Pope Francis and Economics

The latest issue of the Independent Review is devoted to consideration of the relationship between Pope Francis and economics. The Introduction is by Robert Whaples. He is a good economic historian, and I hope that I am being fair to his argument.  That said, I do take issue with at least part of the argument. Specifically, he states that “It is clear that Pope Francis and many in the economics profession do not see eye to eye at a fundamental level.” He then proceeds to argue that Pope Francis’s views are inconsistent with fundamental assumptions of economic theory. To make the point clear he refers to the description of the assumptions about consumer behavior in Pindyck and Rubinfled’s microeconomics text :“[C]onsumers always prefer more of any good to less . . . [and] are never satisfied or satiated; more is always better, even if just a little better. (Pindyck and Rubinfeld 2005, 66)" He points out that this assumption is also known as “nonsatiation.”

Whaples then argues that the assumption of non-satiation gives rise to a fundamental difference between economists and Pope Francis:

“As shown earlier, Pope Francis’s view of the world is that one of these foundational assumptions is assuredly invalid. This simply isn’t how God made people. Christianity holds that God made man in His own image. In many cases, this relationship can make man capable of the rationality that goes into the first two assumptions about consumer choice—that preferences are complete and transitive—but the third assumption is fundamentally flawed, says Francis. More material possessions and greater consumption aren’t always or even generally better. A consumer who never feels satisfied with his material life—who always wants more—is not on the path to God.”

Whaples argument, however, misconstrues both what economists do and what Pope Francis is trying to do. First, notice the difference between what Pindyck and Rubinfled say and what Whaples says. Pindyck and Rubinfeld assume that “[C]onsumers always prefer more of any good to less . . . [and] are never satisfied or satiated.” Whaples suggests that Francis believes that “More material possessions and greater consumption aren’t always or even generally better.” Whaples switched from “goods” to “material possessions” and “consumption.” A “good” in economic is anything that a person derives satisfaction (utility) from. A good does not have to be a material possession or something that is generally described as consumption. Whaples is perpetuating one of the most common misconceptions about economics: the belief that economists think people are only interested in their own material well-being, narrowly conceived. People who believe that economists think this way have suggested that voting for interest is inconsistent with economic theory because your vote will not affect the outcome of an election, and therefore will not affect your material well-being. But voting is just as consistent with economic theory as buying a new car. Economic theory does not say what you will or will not get utility from. You can get utility from buying a car, or voting, or going out to dinner, or praying, or buying a diamond ring, or giving to charity, or even from eating this. The things that give people satisfaction are usually the result of culture, personal history, and individual tendencies.

No matter what your preferences, however, you still face the fundamental problem of choice in the face of scarcity. I tell my students it doesn’t matter whether you are Donald Trump or Mother Teresa you have to make choices about how to allocate the resources you have. By the way, I used the Donald in the example long before the election. Even if you only seek to serve God you have time make choices about how to allocate your limited resources, especially time. Francis himself has to choose between time spent in prayer, time hearing confession, time celebrating Mass, time spent on writing encyclicals, time spent meeting with Bishops, and time spent on his many administrative duties as the head of the church.

If economic theory does not say what people want, what does it do? Economic theory says that if people derive satisfaction from something they are likely to do it more if the cost of doing it decreases and likely to do it less if the cost of doing it increases. What economists get out of their models of consumer behavior is predictions about how people will respond to changes in the constraints (things like income and the costs of goods). In models of rational utility maximizing behavior, people respond in predictable ways to changes in the constraints they face. Do people in the real world maximize behavior? I don’t know. I don’t care? I can’t observe their utility. I can observe changes in constraints, and I can observe changes in behavior, and I can assess the degree to which the changes in behavior are consistent with the predictions of the model. I can’t say whether some person will think that voting is a good, but I can predict if the cost of voting increases they are less likely to do it.

As an economist I take people’s preferences as they are. Personally, I may find attendance at stock car race to be more bad than good, but as an economist it is not my business to tell other people that they should not get utility from it. The fundamental difference between economists and the Pope is that telling people what they should want is an essential part of his job as Pope. The Pope is not taking preferences as given and trying to make predictions about behavior. I stated before that people’s preferences tend to come from culture, personal history, and individual tendencies. The Pope, as well as other religious leaders and many secular leaders, do not take people’s preferences as given. They want to shape those preferences. They try to persuade us that we should get satisfaction from one thing rather than another. They try to persuade us that we will be happier if we consume more prayer and charity rather than more cars and marble counter tops.

Ultimately, economists have no more business complaining about the Pope trying to persuade people that they will gain more satisfaction from consuming prayer, penance, and charity than they do complaining about Apple trying to persuade people that they will gain more satisfaction from a Mac than a PC. 

Economic History Update

Eric Hilt has a new paper on “Economic History, Historical Analysis and the "New History of Capitalism."  He is presenting the paper at the Penn Economic History Forum. The paper reviews eleven books that have figured prominently in the New History of Capitalism. It summarizes many of the complaints that economic historians have made about these works but still makes a plea for increased dialogue between economic historians and historians of capitalism.

The Annual Meeting of the American Economic Association will have a session on Cliometrics in Historical Perspective: In Remembrance of  Robert Fogel and Douglas North (follow the link for abstracts of the papers):

A Cliometric Counterfactual: What If There Had Been Neither Fogel nor North?

Claude Diebolt

France National Centre for Scientific Research and University of Strasbourg

Michael Haupert

University of Wisconsin-La Crosse

What Fogel and North Got (Spectacularly) Right, and What They Got (Modestly) Wrong

Deirdre McCloskey

University of Illinois-Chicago

Douglass North, Cliometrics, and the New Institutional Economics: Continuity or Divergence?

Lee Alston

Indiana University and NBER

Cliometrics and Econometrics

Robert Margo

Boston University and NBER

Here are a couple of links related to Joel Mokyr’s most recent book A Culture of Growth: the Origins of the Modern Economy:

Here is review by Brad De Long

Here is an interview with Mokyr

Recent Capitalism and Slavery Stuff

The Junto has been hosting a weeklong series of posts about Slavery’s Capitalism. I blogged about the book here back in August. Part of the discussion in the comments section at the Junto has considered the use of terms like “essential.”

Speaking of “essential”, yesterday Dartmouth hosted what should have been a very interesting debate “Was Slavery Essential to Capitalism?” Doug Irwin was the moderator. Unfortunately, you had to be at Dartmouth to see it, but I heard from Irwin that the Chronicle of Higher Education planned to cover the debate. The participants were Alan Olmstead, Caitlin Rosenthal, Sven Beckert and Trevon Logan.

Speaking of Trevon Logan, I was re-reading his paper A Time (Not) Apart: A Lesson in Economic History from Cotton Picking Books, which I had assigned to my Economic History  class. For what it’s worth, I highly recommend the paper to economists and historians, as well as to people who aren’t economists or historians.

History of Capitalism at AHA

Here is an interesting session scheduled for the meeting of the American Historical Association. Abstracts of each paper can be seen by clicking on the paper title. I have read the first two papers and like them a lot. The Lamoreaux and Wallis paper applies the North, Wallis and Weingast framework of movement from limited access orders to open access orders to the United states by examining changes at the state level during the antebellum period. If you wish to read the paper, it can be found quite easily by searching google scholar. The Rhode and Olmstead paper is a pretty devastating critique of the sloppy quantitative analysis of some of the most prominent “New Historians of Capitalism,” especially Baptist and Beckert. Similar arguments have been made online by me, Pseudoerasmus, and others, but the Rhode and Olmstead paper is very thorough. I haven’t read the Rosenthal paper, which seeks to provide a definition of capitalism that is consistent with both wage labor and slavery. I am somewhat skeptical that capitalism can be a useful analytical concept. The term carries too much baggage. Nevertheless I look forward to reading her paper at some point in the future.

Perspectives on the New History of Capitalism

AHA Session 321

Sunday, January 8, 2017: 11:00 AM-12:30 PM

Centennial Ballroom B (Hyatt Regency Denver, Third Floor)

Chair:

William Summerhill, University of California, Los Angeles

Papers:

The “New History of Capitalism,” Cotton, and Slavery
Paul W. Rhode, University of Michigan; Alan L. Olmstead, University of California, Davis

States, Not Nation: The Sources of Political and Economic Development in the Early United States
Naomi R. Lamoreaux, Yale University; John J. Wallis, University of Maryland, College Park

Slavery, Capitalism, and Commodification
Caitlin Rosenthal, University of California, Berkeley

Comment:

Eric Rauchway, University of California, Davis

Session Abstract

Research within what scholars have come to call the "New History of Capitalism" has revitalized interest in economic history among historians. This session provides an assessment of this work from diverse perspectives. One paper highlights significant problems in the interpretation of evidence in major studies within the New History of Capitalism that focus on slavery and the cotton economy. A second sheds new light on the critical role played by states in key changes that underpinned political and economic modernization in the antebellum era. And a third paper problematizes the scope of phenomena encompassed by capitalism, as the term is presently employed, in order to craft an operational definition that accommodates both wage labor and slavery in antebellum America. Taken together the papers identify pitfalls in both traditional and new interpretations of antebellum economy and polity, while pointing the way forward for historians who seek to undertake research on the fundamental economic and political issues of the era.

The 1894 Act to reduce taxation

Steven Weisman argues in the Washington Post that most people believe the tax rate they pay is fair, but worry that the rich don’t pay their fair share.  I just wanted to elaborate a bit on the history of the income tax.  Weisman writes about the introduction of an income tax during the Civil War and then states that

“The income tax disappeared when the war ended. But it returned on the eve of World War I, enabling President Woodrow Wilson to raise the marginal income tax rate to 70 percent. Wilson called paying taxes a “glorious privilege” and a way for the businesses profiting from military buildup to give back. Sen. Hiram Johnson of California even attacked “the skin-deep dollar patriotism” of those who favored war but opposed taxes on the wealthy.”

The tax did disappear when the war ended and did return on the eve of World War I, but that was the second time it had returned.  The first time was in the 1890s. I suspect it was an editorial decision to leave this episode out. Weisman has written a book about the history of the income tax and certainly knows about the events of the 1890s. Unlike him, I have no space constraint on my blog so I have room to recount the story of the Wilson-Gorman Act. If anyone wants the references for the information below see chapter seven of my book on the Farmers Loan and Trust Company.  

Generally referred to as the Wilson-Gorman Act, or simply the Wilson Act, the official name of the 1894 income tax legislation was "An act to reduce taxation, to provide revenue for the government, and for other purposes." The tax reduction referred to in the Act was a reduction in tariff rates. To make up for the reduction in tariff revenue, the Act imposed a two percent tax on incomes over $4,000. “The object,” the lawyer James C. Carter later explained, “was to redress in some degree the flagrant inequality by which the great mass of the people were made to furnish nearly all the revenue, and leave the very wealthy classes to furnish very little of it in comparison with their means.” 

In addition to being part of the wealthy classes, executives of trust, banking and insurance companies had additional reasons for opposing the new taxes. In addition to the individual income tax, the Act also imposed a two percent tax on the income of corporations. This tax alone would have raised considerable opposition, but the leaders of these particular financial firms were even more troubled that the Act exempted financial institutions organized on a mutual plan from the tax. They wanted to have the law ruled unconstitutional but, there were two obstacles to challenging the law in court. The first obstacle was that the Supreme Court had already rejected a challenge to the constitutionality of an income tax. The income tax imposed during the Civil War had been challenged and upheld.  The second obstacle was that §3224 of the United States Revised Statutes, declared that “No suit for restraining the assessment or collection of any tax shall be maintained in any court.”  Thus individuals and corporations subject to the tax could not directly oppose the collection of the tax through the courts. Only after they had paid the tax under protest could they mount a legal challenge.

William D. Guthrie, a partner in one of the most prominent legal firms in New York: Seward, Guthrie, Morawetz and Steele, believed that the first obstacle was really no obstacle at all. In his opinion, the previous decisions upholding income taxes were in error and, therefore, the Court was not bound by them. The second obstacle was a little more difficult, but Guthrie thought that there was a way around it as well. He believed that a “suit in equity, with the remedy of injunction, often affords the most prompt and satisfactory relief where property rights are involved.”  But to bring the case within equitable jurisdiction it was necessary to show that “there is no plain, adequate and complete remedy at law.”  An injunction could not be obtained simply by arguing the law was unconstitutional. “Before the aid of a court of equity can be invoked,” he explained, “it must appear that the enforcement of the tax would lead to a multiplicity of suits, or produce irreparable injury, or, where the property is real estate, would throw a cloud upon the title of the complaint, or that there is an element of fraud or breach of trust, or some other ground of equitable jurisdiction.”  He concluded that “if a trust company should be about to voluntarily comply with an unconstitutional tax law, and should decline to accede to the request of a shareholder asking the trustees to pay under protest and to contest the legality of the tax, a suit might be brought against the trustees to restrain them from violating their duty.”  The case would not technically be a case to prevent the collection of the tax but a case to prevent a corporation from violating its duty to its shareholders. Nevertheless, the Court would be forced to rule on the constitutionality of the tax.  Guthrie worked to initiate two cases based upon this plan, one with the Farmers’ Loan and Trust Company and the other with the Continental Trust Company.

The boards of trustees of both companies agreed to adopt a resolution “somewhat to the effect that while there is doubt about the constitutionality of the Act, they are not disposed to hamper the Government in collecting its revenue, and that they will, therefore, set aside from the profits of last year a sufficient amount to pay the income tax and will pay it when it becomes due.” After the announcement, Guthrie made a formal request on behalf of Charles Pollock that the company seek the advice of the courts or pay the tax under protest. Charles Pollock was a citizen of Boston and, since 1892, the owner of ten shares of stock in the Farmers’ Loan and Trust Company. The board of directors refused to comply with Pollock’s request and Guthrie filed a bill in equity on behalf of Pollock and all other similarly situated stockholders seeking to enjoin the Farmers’ Loan and Trust Company from paying the tax. The bill claimed that the tax was unconstitutional, that Farmers’ would violate its duty to its shareholders if it paid the tax voluntarily, and that great injustice would be done if the tax were paid. 

Newspapers throughout the country speculated as to who was ultimately footing the bill for the case: New York businessmen, the trust companies, or simply wealthy New Yorkers such as the Astors.  The speculations were largely correct.  Guthrie’s corporate clients were the ones funding the case. Essentially, the lawyers on both sides of the case were working for the trust companies.

Historians have tended to emphasize the personal income tax and the issue of whether or not it was a direct tax:  Article I, Section 8 of the Constitution requires that “Duties, Excises and Imposts, Shall be Uniform throughout the United States.”  Although the personal income tax has received the most attention, Guthrie and his team placed considerable emphasis on the tax on financial institutions and the issue of uniformity.  In Guthrie’s view, “Congress has no power, at the expense of others owning property of the same character, to foster and aid private trading corporations, such as building and loan associations, savings banks and mutual life, fire, marine, inland, and accident insurance companies or associations, which serve no national purpose or public interest whatsoever and which exist solely for the pecuniary profit of their members.” 

Justice Fuller delivered his opinion on April 8. The Court held the law to be invalid in so far as the tax on income from real estate was held to be a direct tax that was not apportioned among the states and the tax on municipal and state bonds impinged on the power of states to borrow. Fuller went on to observe, however, that many of the central issues of the case had not been settled. Justice Jackson had been absent and the remaining justices had not been able to arrive at a majority opinion on whether the entire income tax was unconstitutional. “Upon each of the other questions argued at the bar,” Justice Fuller noted, “the justices who heard the argument are equally divided, and, therefore, no opinion is expressed.”  Because of the importance of the unanswered questions, both sides asked for a rehearing before the full Court. In the meantime, Guthrie attempted to ready other challenges to the Act. Though he did not proceed with them after the application for a rehearing of the Pollock case was quickly accepted by the Court, and the rehearing was scheduled for May 6,7, and 8.

Counsel on both sides made essentially the same arguments they made at the original hearing. The decision of the Court was announced on May 20. The majority of the Court determined the income tax imposed in the law to be invalid. The vote was five to four with Fuller, Field, Brewer, Gray and Shiras in the majority and Harlan, Brown, Jackson and White dissenting  

The victory of the anti-tax forces in 1895 is generally regarded as a fleeting one. The Sixteenth Amendment (1913) allowed for direct taxes that were not apportioned among the states and Congress soon passed an income tax. But the view that Pollock v. Farmers’ Loan and Trust Co. lost its relevance with the passage of the Sixteenth Amendment arises from a tendency to focus solely on the second hearing of Pollock v. Farmers’ Loan and Trust Co. and the issue of the personal income tax. The opinions in both the first and the second hearing of the case contained other rulings on taxation. In both opinions, the Court ruled that the federal government could not tax the bonds of states and municipalities.

Some feared that the Sixteenth Amendment would overturn the exemption of state and municipal bonds. The wording of the Sixteenth Amendment was quite broad. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without any regard to enumeration.” But it only overturned the portions of the Pollock opinion dealing with income. The exemption of income from state and municipal bonds expressed in Pollock was not explicitly overturned by the Supreme Court until 1988 in South Carolina v Baker.  Even then the Court did not reject Fuller’s logic in the Pollock case. Instead, it declared that the case law regarding intergovernmental relations had evolved.  Justice Brennan explained that “under the intergovernmental tax immunity jurisprudence prevailing at the time, Pollock did not represent a unique immunity limited to income derived from state bonds. Rather, Pollock merely represented one application of the more general rule that neither the Federal nor the State Governments could tax income an individual directly derived from any contract with another government.”  The rule applied to an employee’s income and rental income from a state government as well as interest payments on its bonds. Brennan went on to explain that ruling in Pollock no longer applied because this underlying rule had since been rejected. “The rationale underlying Pollock and the general immunity for government contract income,” he declared, “has been thoroughly repudiated by modern intergovernmental immunity case law.”   

By the way, if you were wondering about the picture, it is photograph of Guthrie's Long Island estate.

Are You For Real

I just received an email asking me to sign a statement by "Economists Concerned About Hilary Clinton's Economic Policies." I'm thinking it must be a joke. At the bottom it states that its mailing address is 725 Fifth Avenue, which is the location of Rump Tower. Surely, it must be a joke.

If someone wanted me to sign a statement by "Human Beings Concerned by Pretty Much Every Word That Comes Out of Trumps Mouth" I would happily sign that.

I can't imagine how someone could listen to Trump and be concerned about Clinton's economic policies. Trump talks about defaulting on the national debt, like he has defaulted on so much of his own debt. Of course he can't do this for a while because he will need to borrow a lot to pay for his ridiculous tax and spending "plan."

I have to admit even if I thought his economic plans made sense, and even if I believed that a man who can't open his mouth without a lie coming out would follow through on them, I would not vote for him.

A man who says he will use torture should not be president.

A man who says he will kill the wives and children of suspected terrorists should not be president.

A man who says that he will discriminate against people based on their religion should not be president.

A man who says he will torture people should not be president.

A man who disrespects POWs and the families of people who gave their lives in service of their country should not be president.

A man who could only take the oath of office by lying should not be president.

These are the actions of an evil man. You con't elect an evil man and still be a good country.

How can you worry about Obamacare, or Clinton's tax policies when there is so much more at stake. Obamacare and higher taxes on the wealthy will not ruin the country. Trump will.

By the way, I did not sign the statement.

What Did Historians A Generation Ago Think About Slavery?

This post is an expanded version of a comment that I submitted over at The Junto in response to Benjamin Park’s review of Matthew Karp’s This Vast Southern Empire. The Introductory paragraph states that “A generation ago it was common for historians to talk about the “regressing” southern states in the decades preceding Civil War,” but that “scholarship from the past couple decades have put that myth to rest. Michael O’Brien demonstrated that southerners were intellectuals who contemplated the most sophisticated issues of modernity. Edward Baptist showed how the slave institution increased in strength as the financial staple in America’s capitalistic order. Walter Johnson and Sven Beckert displayed how slaveholders were at the forefront of an increasingly global economy.”

            My only concern in regard to this very informative and well written review is the introductory paragraph. I think the introduction buys into a false historiography of slavery that some authors, most notably Edward Baptist, have been trying to sell. I don’t believe that it accurately characterizes the state of history a generation ago.

            I suppose we could argue about what constitutes a generation ago, but I happened to have a copy of an undergraduate American History textbook from almost 30 years ago: George Brown Tindall’s America: A Narrative History Volume, 2^nd edition (1988). Tindall wrote on page 371 that “More often than not the successful planter was a driving newcomer, bent on maximizing profits. While the profitability of slavery has been a long standing subject of controversy, in recent years, economic historians have reached the conclusion that the slaves on average supplied about a 10 percent return on their cost.” He went on to note that slaves were the most profitable investment available in the South, and that incomes in the South were not only comparable to the wealthiest countries in the World, but that in the newer cotton lands incomes were among the highest in the United States. The view that he presented to undergraduates almost 30 years ago was of a thriving and successful southern economy based on slave labor. There is no indication that he thought this was a controversial interpretation.

            Unlike Tindall, some more recent authors have tried to present a version of the historiography of slavery that has been stripped of a half century of research by economic historians, as well as the fact that much of that research had been incorporated into history texts.

            My comment ended at this point, but I will add some detail about the aspects of research in economic history that have been neglected in some recent work on the history of slavery.

            There are three areas of research that have been largely ignored in a number of recent works on the history of slavery:

1. Research on the economic nature of slavery. Beginning with the work of Conrad and Mayer in the 1950s and extending through the work of Fogel and Engerman in the 1970s and Fogel in the 1990s, economic historians had accumulated a mountain of evidence that slaveholders were profit maximizing capitalists, that they were able to generate increases in productivity over a long period of time, and that they were optimistic about the future of their economic system.  To the extent that recent historians have claimed credit for demonstrating that slavery in the American South was a dynamic capitalist system they are taking credit for something that had already been done.

2. Research on the role of slave produced goods, particularly cotton, in American economic development.  Recently, I noted that several authors in Slavery’s Capitalism rely upon Doug North’s theory of economic growth through interregional trade driven by the South’s specialization in cotton export production. Yet numerous economic historians had compiled evidence that North’s interpretation overestimated the role of interregional trade and underestimated the role of intraregional trade for economic development. The evidence did not support the conclusion that cotton was the driving force behind economic growth. Second, much of the work done on early industrialization has emphasized the role of intraregional trade. Much of early industrialization appears to have been directed at local demand not demand from the South or Europe. See Robert Gallman,"Self-sufficiency in the Cotton Economy of the Antebellum South." Agricultural History 44, no. 1 (1970): 5-23; Lawrence A. Herbst, "Interregional commodity trade from the North to the South and American economic development in the antebellum period." The Journal of Economic History 35, no. 01 (1975): 264-270; Colleen M. Callahan, and William K. Hutchinson. "Antebellum interregional trade in agricultural goods: preliminary results." The Journal of Economic History 40, no. 01 (1980): 25-31; Diane Lindstrom Economic Development in the Philadelphia Region  and, more recently, David Meyer Roots of American Industrialization or see his essay on Industrialization in EH.Net’s Encyclopedia.

            Ignoring the vast scholarship on the subject leads to things like Baptist’s attempt to quantify the relative importance of slave produced cotton, which should be regarded as one of the most embarrassing moments in the history of American history, as he spends two pages making up numbers and then summing them. See here.

3. Research on the negative consequences of slavery for long term economic development. Gavin Wright. "Old south, new south." NY: Basic Books (1986); Stanley Engerman and Kenneth L. Sokoloff. Economic development in the Americas since 1500: endowments and institutions. Cambridge University Press, 2012; Nathan Nunn. "Slavery, inequality, and economic development in the Americas." Institutions and economic performance (2008): 148-80. As Robert Wright has recently argued, the fact that enslavers grew rich does not necessarily imply that slavery enriched the economy as a whole.

While there is a lot of good work being done on the history of slavery, progress will be limited to the extent that new scholars buy this false historiography and fail to address the work done by economic historians over the last half century.

Don't People Read Solow Anymore?

Unlearning Economics had long blog post this morning, reviewing Dani Rodrik’s Economics Rules at Pieria. As one might guess from his name, Unlearning Economics thinks Rodrik is too attached to neoclassical economics and insufficiently supportive of pluralism. I generally, disagree with him. I am an economic historian and an institutional economist, but I am fundamentally a traditional economist. My favorite class to teach is Principles of Microeconomics. I like using very simple models to demonstrate things like the influence of barriers to entry and product differentiation on the performance of firms, or the influence of elasticity on who bears the burden of a tax. I often struggle to see the added value of, for instance, behavioral economics. But what struck me about the post was this passage.

“Though he doesn’t claim so himself, Rodrik’s methodological approach could be considered a more sophisticated restatement of Milton Friedman’s famous paper The Methodology of Positive Economics, which similarly sought to defend economic models from charges of unrealism and irrelevance. While Friedman argued that the unrealism of a theory’s assumptions does not matter as long as the theory makes correct predictions, Rodrik adds nuance to this by stating that while unrealistic assumptions are in general necessary and useful, some assumptions are so important that they must be amended to be more in line with reality. Rodrik calls these ‘critical assumptions’, stating that “an assumption is critical if its modification in an arguably more realistic direction would produce a substantive difference in the conclusion produced by the model.” By doing so he distinguishes his argument from the seeming ‘anything goes’ implications of Friedman’s essay.”

What struck me about the passage was that the author seemed unaware of Robert Solow’s work. I have not read Rodrik’s book yet, but I searched the book on line and was a little surprised that it did not appear to mention Solow either.

This is the introduction of Solow’s 1956 “A Contribution to the Theory of Economic Growth.”

In other words, you have to make simplifying assumptions, but that does not mean that you can assume anything you want. The first footnote is important as well.

 

What is or is not a crucial (or critical) assumption depends on what question you are trying to answer.

More Economic History

The program for the annual Meeting of the Economic History Association is available and has links to many of the papers that will be presented. This morning I read an interesting paper by Geoffrey Fain Williams on the role of the British Joint Stock Banking Acts in the Panic of 1837. 

David Beckworth continues to provide historical perspective on macroeconomic issues at his Macro Musings Podcast. This week he talks to Hugh Rockoff about U.S. monetary history. Previously he has talked to Doug Irwin about trade, Jason Taylor about the Great depression and World War II, and Brad DeLong about Hamiltonian political economy.

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

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

The good:

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

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

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

The Bad:

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

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

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

The Ugly:

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

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

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

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

Olmstead and Rhode argue:

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

Baptist argues:

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

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

Why I Don’t find Baptist Persuasive

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

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

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

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

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

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

Other Things and Stranger Things

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

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

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

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

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

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

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

some economic history stuff

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

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

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

Michael Munger talks about slavery and racism at Econtalk.

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

Some other stuff:

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

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

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

Program of the World Congress on Business History

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

BTW this is Dodger the Doggy

Inequality in Economic History

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

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

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

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

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

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

Open Access in History and Economics

The Exchange had a post the other day about a special issue of the Journal of the Gilded Age and Progressive Era focusing on the history of capitalism. Several of the papers looked interesting. Unfortunately, I discovered that I only have access to JGAPE with a one year delay. My wife teaches at American University, and their access also has a one year delay. I then took the next step of searching for open access versions of the papers: working papers or papers presented at seminars. I put the title and author of each paper into Google Scholar. I did not find an open access version of a single one of the papers. I then tried the same thing with the first seven papers in the August issue of American Economic Review. Granted, this is a small and unscientific sample. Nevertheless, the result is consistent with the impression that I have had for a while that economics is more open access than history. What I am not sure about is why. I think economists believe that there is no cost to providing open access to working papers, and, as best I can tell, there is not. Do historians believe there is a cost? Is there? I know there are concerns about open access to dissertations reducing the demand for a book derived from that dissertation. Are these concerns well founded? And what about journal articles? 

Women and Econ Blogs

Claudia Sahm blogged about the lack of women among econ bloggers

I looked at intelligenteconomist.com’s list of top economic blogs an only found four (out of one hundred)

Carola Binder

Jodi Beggs at Economists Do It With Models

Lynne Kiesling (with Michael Giberson) at Knowledge Problem

Muriel Niederle at Experimental and Behavioral Economics

Economic History from the Last ASSA

Historical Perspectives on Financial Crisis, Banks and Regulation 
Presiding: Gary Richardson 
Crisis and Collapse in the Long Run: Some Microeconomic Evidence Raghuram Rajan and Rodney Ramcharan
What Ends Banking Panics? Gary Gorton and Ellis Tallman
Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve Mark Carlson and David Wheelock 
Commercial Bank Leverage and Regulatory Regimes: Comparative Evidence from the Great Depression and Great Recession Christoffer Koch, Gary Richardson and Patrick Van Horn 
View Webcast

Critiquing Robert J. Gordon's Rise and Fall of American Growth (Panel Discussion)
Presiding: Robert Shiller
Gregory Clark
Nicholas Crafts
Benjamin Friedman
James T. Robinson
View Webcast

Evononsense and Homo Paleas

I was just looking at Evonomics.com, an important new source of misinformation about economics. Numerous essays there talk about how economic analysis is based on the study of homo economicus, a creature that is only concerned about its own selfish material interest.  

More specifically:

“homo economicus… is the character that inhabits the economics texts, and the computer models that are the silent dictators of analysis and policy. Econ, as I will call him, is a myopic integer of self-seeking, who goes through life with a relentless and unfailing calculus of personal loss and gain. He has no social affinities, is oblivious of social context, and has no capacity or inclination to think of anyone besides him or her self.” (Jonathan Rowe at Evonomics)

It is easy to see how foolish those economists are and what a waste of time economics is. There is only one small problem. The imaginary being is not homo economicus, it is homo paleas. Homo paleas is an imaginary economist created by people who want to criticize economics without having to go to the trouble of studying what economists actually do.

Economists generally do analyze models in which people are assumed to maximize utility, but these people can get utility from anything they like. No real economist says that you can’t get utility from someone else’s pleasure, or, for that matter, someone else’s pain.

What have economists actually said?

Adam Smith wrote in his Theory of Moral Sentiments that

“How selfish soever a man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though h derives nothing from it except the pleasure of seeing it.”

Well, Smith was special. It must have been after him that economists starting studying homo economicus. What did Alfred Marshall say?

Alfred Marshall wrote in his Principles of Economics that

“Thus though it is true that "money" or "general purchasing power" or "command over material wealth," is the centre around which economic science clusters; this is so, not because money or material wealth is regarded as the main aim of human effort, nor even as affording the main subject-matter for the study of the economist, but because in this world of ours it is the one convenient means of measuring human motive on a large scale. If the older economists had made this clear, they would have escaped many grievous misrepresentations; and the splendid teachings of Carlyle and Ruskin as to the right aims of human endeavour and the right uses of wealth, would not then have been marred by bitter attacks on economics, based on the mistaken belief that that science had no concern with any motive except the selfish desire for wealth, or even that it inculcated a policy of sordid selfishness.” (Book I Ch. II).

Okay, it wasn’t Marshall. Maybe economists now think that people can’t care about others.

In 2011, Andersen, Ertac, Gneezy, Hoffman and List explained that

“where economics provides its most basic predictions revolves around how people should respond to changes in incentives—pecuniary or nonpecuniary (Gneezy and Aldo Rustichini 2000)—not whether subjects have fairness, spite, or altruistic proclivities.” (Stakes Matter in Ultimatum Games)

Because they analyze the actions of the imaginary homo paleas rather than actual economists, these critics of economics think they have shown the weakness of economics when they point out that people vote, or give to charity, or are willing to incur a cost to punish economic experiments are concerned with fairness. The trouble is that there is actually nothing in economics that suggests a person cannot care about other people.

Economics theory does not suggest that people should not give to charity. It suggests that people will do it more if you lower the cost by, for instance giving a charitable deduction.

Some New Stuff

Here is the program for the Development of the American Economy section of the NBER summer Institute. There are links to many of the papers.

Here is the program for a conference on the history of capitalism. Although I have been critical of much of what has been labeled the new history of capitalism, there are some interesting looking papers here. I don't plan to go to the conference, but I look forward to seeing Sharon Murphy's work on bank financing and slavery at some time in the future.

Here is Jeffrey Beall blogging about a new paper on open access publishing (particularly the fraudulent form of it) by my colleague Margaret Ray. He provides a link to the paper.

Based upon this tweet, it appears that someone at Cornell's History of Capitalism Camp was talking about Mary Eschelbach Hansen's work on bankruptcy. She is, by the way, my favorite economic historian.

Stanley Fish on Historians Against Trump

The New York Times published a remarkably dishonest essay by Stanley Fish. Fish attacks a group of historians for publishing a statement opposing Donald Trump.

Fish begins by making clear that, while he is specifically attacking these historians, his remarks really apply to all professors. Ironically, the historians make clear in their letter that they are not all professors. Even casual examination of the list of historians reveals that many are not professors. But Fish won’t let details like that get in his way. (quotes from Fish are in bold)

“PROFESSORS are at it again, demonstrating in public how little they understand the responsibilities and limits of their profession.”

Fish claims that

“They suggest that they are uniquely qualified to issue this warning because they “have a professional obligation as historians to share an understanding of the past upon which a better future may be built.”

This is a really nice touch. Fish has taken a quote from the letter, but introduced it with a lie. Nowhere in the letter is it explicitly or implicitly suggested that historians are uniquely qualified. To the contrary, the letter refers to other groups that have already issued similar letters.

This is followed by some more cutting, pasting and inserting by Professor Fish. He is, after all, Professor Fish, which is the reason is being published in the New York Times.

Or in other words: We’re historians and you’re not, and “historians understand the impact these phenomena have upon society’s most vulnerable.” Therefore we can’t keep silent, for “the lessons of history compel us to speak out against Trump.”

I’ll just include this statement about extraordinary hubris for the enjoyment of anyone that knows who Stanley Fish. I wouldn’t be surprised if Fish himself didn’t get a good laugh out of it.

I would say that the hubris of these statements was extraordinary were it not so commonplace for professors (not all but many) to regularly equate the possession of an advanced degree with virtue.

He then returns to his assertion that the historian’s claim to be uniquely qualified.

The claim is not simply that disciplinary expertise confers moral and political superiority, but that historians, because of their training, are uniquely objective observers: “As historians, we consider diverse viewpoints while acknowledging our own limitations and subjectivity.”

In fact, no such claim of uniqueness is made in the letter. They don’t say that all historians oppose Trump and they don’t say that only historians are in a position to evaluate Trump. They simply state that they are historians and that their position as historians has led them to believe that they should oppose Trump.

Historians do have to consider diverse viewpoints and acknowledge their own limitations and subjectivity. They don’t all do it well. I spend plenty of time criticizing bad historical scholarship, but that criticism presumes that historians should consider diverse viewpoints and acknowledge their limitations and subjectivity.

In the interest of acknowledging my own subjectivity, I probably should acknowledge that I hate Trump with the white hot passion of a thousand burning suns. But the evidence that Fish is lying is clear. Simply read the letter.

The Rise and Fall of American Economic Growth

I finally got around to reading Robert Gordon’s Rise and Fall of American Economic Growth. It is an excellent book. Much of the book is essentially an expansion of Lebergott’s Pursuing Happiness. It describes the many ways in which the material conditions of life (what they consumed, how they worked, and their health) were transformed from 1870 to 1970. Gordon argues that economic growth this period essentially created modern economic life: comfortable homes with electricity and clean water, cars parked out front, and all of this purchased with less labor hours and less onerous labor. 

Much of the attention the book has received has focused on Gordon’s argument that current innovations in information and communication are not transforming life the way the earlier changes did and that the rate of growth is unlikely to return to the rapid pace experienced for most of the twentieth century. This argument actually occupies a relatively small part of the book. I also found this part of the argument to be somewhat more cautiously stated than I think it has been in the popular press and in blurbs for the book. While Gordon argues that some of these innovations were uniquely transforming and points to specific factors that he believes are likely to slow growth (e.g. demographic change, education, inequality), he also has suggestions for policy changes which might mitigate some of these headwinds (e.g. reducing excessive regulation, policies to reduce inequality). In other words, he doesn’t appear to believe that the current course is inevitable. He also acknowledges that any attempts to make predictions about future innovations are somewhat speculative.

His analysis of the causes of the “Great Leap Forward” also seems reasonable, though I think he gives too much credit to Alex Field for pointing out the technological innovations that took place during the Great Depression and not enough to Michael Bernstein, who emphasized these changes long before Field.

I do tend to disagree with Gordon and others who underplay the transformation brought about by information technology. You can say that it is only entertainment and communication but my children ages 17, 23 and 27 are never without their phones. They use social media, they watch movies and tv shows. They listen to an incredible variety of music. When I was a teenager you pretty much had to pick one kind of music: heavy metal, or punk, or disco. My kids listen to everything. They listen to podcasts on soccer, cooking, politics, etc. They can’t get lost. A map is no further than the phone. Maybe it is just entertainment and information, but it is a world of information and entertainment in their hand.

I agree with Gordon that attempts to make predictions about future innovations are speculative, but I tend to be somewhat more optimistic than he is. In part, my optimism stems from the dismal performance of dire predictions about the future. Read Jevon’s on the Coal Question, or Alvin Hansen on secular stagnation.

Part of my optimism is also related to what I think might be the chief weakness of the book. It tells the story strictly from an American standpoint. The problem with this is that the same things happened in many other countries. The United States is not the only wealthy country. One of the things that I believe I learned from John Nye (listen to John’s Econ Talk on the Great Depression, Political Economy and the Evolution of the State) is that you might want to occasionally look outside of particular area to see if the same thing is happening in other places. If it is, you might want to ask what are the broader forces at work. I think that if innovations can travel across borders and innovation is not isolated to Americans there are some good reasons to be optimistic. Increased economic freedom and access to education in Asia have the potential to dramatically increase the pool of innovators. I don’t think that economic freedom is firmly enough established to feel completely secure about this, but I think the potential is great.