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

Happy Constitution Day

http://www.archives.gov/exhibits/charters/constitution.html

Romney Plan?

I received an email from Economists for Romney, asking me to join them in endorsing his economic plan. The email said that

Governor Romney would:

• Reduce marginal tax rates on business and wage incomes and broaden the tax base to increase investment, jobs, and living standards.
• End the exploding federal debt by controlling the growth of spending so federal spending does not exceed 20 percent of the economy.
• Restructure regulation to end "too big to fail," improve credit availability to entrepreneurs and small businesses, and increase regulatory accountability, and ensure that all regulations pass rigorous benefit-cost tests.
• Improve our Social Security and Medicare programs by reducing their growth to sustainable levels, ensuring their viability over the long term, and protecting those in or near retirement.
• Reform our healthcare system to harness market forces and thereby reduce costs and increase quality, empowering patients and doctors, rather than the federal bureaucracy.
• Promote energy policies that increase domestic production, enlarge the use of all western hemisphere resources, encourage the use of new technologies, end wasteful subsidies, and rely more on market forces and less on government planners.

I'm not sure whether this is the plan, but there was no link to to a more detailed plan. It sounds like good stuff, but if there is an actual plan for reducing the growth of Medicare, Social Security and the debt I would like to see it before I endorse it.

Former Students

Scott Drenkard at the Tax Foundation

and Kimberly Suttle at the Lexington Institute

Bad History of Economic Thought

Nicholas Wapshott appears to believe that ignorance of economics should not keep one from writing about it. His editorial in the Washington Post today suggests that the United States experienced hyperinfaltion in the 1970s and that Milton Friedman thought government spending caused inflation and the Fed should manage interest rates to control the economy. In other words, he knows nothing about Friedman or economics more broadly. Nevertheless, someone published a book that he wrote about Hayek and Keynes. Fortunately, the Fredericksburg Free Lance Star ran opposing editorials by Don Boudreaux and Dani Rodrik.

Elinor Ostrom

Her death is a great loss for all the social sciences. Its hard to believe that it has been twenty years since I first read Governing the Commons. It came out in a series that Doug North was co-editing, and he gave me a copy. She will of course be remembered for her pioneering work on common property. I think that in the long run she will be remembered even more for her apprectiation of the diversity of institutions and her insistence upon the need for both rigorous theory and careful empirical analysis. Elinor Ostrom's approach to the analysis of institutional change was not easy, but it was fruitful. I might also note that her papers can used as a model for anyone seeking to write clearly about complicated issues.

More on the 19th Century

What Happened During the 1870s?

Source: Historical Statistics of the United States Millenial Edition series ca 9, ca11 and ca19.  

Shorter papers?

Why does the American Economic Review continue to list some papers as "Shorter Papers" when they are longer than "Articles?" In the most recent issue Schularick and Taylor's "Credit Booms Gone Bust" is in the "Shorter Papers" even though is is over 30 pages long, longer than many of the "Articles." One of the "Articles" is less than 20 pages long. Get rid of "Shorter Papers" and publish the "Articles" in order of perceived importance. Right now it just looks like the editors can't count.   

Dumb Tweets

I just had to delete Brad De Long from the list of people I was following on twitter because he keeps retweeting some guy named Noah Smith. Noah Smith accused Tom Murphy of underestimating the size of North Dakota by a factor of 400. Murphy said that the area of North Dakota was about the same as a square with sides of 425 km. North Dakota is pretty much a rectangle with height of 340km and width of 545 km. Hard to see how he could be off by a factor of 400.

Earlier he said a paper by Michael Bordo and Joseph Haubrich was "bullshit." He appeared to be suggesting that the paper said there were financial crises in 1972 and 1982. The table on page 23 of the paper clearly states that there were not financial crises associated with those business cycles.

I don't know who Noah Smith is or why Brad De Long keeps retweeting him, but I'm not going to waste any further time or energy reading them.

Free stuff

One of my favorite books on American Economic History, Robert Higgs' The Transforamtion of the American Economy, 1865-1914, is available here. Thanks to the Mises Institute and Bob Higgs.