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.

Economic History Videos and a Podcast

Peter Temin at INET by way of The Past Speaks.

Barry Eichengreen  by way of Finance: Past, Present and Future.

Gavin Wright on Sharing the Prize: The Economics of the Civil Rights Revolution at New Books in History

Review of Half Has Never Been Told

Trevor Burnard reviews The Half Has Never Been Told in Slavery and Abolition.

"This book has been the subject of a minor scandal as a result of a negative review in the

Economist in which the author was accused of writing advocacy rather than history. An

ensuing controversy led to an apology and the withdrawal of the review. But the

Economist’s withdrawal of a spiteful review does not necessarily mean that this is a good

book. Indeed, it is a poor book. It is badly written, sometimes spectacularly so. It is

inadequately researched and shows a lack of familiarity with economic theory. It is

overblown and full of overstatements. Most disturbingly, however, it is sloppy,

indeed scandalously deficient, in its referencing. These deficiencies are so serious as

to cast considerable doubt about the capacity of the author to present evidence properly.

In short, a lot of the book is just made up, as a deliberate strategy arising from a

flawed research design."

I have had similar thoughts myself.

Koyama on the History Manifesto

Mark Koyama reviews the History Manifesto. In it he mentions Pseudoerasmus' post on the many errors in the book.

The rise and fall of economic history

Peter Temin describes the rise and fall of economic history at MIT in the History of Political Economy and an un-gated version here.  Temin also talks about the costs of not having actual economic historians, even if you do have people who write about history.

MIT isn’t the only place to experience a rise and fall of economic history. My grad school  (for my econ Ph. D.) has pretty much completely turned its back on economic history. When I was there we had Douglass North, John Nye, and, for the last year or so, Sukoo Kim. There was a well-attended history lunch every week. Doug retired. John went to George Mason. Soks is still there, but my understanding is that he is not very involved in the economics department. History is not listed as a field for graduate students. The economists that replaced the economic historians have demonstrated the potential problems associated with model makers using the past without consideration for the historians concerns with context and source criticism. Boldrin and Levine use the example of James Watt to argue against patents. On the actual influence of Watt’s patent see Selgin and Turner “Strong Steam, Weak Patents” JLE 2011 or Bottomley’s British Patent system During the Industrial Revolution.

 My wife’s grad school also moved away from economic history. While she was doing her graduate work at Illinois they had Jeremy Atack, Larry Neal, Lee Alston, and Charles Calomiris. Now, if they have an economic historian, I don’t know who it is.

Fortunately, it is also possible to name departments where economic history is either on the rise or holding its position, with multiple economic historians and consistent production of good Ph. D. students. UC Davis, Yale, Vanderbilt, George Mason, and Northwestern are some of the schools that come to mind. My apologies to the other good schools I did not mention.

Bankruptcy

Juan Sanchez of the St. Louis Fed looks at recent bankruptcies and concludes that

"BAPCPA clearly had an impact on the number of bankruptcies being filed. However, the exact impact may not be known for some time, since the recession hit right after the BAPCPA was implemented."

I agree that it is going to be difficult to determine the impact of BAPCPA (Bankruptcy Abuse and Consumer Protection Act) . Consumer bankruptcy is usually the end of a series of events: debt, default, and non-bankruptcy collection. There are a many things besides the bankruptcy law that play a role in the process.

Also from the St Louis Fed is this discussion of a symposium on the balance sheets of American families.

The Gold Standard

Here is my favorite gold standard political cartoon from an 1896 Harper's Weekly.

The cartoon shows godlbugs as widows, orphans and veterans. In other words, people living on fixed incomes. It reflects the view that the primary benefit of a gold standard was to place a constraint on the money supply.

However, from the St Louis Fed on U.S. economic performance under the gold standard from the St. Louis Fed: "the historical evidence indicates that neither a gold standard nor the absence of a central bank guarantees economic or financial stability."

The end of capitalism?

Jeremy Rifkin says the end of capitalism is coming. In the meantime, he will tell you about it for only $20,000 to $40,000.

History of Capitalism at the Legatum Institute

The Legatum Institute has a program on the History of Capitalism.

They are sponsoring a series of lectures, which are available online.



This one is Nicholas Crafts explaining why England was first to industrialize.

Bailyn, Wood and American History

Gordon Wood on Bernard Bailyn and William Black on Gordon Wood on Bernard Bailyn (at the Junto)

I was a bit surprised when Wood suggested that historians had not liked the Barbarous Years. I quickly looked at the reviews in AHR and JAH. They weren’t really too negative.    Archer thought that the book was “a marvelous accomplishment and a testament to Bailyn’s standing as one of our finest historians.” Pulsipher declared that it was the “kind of book that the word “magisterial” was made for.”

 

I’m not sure to what extent Bailyn is regarded as an economic historian, but his early work appeared in the Journal of Economic History and Explorations in Entrepreneurial History as well as The New England Merchants in the Seventeenth Century .

Here is some more recent work on New England merchants and credit by David Flynn and Jeremy Schwartz

Economic Growth

This last week I have been reading Sven Beckert’s Empire of Cotton and Sheilagh Ogilvie and A.W. Carus Institutions and Economic Growth in Historical Perspective. Both deal with the relationship between institutions and economic growth.

Beckert’s book reminds me of the old saying that “There is much here that is new and much that is interesting. Unfortunately, that which is new is not interesting, and that which is interesting is not new.” The interesting parts are the discussions of the industrial revolution (mostly Robert Allen’s theory), the role of force in promoting trade (Findlay and O’Rourke, and others, have made this argument); the capitalist nature of slavery (Conrad and Meyer and Fogel and Engerman said this a long time ago). What’s new is the argument that cotton, slavery and empire were not just important parts of economic history, they are the key to how the west got rich and capitalism was born. The book falls into the popular “________ that changed the World” category, where you insert whatever it is you are writing about into the blank. It places too much emphasis on one part of the economy: cotton. This is particularly true for the United States. We see many references to the importance of cotton as an export, but we never see any information about how important exports were to U.S. growth. The problem is that economic historians for more than half a century have been moving away from simple monocausal arguments about economic growth.  Beckert declares that slavery was the first big business, not railroads. But the new history of capitalism is on no firmer ground making slavery the driving force behind economic growth than Rostow’s non-communist manifesto was in making railroads the driving force. The only difference is that much of the evidence about railroads the importance of railroads was developed after Rostow wrote.

Of course, one can make the argument that “Plunder may not have directly fueled the Industrial Revolution, but mercantilism and imperialism were an important part of the context within which it originated, expanding markets and ensuring the supply of raw materials.” (Findlay and O’Rourke, xx) But Findlay and O’Rourke already made this argument in Power and Plenty.

Sheilagh Ogilvie and A.W. Carus Institutions and Economic Growth in Historical Perspective is at the opposite extreme. For them the devil is in the details. One of their key points is that it is not really productive to consider the influence of one institution in isolation; particular institutions can only be understood within the broader institutional framework that they are a part of. Beckert should have given more consideration to this point because the most obvious problem with his argument is that the institutions at the center of his story (slavery, expropriation, and the use of force to control trade) have existed for a long time. They did not lead to modern economic growth. If Ogilvie and Carus are right understanding modern economic growth might be hard work.

Pioneer Girl

I ordered a copy of Laura Ingalls Wilder's Pioneer Girl: The Annotated Autobiography several months ago, but I just got it last week. The University of South Dakota Press underestimated the demand by a pretty wide margin. I did not read the any of Wilder's books until I was an adult and read them to my kids.  I loved all the detail about life on the Great Plains in the nineteenth century. I remember great descriptions of things like how to build a log cabin and what the brake man did on a train.

http://pioneergirlproject.org/

Financial History

John Turner on Financial History and Financial Economics

Sean Kenny and Anders Ogren on Corporate Governance of Regulation : Unlimited and Limited Banks Compared in the 1907 Crisis (the paper examines Swedish banks in the 1907 crisis)
It is nice to see some international perspective on 1907. In addition, the paper examines some of the same questions regarding regulation of financial institutions as my recent paper on trust companies in the Panic of 1907.

Some Digital History

A digital reconstruction of Washington, D.C. in 1814


The Junto is doing a week long roundtable review of Richard S. Dunn's A Tale of Two Plantations: Slave Life and Labor in Jamaica and Virginia


And here is the website that goes with the book

The Economic Benefits of Finance

A new working paper by Luigi Zingales

New Books in Business History

From the Exchange

If you are working on a book you might want to think about how to put capitalism in the title.

In his keynote address to the Economic and Business History Society when it met in Baltimore Lou Galambos discussed the success of history of capitalism as a brand.

New Stuff on the History of Bankruptcy

Mary O’Sullivan “A Fine Failure: Relationship Lending, Moses Taylor, and the Joliet Iron and Steel Company, 1860-1888,” Business History Review (Winter 2014) examines how one industrial failure actually played out under the 1867 Bankruptcy Act. I found particularly interesting the discussion of conflicts over jurisdiction and the attempts of local courts to protect local interests, including employees and local merchants.

 

M. Susan Murnane, Bankruptcy in an Industrial Society: A History of the Bankruptcy Court for the Northern District of Ohio. (University of Akron Press) provides a detailed study of how bankruptcy courts actually operated over a long period of time. I learned a lot about how referees were selected and how they operated.

Forecasting Recessions

Robert Shiller recently wrote about on the value of economics. I agree with most of what he says, but he also seems to perpetuate a myth about the inability of economists to forecast downturns in the economy.

 

Shiiler states that “Indeed, economists failed to forecast most of the major crises in the last century, including the severe 1920-21 slump, the 1980-82 back-to-back recessions, and the worst of them all, the Great Depression after the 1929 stock-market crash.”

Read more at http://www.project-syndicate.org/commentary/are-economists-good-by-robert-j--shiller-2015-01#IvJFopWQS6EmSZ2Z.99

I am not going to address all of these recessions, but it is relatively easy to look back to 1980. In the New York Times I find this

“the April decline in the composite index was the fourth in the last six months and comes at a time when many private economists are predicting a mild recession during the last half of 1979.” New York Times June 1, 1979 pg. D1.

And this

“Summarizing the latest Data Resources forecast, Miss Mosser said that “the economy will at best slow down and at worst we’ll see a double dip come the first of this year.” New York Times Dec. 2 1980 pg. A1.

Not all economists agreed, but it is certainly not the case that no one saw it coming.

Forecasting recessions with a reasonable degree of accuracy is actually one of the easier things to do in economics. The yield curve, for instance, is an easy to use and pretty reliable tool. If it is upward sloping the chances of a recession in the near future are small. If it flattens out or slopes downward the chances of a recession are pretty good. Anyone paying attention to the yield curve should not have been surprised by our most recent recession.

It is harder to forecast the severity of recession, but Shiller was one of a number of economists that expressed concerns about the underlying strength of the economy in the time leading up to the most recent financial crisis, suggesting that next recession could be severe because of problems in financial markets.  

Economics needs better critics

The Washington Post describes protests at the ASSA.

They suggest that students ask their economics professors

How does climate change factor into our study of economics?
Why is there nothing about Islamic economics in our curriculum?
Should we slow down fast money with a Robin Hood Tax?


The first question is odd because the discussion of market failures, such as degradation of the environment, is a prominent part of mainstream economics. Austrian economists think that mainstream economists talk about almost nothing but market failures. One of the people they targeted was Greg Mankiw. Mankiw is one of the most prominent supporters of increased taxes on negative externalities.

Why are they concerned about Islamic economics but not Catholic social theory? Are they also concerned that natural scientists teach theories based on religious beliefs?

I have no idea what it means to slow down fast money.

I am not what most people would regard as a traditional mainstream economist. I would like to see less attention to formal mathemtical models, and more attention to institutions, to history, and to narrative forms of explanation.  But these people do not appear to have even a basic understanding of economics.

The Benefits of Doing Historical Research

Anthony Grafton and James Grossman in The American Scholar

 

"The best defense for research, however, is that it’s in the archive where one forms a scholarly self—a self that, when all goes well, is intolerant of weak arguments and loose citation and all other forms of shoddy craftsmanship; a self that doesn’t accept a thesis without asking what assumptions and evidence it rests on; a self that doesn’t have a lot of patience with simpleminded formulas and knows an observation from an opinion and an opinion from an argument."

 

In other words, doing history develops skills that all college graduates need.