What is a rational choice?

 Many people know that economists use models of rational choice. But what does that mean?

Ruth Marcus explains to her readers that, “Economically speaking, the decision to have children is not utility-maximizing. And yet, most of us — intentionally, passionately, joyfully — make this least rational of choices. More than once.”

The economist Richard Thaler makes similar statements in the New York Times, as well as in his new book

“Economists create this problem with their insistence on studying mythical creatures often known as Homo economicus. I prefer to call them “Econs”— highly intelligent beings that are capable of making the most complex of calculations but are totally lacking in emotions. Think of Mr. Spock in “Star Trek.” In a world of Econs, many things would in fact be irrelevant.”

Thaler goes on to explain that

 “An Econ would not expect a gift on the day of the year in which she happened to get married, or be born. What difference do these arbitrary dates make? In fact, Econs would be perplexed by the idea of gifts. An Econ would know that cash is the best possible gift; it allows the recipient to buy whatever is optimal. But unless you are married to an economist, I don’t advise giving cash on your next anniversary. Come to think of it, even if your spouse is an economist, this is not a great idea.”

The problem is that all this is a bunch of nonsense. Utility simply means satisfaction. If you are doing something “intentionally, passionately, joyfully” it seems fair to assume you are getting a great deal of utility from it. How are people “totally lacking in emotions” going to get satisfaction from anything?

What do economists actually mean by rational choice? I’ll let Gary Becker explain:

“What is meant by rational behavior? Consider first what is not meant. Certainly not that people are necessarily selfish, “economic men” solely concerned with their own well being. That would rule out charity and love for children, spouses, relatives or anyone else, and a model of rational behavior could not be so grossly inconsistent with actual behavior and still be useful. A viable definition of rationality must not exclude charity and love: indeed consistent family behavior probably requires love between family members.

                Also, rationality should not imply that each household’s decisions are necessarily independent of those made by others. Different households are linked ultimately by a common cultural inheritance and background, and they may also be linked in a more proximate way. If household j increases its consumption of X, household I might be led to change its consumption of X. Such interdependencies commonly occur, and should be consistent with our model of rational behavior.

                The essence of the model of rational behavior is contained in just two assumptions: each consumer has an ordered sort of preferences, and he chooses the most preferred position available to him.” Becker Economic Theory pages 25 and 26)

Preferences can, and often are, driven by emotions. Preferences are also influenced by the culture we live in and the people we live with.

The one thing that the rational choice approach does not do is to say what people should want. This, of course, makes the traditional economic approach very different from a behavioral economic approach that seeks to “nudge” people to do what Richard Thaler thinks they should do.   

On The Run and Social Science Research Methods

There has been a lot more about Alice Goffman’s On the Run the last few days.

Lubet’s review

Goffman’s response to Lubet

Lubet’s response to the response

The Volokh Conspiracy

The anonymous 40 page critique of Goffman’s work

Philip Cohen

 

Although, much of the attention has been focused on the issue of her possible criminal conduct, it is the methodology of her project that really concerns me. I have not yet read the book. I have, however, read her paper in the American Sociological Review that was based upon the same research. She claims to have spent six years studying the residents of a neighborhood in Philadelphia. The name of the neighborhood is a pseudonym as are the names of all the individuals. Consequently, it is not possible to verify any of her claims. It is not even possible to check her account against her own field notes. She claims to have destroyed them. All of this is ostensibly to protect the people who are described in the book.

Her entire methodology is so alien to my view of research in the social sciences I find it hard to comprehend. It is not her immersion in the culture of the people she was studying that concerns me. It seems like a legitimate method of qualitiative research. Whether you use qualitative or quantitative methods should be determined by the question you are trying to answer. What puzzles me is the complete lack of accountability. One of the essential elements of good historical research is to be clear about the relationship between your conclusions and the sources that you use. Anyone should be able to follow your trail of sources to see if it leads to your conclusions. Is anyone going to believe you if you say that you use evidence from a secret notebook at an undisclosed archive? Could you write a history dissertation at Princeton based upon a secret diary that you say you destroyed to protect the author’s privacy?  In economics you are generally expected to be ready to present you data to other researchers or have a very good reason why you cannot. The American Economic Review, for instance, expects authors to make their data available. Reinhart and Rogoff got in trouble a while back for a spreadsheet error, but we should not forget that when a graduate student asked for the data they gave it to him. Goffman’s entire body of research appears to depend on “Just trust me.”

I am not saying that she lied. There are troubling inconsistencies within her accounts and between her accounts and other evidence. And her response to Lubet’s suggestion that she had committed a crime only adds another inconsistency. Her account in the book is completely different than the account in her response. Even if there were not inconsistencies, I would be concerned about a methodology that places so much weight trusting the author. The rewards in the social sciences for coming up with results that are deemed interesting and important are considerable. Goffman got a Ph. D. from Princeton, a best dissertation award, a book contract, a publication in the American Sociological Review, a TED talk, and a job at the University of Wisconsin. The temptations to give people what they want are too great to rely upon a methodology that provides no means for subsequent researchers to evaluate the evidence.

 

Note about the anonymous critique: Some might wonder why I am willing to link to an anonymous critique when I have such a problem with the anonymity in Goffman’s work. I have seen discussion on the web suggesting that because this critique is anonymous it should be completely disregarded. I don’t know why the author prefers to remain anonymous. As long as their argument is not based upon their authority I do not really care. The Federalist papers were published under a pseudonym. Gosset’s work on the t distribution was published under a pseudonym. I do not regard anonymity itself as a problem. The anonymous author of the critique does not at any point ask me to just trust them. There is nothing in their argument that hinges on their identity rather than the evidence.

   

Hobbes and GameTheory

In Hobbled by Hobbes Christopher Ryan argues that the anthropological and archeological evidence is inconsistent with Steven Pinker’s interpretation of long term trends in violence. I don’t yet have a firm opinion about that issue, but Ryan also refers to Pinker and others as neo-Hobbesian. He explains that

“For reasons having nothing to do with scientific accuracy, Hobbes’ dire sloganeering about the misery of pre-civilized human life echoes down the centuries. Who among us, three and a half centuries later, has not heard that our ancestors’ lives were “solitary, poor, nasty, brutish and short”? This demonization of human existence in pre-state societies is essential to preserving the legitimacy of God and country—both of which run a protection racket promising to guard us against our own demonic inner nature. Hobbes’ infectious meme is certainly among the most famous phrases ever penned in the English language, and it shows no sign of fading. Indeed, his dismal view of human nature is still being enthusiastically spread by neo-Hobbesian presidents, pundits and professors.”

I have thought for some time that Hobbes view of human nature has been somewhat misinterpreted. In Chapter 11 of Leviathan he describes his view of human nature:

“So that in the first place, I put for a general inclination of all mankind, a perpetual and restless desire of power after power that ceaseth only in death.”

 That does sound like a pretty dismal view of human nature, but then he explains:

“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.”

In Hobbes view the problem was less our demonic human nature than that people are essentially a prisoners’ dilemma type game, a multi-person arms race.

Just make it up

I have written several times about how Edward Baptist just makes up numbers for his estimate of the importance of slavery to American economic development. It turns out that he is on to something. Just making things up seems to be very popular in the social sciences now. Here is some recent just making things up in sociology, and here is some recent just making things up in political science. All of these examples share three things in common:

1.       They just made stuff up.

2.       It wasn’t that hard to see that they just made things up.

3.       The all got glowing reviews or awards because their conclusions confirmed the beliefs of the reviewers.

Of course, this isn’t really new

Anthropology

Psychology

More history

Sort of related to economic history

We just spent the weekend driving from Fredericksburg to St. Louis and back (for Mary's parents 60th anniversary). We stayed a night in Louisville because we wanted to eat at 610 Magnolia. The meal was very good, but we wished that there had been more Smoke and Pickles. We stayed a few blocks away from the restaurant at the Culbertson Mansion on 3^rd Street, one of the many amazing homes built along that street in the 1880s and 1890s. Our brief stay made me curious about the economic history of Louisville, particularly the Southern Exposition.

In St. Louis, we discovered the Urban Chestnut Brewing Company. While living in München  in the summer of 1997 I discovered that I had a taste for weissbier, and Urban Chestnut makes a very good one, though Schneider Weisse is still my favorite. If you are in St. Louis, the food at their Bierhall is also quite good.

Some big picture economic history

Robin Grier talks with Marshall Poe about The Long Process of Development: Building Markets and States in Pre Industrial England, Spain and the Colonies her new book with Jerry Hough at the New Books Network. She argues that state capability is an essential (though hard to develop) ingredient for economic growth.

Jeremy Adelman considers “What Caused Capitalism?” as he reviews some recent books.

Education, Economics and History

Here is a nice essay on the benefits of higher education from the New York Times.

 

Also from the New York Times is Mankiw on the economics of trade and the politics of trade.

 

Here is more from Pseudoerasmus on cotton and economic growth, highlighting McCloskey’s argument about the role of cotton in the Industrial Revolution.

 

Speaking of cotton and economic growth, The Half Has Never Been Told won two awards last week. I feel like the boy who said the emperor has no clothes, except I keep saying the Baptist has no evidence.

 

It is not a great work of history; it is not good work of history, and it should be obvious to any historian who reads the book.

 

1.       Baptist misrepresents the historiography of slavery and his references are often missing or misleading.  See also an earlier post of mine and the recent post by Pseudoerasmus

 

2.       Baptist makes glaring factual errors.

 

3.       Baptist does not make a pretense of using evidence to support some of his conclusions. To me the most obvious problem, one that even non-historians should be able to see, is the way that he makes up an estimate of the economic importance of slavery. Many people have suggested that the book shows how slavery was central to the development of the American economy. That argument hinges on this calculation, and the numbers in that calculation are clearly just made up. To me, this tendency to just make things up is the most damning of the problems with the book. Although it can’t be proven, I suspect that every book on history contains some error. We all make mistakes. Consequently, problems with historiography, facts and citation are matters of degree. It is difficult to say at what point such mistakes start to raise doubts about the book as a whole. On the other hand, making up numbers is not a mistake. It is not like misremembering a date, or name, or citation. It demonstrates a fundamental disregard for the role of evidence in historical argument.

What Is Capitalism?

S-USIH.org has the fourth of James Livingston’s essays on What is Called History at the End of Modernity. among other tings, Livingston is interested in recent assertions that slavery was capitalist. Like many of the people who have commented on the essay, I was reminded of the debate between Brenner and Wallerstein in the 1970s, but I also thought of this from Beckert’s Empire of Cotton

 

“In 1980 the Soviet Union produced nearly 6 billion pounds of cotton, making it the world’s largest producer after China. These stratospheric gains—production increased by about 70 percent between 1950 and 1966 alone—were only possible because of massive state investments in irrigation, fertilizers and machinery.

                Such recourse to the state in postcolonial and postcapitalist societies was not a return to the war capitalism of the eighteenth and early nineteenth centuries, but a sharpening of the tools and enhancing of the methods of industrial capitalism.” (Empire of Cotton pages 435-36)

Maybe I am reading this the wrong way, but it seems to say that the rapid growth of cotton production in the USSR and China was “a sharpening of the tools and enhancing of the methods of industrial capitalism.” It is not just slavery that is capitalist, communism is capitalist. If communism is capitalism, is capitalism a useful category for the analysis of economies?

Clearly, there is a place for the study of capitalism.  If nothing else, we need to try to understand how people have used the term in different places and times. What is not clear is how useful it is as a tool to analyze economic history.

In economics it seems to me that capitalism has largely gone out of fashion as a useful category for analysis. Economists used to write about capitalism on a regular basis (for example, Schumpeter’s Capitalism, Socialism and Democracy; Friedman’s Capitalism and Freedom; and Williamson’s Economic Institutions of Capitalism).  Many departments of economics offered courses in Comparative Economic Systems that examined the differences between capitalism, communism and socialism. Comparative economic systems courses went out of fashion with the decline of communism. More generally, it wasn’t clear that traditional notions of what capitalism were useful for understanding big questions like growth and distribution.  New institutional economists generally seem to regard the old categories used in comparative economic systems as inadequate.

 

Standards of Accuracy in Historical Scholarship

At H-SHEAR Daniel Feller writes about Standards of Accuracy in Historical Scholarship in recent works by Johnson and Baptist and starts an interesting discussion.

 

Another Rant on Cotton and Growth

This is one of the reasons why books like Empire of Cotton and The Half has Never Been Told irritate me so much. People like Harold Myerson start spreading their misinformation in newspapers like the Washington Post. Myerson writes that

“For much of the 20th century, the prevailing view of the North-South conflict was that it had pitted the increasingly advanced capitalist economy of the North against the pre-modern, quasi-feudal economy of the South. In recent years, however, a spate of new histories has placed the antebellum cotton economy of the South at the very center of 19th-century capitalism. Works such as “Empire of Cotton,” by Harvard historian Sven Beckert, and “The Half Has Never Been Told,” by Cornell University historian Edward E. Baptist, have documented how slave-produced cotton was the largest and most lucrative industry in America’s antebellum economy, the source of the fortunes of New York-based traders and investors and of British manufacturers. The rise in profitability, Baptist shows, resulted in large part from the increased brutalization of the slave work force.”

Was the prevailing view that the South was quasi-feudal? No. Anyone who had read any economic history in the last 60 years knew better.

Was slave produced cotton the largest and most lucrative industry? No. Cotton was the largest export, but not the largest product; both wheat and corn exceeded cotton in the value of crops produced (based on estimates from De Bows Statistical View). Cotton production amounted to about 4 % of GDP.

 

Have they documented how slave produced cotton was the source of the fortunes of New York based traders and investors? No. I think this will be rather difficult for them to do. According to Albion’s Rise of New York Port, in 1860 only $12.4 million worth of cotton was exported from New York, while more than $96 million was exported from New Orleans, smaller southern ports like Charleston and Savanah also exported more cotton than New York. Cotton accounted for a small share of the more than $120 million in exports from New York. Moreover the $233 million in imports that came through New York dwarfed the value of exports from the port. In other words, cotton accounted for a relatively small share of the shipping activity in New York. In addition, while some New York investors no doubt profited from slavery, at least some others saw slavery as a liability in financial markets. When Lewis Curtis of the Farmers Loan and Trust Company wrote to the Rothschilds in June 1838, trying to interest them in bonds to finance railroad construction in Michigan, he underlined that “it is a Free State and Slavery is prohibited.”  I do not know that the Rothschilds cared, but Curtis clearly thought they might. The bottom line is that we do not yet know the extent to which fortunes of New York traders and investors were built on cotton. So far, it has only been asserted; it has not been established with evidence.

Maybe I am wrong, but at least I will tell you what evidence I am basing my conclusions on.

Cheap as Chips

An essay on open access from the blog of the Omohundro Institute.

" Debates about Open Access often take place at a level of abstraction that privileges not simply clichés about technology (“Information wants to be free”) and statements of moral principle (“Impeding the circulation of knowledge hinders human progress”) but also assertions about out-of-control costs.  The comparator in these conversations, in short, is never an order of french fries.  Instead, it’s the thousands upon thousands of dollars charged by commercial publishers for access to STEM journals.  And fair enough.  There are discussions that need to be had about access to scholarship and the transfer of resources from educational institutions to private companies.  (For Karin’s recent contribution to those discussions, see her guest post on the Scholarly Kitchen blog.)  But those conversations must also recognize that there are other realities out there."

Some new stuff

Cohen and Mandler on silent changes to the History Manifesto.

The preliminary program for BHC EBHA is up.

Lindert and Williamson income estimates for colonial America.

Open Access and Predatory Publishing

LSE Impact Blog has an essay by Monica Berger and Jill Cirasella  on Open Access:

“Although predatory publishers predate open access, their recent explosion was expedited by the emergence of fee-charging OA journals. Monica Berger and Jill Cirasella argue that librarians can play an important role in helping researchers to avoid becoming prey. But there remains ambiguity over what makes a publisher predatory. Librarians can help to counteract the misconceptions and alarmism that stymie the acceptance of OA.”

They have some valid points, but there is also much that I disagree with. They spend too much time criticizing Jeffrey Beall for not being sufficiently supportive of OA. In addition, they confuse the issue of low quality and predatory. There are a lot of low quality journals out there, but they do not charge large fees to publish papers on line, they do not advertise that you can have your paper published in a month, they do provide some peer review and editing. They do not face up to the costs of the rush to OA, especially attempts to mandate publication in OA journals.

Open access is not the same thing as predatory. Open access means that people can view a piece of scholarship without having to pay a fee, either directly or indirectly through their school or employer. Predatory journals exist to make money by selling false information. The false information that they sell is that the papers in them have been published in a peer reviewed journal. Academics pay the predatory publisher to say that their paper has been published in a peer reviewed journal; the academics then put the lie into their cvs and their annual activity reports and their tenure and promotion files. After examining a number of these journals I am convinced that it is all too easy tell legitimate publishers from predatory publishers.   The researchers that publish in these fake journals are not being preyed upon; the people that are led to believe that these researchers are publishing in peer reviewed journals are the prey.  Beall’slist is really more of a tool for these people than it is for researchers.

Being open access does not prove that a journal is predatory. Not being open access does not prove that a journal is not predatory. There is, however, a connection between open access and predatory publishers. Legitimate open access journals have created an opportunity for predatory publishers by publishing online and charging fees. Predatory publishers mimic these features, but, unlike traditional journals they have no incentive to provide peer review and editing. Traditional journals have an incentive to engage in careful peer review and editing. They need to get people to buy their journal. The articles have to be good enough that universities, members of an association, or people in the field will be willing to pay to read them. Predatory publishers have no incentive to expend time and resources on peer review and editing. The last thing they want is to have anyone read the articles.  If you read something like this it will only make it harder to tell people that you thought you were publishing in a legitimate journal.

Personally, I do not see publication in traditional journals as incompatible with open access. I noted in a previous post that I went through a recent issue of The American Economic Review and was able to find an open access, or ungated, version of every paper.  In addition, we were hiring this year and pretty much everyone had a website with access to their job market paper. There are often some differences between the “ungated” version of a paper and published version of a paper; if you want to cite a paper you should probably get access to the published version. But if the issue is simply access to research results the ungated version will typically provide this. It seems to me that this general approach existed in economics for a long time. Even before widespread access to the internet economists distributed working papers.  Pretty much anyone who mattered had probably read your paper years before it appeared in print.  There may be reasons why this approach will not work in some disciplines. There may even be reasons it will not continue to work in economics, but advocates for open access journals need to acknowledge the problems they give rise to and the possible alternatives.

More on The History Manifesto

American Historical Review has Cohen and Mandler’s critique of The History Manifesto and Armitage and Guldi’s reply. Cohen and Mandler also have a rejoinder to Armitage and Guldi’s reply. I have previously referred to reviews of the Manifesto by Pseudoerasmus and Mark Koyama.

More on the "new history of capitalism"

The U.S. Intellectual History Blog has published an interesting essay by James Livingston on the new history of capitalism and Walter Johnson's River of Dark Dreams. The essay is part 3 of a 4 part series.

More on the recession of the early 1920s

I saw the other day that James Grant’s The Forgotten Depression had received an award from the Manhattan Institute. The book argues that the economy recovered quickly from a “Depression” in the early 1920s because the government did not intervene, and that this provides a lesson for our times. On the same day I read a new paper in the Journal of American History, “Before the Roar: U.S. Unemployment Relief after World War I and the Long History of a Paternalist Welfare Policy,” by Daniel Amsterdam.  You would think they were written about two different countries. Amsterdam describes numerous government responses (largely at the state and local level, but in some cases promoted at the federal level) to unemployment during the recession in the early 1920s.

I have to say, I find The Forgotten Depression and its reception a bit puzzling. It seems to me that the need to identify examples of times when the economy recovered quickly without government intervention is motivated more by politics than by economic theory or historical evidence. Why should a recovery be quick? If a credit boom leads to a severe misallocation of resources, why would we expect that reallocation after the boom would occur at any particular speed? Where is there in, for example, Austrian Business Cycle Theory a method of predicting how many months a recovery will take? Why, even in the absence of government intervention, might it not take years for reallocation to occur?

I can understand making an argument that, other things equal, markets should adjust more quickly when there are fewer restrictions placed upon them. But 1920 and 2008 are so far from other things equal it is difficult to make useful comparisons. The two periods differ fundamentally in terms of the source of the boom and bust. The misallocation of resources, by peacetime standards, was driven by the war.  In addition, Grant focuses on the federal government’s response to unemployment, but before WWII spending by state and local governments (as well as regulation) exceeded that of the federal government.  Just because the federal government did not do something in the past does not mean that government did not do it. One would need to look carefully at state and local actions to understand the role of “government” during the recession of the early twenties. Amsterdam does not provide a complete picture of state and local action, but it is a good start.

And, yes, I called it a recession, not a depression. If we choose to call the early twenties a depression then almost every downturn in U.S. history should be called a depression. Grant rejects recent estimates of historical business cycles by Christina Romer. Perhaps Romer’s estimates are in error, but I do not find the lyrics of “Aint We Got Fun” to be persuasive evidence that she erred.

The graph below shows percent change in Real GDP (1890-1950) based on the Millennial Edition of Historical Statistics (Ca 9). The recession of the early 1920s was simply was not unusually long or severe compared to other downturns.

 

The History of Corporations and Securities Markets

Leslie Hannah’s keynote address to the Economic and Business History Society, “The Origins, Characteristics and Resilience of the “Anglo- American” Corporate Model,” is now online.

 

Mary O’Sullivan argues that J.P. Morgan’s role needs to be re-examined in “Too Much Ado About Morgan’s Men: The U.S. Securities Market, 1908-1914.”

A Tale of Two Plantations

I have recently written about some new books on the history of slavery that I did not like. I just finished one that I really did like: A Tale of Two Plantations: Slave Life and Labor in Jamaica and Virginia by Stephen Dunn. It is a remarkable work, following the lives of hundreds of slaves on two large plantations: Mesopotamia in Jamaica and Mount Airy on the Northern Neck of Virginia, not far from where I live. The bloggers at the Junto devoted several days to discussion of the book and an interview with the author. One of the things that I most enjoyed was the description of the process of historical research. I thought this book was a great example of the historian taking his reader along with him to the archives, describing the difficulties in finding sources, the limits of those sources, and how he made certain inferences from those sources.  

There is also a website that goes with the book.

Burnard and Baptist on the History of Slavery

I posted a link to Trevor Burnard’s review of The Half Has Never Been Told in Slavery and Abolition. The review raises many of the issues that I and Pseudoerasmus had previously raised in our blogs. Because the journal also published Baptist’s reply I thought I would review my take on the book and Baptist’s reply to some of the criticism.

My understanding of Baptist’s book is that he attempts to develop the following chain of reasoning.

1.      Slaveholders were capitalists, seeking profits by physically coercing, i.e. torturing slaves to produce more.

2.      Over time slaveholders increased productivity in cotton picking.

3.      More intense (or more effective) coercion was the source of increased productivity.

4.      The increases in cotton production were the driving force behind American economic growth.

5.      Therefore, American capitalist development was driven by increasingly intense exploitation of slaves.

 

Link 1. The first link in the chain is the strongest. It is also the least novel. No one disputes that slaveholders physically abused slaves to force them to work harder. The only real disputes have been about the extent to which rewards were used relative to the extent to which punishment was used. Fogel and Engerman leaned toward an emphasis on positive incentives. Research since Time on the Cross, leans the other way. Gutman showed the flaws in TOC analysis of whipping. Rick Steckel demonstrated that heights of slaves were significantly lower than whites, consistent with inadequate nutrition. The available evidence suggests that the amount of labor that African Americans supplied after emancipation was much less than they had supplied under slavery. And, although one might question the extent to which they are representative, numerous slave narratives and autobiographies provide evidence of extensive use of whipping and other forms of torture.   

Baptist, however, also tries to portray his view of slaveholders as capitalists as a shift in historical understanding, and this is one of the points upon which Burnard criticizes his book.

Baptist replies to Burnard

in my introduction, I suggest that historians have not done enough to show the relationship

between nineteenth-century changes in the Southern slave economy on the one hand,

and the emergence of industrial and financial capitalism in the USA on the other. Here

Burnard is miffed that I do not begin with a recitation of historiographical begats and

begottens. True enough, in this trade-press book, I chose to eschew the traditional long

historiographical slog of a monograph’s introductory chapter.

 

But in his book he does not just suggest that historians have not done enough. He declares that

“during the late antebellum years, northern travelers insisted that slave labor was less efficient than free labor, a point of dogma that most historians and economists have accepted.”

This statement is demonstrably false and misleads readers about the historiography of slavery. there have been surveys of economic historians that show that more than two-thirds would agree that slave agriculture was efficient relative to non-slave agriculture. It has been more than a half century since Conrad and Meyer showed that investment in slaves had a return comparable to other potential investments. Fogel and Engerman long ago argued that slave agriculture was as dynamic a version of capitalism as existed anywhere in the United States. In awarding the Nobel Prize to Fogel in 1993, the Nobel committee stated that “Fogel showed that the established opinion that slavery was an ineffective, unprofitable and pre-capitalist organization was incorrect. The institution did not fall to pieces due to its economic weakness but collapsed because of political decisions. He showed that the system, in spite of its inhumanity, had been economically efficient.”  

 

Burnard and others have also questioned Baptist’s use of approaches usually associated with fiction to describe the slave experience. This is not my style and it is generally not what I like to read. On the other hand, as long as it is clear when he is trying to use historical imagination to enhance our understanding I don’t think it is necessarily illegitimate as a technique.

 

Link 2. There is considerable evidence that productivity of cotton production increased. Baptist, however, did not produce this evidence Paul Rhode and Alan Olmstead did. Baptist cites them, but he cites an old working paper rather than the paper that was published in the Journal of Economic History several years ago.

Link 3.  Baptist misrepresents Rhode and Olmstead on the source of productivity increase. They argue that the increase was due to improvements in cotton plants. They not only provide evidence for increased productivity, they provide evidence that increase in productivity were largest in areas where there was the most development of new cotton plants. This evidence is the reason that they argue that plant breeding was the primary source of productivity increase. They did not just assume that it must have been improved knowledge about plant breeding. Baptist uses their evidence on an overall increase in productivity but does not address their evidence that productivity increased at different rates in different parts of the South. 

It is plausible that slaveholders got better at coercion over time. They could have, for instance, made more extensive use of the record books that form Olmstead and Rhode’s primary source to more effectively determine their use of force. The trouble is that Baptist does not show that coercion increased over time or respond to the evidence that differences in plants caused the increases in picking productivity. Link 3 is weak.

 

Link 4.  This link is the weakest. It is also not new. In the 1960s, Doug North essentially argued that cotton exports were the driving force in antebellum growth because they were at the center of interregional trade between the South, the West, and the North. However, evidence since then has accumulated that tended to undermine this theory. The South was not dependent on the West for food. Northern development was driven largely by intra- regional rather than inter-regional trade (see, for instance, Lindstrom on Philadelphia or more broadly, David Meyer on industrialization).

The fundamental problem is that although cotton was a large part of exports, exports were not a large part of GDP. Consequently, cotton only accounted for about 4 percent of GDP. Baptist seeks to deal with this through a bit of imaginative accounting. As I have pointed out previously Baptist simply makes up the numbers for his calculation.

 

He replies to Burnard’s criticism of his calculation

  

Or consider my ‘back-of-the-envelope’ calculation on page 321 of my text. ‘Economic historians

. . . don’t work out GNP by “back of the envelope” calculations’, Burnard huffs. Here is

what two of the finest economic historians of the nineteenth-century USA say about how

they ‘work out’ historical GNP estimates:

All pre-1929 estimates are based on fragmentary data that were not originally collected

for the purpose of making national product estimates. This means that the

series are less precise than the official estimates. Moreover, the further back in

time these estimating methods are pushed, the more degraded the quality of existing

data and the more scarce reliable detailed series become. These problems force the

investigator to fill the gaps with interpolated data, rough estimates, and conjectured

relationships between available and missing data. (PaulW. Rhode and Richard Sutch,

‘Estimates of National Product Before 1929’, in Historical Statistics of the United

States, Millennial Edition On Line, ed. Susan B. Carter et al. (Cambridge: Cambridge

University Press, 2006), 3–12) In addition, careful readers will realize that whatever the strengths or weaknesses of the speculations and conjectures which I undertake on page 321, the exercise is not actually one of ‘working out GNP’.

 

This is a red herring. Interpolating and estimating based upon conjectured relationships are not the same as just making things up. Economists that make this calculations document the methods and the evidence that they use to make these estimates. Baptist just throws numbers out, with no rational or documentation.  In addition, although he says here that he is not working out GNP, in his book he refers to GNP as a measure of economic activity and then concludes by telling us that nearly half of economic activity can be attributed to cotton production by slaves.

 

Without links 3 and 4, the final link in the chain also fails. What we are left with is a book that documents the abuse of slaves and their movement west. These are important and, at points, Baptist handles them well. There isn’t, however, much that is new.

 

As an economist I also feel the need to comment on the exchange between Burnard and Baptist regarding economics. In his book Baptist frequently feels the need to tell people what economists think or say. Almost invariably, he ends up showing how little he knows about economics.  I have already described his trouble with GDP, but here are two additional examples.

“it led to continuous increases in productivity per person- what economists call “efficiency.” Page 112

Productivity refers to output per unit of input. Productivity per person is like saying output per person per person. There are several different definitions of efficiency. None are the same as productivity. In other words, this is not what economists call efficiency.

“For decades before the financial crisis of 2008, most economists dogmatically insisted the behavior of the market and its actors was inevitably rational. Yet a few brave souls insisted that the history of bubbles, booms and crashes showed a clear historical record of mass irrational economic behavior.” Page 270

In most of economists, rationality is a pretty narrow concept having to do with preferences. It requires things like

1.      For any two bundles of goods a person either prefers one to the other or indifferent between the two   

2.      If  bundle A is preferred to bundle B, and bundle B to bundle C, then A is preferred to C

 

There is absolutely nothing in this conception of rationality that implies that people have perfect information or that things will always work out well. Many economic models analyze how things might not work out well if people asymmetric information. A few people may have used the phrase rational market, but it is not the typical use of the word rational among economists. Many economists do refer to efficient markets. Ironically, the efficient market hypothesis implies that markets follow a random walk; they are not predictable.