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.

The Good, the Bad, and the Ugly: Slavery's Capitalism

This is not a real review. I think a  real review would spend more time on the Good.  This is  more like my initial responses to Slavery’s Capitalism: A New History of American Economic Development edited by Sven Beckert and Seth Rockman.

The good:

It is a good book. I learned a lot, and the essays raise many interesting questions. Most of the authors use extensive research in primary sources to provide new insights about slavery and American economic development. Bonnie Martin, for instance, uses thousands of mortgage records to illustrate the widespread use of slaves as collateral and the central role of neighbor to neighbor credit. John Majewski examines the Limestone region of the Upper South. He finds that, although the area was very productive and similar to areas in free states just north of it, it exhibited the same low levels of investment in education and relative dearth of innovative activity, as measured by patents, as the rest of the South. The study thus fits in with work of Sokolof and Engerman and Nunn on the negative long term effects of slavery. He also explores the significance of these findings for our understanding of Republican opposition to the spread of slavery.

Many of the essays raise interesting questions when considered together. How does Rood’s picture of an innovative wheat and flour industry in Virginia fit with Majewski’s picture of the South’s lag innovative activity? How does Martin’s picture of lending dominated by personal transactions fit with the accounts by Rothman and Boodry emphasizing more formal and geographically dispersed credit markets?

These are just the first papers that came to mind; there are plenty of other interesting papers in the book.

The Bad:

Bad may be too strong a word, but I’m sticking with so I can stick with the title of this post. Several of the authors run into problems when they try to make claims about the relative importance of slavery to American economic growth. The problems stem from the desire to show that slavery was not just “a” significant or important part of the economy, but was instead “everything” to New England, or “indispensable” to American economic growth. These claims tend to emphasize the role of slavery in international trade, which was large. The problem is that international trade itself was not a large part of the economy. Cotton was more than half of exports, but it was still only about 4-6 percent of GDP. It was thisproblem that led Ed Baptist to tie himself in knots trying to expand its share of GDP.

Doug North’s Economic Growth of the United States (1961) is cited by several of the authors because it emphasizes both international and interregional trade, making cotton exports the driving force behind antebellum growth. It seemed like a reasonable story given the evidence that Doug had collected, but subsequent research generated evidence that contradicted the theory. First, work by a number of economic historians (Gallman, Hutchison and Williamson, and Herbst) found that Doug’s theory tended to underestimate the degree of regional self-sufficiency and overestimate the importance of interregional trade. Second, subsequent work on early industrialization has emphasized the role of intraregional trade. Much of early industrialization appears to have been directed at local demand. Notable contributions on this subject were made by  Diane Lindstrom Economic Development in the Philadelphia Region  and more recently by David Meyer Roots of American Industrialization or see his essay on Industrialization in EH.Net’s Encyclopedia. In short, subsequent research did not support the conclusion that cotton was the driving force behind economic growth. Doug acknowledged the implications of this subsequent research in his later work, such as Growth and Welfare in the American Past.

Personally, I’m fine if you tell me an interesting story. It does not need to be “the” story about “the” driving force behind American development.  But, to the extent that people do want to make such claims, they need to address the work done by economic historians since North’s Economic Growth of the United States. Apparently, at the conference that led to this volume Stanley Engerman raised questions about the extent of the role of slavery in Northern development, but his paper does not appear in the book.

The Ugly:

Hide your straw men; Ed Baptist is back in town.

He seems most intent on defending his indefensible book. In terms of economic history, Baptist made two novel claims in his book: that slavery was “the” driving force behind American growth and that increases in productivity in the cotton South were driven by improvements in coercion, which led to innovation in picking by enslaved people.

I have shown earlier that his attempt at a calculation of the size of cottons role in the economy was nonsense. Fortunately, he does not resurrect it in his essay. Instead, he focuses his energy on defending his argument about productivity growth against the alternative interpretation put forward by Rhode and Olmstead.

For those not familiar with the debate I think I can fairly summarize it as follows

Olmstead and Rhode argue:

Slave holders used physical coercion to force slaves to pick large volumes of cotton as rapidly as possible. To increase the amount of cotton that slaves were able to pick they also sought to improve cotton plants so that a slave working at maximum effort could pick a larger volume of cotton. They provide several types of evidence. First, they use evidence from picking books to show that productivity increased. Second, they provide direct evidence experimenting with seeds that planters worked to create improved varieties of cotton (for example, descriptions of new seed varieties and planter’s records of). Third, they argue that the fact that productivity growth was higher in places where upland varieties were grown than in places where sea island cotton was grown supports their argument because sea island cotton did not experience the same improvements in seed varieties that upland cotton did.

Baptist argues:

Increases in physical coercion generated the improvements in productivity over time. Slaveholders became better at pushing slaves and slaves responded by becoming better at picking.

Baptist, acknowledges that some improvement occurred in seeds but discounts the extent of it. He argues that the difference between sea island and upland varieties is irrelevant because they operated under different labor regimes. Sea island areas tend to use a task system rather than what he refers to as a pushing system. In his essay in the book he reasserts this argument and emphasizes that he believes spotted fundamental flaws in logic of Rhode and Olmstead, Specifically, Baptist argues that the decline in production and productivity after emancipation inconsistent with Olmstead and Rhode, but consistent with his argument, and he claims that the very existence of the picking books refutes Olmstead and Rhode.

Why I Don’t find Baptist Persuasive

Baptist’s claim that the decline in cotton production after emancipation is inconsistent with Rhode and Olmstead is argument by misrepresentation. He is only able to make it by misrepresenting their argument.  For Rhode and Olmstead productivity is a function of a number of things: the quality of the soil, the quality of the plants, weather, and the ability to use violence to force maximum effort from the slaves picking the cotton. Consider the following excerpt from their 2008 paper in the Journal of Economic History (By the way, can anyone tell me why Baptist continues to cite the working paper almost a decade after the paper was published in a journal?)

I think Olmstead and Rhode knew that brutality was an essential part of the planter's recipe for productivity. If you take away any ingredient in that recipe, including the brutality, productivity would tend to fall. The fall in picking rates after emancipation  does not refute their argument, it is perfectly consistent with their argument. 

Baptist employs such argument by misrepresentation througout his essay. He claims that Olmstead and Rhode “uncritically” used the claims of people interested in selling new seeds to support their claim and that the very existence of the picking books refutes Rhode and Olmstead because planters recorded information about slaves and picking not seeds. But, since Baptist claims to have read Olmstead and Rhode, he surely knows that they used a variety of sources, including planter’s diaries that recorded experiments with seeds. In a footnote he claims to refute Ransom and Sutch’s argument that productivity actually increased after emancipation. They arrived at this conclusion based upon their estimates of how much former slaves dramatically reduced labor supply, especially of women and children. Baptist argues they are wrong because photographs and testimony indicate that there were still women and children working in the fields. But, Ransom and Sutch never even remotely suggested that African American women and children joined the leisure class after emancipation. Everybody worked, just not as much as when they were coerced to work, a claim which seems like it should be consistent with Baptist’s own argument. Finally, Baptist spends several pages presenting himself as the defender of slave narratives as a historical source. Who he is defending them from? Slave narratives have long been used by many historians and even by economists like Olmstead and Rhode.

The biggest problem, however, is not the weakness of Baptist’s critique of Olmstead and Rhode, it is his continued failure to provide any evidence in support of his own claim. He provides plenty of evidence that slaves were whipped, as well as tortured in other ways, for not meeting production quotas. He also provides evidence that quotas increased over time. The problem is that we already knew both of those things, and they are both consistent with Olmstead and Rhode’s interpretation: Slaves were forced pick at maximum effort, and the amount of cotton that could be picked with maximum effort increased over time due to biological innovation. The evidence that Baptist needs to support his argument is evidence of innovation in two areas. The first type of innovation is improvements in methods of physical coercion. He provides evidence that slaveholders kept records of daily picking and whipped slaves for failing to meet quotas. But picking books existed from at least the first decade of the nineteenth century. Moreover, whipping was common well before cotton became the primary crop in the South and was common outside cotton producing areas. If you have any doubts about the use of whips outside the Cotton South, look at the runaway slave ads for eighteenth century Virginia, you won't have to look far to find references to a runaway having a back that is “well scarred” or with “many whelks” or “used to the whip.”  Baptist needs to show that slaveholders not only kept records and used physical coercion but that they did these things better over time. And I am not talking about one planter getting better as he becomes more experienced, I am talking about changes over decades, changes that can be passed on from one planter to another.  He dos not show this. Ironically, when he does provide an example of innovation from a slave narrative (the whipping machine) he discounts it, saying he does not believe it was real.

The second type of innovation that Baptist needs to demonstrate is innovation in picking techniques. Again, keep in mind that we are not talking about one person increasing their productivity as they become more experienced, we are talking about increases in productivity that take place decade after decade. Baptist’s argument is not about particular people increasing their picking rates with practice. His argument requires improvements in technique that can be passed on from one generation to another. He does not provide any evidence of this passing on of techniques. Ironically, his argument for the importance of slave narratives as a source conflicts with his claim that innovation in coercion produced innovation in picking. Not only does he not provide examples of narratives describing these innovations in picking technique, many of the most well-known accounts, such as Charles Ball and Solomon Northrup, suggest that picking productivity was largely a matter of practice and innate dexterity. 

In the end, Baptist just throws out strawmen and knocks them down, hoping that you won’t notice that he is not actually providing the evidence that is needed to support his argument. 

Other Things and Stranger Things

The top of this page says that “This is a blog about economics, history, law and other things that interest me.” Anyone who has read the blog knows that I don’t usually write about “other things that interest me.” This blog post is an exception to the rule. The other thing is Stranger Things. I am certainly not the first person to suggest that it is not only one of the best television shows this year, but one of the best ever. Several years ago Salman Rushdie made an argument for the virtues of television as a medium for creative expression. I think Stranger Things supports his argument.

Part of the appeal for me is that I tend to enjoy series that are structured like Stranger Things: there is a story in each episode but each story is part of a bigger mystery. It is essentially the format of the old serials they used to show at movies, or serialized stories even before that. Twin Peaks did it well. Lost probably did it best. Yes, I even liked the finale. Orphan Black may turn out to be the best. We’ll find out next year.

The trouble with these types of series, however, is that they often fall apart the closer they get to the bigger mystery.  Under the Dome, for instance, was fun the first season, but when the closer they got to the bigger mystery the more it turned to crap. Nevertheless, I am hoping for a second season of Stranger Things. I would like to see more of the characters and see more of the bigger mystery resolved. What is the upside down? What is the monster? What is it doing with its victims and those slug things? One option would be for it all to be creations of Eleven’s mind. I don’t mean that it is all in her head like St. Elsewhere. I mean that her mind makes these things real, like characters in Joe Hill’s NOS4A2 or Steven King’s Lisey's Story. I actually hope they don’t take that route. It has been done and it would make Eleven too similar to Vic McQueen (using their powers takes a physical toll on both of them). I think I would prefer if the boys were right about it actually being another dimension. I am hopeful that the Duffer Brothers will not screw it up because they did such a great job with the first season and they appear to have given more than a little thought to the bigger mystery. There is supposedly a 30 page document about the Upside Down. If I were them I would make sure it is not on any device that can be hacked.

The mystery I am most curious about is, What is going on with Hopper? I don’t mean the leftovers and Eggos. Eleven is alive. My guess is that she is hiding in the Upside Down because she knows that Mike is in danger when she is with him. After all, Brenner basically told her they would hurt the boys if she didn’t come with him. I have a hard time believing that he actually betrayed Eleven. It was completely inconsistent with everything we have seen about him. Moreover, asking Brenner for his word when he had to believe that Brenner’s word was worthless also suggests there was something more going on. Something must have happened between Hopper and Eleven that we did not see.

Of course all of the great writing would not amount to much if not for the great acting. The show is set in 1983, and Mathew Modine and Winona Ryder remind us why they became stars back in the ‘80s. That said, Finn Wolfhard, Noah Schnapp, Gaten Matarazzo, Caleb McLaughlin and Millie Brown are what really make the show standout. I think Millie Brown’s performance was particularly important to the success of the show. I told my daughter that it reminded me of Kristen Stewart in Panic Room. I believe Stewart was around the same age Millie Brown is now when Panic Room was filmed. When I first saw Panic Room I was amazed that someone so young could express so much with so few words. Millie Brown has even less less lines, and her performance is even more amazing.

Netflix has not yet announced a second season, but they should probably hurry up and do so while they can still afford the cast. To finish with a little economics, I’ll illustrate the problem with a little supply and demand analysis. I predict that Stranger Things will cause a dramatic increase in demand for Millie Brown. Ceteris paribus, as demand increases from D1 to D2, given that the supply of Millie Brown is fixed at 1, the result will be an increase in the price from P1 to P2. I don’t see any reason to believe that this trend won't continue into the foreseeable future. 

So, I wasn’t even able to get through this post without some economics. And, yes, it is a pretty crappy looking graph for a professional economist, but this is just a blog post about other things.

some economic history stuff

I have not been blogging because I have been busy trying to finish up a paper and prepare for class, but here is some recent economic history stuff.

Some podcasts (I listen to podcasts when I am walking Dodger the Doggy):

David Beckworth at Macro Musings interviews Doug Irwin. The interview covers a number of topics related to trade and American economic history: the costs and benefits of trade, the political economy of protectionism, and the gold standard. Irwin also explains why Ha Joon Chang’s analysis of the role of trade policy in development is at best “superficial.” For those of you who are not familiar with his work, Ha Joon Chang is a professor at Cambridge and one of the sources on economic history most admired by people who don’t know anything about economics or history.

Michael Munger talks about slavery and racism at Econtalk.

There are also a lot of podcasts related to economic issues in early America at Liz Covart’s Ben Franklin’s World, e.g., slavery, Shay’ Rebellion, the Stamp Act riots, and financing military expenditures. Most recently I listened to the interview with Abigail Swingen about her book Competing Visions of Empire; in the podcast she puts the American colonies and the development of slavery in America into the broader context of the British Empire.  

Some other stuff:

You can read Jared Rubin’s forthcoming Rulers, Religion, and Riches: Why the West got rich and the Middle East did not at his website.

Richard Sambisavan asks what we can learn from bond prices in early America.

Mark Koyama examines the decline of the Roman economy and questions the usefulness of the peasant mode of production.

Program of the World Congress on Business History

I am still waiting for my copy of Slavery’s Capitalism, but I intend to write about it as soon as I can.

BTW this is Dodger the Doggy

Inequality in Economic History

I found the initial reactions to Piketty’s Capital interesting because assessments of the empirical analysis seemed to line up immediately on ideological grounds before anyone had a serious opportunity to evaluate so much evidence. People on the right were certain it was wrong; people on the left were sure that it was right. Both were clearly basing their conclusions on what they wanted to be true. This was particularly clear in the uncritical use of his work by the New Historians of Capitalism. See this video (41 minutes in) where Jefferson Cowie says how bad Piketty is as a historian and follows that with how he still uses his numbers blindly. What ever happened to critical evaluation of the evidence? In NHC it has been replaced by the ability to repeat clever phrases like “tyranny of the market” and “cash nexus.”  

Enough of my rant against NHC. Capital was a big book; it takes time to really evaluate the empirical work in such a book. Well, time has passed, and some of that work has now been done. In general, it does not seem to support Piketty.

Richard Sutch challenges the reliability of many of the estimates for the U.S.

Carlos Goes fails to find empirical support for the central hypothesis about inequality and capitalist development.;

Does this mean that Capital was a bad book? I don’t know. Some big idea books are serious efforts to make sense of the available information. Sometimes they turn out to been wrong in fundamental ways. I think examples of this might be Doug North’s Economic Growth of the United States (overemphasis on trade, especially, interregional trade), Fogel and Engerman’s Time on the Cross (underestimated use of coercion and overestimated nutrition), and Pomeranz’s Great Divergence (divergence appears to have started earlier than Pomeranz thought). All of these were reasonable attempts to make sense of the available information, but they prompted a lot of research which ultimately contradicted at least some of their conclusions. All of these authors, while not necessarily accepting all the critiques of their work, acknowledged when subsequent evidence persuasively contradicted their earlier interpretations. The ultimate test for Piketty will be how he responds to the critiques of his work that have provided more evidence on inequality over time.

In any case, if Piketty’s analysis of inequality is flawed, what should you read. I would suggest Lindert and Williamson’s  Unequal Gains: American Growth an Inequality. The book is very dense with descriptions of how the estimates were developed. If you are short on time you can get a preview at VOX or read Vincent Geloso’s review at Essays in Economic and Business History.