Another Loss

This has been a rough couple of months for Economic History and American History. I posted earlier this summer abou the death of Bob Fogel. Shortly after that, Edmund Morgan, author of American Slavery American Freedom: the Ordeal of Colonial Virginia and numerous other works, passed away. In July, Cynthia Taft Morris died. Along with Irma Adelman, Cynthia was a pioneer in the effort to measure institutions and institutional change.  Then Pauline Maier. Maier is probably best known for American Scripture: The Making of the Declaration of Independence, but her paper on "The Revolutionary Origins of the American Corporation," William and Mary Quarterly (1993) has been widely cited in American economic history. Today I read that David Landes has passed away.   

More New History of Capitalism (aka lets just make stuff up)

Since the NY Times article on the New History of Captalism, I have been trying to catch up with the recent work in this field. Unfortunately, I was dissapointed by Jonathan Levy's Freaks of Fortune. I just started Julia Ott's When Wall Street Met Main Street. On the first page of the first chapter she declares that "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." She does not provide the source for this statement. Most of it is not true. Prices fell, but real output per capita increased. Overall, the period was one of relatively rapid productivity growth.


This is a graph of real gdp per capita during the period in question.

Source:www.measuringworth.com

Per capita output did not fall steadily; it rose unsteadily.
This information is not hard to find.

Death of Robert Fogel

Bob Fogel has died. Here is the obituary from the NY Times.

Wealth

The Washington Post has an article based on research at the St. Louis Fed, showing that net worth has not recovered from the recession. The article is titled Americans have rebuilt less than half the wealth lost to recession.

The article includes the following graph

Its not clear, however, that comparing wealth to the 2007 peak makes sense. Consider the following graph of net worth from 1990 to 2012

The two graphs are not directly comparable. The lower one shows net worth of all households and non-profit organizations in billions of dollars. It is not adjusted for inflation or the number of households. Nevertheless, it illustrates the problem with the first graph. The build up in wealth from 2002 to 2007 was clearly above the trend. why woulkd it be reasonable to expect a return to that lelvel of wealth rather than a return to the trend. The current levels of net worth appears consistent with the longer term trend.

from http://research.stlouisfed.org/fred2

Shame on the OAH: A Rant About Joanthan Levy's Freaks of Fortune

The Organization of American Historians recently presented Jonathan Levy’s Freaks of Fortune with book three awards. If this is as good as it gets in American history, the field is in a sad state. The book is not great history; it is not even good history.

The premise of the book is that the history of “risk” as we know it dates to the nineteenth century.  He explains that “at the end of the eighteenth century “risk” still simply referred to a commodity bought and sold in an insurance contract. Outside long distance maritime trade risk had very little meaning or use.”  And by the end of the nineteenth century “risk was in fact everywhere. Before that century of capitalist transformation, however, it was not.” Before this capitalist transformation risk did not mean “extreme peril, hazard or danger.” But the capitalist system that “thrives off radical uncertainty” brought “the insecurity of the sea to the land.” This is all fascinating. Unfortunately, it is also nonsense. The first American dictionary, Noah Webster’s 1806 Compendious Dictionary of the English Language, was much less extensive than his later works but still included the word risk:

Risk, n. hazard, chance, danger

Risk, v.t. to hazard, expose to chance, endanger

A quick search of American Periodical Series Online can provide examples of the use of “risk” outside a maritime context:

In 1789 and essay in Columbian Magazine notes that allowing hay to lie out for several days before it is collected”subjects it very much to the danger of getting rain, and thus runs a great risk of being made good for little.” (Columbian Magazine July 1789)

Or, “The inconveniences of ridges high and crooked are so many, that one would be tempted to apply a remedy and any risk.” (Christian Scholar’s and Farmer’s Magazine July 1789)

The whole book is based on a premise that is nonsense and easily shown to be so. Moreover, accepting the premise requires one to ignore considerable research about how people, especially farmers, dealt with risk before the nineteenth century.

Levy goes onto talk about things like the Farmers’ Loan and Security Company, which did not exist. He may at least have been close this time; there was a Farmer’s Loan and Trust Company. Perhaps this is nitpicking, but how could someone study the history of capitalism and not know about the Farmers’ Loan and Trust Company, one of the named parties in Pollock v. Farmers’ Loan and Trust Company, the 1895 case that ruled an income tax unconstitutional.

I can’t say that there were not parts of the book that I found interesting and enjoyable, but, overall, I found it to be deeply flawed. It came nowhere near the standards that historians should aspire to. The members of the OAH should be the ones most concerned that American history be based on thorough, careful and critical consideration of the sources; they should be the ones shouting that the emperor has no clothes when it is not. Instead, they have granted the emperor three awards for the best robes.


Correction August 31. 2019 Mike Konczal pointed out to me that Levy referred to the Farmers' Loan and Trust Company as the Farmers' Loan and Security Trust Company not the Farmers' Loan and Security Company.

History of Capitalism

The New York Times examines the rise of courses focused on the history of capitalism.

Armen Alchian

Marginal Revolution and Organizations and Markets are reporting that Arment Alchian passed away. I'll never understand why he did not receive the Nobel Prize.

Financial Regulation and the Panic of 1907

My paper "Financial Regulation and the Panic of 1907" will be in the Winter 2013 Business History Review.
Here is the abstract

Previous studies of the Panic of 1907 have argued that lax regulation enabled trust companies to take excessive risks, leading to a loss of confidence and massive runs. These studies have, however, given relatively little attention to the historical development of trust companies. This paper argues that a more historical perspective can lead to a better understanding of the institutional framework and the actions of trust companies. Depositors did not lose confidence because of inadequate regulation; depositors lost confidence in specific trust companies because of false rumors, and diversity among trust companies hindered cooperation to halt the Panic.

And here is an earlier version on SSRN

Sometimes Bad Things Happen to Good Trust Companies: A Reexamination of the Trust Company Panic of 1907