course focuses on historiography. The second course focuses on the use of primary sources. The new historians of capitalism need to retake both.

I have no problem with legitimate criticism of economics or economic history. I have been known to criticize them myself. See, for instance, here. And if you think I am some right wing ideologue that hates the NHC people because they criticize capitalism, see here and here for my response to free market economists who misuse history. The difference between my criticism of economics, economic history or NHC and their criticism of economic history is that I point to a specific problem, provide evidence that it exists, and show that the problem has led to erroneous conclusions. The NHC critiques of economics provide no evidence. 

What are the important questions or topics are economic historians are not working on because of ideology or methodological narrowness? Is it slavery and coercion? See Fogel or Fenoaltea. Corruption? See Wallis.  The use of state power? See Findlay and O’Rourke. The importance of ideas? Take a look at Mokyr or McCloskey. Inequaltiy? See Lindert. The development of financial markets and dealing with risk? Where do I even begin? You could claim that economic historian's methods limit the answers they can arrive, but, as  I pointed out earlier, many of the conclusions are the same ones NHC is now taking credit for. 

Finally, I should note that the nature of the NHC claims about economic history make them virtually immune to real argument. After all, how can you believe anything I say when I am obviously just speaking for the banking dynasts that I serve? 

More on Cowie on Economics

There were a couple of other points about Cowie’s critique of economics in the Chronicle that I wanted to address but did not have time for the other day. Cowie claims that

 “smug in their security, economists are the least likely to cite other disciplines. Perhaps the most disturbing thing is the remarkable extent to which graduate training in the field is similar across institutions and departments — a stark contrast to other disciplines. And most of that graduate education is driven by textbooks and textbooks alone. To other social scientists and humanists, that is an astonishing proposition, and evidence of the field’s range of ideas.”

The argument that that economists are the least likely to cite others is from "The Superiority of Economists," in the Journal of Economic Perspectives. Unlike Cowie the authors of this study do note one of its limitations. They do not include books in their analysis, and economics is much more focused on journal articles than most disciplines. Books tend to count very little, if at all, in economics departments at research universities.

Moreover, anyone concerned with the issue should be familiar with the actual numbers. This is the table from the article

The percentage of citations to articles in journals from other disciplines is very low in economics, but it is not high in political science or sociology.

Cowie’s other point about the training of economists also suggests that he does not understand the role of articles in economics. Graduate study, and undergraduate study, in economics tends to be relatively uniform. Even heterodox economists tend to make sure that their students are well grounded in the standard theory and methods, and textbooks play an important role in graduate education. The role of textbooks is, however, primarily limited to the first year. After the first year the focus shifts to journal articles or, if you have a professor who is working on the cutting edge of a topic, the latest working papers (that’s what happened when I took Norm Schofield’s social choice and welfare class). In addition, much of the most important parts of graduate education take place outside of the class room in the seminars and workshops.  Economists do not spend three to five years reading textbooks. They spend most of their time learning how to write papers that can be published in peer reviewed journals.

It also turns out that Cowie’s essay in the Chronicle was pretty much verbatim a speech that he gave last year at a conference on the education of economists. I’m serious. He gave a talk at a conference on educating economists. Here is the video. The video is relevant because he ad libs a few times, and those ad libs turn out to be pretty informative.

One of the ad libs has to do with his reference to Robert Frank’s experiments on the prisoner’s dilemma (about 33 minutes in). Cowie jokes that he would like to have someone explain to him “why this is such a popular way of understanding the world” since he has “never actually been in a prisoner’s dilemma scenario.” Anyone who actually tries to talk to economists and wanted to know why they are interested in this game would know that it is model that illustrates the problem of maintaining cooperation when individuals have an incentive not to cooperate. The problem is pervasive. People often face situations in which they can benefit from cooperation but also have incentive to individually depart from that cooperation on the job. For instance, when employees shirk on the job or employers don’t properly credit them for all of their time or for overtime they are departing from a cooperative outcome. I usually point out  to students that much of modern political theory arises from a prisoner’s dilemma scenario because Hobbes stated

I put for a general inclination of all mankind, a perpetual and restless desire of power after power that ceaseth only in death.

And the cause of this is, is not always that a man hopes for a more intensive delight than he has already attained to; or that he cannot be content with a moderate amount of power; but because he cannot assure the power and means to live well, which he hath at present without the acquisition of more.”

The prisoner’s dilemma is not important because we will all become prisoners or because cooperation always fails. It is important because cooperation is often difficult, but to understand how we overcome the difficulties and maintain cooperation we need to understand the underlying problem. One can disagree about the role of the prisoner’s dilemma in social analysis but to assert that one simply doesn’t understand why it matters reflects a degree of willful ignorance.

Even more telling are Cowie's comments related to Piketty’s work (41 minutes into the video). He recites the long quote from Piketty that he included in the Chronicle essay. He then states that “Piketty is a lousy historian. He doesn’t even get his facts right, oftentimes.”  He points out that one historians review called the history in it abysmal. He goes on, however, to say that “I use the data all the time. I’m hoping the data is clean because I use it blindly and I think it’s very powerful.” What? All the stuff I know about he gets wrong, but I’m going to keep blindly using his numbers because I like what they say. This is precisely the problem that I have with much of the new history of capitalism. Advocates of it tend to throw out old historical standards of source criticism in favor of producing the argument that they want. Perhaps he should focus on the beam in his own eye than the mote in his brothers. 

Scott Reynolds Nelson reviews Jefferson Cowie

Related to yesterday's post, Scott Reynolds Nelson reviews Jefferson Cowie's latest book.

"Cowie shows a mastery of the fierce debates in labor history, political history, women’s history, and political theory. He’s weaker, however, in his discussions of the South, economic issues, and the Gilded Age."

Nelson explains that Cowie

"briefly examines, then dismisses, the international economy by saying that Gilded Age America sat behind a tariff wall. In fact, American tariffs in the 1880s were tiny compared with those of Germany, France, Russia, and the Ottoman Empire.

Cowie’s Gilded Age pits workers against robber barons, who used the labor efficiencies of steam engines and huge factories to play one ethnic group against the other. That’s true enough but also a cliché. The biggest Gilded Age productivity gains were in smaller Northern industries where skilled German immigrants supervised Eastern European semi-skilled, literate, and numerate machine operators. The standard of living in the South, which had neither, fell behind for half a century.

This is not to romanticize the Gilded Age, which saw atrocious death rates in industrial accidents and brutal attacks on strikers. But workers’ standard of living was, by international standards, rising compared with its low point in the 1850s.

Cowie further suggests that a pivotal national election in 1896 allowed workers to be "incorporated" into the Republican Party, thus destroying the Populist coalition. But the critical election was actually 1894, and it followed an international financial crisis for which workers blamed Democrats.

If understanding the American Gilded Age requires seeing the international scene, so does understanding the New Deal. As Eric Hobsbawm, Alfred Chandler, and Thomas Sugrue have separately argued, the New Deal high-wage system succeeded only between 1945 to 1973 when the United States had few international competitors. By 1973, Japanese and German firms had retooled to challenge American monopoly power in world markets, forcing U.S. plant closings, loss of union jobs, and an international redistribution of labor.

Cowie likewise dismisses the international oil shocks of 1973 and 1979 as only contributing to the inflation of the 1970s; America’s war in Vietnam was the primary culprit, he asserts. But the oil shocks and the retooling of Germany and Japan together contributed to the failure of the American steel, auto, chemical, and appliance industries."

It is possible that Jefferson Cowie might not be the best person to turn to for advice about understanding the economy, past or present.

More Silliness from the History of Capitalism Folk

In the chronicle of Higher Education Jefferson Cowie asks “Why Are Economists So Small Minded?”

Sections from the article are in bold.

History is valuable, and, if the education of economists were more of an intellectual endeavor than a pipeline to careers in finance, it could be one intellectual component in a basket of approaches to get students to think more widely. Unfortunately, economic historians tend to be busy reducing history to the application of contemporary models to old data sets. And they don’t like to talk with people in the history department very much.

He quotes approvingly from Piketty:

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.

Hard to imagine why economists wouldn’t want to talk this historian.

Professor Cowie: “Let’s chat about your childish passions, ideological speculation, and petty preoccupations.”

Economist: “Maybe some other time.”

I don’t know what he means by “reducing history to the application of contemporary models to old data sets.” He of course does not provide any specific examples, just generalizations. The economic historians I know of are collecting evidence to create new data sets and developing theories to try to better understand the past.

The criticism that economists are preoccupied with purely theoretical mathematical models is not supported by the evidence. For instance in the latest American Economic Review (Feb 2016) 7 of 9 papers are empirical. It is not some unusual special issue. All the recent John Bates Clark Medalists have won for their empirical work. It is like these critics, like Cowie, picked up their critique of economics from their adviser, who got it from their adviser, with the trail going back to somebody in the 1960s or 1970s.

What really irritated me was the suggestion that economic historians should be more like the historians of capitalism.

In the past several years, there has been a resurgence of interest in the history of capitalism. What once might have been called the study of "political economy" is an emerging intellectual framework combining an array of methods and questions with a return to putting capital at the center of the historical narrative. The hope of those engaged in the history of capitalism is to challenge the clinical modeling of social life. There is not one thing we can call "capitalism," after all, but a contingent historical assemblage of work, investment, production, politics, and trade from the 15th-century spice trade through slave cotton to today’s digital labor.

The new historians of capitalism tend to be more consciously ecumenical in their research and interpretive methods. Their strength is the opposite of mainstream economics. As the historian Louis Hyman has put it:

"When the story calls for linear regression, they use linear regression. When the story calls for the backstory of the commodity, they de-fetishize and figure out the story. When gender is the dominant force in the archive, they use feminist theory. Leveraging the ease of data analysis, the historians of capitalism display a return to numbers that has been lacking in historical scholarship of late. While math is widely used, its models are not lionized. Data does not displace the human element in history, but complements it. It is used to clarify and explain, but not be so complex that it can’t be conveyed to normal humans."

Which historians of capitalism, other than Hyman himself, are using regression analysis? I have read Baptist, Beckert, Mihms, Hyman, Ott and Levy. I don’t recall seeing it there. Maybe, it was and I forgot. If it is there, I look forward to someone reminding me where. 

The primary features of the new history of capitalism seem to be hostility toward economics (including economic historians), ignorance or disregard of the work done by economic historians, and a willingness to play fast and loose with numbers.

It would be nice if they would learn enough about economics not to write about things like "productivity per person." And I can’t count how many times I have seen someone repeat Baptist’s entirely made up number about the share of GDP accounted for by slave produced cotton as if he had actually done something. He is the most egregious example, but he is not alone. There are other examples from other historians of capitalism that I have mentioned in previous blog posts.

I was very optimistic when I first heard about the new history of capitalism. I am the person that it should appeal to. I believe that history should play a larger role in economics and that economists should pay more attention to other disciplines. I did a Masters in Economic History from the LSE before getting a Ph.D. in Economics. While doing those degrees, I took graduate courses in other disciplines: sociology at the LSE and political science at Washington University. Most of my work does not contain fancy math or statistical analysis. If the new historians of capitalism were actually doing what Hyman says they are doing I would still be optimistic, but they are not. They are content to throw out dated critiques of economics, generalization about economist’s motives, and made up numbers about what happened in the past. The new historians of capitalism need to do better. Their audience deserves it.


Note: This post has been edited from its original version, which did not make clear that the second section from the article  was Cowie quoting from Piketty.

Was the Gilded Age a Gilded Age?

 James Livingston argues in the Chronicle of Higher Education that we are not living in a second Gilded Age, primarily because the original Gilded Age wasn’t actually what people think it was.

"First of all, what was the Gilded Age? The term comes from Mark Twain and is generally used to describe the period from about 1870 to about 1900. It is widely regarded as a time when big business came to dominate the American economy and Robber Barons ruled.

 Livingston argues that, in fact, labor ruled and capitalists were the losers:

“In the so-called Gilded Age, real wages increased dramatically but labor productivity didn’t, so capitalists suffered. Extraordinary economic growth happened, no doubt about that then or now, but workers were, as the capitalists complained, the principal beneficiaries. For example, real wages in the nonfarm sector increased roughly 30 percent between 1884 and 1896 (unemployment wasn’t rising), but productivity flatlined. The opposite is true of our time.

Why, then, did workers win the class struggle of the late 19th century? Not because they were represented by trade unions. Only 10 percent of the labor force belonged to such a thing. And not because they weren’t militant — between 1881 and 1905, when the Bureau of Labor Statistics kept meticulous records, the number of strikes, lockouts, establishments affected, and participants increased at a rate that would panic contemporary observers. With almost no union representation, workers won — they were the victors in the majority of strikes and lockouts measured in the late 19th century by the BLS.”

I agree with some of Livingston’s interpretation. The late nineteenth century was not just a period in which capitalists oppressed labor to make larger and larger profits. On the other hand there are several specific elements that I am not so sure about.

Because there are no citations I am not sure where the evidence comes from. I am also not clear why 1884 to 1896 would be a particularly useful period. The statement about unemployment is confusing because estimates of unemployment for the nineteenth century find the unemployment rate in 1896 to be considerably higher than 1884. J.R. Vernon (1994 Journal of Macroeconomics) estimated unemployment at 4.01% in 1884 and 8.18% in 1896. Romer and others estimated it was over 10 % in the mid 1890s. I also don’t know of any evidence that productivity growth flatlined during the Gilded Age. Estimates I am familiar with show quite the opposite. The following table is from Abromowitz and David

What did happen to real wages and labors share during the Gilded Age? The following table is from Measuring Worth. It shows the annualized growth rates for several series from 1870 to 1900.

US	1870 to 1900
Consumer Price Index	-1.46%
Unskilled Wage	-0.05%
Production Worker Compensation	0.64%
Nominal GDP per capita	1.11%

The wage series are in nominal terms, but you can see that in the case of production workers nominal wages increased and in the case of unskilled workers it fell less rapidly than prices. The workers represented in these two series would have experienced increases in real wages, but their nominal wages were not rising more rapidly than nominal GDP per capita. It is also not clear that capitalists were in a losing battle. For instance, the following graph, also using data from Measuring Worth, shows the nominal value of a $1 investment in the S&P Index in 1871, assuming that dividends are reinvested each year.  

Overall, I think Livingston’s interpretation suggests too much of a zero sum game between labor and capital. If labor gained, capital must have been losing. The available evidence is consistent with both labor and capital doing well during the late nineteenth century.

Can we maintain our present rate of increase of consumption?

“we cannot long maintain our present rate of increase of consumption; …the cost of fuel must rise, perhaps within a lifetime, to a rate injurious to our commercial and manufacturing supremacy; and the conclusion is inevitable, that our present happy progressive condition is a thing of limited duration.”

I was reminded of this quote last week by the many reviews of Robert Gordon’s new book The Rise and Fall of American Economic Growth . The quote is not from Gordon. It is from the English economist Stanley Jevons, writing in 1865. The point is that economists don’t have a great record of making predictions about when modern economic growth will end. I think economists are actually pretty good at predicting a lot of things, but you do not receive a crystal ball with your Ph. D.

Schumpeter distinguished between the adaptive response and the creative response. The adaptive response is what economic theory does well. When the price of one good rises you reduce your consumption and switch to relatively cheaper substitutes. These sorts of changes are predictable. The creative response is not predictable. In retrospect you can usually tell a story, consistent with economic theory, about the invention of the spinning jenny, or kerosene, or transistors, but you can’t predict it beforehand. Modern economic growth comes from these fundamentally unpredictable creative responses. I would agree with Gordon that the innovations during the late nineteenth and early twentieth centuries had a particularly large impact on physical well-being, especially water purification and sewage systems, areas in which there is apparently still some work to be done. I do think, however, that he understates the impact and the potential future impact of recent developments in science and technology on people’s lives.

I am optimistic that as long as people have the opportunity to be creative, innovation will continue. As for headwinds in the U.S. (factors militating against continued growth) I also think we should not think about the U.S. as if the rest of the World did not exist. I am hopeful that more than a billion people in Asia will have more opportunities to add to the stock of knowledge than they did in the past, and that the whole World might benefit. Of course, I could be wrong too.  

Recent Working Papers in American Economic History

Price Fishback How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s

NBER Working Paper No. 21925

The New Deal during the 1930s was arguably the largest peace-time expansion in federal government activity in American history. Until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of New Deal programs. Over the past decade scholars have developed new panel databases for counties, cities, and states and then used panel data methods on them to examine the examine the impact of New Deal spending and lending policies for the major New Deal programs. In most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy. Many of the studies also use instrumental variable methods to control for endogeneity. The studies find that public works and relief spending had state income multipliers of around one, increased consumption activity, attracted internal migration, reduced crime rates, and lowered several types of mortality. The farm programs typically aided large farm owners but eliminated opportunities for share croppers, tenants, and farm workers. The Home Owners’ Loan Corporation’s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers. The Reconstruction Finance Corporation’s loans to banks and railroads appear to have had little positive impact, although the banks were aided when the RFC took ownership stakes.

Joseph Davis, Marc D. Weidenmier

America's First Great Moderation

NBER Working Paper No. 21856

We identify America’s First Great Moderation, a recession-free 16-year period from 1841 until 1856, that represents the longest economic expansion in U.S. history. Occurring in the wake of the debt-deleveraging cycle of the late 1830s, this “take-off” period’s high rates of economic growth and relatively-low volatility enabled the U.S. economy to escape downturns despite the absence of a central bank. Using new high frequency data on industrial production, we show that America’s First Great Moderation was primarily driven by a boom in transportation-goods investment, attributable to both the wider adoption of steam railroads and river boats and the high expected returns for massive wooden clipper ships following the discovery of gold in California. We do not find evidence that agriculture (i.e., cotton), domestic textile production, or British economic conditions played any significant role in this moderation. The First Great Moderation ended with a sharp decline in transportation investment and bank credit during the downturn of 1857-8 and the coming American Civil War. Our empirical analyses indicate that the low-volatility states derived for both annual industrial production and monthly stock prices during the First Great Moderation are similar to those estimated for the Second Great Moderation (1984-2007).

John Komlos and Brian A'Hearn respond to Bodenhorn et al on the antebellum decline in stature.

The Decline in the Nutritional Status of the U.S. Antebellum Population at the Onset of Modern Economic Growth

NBER Working Paper No. 21845

The decline in the physical stature of the American population for more than a generation beginning with the birth cohorts of the early 1830s was brought about by a diminution in nutritional intake in spite of robust growth in average incomes. This occurred at the onset of modern economic growth on account of rising inequality and an increase in food prices, which brought about dietary changes through the substitution away from edibles toward non-edibles. In a recent working paper, Bodenhorn, Guinnane, and Mroz question this consensus view, suggesting that a decline in heights in a military sample may not be representative of the population at large. They argue that increasing wages in the civilian labor market may well induce an increased proportion of shorter men to volunteer for military service thereby driving down the mean height of soldiers even if the height of the population remains unchanged. However, they neglected to examine whether labor market conditions did actually improve during the Civil War in such a way as to induce shorter men to enlist. Had they done so they would have found just the opposite: during the course of the war real compensation in the military increased by some 39% to 66% relative to civilian earnings. This should have led to an increase in military heights if the logic of their model were accurate, when in fact they declined. Both the historical evidence and an assessment of the model indicate that failing to consider patriotism as a powerful motive for enlisting was another serious error. A thorough analysis of the Union Army height data, considering recruiting periods as short as 90 days during which labor market conditions could not have changed markedly indicates that there can be no doubt at all that the decline in the height of soldiers beginning with the birth cohorts of the early 1830s is representative of the trend in the physical stature of the male population at large. The implication is that there was a widespread diminution in nutritional status of the population in the antebellum period.

Ellis Tallman and Gary Gorton

How Did Pre-Fed Banking Panics End?

How did pre-Fed banking crises end? How did depositors' beliefs change? During the National Banking Era, 1863-1914, banks responded to the severe panics by suspending convertibility; that is, they refused to exchange cash for their liabilities (checking accounts). At the start of the suspension period, the private clearing houses cut off bank-specific information. Member banks were legally united into a single entity by the issuance of emergency loan certificates, a joint liability. A new market for certified checks opened, pricing the risk of clearing house failure. Certified checks traded at a discount to cash (a currency premium) in a market that opened during the suspension period. Confidence was restored when the currency premium reached zero.

What I've Been Listening To

Liz Covart’s Ben Franklin’s World is a podcast on early American history. Recently she has teamed with the Omohundro Institute to produce podcasts on Doing History. I was a fan of the old Making History podcast and I am happy to see someone again trying to fill this niche.

Daron Acemoglu at the Economic Rockstar Podcast

James Heckman on EconTalk

And

Valerie June