is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

Institutional Change and American Economic Growth

Author(s):Davis, Lance E.
North, Douglass C.
Reviewer(s):Morris, Cynthia Taft

Lance E. Davis and Douglass C. North (with the assistance of Calla Smorodin), Institutional Change and American Economic Growth. Cambridge: Cambridge University Press, 1971. viii + 282 pp.

Review Essay by Cynthia Taft Morris, Department of Economics, Smith College and American University.

Davis and North Launch Neoclassical Institutional Theory

This book is an early major step in the evolution of the thinking of Douglass North and his collaborators on the “new” neoclassical theory of institutional change — the institutional arm of the new economic history that began to flourish in the 1960s. Among the many notable later steps are The Rise of the Western World (1973) with Robert Paul Thomas and “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice” with Barry Weingast (1989) — which ranks third in citations among articles ever published in the Journal of Economic History.

Lance Davis and Douglass North develop a theory of institutional change so familiar that it is easy to forget the theory was ever “new.” They lay out a model where the core logic of institutional change is neoclassical cost-benefit analysis and the motivating drive for institutional change is profit maximization. The goal of the authors’ “intellectual journey through American economic history [is] . . . to provide a description of the processes that have produced the present structure of economic institutions. That description, in turn, is the basis for a first (and very primitive) attempt at the formulation of a specified, relevant, and logical theory of the birth, growth, mutation, and, perhaps, death of these institutions. The book is a study of the sources of institutional change in American history. It is concerned with the relationship between economic organization and economic growth” (p. 4).

Chapter 1 presents the concepts and definitions (institutional and economic environments, institutional arrangement, institutional instruments, and institutional innovation). An institutional arrangement will be innovated if the expected net gains exceed the expected costs. Arrangements range from purely voluntary to totally government controlled and operated and seek to realize economies of scale, lowered transactions costs, internalization of external economies, reduction of risk, or redistribution of income (pp. 10-11).

Chapter 2 analyses the government’s role in redistribution. The authors’ purpose is to include the role of government in their theory of institutional change in spite of the unsatisfactory state of political theory. To exclude it would likely “yield a model of institutional change no more useful in the growth context than are the present models with their ceteris paribus assumptions about institutions” (pp.37-38). In their analysis, governments with effective coercive power will be the preferred vehicle for institutional innovations where governments are well developed but markets are not, where external benefits are large but property rights are dispersed, where benefits are substantial but indivisible, and where benefits are not increased and the goal is redistribution. The costs of using government to appropriate others’ wealth and income depends on the numbers and heterogeneity of the persons organized, the feasibility of excluding outsiders from benefiting, the complexity of political coalitions, the rules of the political game, and the character of electoral suffrage.

Chapter 3 specifies the dynamics of the model in the context of American history. The authors seek to predict both the institutional “level” of change and the time lag from first perception of profit opportunity to institutional innovation: New institutional arrangements will be innovated where profit or income opportunities appear that require institutional changes or where cost reductions can be achieved with new business forms or political moves redistributing income. Among many influences changing the benefits and costs of institutional innovations are changes in market size, technical change, changes in income expectations, organizational changes in closely related activities, cost reductions associated with government-financed information or reductions in risk, and political changes altering voting or property rights. All these except political changes have parallels in neoclassical theories of technical change. However, “to do no more than assert a relationship between income changes and arrangemental innovation is hardly a significant step; . . . it is our intention to offer a theory that helps predict (or explain) the emergence of these new or mutated arrangements. In particular, the theory predicts the level (individual, voluntary cooperative, or governmental) of the new institutional arrangement and the length of time that passes between the recognition of the potential profit and the emergence of the new arrangement” (p. 39).

The core of chapter 3 divides the causes of varying lags between the perception of an innovation and its successful emergence into four steps: perception and organization, invention, menu selection, and start-up time. (i) The time lag between perceived profit and the organization of a “primary action group” depends on how much profits there are and their certainty. (ii) Where no suitable options are immediately available, time is required for invention. (iii) Where options are available, time is required to search out and select the most profitable ones. (iv) The start-up time for the innovation will vary with the “level” of institutional change, that is, according to whether it is an individual arrangement (shortest lag), a voluntary cooperative one (a longer lag because of more complex arrangements), or a governmental innovation (a still longer lag because political organization is required).

The final chapter of Part I on the theory deals with the exogenous institutional environment, and thus the initial conditions in Davis and North’s model of institutional change. Chapter 4 sketches substantial historical changes in the institutional environment: the rules governing the extent and weighting of voting rights, the legal basis for private property, and “the expectational weights that the community chooses to apply to the future costs and revenues of particular arrangemental innovations — weights that are the product of experience triggered by events exogenous to the model” (p.65). Important sources of change in these three aspects of economic life are (i) the Constitution and its interpretation by the courts, (ii) the common law, and (iii) “the external changes in the political and economic life of the nation that affect the people’s attitudes toward government” (p. 65). A lively sketch of dramatic historical changes and fluctuations over 175 years in each of these categories follows.

Part II consists of six historical chapters in which Davis and North apply their model of institutional change to American economic history by telling vivid stories of changes in land policies, financial institutions, transportation, market structure in manufacturing, the organization of the service industry, and labor market changes affecting unions and education. These stories illustrate well the explanatory potential of their model by describing the history of business and labor responses to changing profit and income opportunities through the adoption of new institutions or adaptations of old ones. No attempt is made here to evaluate these stories since this reviewer has no specialized expertise in American economic history. Of necessity given space constraints, they are selective and reflect the specialties of the authors, as they themselves carefully state in the introduction to the book.

The great strength of the neoclassical theory of institutional change is that it yields an insightful and plausible “explanation” of a wide range of institutional changes over time in individual market economies where the private profit motive is strong and neoclassical-type market supply responses are already widespread. An enormous volume of literature has developed in response to the work of Douglass North and his colleagues. North himself has been an outstanding leader in the expansion of the scope of applications of neoclassical institutional theory.

The limitations of the theory are most evident in the study of cross-country differences in institutional responses to the challenges of opportunities for profit and higher incomes. The new economic theory of institutional change is a variant of historical challenge and response theories, all of which suffer from a similar problem. To quote Nathan Rosenberg’s discussion of David Landes’s Unbound Prometheus (1969), “the industrial world is full of ‘challenges’ and always has been. Why do some challenges in some places at certain times generate successful responses and at other times do not?” (1971, p. 498). Telling historical stories consistent ex post with theories of institutional change does not address the questions raised by many historical instances when profitable opportunities for institutional change did not bring forth historical responses that helped accelerate economic growth. Constrained by its focus on market opportunities and responses, the neoclassical institutional theory poorly accommodates institutional changes driven by nationalist, religious, or imperialist motives so intense as to sacrifice economic gain. Also, the theory accommodates poorly historical country-specific institutional developments that are the outcome of chance and strong path dependency such as are evident in historical patterns of private land acquisitions or foreign domination in some developing countries.

The limitations to the excellent work of North and his collaborators are noted here as a warning that no one theory handles well the diversity of comparative historical experience. Casual empiricism is the usual practice in delimiting the countries and periods to which each theory applies. Because of this, the entire literature on institutional change is particularly weak on the diverse consequences of similar economic, demographic, and technological changes in different institutional settings. We all need to delimit more effectively the domains to which familiar models apply (Morris and Adelman, 1988, p. 32).


David S. Landes. 1969. The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present. Cambridge: Cambridge University Press.

Cynthia Taft Morris and Irma Adelman. 1988. Comparative Patterns of Economic Development, 1850-1914. Baltimore: Johns Hopkins University Press.

Douglass C. North and Robert Paul Thomas. 1973. The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press.

Douglass C. North and Barry Weingast. 1989. “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,” Journal of Economic History, 49 (December): 803-832.

Nathan Rosenberg. 1971. “Review of the Unbound Prometheus,” Journal of Economic History, 31 (June): 497-500.

Cynthia Taft Morris is distinguished economist in residence, American University and Charles N. Clark Emeritus Professor of Economics, Smith College. She is past president of the Economic History Association.


Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):General or Comparative

Anthropologists in the Stock Exchange: A Financial History of Victorian Science

Author(s):Flandreau, Marc
Reviewer(s):Attard, Bernard

Published by EH.Net (September 2017)

Marc Flandreau, Anthropologists in the Stock Exchange: A Financial History of Victorian Science. Chicago: University Press of Chicago, 2016. xix + 421 pp. $105 (cloth), ISBN: 978-0-226-36044-7.

Reviewed for EH.Net by Bernard Attard, School of History, Politics and International Relations, University of Leicester.

Marc Flandreau, a financial historian and professor at the Graduate Institute of International Studies and Development in Geneva, has written a book about white-collar crime, science and power in mid-Victorian Britain. He argues that the often fraught relations between knowledge, truth and value meant that the incentives to exploit and commercialize scientific knowledge for private gain were as great for the Victorians as they are today. Victorian anthropology thus serves as a metaphor for the wider dilemma facing social science and Flandreau’s ambition becomes nothing less than to write a book “about modernity and its birth” (p. xv). At the heart of his study is the conjuncture in the 1860s and early 1870s of the foreign loan boom on the London Stock Exchange, the institutionalization of anthropological science and what Flandreau views as the reconstruction of British imperial policy. These are connected by a large cast of characters (including Flandreau’s white-collar criminals); by their often occluded links with the British state; and, above all, by the great mid-nineteenth century expansion of the capital market and its pervasive impact on Victorian society.

It will already be evident that this is no ordinary book of economic history. In fact, it is not written as economic history at all, or certainly not the kind concerned with quantification and model testing. This is not a criticism but merely a signal to the readers of this review. In both research method and discursive practice, Flandreau self-consciously uses the techniques and craft of the historian rather than the social scientist. The narrative form has been chosen to discover his particular truths. Where Flandreau remains distinctively a financial historian is in choosing the tools of financial economics to analyze the ways in which Victorian anthropological knowledge was created, appropriated and turned into value on the Stock Exchange through the creation of financial securities that could be puffed, sold, shorted and otherwise manipulated. The problem of value, Flandreau asserts, is “at the heart of the social sciences” (p. xi), which are never disinterested. Throughout, however, the analysis is grounded in the painstaking accumulation of qualitative evidence and the moral vision of Anthony Trollope’s great contemporary novel about white-collar crime and corruption The Way We Live Now, written in 1873 and serialized in 1874–75.

The foregoing explains the subtitle of Flandreau’s book: “A Financial History of Victorian Science.” Anthropologists figure in the main title because at the heart of his story is the brief career of the Anthropological Society (colloquially known as “the Cannibal Club”), which broke away from the Ethnological Society of London in 1863 and then merged back into it to form the Anthropological Institute in 1871. By coincidence or design (the particular conjuncture matters most to Flandreau) the attacks on the reputation of the Anthropological Society which led to its ultimate demise happened almost simultaneously with the formation of the Corporation of Foreign Bondholders in early 1869, itself an amalgamation of several smaller bodies. Just as significantly, they occurred when upstart part-time or quasi anthropologists were becoming increasingly disruptive as orchestrators of public opinion and promoters of financial schemes associated with parts of the world, notably Central America and Africa, about which they claimed special knowledge. Most notoriously, these individuals were mixed up in some of the hopelessly grandiose ventures, like the Honduran interoceanic “ship-railway,” that were eventually investigated by the 1875 Select Committee on Foreign Loans. For Flandreau, however, his characters were not simply representative of the diverse interests and activities of the British upper-middle class but engaging in a deliberate and carefully staged traffic between the Victorian learned societies and the Stock Exchange as a result of which scientific truths were established, manipulated and turned to commercial advantage. Flandreau is thus also seeking to recast the history of Victorian anthropology and reinstate several relatively forgotten and sometimes disreputable figures. In his version, the rivalry of the Anthropological and Ethnological Societies was not, as conventionally understood, a contest between alternative versions of anthropological science: the one racist, sexist and possibly bankrolled by the American South (the Anthropologicals); the other concerned exclusively with the disinterested pursuit of scientific truth (the Ethnologists). Rather, it was a struggle over the ownership of anthropological knowledge (and thus the value that could be extracted) between insiders and outsiders in Victorian society, i.e. social groups whose status and access to power differed considerably. The final merger of the two societies and creation of the Anthropological Institute is interpreted as a successful bid by the political and scientific establishment to reassert control over the creation, uses and abuses of anthropology after the various disturbances — scientific, financial and imperial — with which members of the Cannibal Club had been associated.

This is a rough summary of a complex and sometimes convoluted argument whose many threads Flandreau assiduously follows. His method is the piecing together of apparently isolated fragments of information to discern patterns, correspondences and connections, some of which are candidly speculative. For those with a general interest in Flandreau’s work but who only want the gist of his argument, the Preface (also containing his apologia), Introduction (“The Stock Exchange Modality”) and Conclusion (“Catharsis: The Displayed and the Hidden”) will be sufficient. The Introduction, in particular, sets out Flandreau’s arguments about the “stock exchange modality” — best summed up in his own words as “the ‘art of puff’ or the promotion of bubbles” (p. 8) — as a form of knowledge, and “brokerage” as a Jungian archetype which connects the never disinterested efforts of the anthropologists to what went on more obviously in the Stock Exchange. In fact, Flandreau describes the stock exchange modality as his book’s “true subject” (p. 4) and the source of its contemporary relevance.

Otherwise the meat of the book is in 11 chapters, each comprising several short sections. The first (“Writing about the Margin”) is a conspectus of what follows, introducing the key characters, institutions and themes. The emphasis here is on the connected worlds of Victorian science and finance. Chapter Two (“Rise of the Cannibals”) presents Flandreau’s reinterpretation of the origins of the Anthropological Institute and the rivalry between its two predecessors. Chapter Three (“Anthropologists without Qualities”) investigates the social origins of the Anthropological Society and therefore the sociology of Victorian science itself. By doing so, it also seeks to rehabilitate the Cannibals from the allegation that they were peculiarly racist and sexist, arguing that they were not conspicuously more so than their rivals. Chapter Four (“The Ogre of Foreign Loans”) turns attention to the foreign loan boom of the 1860s and early 1870s. Here the learned societies contributed by lending their authority to the dubious assertions of financiers and promoters. Chapter Five (“The Learned Society in the Foreign Debt Food Chain”) switches to the anthropologist as entrepreneur and white-collar criminal, taking as its model George Earl Church, a U.S. citizen and sometime vice-president of the British Royal Geographical Society, who promoted an abortive Bolivian railway in the early 1870s and a government loan which soon went into default.

Chapter Six (“Acts of Speculation”) explores the notion of good faith (bona fide) and the rituals involved in testing it. For Flandreau, far more than the gentility of Cain and Hopkins’ “gentlemanly capitalists,” a person’s bona fides was the basis of reputation and trust — one of the “technologies of trustworthiness” — in both Victorian science and the Stock Exchange. Chapters Seven and Eight (“Wanderlust: The Upbringing of a Victorian Racist” and “Salt-Water Anthropology”) follow the career of Bedford Clapperton Pim, naval officer, anthropologist, entrepreneur, conservative Member of Parliament and (in Flandreau’s account) white-collar criminal. Pim’s history exemplifies the “interestedness of science.” Anthropology allowed him to create a form of property which he used to launch his grandiose transportation schemes in Central America. In his hands, it becomes one of the “micro-technologies of globalization.” Chapter Nine (“The Violence of Science”) turns attention to British imperialism and the role of the Anthropological Society in orchestrating public opinion against the Liberal government over its non-interventionist policy during the Abyssinian hostage affair of 1864–68. For Flandreau it is an instance of how the learned societies were becoming powerful constituents of public opinion whose influence was discerned and responded to by politicians like the Conservative Benjamin Disraeli, who had past experience in stock exchange promotion and present connections with individuals like Pim. Chapter Ten (“The Man Who Ate the Cannibals”) shifts the story to Hyde Clarke, an engineer, occasional statistician and writer on business cycles, promoter and anthropologist, whose attack on the Anthropological Society in the Athenaeum in 1868 was instrumental in its ultimate demise. Clarke’s actions are represented here as a bear speculation modelled on the techniques of the Stock Exchange, while Clarke himself, who came to be Secretary of the Corporation of Foreign Bondholders, is characterized as a “fixer” whose social utility derived from performing this function in a variety of contexts.

Finally Chapter Eleven (“Subject Races”) draws together the many threads of the narrative. Here Clarke’s raid on the Anthropological Society and the formation of the Corporation of Foreign Bondholders shortly after in February 1869 are interpreted as part of a bipartisan effort by the Victorian state to take back control of the management of foreign loans and even imperial policy itself from the kinds of persons — delinquent consuls and naval officers as well as stock exchange operators — whose bona fides were manufactured by bodies like the Anthropological Society. It was the assertion of the establishment over the insurgents and incomers, and at its core was “a redefinition of what constituted the contours of good and bad in both finance and anthropology” (p. 261). In this the Liberal politician, banker and scientist, John Lubbock, who served in senior positions in both the Anthropological Institute and the Corporation, is seen as a pivotal figure.

This is a necessarily inadequate summary of a densely written and closely argued text. The scale of the problem confronting any reviewer will be evident. This is a book about criminality, Victorian science, the foreign loan boom and British imperialism, all within the same field of vision. It is by turns hugely ambitious, challenging, exasperating and deeply personal. Specialists will no doubt have something to say about the various subjects it straddles. For this reviewer it appeals most directly as an exploration of two connected things: the culture of mid-Victorian financial capitalism and the ramifying impacts in the wider culture, society and politics of the rise of a rentier society. Above all, however, it should encourage us to look at the apparently familiar with fresh eyes.

Bernard Attard is a Lecturer in Economic History at the University of Leicester. His most recent publication, “Imperial Central Banks? The Bank of England, London & Westminster Bank, and the British Empire before 1914,” appeared in Olivier Feiertag and Michel Margairaz (eds), Les banques centrales et l’État-nation (Paris: Presses de Science Po, 2016).

Copyright (c) 2017 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (September 2017). All EH.Net reviews are archived at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century

John Bascom and the Origins of the Wisconsin Idea

Author(s):Hoeveler, J. David
Reviewer(s):Johnson, Marianne

Published by EH.Net (July 2017)

J. David Hoeveler, John Bascom and the Origins of the Wisconsin Idea. Madison: WI: University of Wisconsin Press, 2016. xi + 229 pp. $45 (hardcover), ISBN: 978-0-299-30780-6.

Reviewed by EH.Net by Marianne Johnson, Department of Economics, University of Wisconsin — Oshkosh.

In 2014, as part of the biennial budgetary process, Governor Scott Walker proposed to modify the University of Wisconsin’s mission, known as the Wisconsin Idea, striking the statements to “extend knowledge and its application beyond the boundaries of its campus,” to “serve and stimulate society,” and to “extend training and public service designed to educate people and improve the human condition.” He also proposed to delete the phrase “Basic to every purpose of the system is the search for truth.” Instead, the university system was to “meet the state’s workforce needs.”

When discovered buried deep within the budget proposal, the changes were met with outcry and condemnation from the University and its supporters. University of Wisconsin System President Ray Cross stated “The Wisconsin Idea is embedded in our DNA. It is so much more than words on a page. It is the reason the UW System exists. It defines us and forever will distinguish us as a great public university” (Milwaukee Journal Sentinel, 4 February 2015). The New York Times editorialized “Save the Wisconsin Idea” (16 February 2015).

When confronted, the governor denied instigating the changes and blamed a “drafting error.” Sued by the Center for Media and Democracy and several Wisconsin citizens under Wisconsin’s Open Records Law, documents revealed a deliberate attempt to circumscribe the mission of the University of Wisconsin and its system of affiliated schools.

To understand both why the governor had sought the change and the reaction of those in the University of Wisconsin system, it is important to have a book such as that by David Hoeveler on John Bascom and the Origins of the Wisconsin Idea. Combined with Nancy Unger’s biography of Robert La Follette (2000) and Malcolm Rutherford’s The Institutionalist Movement in American Economics (2011), academics and interested readers now have a trio of excellent historical works on the Wisconsin Idea, Wisconsin Progressivism, and Wisconsin’s unique brand of Institutional economics.

Wisconsin gained outsized influence in the early part of the twentieth century, driven by larger-than-life personalities such as “Fighting Bob” La Follete and his partner in reform, University of Wisconsin President Richard Van Hise. The latter is usually credited with the first complete statement of the Wisconsin Idea. Richard T. Ely and E.A. Ross remade the social sciences as taught at American universities, drawing on the German academic tradition of seminars. John R. Commons and his army of disciples oversaw an expansive national political advocacy campaign for labor reform, unemployment insurance, social security and the minimum wage.

Ely was famously prosecuted for espousing socialist doctrines in 1894. The Board of Regents ruled in Ely’s favor, setting the standard for academic freedom. University President, Charles Kendall Adams, writing on behalf of the Board of Regents concluded that “Whatever may be the limitations which trammel inquiry elsewhere, we believe that the great state University of Wisconsin should ever encourage that continual and fearless sifting and winnowing by which alone the truth can be found.” This statement can be found on a plaque at the entrance of Bascom Hall, the best-known building on campus.

Though Bascom predates the great hey-day of Wisconsin Progressivism, Hoeveler makes a compelling case for Bascom’s importance in laying the foundation for change at the end of the nineteenth century.

During Bascom’s professional lifetime, two socio-demographic trends emerged that were to fundamentally alter higher education in the United States: an increased demand for specialized education and an increased demand by women for professional training and careers. American universities responded to the first of these changes by expanding course work at all levels. The second shift involved the transformation of educational opportunities for women. With the influence of Progressivism and the suffrage movement, public opinion slowly shifted to support higher education for women. Having lost the battle for co-education at Williams College, Bascom accepted the presidency of the University of Wisconsin in 1874. Earlier that same year, the university had affirmed a co-educational curriculum. Bascom was an avid supporter of women’s access to higher education. Rather than limiting women’s education to domestic subjects and finishing schools, Bascom argued forcefully for their access to a full liberal education stating that “This exclusion of women from our highest seats of learning is among the remnant…[of] a dark and savage past” (Bascom 1872, 2). Bascom’s two daughters both earned their bachelor’s degrees at Wisconsin, where he defended the right for women to face an identical curriculum to men. Florence Bascom became the second woman to earn a Ph.D. in geology in the U.S.

Much of the book is given over to Bascom’s biography and intellectual influences, including German philosophical idealism, the liberal Protestantism associated with the Social Gospel movement in the U.S., and the theory of evolution. Hoeveler argues that “Bascom made a creative synthesis of these intellectual systems and from them forged the beginning of the Wisconsin Idea” (p. 5). Individuals interested in the intellectual influences of the period will find the book particularly useful.

The first two chapters consider Bascom’s education and early career years, with a heavy emphasis on his own writings and philosophical struggles, particularly in reaction to the American Civil War. Chapter 3 addresses Bascom’s move to Wisconsin, where he served as president from 1874 to 1887. Chapter 4 deals with the changing nature of American universities and their role in society at the end of the 1800s, and Chapter 5 looks at the impact of the Social Gospel movement on the University of Wisconsin and American universities more generally.

The next three chapters address the origins of Progressivism which Hoeveler identifies in three distinct forces: (1) the temperance movement, (2) the women’s suffrage movement, and (3) the profound shift in perceptions of class struggles and of labor rights in the last decades of the nineteenth century. Though much of the book provides interesting background for those that study intellectual history, it is Chapter 8 that will capture the attention of historians of economic thought. Most of the material in this chapter will be familiar to economists who work in this period, but Hoeveler does a nice job of situating Bascom in this milieu of change and to introduce Ely who would later play such a significant role for the University of Wisconsin.

Chapter 9 returns to the Wisconsin Idea and guides the reader through Bascom’s departure from Wisconsin, the hiring of Richard T. Ely, Charles Van Hise’s presidency, the arrival of John R. Commons, and the great debates between La Follette and the university over World War I.  These changes left Wisconsin to be viewed as either the “the outstanding liberal university” (Howe 1989, 247) or a “hot bed of radicalism” (New York Times 1930, 34). Though Bascom’s presidency had ended before these momentous events, Hoeveler does a great service by presenting an excellent account of the life of Bascom and reminding us that ideas emerge from a complex interaction of social, political, philosophical and personal forces.


Bascom, John. 1872. “College Organization,” Independent, September 5 (1872), 2 – 3.

Howe, Florence. 1989. “Practical in Her Theories: Theresa Schmid McMahon,” in Lone Voyagers: Academic Women in Coeducational Universities, 1870–1937, ed. G.J. Clifford, 223 – 280. New York: The Feminist Press at the City University of New York.

Rutherford, Malcolm. 2011. The Institutional Movement in American Economics, 1918–1947. New York: Cambridge University Press.

Unger, Nancy C. 2000. Fighting Bob La Follette: A Righteous Reformer. Chapel Hill, NC: University of North Carolina Press.

“The Wisconsin Idea,” University of Wisconsin Madison.

Marianne Johnson is the author of several works on Wisconsin Institutionalism and Progressivism in economics including papers in the Journal of Economic Issues (2017, 2015, 2011) and History of Political Economy (2014) — and a book chapter on the “Daughters of Commons” for Routledge (forthcoming).

Copyright (c) 2017 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (July 2017). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not

Author(s):Rubin, Jared
Reviewer(s):Mokyr, Joel

Published by EH.Net (April 2017)

Jared Rubin, Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not. New York: Cambridge University Press, 2017. xxi + 273 pp. $30 (paperback), ISBN: 978-1-108-40005-3.

Reviewed for EH.Net by Joel Mokyr, Departments of Economics and History, Northwestern University.

The Middle East, it has been said, is not just a collection of failed states. It is a failed region. It generates a disproportional number of the world’s orphans and refugees, its GDP per capita is intolerably low despite oil riches, and there are few signs that there is light at the end of tunnel. Democracy seems to have been put on the back burner indefinitely, and human rights are a lost cause in most countries and in retreat elsewhere. Intellectually, too, things look rather dismal: In 2005 Harvard University alone produced more scientific papers than 17 Arabic-speaking countries combined. Muslim countries contribute just 2.5 percent of more than 11.5 million papers published worldwide each year (Muslims constituted 23 percent of the world’s population in 2010). A 1997 Scientometrics paper estimated that 46 Muslim countries (which of course contain much more than the Middle East) contributed 1.17 percent to world science literature as opposed to Spain (1.48 percent).

Is the Islamic religion to blame? Jared Rubin, in this stimulating and highly original study, would deny that emphatically. Although this is a book about religion and its implication for institutional and economic change, Rubin is little interested in the actual doctrinal content of religion. He points out, as many others have, that the essence of Islam could not possibly be as rigid and opposed to commerce and economic change as it may seem, because for the first centuries of its existence, the nations that adopted Islam flourished not just commercially but also in terms of technology, architecture, poetry, agriculture, medicine, and engineering, while western Europe was an ignorant, violent and poverty-stricken backwater. What we have witnessed since 1200 is more than a “divergence”: it is a Great Reversal, of momentous importance till the present day.

Rubin’s book presents us with an explanation for this great reversal, which will have to be taken into account from now on in all future discussions on the economic history of the Islamic world. He does not oversell his argument as the reason for the great reversal, he makes a plausible argument for it as a complementary argument to the ones other serious scholars have made. The book is divided into a few chapters that outline the theory and logic of the argument and then applies these insights to a number of historical case studies. It is a tale that combines economic history, political economy, and religion in a unique and novel way.

Here is the basic argument: any kind of ruler has power because his or her subjects accept their rule and their main concern is what Rubin calls “propagating their rule.”  How do you get people to accept you as their ruler and let you keep your job? Political power is supported by a combination of coercion (that is, violence) and legitimacy (people willingly accept a ruler because they believe that this person has the right to rule them). Through most of history, rulers depended on a combination of the two, though the weights of each differed greatly depending on their costs and benefits. Rubin is exclusively interested in the legitimacy part. Legitimacy is provided by what he calls “legitimizing agents” — groups or entities that have enough influence to make the subjects of the ruler follow instructions and pay taxes. An obvious legitimizing agent is the religious establishment — for example, European rulers once ruled ex dei gratia and called themselves the most Catholic King. Some modern royalty still include the line in their title, although in most places such relics are empty.

Rubin observes that in the early medieval period, both Christian and Muslim rulers used religious authorities as legitimizing agents, but that at some point in the later Middle Ages, Muslim and western European society diverged. Whereas in the Ottoman Empire the sultans continued to rely on religious authorities for their legitimacy, in many western societies the Church’s political leverage was diminished irreversibly. From the beginning, Rubin points out, Christian doctrine envisaged separate spheres for secular and religious power. The schisms and exiles to which the late medieval papacy was subject weakened it greatly in the face of ambitious rulers, and the reformation administered to religious legitimization the coup de grace. Apart from a few corners of Europe such as Spain, religion lost the power it had exercised since even before the prophet Samuel anointed Kings Saul and David.

Why and how did this matter to economic history? Rubin argues that religious authorities were in general conservative, and that the institutions they established are less aligned with commerce and finance than when an economically important elite such as rich urban merchants and artisans are more powerful. As a result of their political influence, religious authorities in the Middle East were successful in blocking critical breakthroughs, most notably the printing press and more sophisticated financial institutions. The printing press facilitated the success of the Reformation, and the Reformation had further favorable economic effects, as has recently been shown by a pair of important papers (Cantoni, Dittmar and Yuchtman, 2016; Dittmar and Meisenzahl, 2016). One might add that even in France, in which the reformation was suppressed, the power of religious authorities to legitimize the king disappeared. Napoleon famously took the crown out of the hands of Pope Pius VII during his 1804 coronation and crowned himself, symbolizing that his legitimization came from military power, not God.

In summary, Rubin argues that the leaders of organized religion tended to be conservative across the board. Their influence, he thinks, depended on their monopoly of eternal truths, and updating those truths threatened to erode their credibility.  The Islamic world was unable to curtail the influence of Islamic scholars until the Islamic world had fallen hopelessly behind Europe. Even within Christian Europe, the power of religious authorities, he feels, helped determine the difference between successful regions such as the Netherlands and Britain and economic laggards such as Spain. When discussing the past three centuries, the influence of religious authorities is somewhat diminished, but what counts in Rubin’s view is that in all poor and backward states, the institutional structure and the capability of key players to “sit at the bargaining table” as he calls it was little affected by the urban-commercial classes whose demands for free and open markets, constraints on the executive, and a rule of law led to rapid economic progress in the north-west corners of Europe.

By combining an institutional argument with religion through the effect that religion had on institutions and politics (rather than on cultural beliefs), Rubin’s argument is reminiscent of an important recent book by Karel Davids, which has not thus far received sufficient attention (Davids, 2013). Both books, in a different way, stress how religious institutions mattered regardless of the precise content of religion. Davids, however, emphasizes another aspect, namely the role of religion in the generation and dissemination of technology. Rubin is primarily interested in institutions that support markets. Yet an explanation of modern economic growth cannot possibly avoid the primum movens of economic growth, which was the rapid expansion and dissemination of useful knowledge. In early medieval Islam, engineers, doctors, and chemists were at the forefront of pushing the envelope. By 1600 the Islamic world had become a follower, by 1800 they were a laggard. A natural extension of Rubin’s idea is that a government dominated by religious authorities will also be less than accommodating to out-of-the-box ideas from natural philosophers, astronomers, mathematicians, and medical doctors. The tradeoff between religiosity and scientific and technological progress has become a serious topic of investigation in recent years (Benabou, Ticchi, and Vindigni, 2014; Squicciarini, 2016). Their findings support the notion that devoutness affects innovativeness negatively and that political institutions could be used by powerful religious leaders to suppress what they considered heretical views.

Rubin is correct in pointing out that in the most progressive countries in western Europe the ability of religious leaders to halt progress was limited.  A striking example of this phenomenon is provided by Amir Alexander (2014), who documents the fierce resistance to infinitesimal mathematics by the Jesuits in the seventeenth century, which seriously slowed down the development of mathematics in Italy. The reason the reactionary powers such as the Jesuits were not able to slow down the development of radical new ideas in Europe materially is primarily the high level of political fragmentation in Europe. If a particular ruler tried to crack down on his most creative subjects because they wrote things he felt to be subversive or heretical, they could always move across the border. Such outside options may have been much more limited in the Ottoman Empire and in China. Interstate competition is another factor that rulers worried about, beside Rubin’s legitimization story. After all, every ruler faced both internal and external threats. Without interstate competition, or “emulation” as eighteenth-century writers called it, Europe might never have had the Enlightenment, which opened the doors to so many of the institutional and technological changes that have helped create economic modernity.

Here and there one could nitpick some of Rubin’s historical interpretations. His account of Spain’s political economy would have greatly benefitted from a closer attention to Regina Grafe’s path-breaking work (Grafe, 2012). Rubin’s agnosticism as to the actual content of religion may be somewhat misplaced: the Sunni revival of the eleventh century did in time move the ruling orthodoxy into a more conservative direction, as Eric Chaney (2015) has shown. More generally, an argument that focuses on “the ruler” and the significance of the propagation of political power may exaggerate the ability of the state to control what the citizens did in pre-twentieth-century societies.

All the same, Rubin has written an important and timely book. His methodology is very much that of the historically informed economist: certain choices are made at some point because they make sense, that is, the benefits to those that make the decision exceed the costs. But once made, these initial conditions can have cascading unintended and unanticipated consequences, and those historically contingent causal chains may well be what drove much of the great and little divergences that our profession is so interested in. Equally important, this well-argued and sensible book about Islam provides a much-needed antidote to the toxic rubbish masquerading as scholarship produced by some of the Islamophobes in the current American administration (e.g., Gorka, 2016). The Middle East’s problem is not Islam; it is History.


Alexander, Amir. 2014. Infinitesimal: How a Dangerous Mathematical Theory Shaped the Modern World. New York: Farrar, Straus and Giroux.

Benabou, Roland, Davide Ticchi, and Andrea Vindigni. 2014. “Forbidden Fruits: The Political Economy of Science, Religion and Growth.” Unpublished working paper, Princeton University.

Cantoni, Davide, Jeremiah Dittmar and Noam Yuchtman. 2016.  “Reformation and Reallocation: Religious and Secular Economic Activity in Early Modern Germany.” Unpublished.

Chaney, Eric. 2015. “Religion and the Rise and Fall of Islamic Science.” Unpublished working paper, Harvard University.

Davids, Karel. 2013. Religion, Technology and the Great and Little Divergences. Leiden: Brill.

Dittmar, Jeremiah E. and Ralf Meisenzahl. 2016. “Origins of Growth: Health Shocks, Institutions, and Human Capital in the Protestant Reformation.” Unpublished.

Gorka, Sebastian. 2016. Defeating Jihad: The Winnable War. Washington, DC: Regnery Publishing.

Grafe, Regina. 2012. Distant Tyranny: Markets, Power, and Backwardness in Spain, 1650–1800. Princeton, NJ: Princeton University Press.

Squicciarini, Mara. 2017. “Devotion and Development: Religiosity, Education, and Economic Progress in 19th-century France.” Unpublished working paper, Northwestern University.

Joel Mokyr is the author of Culture of Growth: The Origins of the Modern Economy (Princeton University Press, 2016).

Copyright (c) 2017 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (April 2017). All EH.Net reviews are archived at

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Middle East
Time Period(s):General or Comparative

Handbook of Cliometrics

Editor(s):Diebolt, Claude
Haupert, Michael
Reviewer(s):Mitch, David

Published by EH.Net (July 2016)

Claude Diebolt and Michael Haupert, editors, Handbook of Cliometrics. Berlin and Heidelberg: Springer, 2016. xxii + 590 pp.  $149 (hardcover), ISBN: 978-3-642-40405-4.

Reviewed for EH.Net by David Mitch, Department of Economics, University of Maryland – Baltimore County.

There is by now a long tradition of handbooks in economics. And they have varied over the decades in their intended audience and aims. J.M. Keynes in his 1922 introduction to the Cambridge Economic Handbook series described it as “intended to convey to the ordinary reader and to the uninitiated student some conception of the general principles of thought which economists apply to economic problems.”  Kenneth Arrow and Michael Intrilligator in their introduction to the North-Holland Handbooks in Economics series describe them as “a definitive source, reference and teaching supplement for use by professional researchers and advanced graduate students. Each Handbook contains self-contained surveys of the current state of a branch of economics in the form of chapters prepared by leading specialists on various aspects of this branch of economics.”

Claude Diebolt (University of Strasbourg) and Michael Haupert (University of Wisconsin-La Crosse), the editors of Springer’s Handbook of Cliometrics have not clearly identified the audience at which the volume is aimed. They do indicate in their introduction (p. xi) that the contributions “stress the usefulness of cliometrics for economists, historians, and social scientists in general.” Their preface and introduction describe the handbook as one that “contains digested knowledge in an easily accessible format,” (p. xv) while also asserting the aim “to foster world-class research” (p. xv).  They have followed the lead of North-Holland’s handbook series of choosing leading specialists in various branches of cliometrics to write its chapters but appear to have given them quite free reign regarding intended audience, scope, and methodology employed.   Indeed one message the volume as a whole conveys is the diversity of formats that can be associated with cliometric history ranging from exercises in applied econometrics to purely verbal narrative expositions.

The volume comes in at just under 600 pages. It is divided into 22 chapters subsumed under some 7 headings.  This implies an average allotment of 27 pages per chapter with the actual chapters varying from 15 to 35 pages in length.  By way of comparison, the North-Holland Handbook of Economic Growth, Vols. 1A and 1B (to choose just one immediately available volume from the many in the series) runs to a total  of 1800 pages in some 28 chapters for an average length of 64 pages per chapter.  The considerable relative restriction in length for the Springer Handbook implies tradeoffs between the scope and level of the audience for a given contribution.  Some contributions in this volume provide an overview of the forest, taking up general concepts such as labor markets or human capital or landmark episodes such as the Great Depression and accomplish this by aiming at primarily an undergraduate audience albeit with elegance and incisiveness.  Other contributions focus on specific trees, considering a few key issues, key studies or key methodologies which they cover in a depth more suitable for advanced graduate students and researchers.

What choice of topics and organization is appropriate for a handbook of cliometrics?  Insofar as cliometrics is a method rather than substantive economic history, organization according to chronological or geographical coverage would not seem in order. If cliometrics is defined as the application of economic theory and quantitative methods to the study of history, then what is to be covered in such a handbook over and above the theoretical and quantitative tools to be applied? Are there either general principles or specific techniques that can be articulated for the application of economic theory and methods to the study of history? Forums on the future of economic history (such as that from the 2015 Economic History Association annual meeting published in the December, 2015 Journal of Economic History) suggest no shortage of methodological advances to consider including Geographical Information Systems, big data and computational power, and use of quasi-experimental methods — to name just some.

The editors acknowledge the difficulty of deciding what to include and that some important and historically significant topics were excluded (p. xi) and point to the goals of achieving “variety over time, topic, and geography” and “a sampling of topics cliometrics has helped to transform over the past half-century” as principles of selection.

The seven section headings chosen for the volume seem more Fogelian than Northian in conception.  Four of the categories, Human Capital, Finance, Innovation, and Government have clear parallels with headings in The Reinterpretation of American Economic History, the important 1972 compilation by Fogel and Engerman of cliometric work. The three other categories that round off the work include a section on the history of cliometrics, a section on growth, and a section on statistics and cycles.  While Douglass North and new institutional approaches certainly get mention throughout this handbook, none of the chapters give extended coverage to institutions or a Northian framework, an understandable decision given space constraints.

The opening section on history contains both Michael Haupert’s history of cliometrics and Peter Temin’s effort to link economic history and economic development via his own illustrious career experiences.  Almost half of Haupert’s history of cliometrics is actually devoted to the history of pre-cliometric economic history; which limits the detail he provides to either old or new economic history.  Such important episodes as the controversy over the cliometrics of slavery are notably missing from his account, though it does provide a quite useful entrée to the topic. Peter Temin’s contribution fills in this gap with his insightful romp through selected cliometrics highlights over the past fifty years pointing to parallels and synergies between the study of economic history and economic development.  He offers the perspective of a pioneering practitioner of cliometrics on work by more recent generations of cliometricians. His is one of the few contributions in the volume to give explicit consideration to the quasi-experimental methods that have become widespread in the work of younger cliometricians. He also considers tensions and opportunities in publication strategies aiming at alternatively economic history or mainstream economics journals as outlets.

The second section on human capital has five contributions which differ widely in scope and detail.  Claudia Goldin and Robert Margo provide quite general, albeit cogent, overviews of respectively cliometric work on human capital and labor markets. Given their own scholarly work they both not surprisingly focus on the U.S. case, though Goldin sets this in the global context of unified growth theory with Malthusian, transition, and human capital phases.  Her treatment of education and schooling centers on her landmark 2008 book with Lawrence Katz rather than a detailed overview of recent research. She also treats health as a form of human capital in considering long run trends in mortality and life expectancy.  She does not provide any assessment or even mention of recent age-heaping approaches to estimating human capital historically.  Robert Margo’s treatment of labor markets centers around estimates of long term trends in some basic magnitudes including that of the labor force as a whole, occupational structure, wage structure, and racial differences.  He provides concise but insightful interpretations of these trends utilizing a simple demand and supply framework. Margo does refer to work exploring underlying sources and data limitations but given his space limitations does not do so in any depth.  A major and innovative area of cliometric research since the late 1970s has been in examining the relationship between nutrition, heights, and biological living standards, and disease environments as evidenced in trends in human heights, the field of anthropometrics.  Lee Craig overviews this research and his particular emphasis on nineteenth century U.S. developments allows him some focus in depth, though he does draw extensively on more global evidence.  He considers in more depth than the Goldin chapter the role of improvements in nutrition and in public health measures in improving the biological standard of living.  Franziska Tollen and Joerg Baten’s contribution provides an in-depth survey of the use of age-heaping indicators to estimate human capital.  They go in detail into the methodology of how age-heaping indicators are constructed and survey a wide range of findings stemming from use of the age-heaping approach.  Unlike other contributions in this section the level of detail is more suited to advanced researchers.  Jacob Weisdorf surveys the use of parish registers by cliometricians and economic and demographic historians more generally. He provides a useful description of the registries themselves. And he makes note of their use not only for the English and other Western European cases but also for Africa and potentially for other regions as well. Weisdorf embeds his survey in a discussion of the Malthusian population framework and the unified growth approach of Oded Galor and collaborators through the evidence parish registers can provide on trends in births, deaths, and marriages. He connects with the human capital theme by taking up the important information registries can provide on occupational trends.  He gives coverage to historically integrated occupational coding schemes that have been developed to categorize the occupations sometimes recorded on parish registries as in the work of Marco van Leeuwen, Andrew Miles and others (2004, 2005), but only passing mention to the major Cambridge Group project of using occupational information on parish registers to extend back in time knowledge about trends in English occupational structure (Shaw-Taylor and Wrigley 2014).

Section Three on Economic Growth contains a further five chapters that are quite varied in character and coverage.  Claude Diebolt and Faustine Perrin nominally give coverage to a range of growth theories, although they use the unified growth approach of Oded Galor and David Weil to provide a narrative of growth over the past millennium while offering an extension by incorporating implications of female economic and social empowerment into their discussion.   Gregory Clark offers a cliometric perspective on the British Industrial Revolution centering on the sources of productivity advance and identifying it as driven by an “upturn in the rate of technological innovation” (p. 207).  Although he does not provide an in-depth survey of cliometric work on the Industrial Revolution, Clark does consider some of the leading underlying explanations that have been offered including institutional and intellectual approaches and those grounded in human capital; he argues that none can provide convincing explanations. He thus concludes that the “Industrial Revolution remains one of history’s great mysteries” (p. 232). James Foreman-Peck takes up economic-demographic interactions by using a simple linear specification of the Malthusian model as his starting point and quite effectively uses it as a unifying framework for his review both of empirical evidence and causal estimation strategies. While I would have been interested in seeing further discussion of the implications of relaxing the assumptions of linearity, Foreman-Peck’s contribution should prove an effective teaching tool in showing how some simple micro-specifications can have far-reaching applications.  Emanuele Felice provides a quite detailed discussion of issues involved in constructing GDP estimates that are comparable across countries and over time and even for sub-national regions, as well as turning to the evidence and approaches in using such estimates to examine tendencies to growth convergence and factors influencing these tendencies.  Markus Lampe and Paul Sharp take up the topic of trade, turning first to the importance of trade, then to how to measure the extent of trade and market integration, then to the role of institutions, technology, and policy in determining trade and finally to the measurement and determinants of trade policy. Their coverage is very well informed, but with only a sentence or two to devote to each study they consider, the emphasis is on breadth rather than depth.

Section Four on Finance, has more unity and coherence between its four chapters than other sections of this volume.  Larry Neal’s opening contribution on the cliometrics of finance focuses specifically on surveying the market for sovereign debt from early modern times through the early twentieth century and the market for short-term commercial credit with particular emphasis on exchange rates, including extensive comments for both topics on available data sources. Neal concludes, however, with extended general reflections on both the accomplishments and limitations of the now quite extensive body of cliometric work on finance.  For his contribution, the late John James defines “Payment Systems” as “the complex of financial instruments and relationships that transfer value between buyers and sellers to complete their transactions” (pp. 353-54).  James provides a wide ranging narrative account — suitable for non-specialists that can be viewed as informed by a cliometric framework or spirit rather than directly cliometric — of the evolution of payment systems so defined from the demonetization accompanying the collapse of the Roman Empire through the early twenty-first century U.S.  In contrast to Neal and James, Matthew Jaremski organizes his survey of cliometric work on financial crises methodologically.  He first considers studies that employ survival and hazard models to examine determinants of banking crises, then turns to the use of data envelopment analysis for a production function/efficiency perspective on deposit insurance and then in the last part of the survey considers approaches to deal with simultaneity in the interaction between financial crises and more general economic activity; these include vector auto-regression, instrumental variables approaches and difference-in-difference models.  Jaremski’s exposition is lucid despite the amount of technical detail presented, though it seems aimed at specialists and researchers in the field.  Caroline Fohlin concludes the Finance section with a wide-ranging international comparative perspective on financial systems.  She starts with some basic typologies on financial systems, distinguishing first between functional and institutional perspectives and then to standard distinctions between a) bank-based versus market-based systems, b) universal versus specialized systems and c) relationship versus arms-length systems.  She then turns to the extent to which the actual historical evolution of financial systems adds complexity to these distinctions. She proceeds to consider determinants of choices between the various types of systems she distinguishes and to evidence on the nexus between finance and economic growth.  Throughout her detailed survey of a large number of studies and countries, Fohlin warns against rigid classification by over-arching categories or mono-causal explanations, leaving her with the final conclusion (p. 427) that “history matters.”

The remaining three sections of the volume each contain pairs of contribution.  The two essays in the fifth section on Innovation provides a quite interesting contrast.  Stanley Engerman and the late Nathan Rosenberg comment on “innovation in historical perspective” by arguing that uncertainty associated with the innovation process implies that the richness of historical accounts of the innovation process can capture important aspects that would be missed in an ahistorical theoretical framework. Engerman and Rosenberg were both early contributors to cliometrics; their chapter, as with that of John James described above, can perhaps be seen as more informed by a cliometric framework than involving direct application of either the theoretical or empirical methods associated with Cliometrics.  In contrast, Jochen Streb directly embraces “the Cliometric Study of Innovations,” surveying both theoretical and empirical cliometric studies of the history of innovation with a particular, though not exclusive, focus on patents as measures of innovation.

The sixth section is on “Statistics and Cycles.”  The contribution by Thomas Rahlf in this section on “Statistical Inference” is actually a history of thought of statistical inference during the twentieth century.  He attempts to link this with cliometrics in the last part of his essay by suggesting that Alfred Conrad, John Meyer and others formulating cliometric methodology were informed by a Bayesian approach and that the history of Bayesian statistics is thus relevant for understanding the methodology of cliometrics.  He also suggests that cliometric inference could benefit from further attention to the criticisms of econometric methodology offered by Rudolf Kalman of Kalman filter fame. However, neither of these suggestions is articulated in any detail. The other contribution is by Terence Mills on “Trends, Cycles, and Structural Breaks in Cliometrics,” which offers a helpful primer on developments over the past quarter century in time-series statistics and econometrics pertinent to this topic and provides a number of illustrations based on cliometric work.

In the final section on government Price Fishback contributes an essay focused on a particular historical episode in which the role of government loomed large and on which he has considerable expertise, that of the 1930s Great Depression in the United States. And Jari Eloranta brings his specialist knowledge to surveying a recurring situation in which governments have been prominent, that of war.  Given the large literatures they each consider, Fishback and Eloranta make the quite sensible choice of providing non-technical narrative overviews suitable for undergraduates and general readers.

Given the varying audiences at which the contributions appear to aim, as well as the range of formats and styles of the contributions, it may be more apt to label this volume a companion to cliometrics or a cliometric sampler than a handbook with the comprehensiveness the latter title might imply. Indeed, as already mentioned above, the editors are more circumspect than Springer’s blurb on its website about the comprehensiveness of coverage.  One can readily come up with a list of topics in which cliometrics has made important contributions that are omitted, including coverage of work on the major economic sectors, income and wealth inequality, and (as noted above) extended treatment of institutional approaches. And as suggested above, I would also have welcomed discussion of quasi-experimental approaches — both opportunities and reservations, in light of how prevalent this has become in recent research.  Nevertheless, given the apparent constraints on length presumably set by the publisher, the choice of topics is quite appropriate.  The editors are to be commended for taking on such a challenging yet important assignment and for recruiting such a strong set of contributors.  The resultant volume contains worthwhile contributions that readers from a range of disciplines and varying degrees of commitment to cliometrics will want to consult.   As more and more historians and sociologists, as well as economists, seem to be venturing into financial history, economic history, and the history of capitalism, it would be interesting to know more about how persuaded they will be about the usefulness of cliometrics by the essays in this volume.


Philippe Aghion and Steven N. Durlauf, eds. 2005. Handbook of Economic Growth Vols. 1A and 1B, Amsterdam: North-Holland Elsevier.

William Collins, Kris Mitchener, Ran Abramitzky, and Naomi Lamoreaux. 2015. “Essays: The Future of Economic History,” Journal of Economic History, 75, 4: 1228-1257.

Robert Fogel and Stanley Engerman, editors. 1972. The Reinterpretation of American Economic History, New York: Harper and Row.

Oded Galor and David N. Weil. 2000. “Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond,” American Economic Review, 90, 4: 806-828.

Claudia Goldin and Lawrence Katz. 2008. The Race between Education and Technology, Cambridge, MA: Harvard University Press.

J.M. Keynes. 1922. “Introduction to H.D. Henderson, Supply and Demand,” Cambridge Economic Handbooks – 1, New York: Harcourt and Brace, pp. v-vi.

Marco H.D. van Leeuwen, Ineke Maas and Andrew Miles. 2004. “Creating a Historical International Standard Classification of Occupations: An Exercise in Multinational, Interdisciplinary Cooperation,” Historical Methods, 37, 4: 186-197.

Bart Van de Putte and Andrew Miles. 2005. “A Social Classification Scheme for Historical Occupational Data,” Historical Methods, 38, 2: 61-94.

Leigh Shaw-Taylor and E.A. Wrigley. 2014. “Occupational Structure and Population Change” in Roderick Floud, Jane Humphries, and Paul Johnson, editors, The Cambridge Economic History of Modern Britain, New Edition, Vol.1, Cambridge: Cambridge University Press, 53-88.

David Mitch is Professor of Economics at the University of Maryland, Baltimore County. He is the author of “Schooling for All by Financing by Some,” Paedagogica Historica, 52: 4 (August, 2016): 325-348.

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (July 2016). All EH.Net reviews are archived at

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Economic Development, Growth, and Aggregate Productivity
Education and Human Resource Development
Financial Markets, Financial Institutions, and Monetary History
Historical Demography, including Migration
History of Economic Thought; Methodology
History of Technology, including Technological Change
Military and War
Industry: Manufacturing and Construction
International and Domestic Trade and Relations
Labor and Employment History
Living Standards, Anthropometric History, Economic Anthropology
Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Political Order and Inequality: Their Foundations and Their Consequences for Human Welfare

Author(s):Boix, Carles
Reviewer(s):Clay, Karen

Published by EH.Net (November 2015)

Carles Boix, Political Order and Inequality: Their Foundations and Their Consequences for Human Welfare. New York: Cambridge University Press, 2015. xii + 311 pp. $65 (hardcover), ISBN: 978-1-107-08943-3.

Reviewed for EH.Net by Karen Clay, Department of Economics, Carnegie Mellon University.

Anyone who has read Acemoglu and Robinson’s Why Nations Fail: The Origins of Power, Prosperity, and Poverty or North, Wallis and Weingast’s Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History or Hoffman’s Why Did Europe Conquer the World? or Pomeranz’s The Great Divergence: China, Europe, and the Making of the Modern World Economy or Mokyr’s The Lever of Riches: Technological Creativity and Economic Progress or similar books will want to consider buying Political Order and Inequality: Their Foundations and Their Consequences for Human Welfare.  The book, written by Carles Boix (the Robert Garrett Professor of Politics and Public Affairs at Princeton University), is very much in the spirit of these books.  It tackles a huge and very important question, provides a theoretical framework, and offers selected empirical evidence to support the argument.

One important way in which this book differs from the economics literature, particularly the work on institutions, involves the direction of causality.   Boix argues that technological change and economic growth preceded the formation of the state.  Political order, growth, and inequality were shaped by economic and military factors.  While institutions play a role in this framework, it is a much more limited role than in the work of some other authors.  Boix links his framework loosely to Marx and to endogenous growth models in the sense that economic change takes place through an endogenous process. This allows Boix to offer a theory that can accommodate political and institutional change.

The framework can be thought of as beginning in an initial hunter-gather world. Individuals led relatively equal lives in small cooperative bands that focused on providing enough food for the group.  The price of growth is then inequality.  And inequality brings about, in turn, the breakdown of cooperation that exists in the “state of nature.”  One example of a technological change that caused inequality and change was plant domestication.  A limited number places were suited to initial domestication, and in those places, greater productivity led to inequality and political change.  Out of this emerged one of two types of states.  The majority of early institutions were monarchical, but some were republican or mixed.  The type that emerged depended on military technology.  Monarchies tended to arise when technologies such as horses gave advantages to looters.  Republics tended to arise when technologies such as navies gave advantages to producers. Inequality is then jointly determined by factor endowments and political institutions and is higher under monarchies than republics. Both types of political institutions tended to stifle innovation in order to maintain the status quo.

Boix attributes the rise of the West to a combination of factors. One was endogenous technical change driven by population growth. Urbanization brought together the elements necessary for innovation and endogenous growth. A second was the political fragmentation of Europe.  In a number of areas of Western European, producers were able to fend off looters or the landed elites intermarried and invested in the industrial elites.  A third was a military revolution that allowed some urban centers to defend themselves and continue the process of growth. War-related technologies allowed some groups of producers to prevent military conquest and eradication of their gains.  These war-related technologies included pikes, gunpowder, and navies. These three factors eventually led to the Industrial Revolution. Other regions had some of the same elements, notably China, but in the end growth was stifled.

The empirical evidence is of necessity selected, because an exhaustive discussion of the evidence would take decades to write and many volumes to publish.  Boix also aims to tell a causal story, which is very much in line with analysis by economists.  What sorts of evidence does Boix provide?  Chapter 1 draws on evidence from the Ethnographic Atlas on social structures, inequality, and political life. Chapter 3 returns to the Ethnographic Atlas with a focus on economic activity.  Here Boix provides some evidence that economic activity drives social and institutional outcomes.  In particular he presents graphs showing the relationship between early transition to agriculture and early state formation.  Chapter 4 draws on data on parliamentary meetings, real wages and population densities in Europe. Chapter 5 investigates economic and political inequality using height data.  Whether one finds this useful will depend on one’s view of height data and the nature of the comparisons across groups. Chapter 6 examines evidence on urbanization, politics, income and wealth.

Political Order and Inequality: Their Foundations and Their Consequences for Human Welfare is an important book.  It is by no means the last word regarding the big historical questions such as why some nations are rich and others poor and why the Industrial Revolution happened in Europe.  It does, however, require economists to carefully consider the causal structure of their arguments and the importance of political institutions.  Perspectives may differ on whether Boix has the story right.  But anyone writing in this area needs to read Boix, along with books listed in the first sentence of this review, and offer an interpretation that fits all of the empirical evidence advanced thus far.

Karen Clay’s publications include “Adapting to Climate Change: Evidence from Long-Run Changes in the Temperature-Mortality Relationship in the 20th Century United States”  (with Barreca, Deschenes, Greenstone, and Shapiro – forthcoming in the Journal of Political Economy) and The Evolution of a Nation: How Geography and Law Shaped the American States (with Daniel Berkowitz).

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (November 2015). All EH.Net reviews are archived at

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The First Knowledge Economy: Human Capital and the European Economy, 1750-1850

Author(s):Jacob, Margaret C.
Reviewer(s):Hornung, Erik

Published by EH.Net (September 2015)

Margaret C. Jacob, The First Knowledge Economy: Human Capital and the European Economy, 1750-1850. Cambridge: Cambridge University Press, 2014. ix + 257 pp. $30 (paperback), ISBN: 978-1-107-61983-8.

Reviewed for EH.Net by Erik Hornung, Max Planck Institute for Tax Law and Public Finance.

Many factors have been identified as causes of the transition to sustained economic growth during the eighteenth and nineteenth centuries. Human capital may be one of the most controversial additions to the long list of causes, not least because the English are not known to have been well educated at the eve of the Industrial Revolution. In The First Knowledge Economy, Margaret C Jacob argues that English knowledge elites were at the heart of the transition. She especially focusses on the marriage between theoretical sciences and applied mechanical knowledge which helped creating many technological innovations during the Industrial Revolution. She, thus, aims at rectifying the prevalent hypothesis that technological progress resulted from tinkering of skilled but science-ignorant engineers. An impressive set of new archival sources supports her argument that English engineers were, indeed, well aware of and heavily influenced by recent advances in natural sciences.

Each of the first four chapter focuses on outstanding entrepreneurs and engineers whose records and transcripts have survived. Available information on technical and scientific knowledge is extracted from correspondence with fellow engineers and businessmen, calculations, lecture notes, thoughts about scientific readings, and involvement in scientific societies. In this manner, the reader learns how scientific content affected mindsets and decisions of famous entrepreneurs and eventually entered the production process. Understanding that their decisions were based on the latest advances in science helps to sort out the misconception that entrepreneurs were uninformed tinkerers who accidentally became successful. When tinkering, they did so with mechanical precision and regard for the known natural laws.

After a rather unstructured introduction, Chapter 1 depicts James Watt and Matthew Boulton, the inventor/entrepreneur duo famed for developing the steam engine. Analyzing a wealth of notebook entries and correspondence, Jacob depicts the views and attitudes towards religion, politics, education and science of the two businessmen and their family members. Although never formal scholars of science at any institute of higher learning, science infused the life and work of both Watt and Boulton.

The second chapter is mainly concerned with the argument that England was first because labor was expensive and coal was cheap, which made the invention of steam engines necessary. Jacob argues that technical knowledge was crucial for technological progress in mining. This claim is substantiated by transcripts which exemplify the technical knowledge of engineers, colliers, and so-called viewers working with steam engines. Clearly the majority of the technical staff in English mining must have been highly literate and capable of doing sophisticated calculations. They needed to estimate the size of engine cylinders, water-pumping potential, and the size and costs of a steam engine to advise mine owners on which steam engines to buy. Their knowledge eventually translated to a wide knowledge base which diffused through publications and public lectures.

Chapters 3 and 4 expand the established concepts to the Manchester cotton spinning industry and the Leeds textile industry. Using the correspondence of cotton barons John Kennedy and James M’Connel, Jacob describes how science and technical knowledge increased in importance during the mechanization of cotton spinning. Cloth manufacturing was arguably less prone to mechanization than spinning. Yet, the notebooks of textile manufacturers John Marshall and Benjamin Gott confirm the established pattern of adoption of scientific knowledge. The chapters conclude that a common language was needed to allow for the interaction between manufacturers and engineers. Once established entrepreneurs were able to mechanize, their businesses and machines became more sophisticated and complex.

Chapters 5 and 6 constitute a geographical change and a methodological break in the book. The center of attention is shifted to France and the “puzzle” why the French lagged behind in industrial development. Although highly interested in the practical uses of the new science, the Ancien Régime failed to create an optimal environment for industrial purposes. Jacob argues that scientific education was almost completely directed toward the aristocracy who entered into military positions. Consequently, technical knowledge was primarily used in military engineering and not for commercial activity. The French Revolution democratized education and increased the scientific content of the curricula, but, this was only a brief episode before the Restoration re-reformed education to replace scientific with religious content subject to harsh supervision by the clergy and police authorities.

Chapter 7 shifts the focus to the Low Countries, comparing Belgium and the Netherlands regarding how French occupying forces managed to instill scientific knowledge in the curricula of secondary schools and universities. Jacob argues that Belgium with its centralized system of education embraced and retained the French reforms towards industrial educational after 1795, which helped them industrialize quickly. Unlike Belgium, the Netherlands with its localized system of education did not embrace French educational reforms and industrialization evolved more slowly.

Jacob argues that we do not know enough about the curriculum in England, since schooling was organized locally. Thus, to understand whether industry benefited from sciences, we have to rely on the scientific knowledge of entrepreneurs and engineers without knowing where it was acquired. Due to the fact that France was more centralized, it can be convincingly established that the French institutional setting did not leave enough room for scientific content in public education. However, it remains unclear whether this argument suffices in contributing to solve the puzzle of continental backwardness. Instead of applying the established concept of relying on biographical information and the personal scientific knowledge of successful entrepreneurs to France (and the Low Countries), Jacob decides to provide a summary of the political economy of schooling and the curriculum during the pre- and post-Revolution. For a suitable comparison we would need to learn more about the adoption of scientific knowledge by continental entrepreneurs and engineers. We might end up finding similar patterns here.  A recent article by Squicciarini and Voigtlaender (2015) focusses on French knowledge elites (subscribers to Diderot’s Encyclopédie), who seem to have been relevant for industrial development during the period from 1750 to 1850.

This book makes an important contribution by showing that English technological development did not occur detached from scientific advances. Jacob carefully avoids drawing strong conclusions and generalizations. She asserts a central role to human capital without making causal claims. A little more structure and clearer statements might have been helpful. If cheap energy and expensive labor made inventing labor-saving technologies profitable, acquisition of scientific knowledge might be considered a proximate factor rather than the ultimate cause.


Mara P. Squicciarini and Nico Voigtländer (2015). “Human Capital and Industrialization: Evidence from the Age of Enlightenment.” Quarterly Journal of Economics (forthcoming)

Erik Hornung ( is Senior Research Fellow at the Max Planck Institute for Tax Law and Public Finance. He is author of the paper “Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia,” American Economic Review 104-1 (2014): 84-122.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (September 2015). All EH.Net reviews are archived at

Subject(s):Economic Development, Growth, and Aggregate Productivity
Education and Human Resource Development
History of Technology, including Technological Change
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century

Coordination in Transition: The Netherlands and the World Economy, 1950-2010

Author(s):Touwen, Jeroen
Reviewer(s):van den Berg, Annette

Published by EH.Net (August 2015)

Jeroen Touwen, Coordination in Transition: The Netherlands and the World Economy, 1950-2010. Leiden: Brill, 2014. xiv + 385 pp. $154 (hardcover), ISBN: 978-90-04-27255-2.

Reviewed for EH.Net by Annette van den Berg, School of Economics, Utrecht University.

One of the great debates of the late twentieth century has been around the well-known study Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (VoC) by Peter Hall and David Soskice, in which developed countries are characterized as either a Liberal Market Economy (LME) or a Coordinated Market Economy (CME), based on five interrelated criteria (spheres). Many scholars have applied the VoC approach since then — including economic historians — trying to reconcile the rather static nature of the approach with a historical, more dynamic analysis. Jeroen Touwen (lecturer in Economic and Social History at Leiden University, and the scientific director of the N.W. Posthumus Institute) adds to this line of research, by applying VoC to the case of the Netherlands after World War II in a careful, critical manner. This has resulted in an impressive and voluminous book of which the principal title, Coordination in Transition, neatly captures the key theme: How did a typical CME react to the structural changes as a result of ongoing globalization (influenced by trade liberalization and technological developments, foremost in information and communications technology), causing a shift to a market-based and knowledge-based economy? One of the new contributions of this book is that it also analyzes recent economic history of the Netherlands, in contrast with most other Dutch studies that only treat the twentieth century.

The Netherlands makes for an interesting case because it is seen as a successful and hybrid CME, with a liberal tradition in business relations as in Anglo-American countries; a strong welfare state like in Scandinavia; and a high degree of coordination similar to Germany. Also readers with no particular interest in the Dutch case (or those who think they already know the country, for that matter) will find this book worthwhile to read, as each chapter sets out with a broader treatment of theoretical considerations before analyzing the Netherlands, each time accompanied by a comparison with several other western OECD countries; and as the author makes relevant statements about (developments of) LMEs and CMEs in general. In so doing, he uses theoretical concepts from several socio-political fields of science, and of many statistical sources, thereby providing the reader with ample information and guidance for further research. The large number of interesting footnotes and references underline the thoroughness and dedication with which the book was written.

In my view, Chapter 2 is the most innovative part of the book because here the author comes up with a novel view on how the original, static VoC framework can accommodate for changes through time by adding a temporal dimension and by focusing on the central concept of non-market coordination, which not only encompasses state-induced regulation, but all kinds of information exchange and negotiation between different stakeholders operating at various levels in the economy. He argues that CMEs, despite all having become more liberal in reaction to structural change, remained characterized by a high degree of deliberative institutions (although often in an adjusted form). Hence, whereas Hall and Soskice theorized that due to institutional complementarities, deregulation of financial markets could “snowball into changes in other spheres as well,” possibly causing a break-up of CMEs, Touwen contends that the overall convergence to the LME did not take place, for which he provides plentiful evidence in the subsequent four chapters.

The limited space in this review does not allow me to elaborate on these chapters in depth. In a nutshell, in all of them Dutch postwar economic history is analyzed by focusing, in succession, on the business system, labor relations, the welfare state and economic policy. As these concern strongly overlapping topics an inevitable disadvantage thereof is that the same themes are addressed several times (be it from different perspectives), which is somewhat tiresome if one would read the whole book in one go. On the other hand, each chapter comes up with additional information and interesting details, thereby delivering further building blocks for the main message of the book: when faced by shocks and external threats, almost in all time periods (except during the polarized 1970s) the Dutch responded gradually but nevertheless adequately via an intricate system of coordination in all five distinguished spheres of the economy (in industrial relations, information sharing with employees, corporate governance, inter-firm networks, and vocational training). Although a deliberate choice of the author, it is a missed opportunity not to elaborate on this last-mentioned sphere, for reasons not explicitly mentioned.  Here and there he just touches upon this important topic, while a bit more comprehensive discussion thereof would have made the application of VoC to the Dutch case complete.

The book clearly describes how non-market coordination in the Netherlands originated in the interwar years and how it developed thereafter. At first this occurred in great harmony under guidance of the state (demand-side, Keynesian policy) in order to restore international competitiveness, culminating in the so-called Golden Years (1950s-1960s). There was close collaboration between government, employer associations and unions at all levels. During the stagflation period of the 1970s unemployment rose, labor relations hardened and the government failed to cut spending. Finally, forced by the structural changes in the world economy, by 1982 the sense of urgency was strong enough for all parties to switch to a more liberal, supply-side economic policy. Wage restraints were accepted in return for the creation of jobs, which were often part-time and temporary. The labor market thus became more flexible. Although this whole process coincided with a drastic reform of the welfare state, it was also accompanied by an active labor market policy, preventing segregation of the labor market as well as a rise in income inequality. So, “more market” went hand in hand with sustained coordination. Addressing the most recent time period, the financial crisis of 2007-10 clearly demonstrates the negative consequences of introducing too much free market, and underscores the continued need for coordination and government regulation. Touwen describes the success of the Dutch CME in terms of “managed liberalization under the wing of consultation.” The ability of non-market coordination to accommodate change forms the connecting thread.

Annette van den Berg (lecturer at Utrecht University School of Economics) is the author (together with Erik Nijhof) of “Variations of Coordination: Labour Relations in the Netherlands” in: K. Sluyterman (ed.), Varieties of Capitalism and Business History. The Dutch Case (Routledge, 2015) and (together with John Groenewegen and Antoon Spithoven) of Institutional Economics. An Introduction (Palgrave Macmillan, 2010). Her email address is

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (August 2015). All EH.Net reviews are archived at

Subject(s):Economic Planning and Policy
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Housing and Mortgage Markets in Historical Perspective

Editor(s):White, Eugene N.
Snowden, Kenneth
Fishback, Price
Reviewer(s):Collins, William J.

Published by EH.Net (April  2015)

Eugene N. White, Kenneth Snowden, and Price Fishback, editors, Housing and Mortgage Markets in Historical Perspective. Chicago: University of Chicago Press, 2014. ix + 397 pp. $110 (cloth), ISBN: 978-0-226-07384-2.

Reviewed for EH.Net by William J. Collins, Department of Economics, Vanderbilt University.

In the aftermath of the recent financial crisis and “great recession,” there is renewed interest in the connections between housing markets, mortgage finance, financial institutions, and the macroeconomy.  Economic historians have engaged this discussion by offering trenchant comparisons between recent events and the American experience in the years before and during the Great Depression, as well as perspective on the evolution of institutions, financial instruments, and policies that played important roles in the recent crisis and ensuing policy debates.  The chapters in Housing and Mortgage Markets in Historical Perspective were written with an eye toward the recent crisis, sometimes engaging it directly and at length but more often using it as motivation for a detailed study of a particular aspect of economic history.  They succeed individually and as a multifaceted group of independent studies, in which authors often cross-reference one another’s arguments and findings.  There is much to be learned here.  Even readers who are experts in some areas covered by this volume will find their horizons expanded by the studies’ collective range and depth.

Eugene N. White (Rutgers University), Kenneth Snowden (University of North Carolina at Greensboro) and Price Fishback (University of Arizona) edited the volume, which emerged from a conference sponsored by the National Bureau of Economic Research in 2011.  It consists of an introduction and eleven chapters, most of which focus on the United States.  The volume is divided into four main sections.  Prior to Section I, however, Snowden provides a concise rendering of “A Historiography of Early NBER Housing and Mortgage Research” (chapter 1).  Housing markets and mortgage finance were an important feature of the NBER’s research programs from the 1930s to the 1960s, resulting in several volumes that have provided the intellectual bedrock for long-run perspectives on such topics.  Snowden’s chapter reviews the landmark studies in the NBER series and will serve as a valuable starting point for anyone who is beginning historical research on U.S. housing and mortgage finance.

The volume’s first section is on “Housing and the Interwar Business Cycle,” featuring chapters by Alexander J. Field (chapter 2), Steven Gjerstad and Vernon L. Smith (chapter 3), and Eugene N. White (chapter 4).  Field’s chapter, “The Interwar Housing Cycle in the Light of 2001-2012,” fully engages comparisons of the interwar experience and the more recent rise and fall of the housing market, as well as the macroeconomic implications of the housing cycle in different historical contexts.  Field carefully delineates the similarities and differences between the periods.  He argues that paying more attention to bank and household balance sheet issues may enrich our understanding of the Great Depression, as it has for the recent crisis, but he emphasizes that for many reasons (e.g., housing was less leveraged in the 1920s) the housing sector likely played a smaller and different role in the run up to the Depression than it played in the 2001-12 period.

Gjerstad and Smith’s chapter on “Consumption and Investment Booms in the 1920s and Their Collapse in the 1930s” develops an argument that differs from Field’s in its degree of emphasis on the importance of losses on residential real estate to the Great Depression.  Gjerstad and Smith describe several channels through which a decline in real estate values would plausibly affect economic activity, both then and now.  For instance, a decline the value of housing would lead households cut back on durable goods purchases and firms to cut back on production and employment, which in turn affects households’ income and ability to repay mortgage debt, which in turn affects bank balance sheets and lending, and so on.  Perhaps future research that explicitly models and measures the channels of influence connecting housing, financial markets, and macroeconomic aggregates throughout the 1920s and 1930s would help bridge the competing historical interpretations of Field and Gjerstad and Smith.

White’s “Lessons from the Great American Real Estate Boom and Bust of the 1920s” focuses on explaining why the housing-market collapse in the 1920s did not lead to a banking crisis despite having many similarities to the mid-2000s housing collapse that caused serious instability in the financial sector.  After reviewing and comparing the rise and fall of construction and housing prices during the two periods, White assesses the roles of the Federal Reserve, changes in lending standards and securitization, risk-taking by financial institutions, deposit insurance, and bank supervision.  At the risk of oversimplifying White’s narrative, it seems clear that the institutional environment of the 1920s did not lead banks to take on the same level of risk that financial institutions did in the 2000s.  As White puts it, “When the bust came, large losses did not accrue to them [banks in the 1920s]; and the most risky securitized mortgages were held by investors, not leveraged financial institutions” (p. 154).

The volume’s second section is “A Closer Look at the Interwar Housing Crisis,” with chapters by Michael Brocker and Christopher Hanes (chapter 5), Price Fishback and Trevor Kollmann (chapter 6), and Jonathan D. Rose (chapter 7).  Brocker and Hanes examine data for a cross section of cities, documenting the size of the boom in construction, home ownership, and home values during the 1920s, especially the mid-1920s, and find a correlation with the size of post-1930 collapse in local housing markets.  In addition to standard census-based information, the authors rely on data from the “Financial Survey of Urban Households” and the “Real Property Inventory,” which were collected in 1934 and include useful retrospective information.  They interpret the patterns as being consistent with a mid-1920s bubble that varied across places and that had not fully adjusted before the onset of the Great Depression.

Fishback and Kollmann’s chapter, “New Multicity Estimates of the Changes in Home Values, 1920-1940,” is the best guide to inter-war housing price data that I have read.  They draw on a variety of sources to trace the trajectory of prices over this period.  Importantly, they find patterns that diverge significantly from those in the series that Robert Shiller (2005) created by combining a particular series from Grebler, Blank, and Winnick (1956) with an index of asking prices for five cities for 1935-53.  This chapter should be the starting point for anyone whose research requires information on housing price dynamics during the interwar years.

In chapter 7, “The Prolonged Resolution of Troubled Real Estate Lenders during the 1930s,” Jonathan Rose describes the slow unwinding of troubled Building and Loan associations (B&Ls) through a detailed case study of Newark’s associations, which fell in number from 499 in 1930 to 55 in 1945.  A fascinating part of the story is that withdrawal restrictions at B&Ls led to the development of a secondary market in B&L shares that, in a roundabout way, helped clear the housing market.  Rose explains how B&L shareholders who sold on these markets realized significant losses compared to more patient shareholders.  Rose also examines variation in reported share prices (circa 1939-40), and then goes on to describe two waves of B&L resolutions, through liquidation or reorganization, in the late 1930s and early 1940s.

The volume’s third section consists of two studies of “Securitization in Earlier Times,” written by Rik Frehen, William N. Goetzmann, and K. Geert Rouwenhorst (chapter 8) and Kirsten Wandschneider (chapter 9).  Frehen, Goetzmann, and Rouwenhorst describe “Dutch Securities for American Land Speculation in the Late Eighteenth Century,” with a focus on financial instruments in the 1790s that financed land purchases in Washington, D.C. and New York State.  “Negotiaties” were complex debt securities that in essence provided claims on future land sales.  The authors review the history of related financial instruments in Dutch markets before describing the fate of the investments in Washington (a failure) and New York (a limited success).  The reorganization of the New York debt into an equity-like instrument was critical to the venture’s relative success, and it demonstrates the inadequacy of debt instruments in a setting where development and gains from land sales were slow to materialize.

The chapter by Wandschneider, “Lending to Lemons: Landschaft Credit in Eighteenth-Century Prussia” is an outlier in the best sense.  Eighteenth-century Prussia is far removed from the context of most of the papers in the volume.  Yet the fundamental economic themes are highly relevant to volume’s discussion, and the institutions created in Prussia in response to inherent problems of mortgage finance are a potent reminder of the value of going abroad to gain a novel perspective.

The volume’s last section, “Postwar Housing Policies,” includes work by Daniel K. Fetter (chapter 10) and Matthew Chambers, Carlos Garriga, and Don E. Schlagenhauf (chapter 11).  Fetter’s chapter, “The Twentieth-Century Increase in Home Ownership: Facts and Hypotheses,” begins by laying out a series of first-order facts about the mid-century rise in U.S. homeownership, viewed from time-series, city-level, age-specific, and cohort-specific perspectives.  The steep rise in ownership after 1940, especially for relatively young men, corresponds to both a decline in renting and a decline in living with relatives.  The rise in ownership was widespread, occurring in every region and in rural and urban areas, though not uniform in magnitude.  He then assesses several hypotheses about the rise in ownership, placing emphasis on demographic factors and changes in mortgage finance while noting that stronger evidence could be developed to address other plausibly important channels, such as rising income and the changing tax code.

Chambers, Garriga, and Schlagenhauf’s chapter, “Did Housing Policies Cause the Postwar Boom in Home Ownership?” takes a different approach to studying homeownership, placing the tenure decision in the context of a dynamic general equilibrium model where government intervention affects ownership through the tax code and mortgage market institutions.  Once the model is parameterized to match key properties of the economy observed between 1935 and 1940, the authors can conduct counterfactual policy experiments for the post-1940 period such as changing the tax treatment of housing or the duration of available mortgage instruments, both of which appear to have a nontrivial impact on overall homeownership rates.  It is interesting that the predicted 1960 ownership rate rises when the mortgage interest deduction is eliminated, implying an important divergence between partial and general equilibrium results.

As in most conference volumes, the chapters of this book do not seamlessly cover a particular area of research, nor were they supposed to.  Instead, as individual pieces of work, they impress with the quality of their insight and their resourcefulness in bringing data to bear on important questions.  They also find plenty of common ground for motivation and discussion as a collection of research papers.  Any scholar interested in the history of U.S. housing and mortgage markets or seeking to learn more about historical antecedents to the most recent financial crisis would find the book worth reading.

William J. Collins is the Terence E. Adderley Jr. Professor of Economics at Vanderbilt University.  He has authored several papers on the economic history of home ownership with Robert A. Margo (Boston University).  He is a Research Associate of the NBER but was not involved in the planning or production of this volume or the preceding conference.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (April 2015). All EH.Net reviews are archived at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Household, Family and Consumer History
Industry: Manufacturing and Construction
Macroeconomics and Fluctuations
Markets and Institutions
Urban and Regional History
Geographic Area(s):Europe
North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Stinking Stones and Rocks of Gold: Phosphate, Fertilizer, and Industrialization in Postbellum South Carolina

Author(s):McKinley, Shepherd W.
Reviewer(s):Irwin, James R.

Published by EH.Net (January 2015)

Shepherd W. McKinley, Stinking Stones and Rocks of Gold: Phosphate, Fertilizer, and Industrialization in Postbellum South Carolina.  Gainesville, FL: University Press of Florida, 2014.  xii + 230 pp. $70 (hardcover), ISBN: 978-0-8130-4924-3.

Reviewed for EH.Net by James R. Irwin, Department of Economics, Central Michigan University.

Stinking Stones and Rocks of Gold is a well-written history of “the beginnings of South Carolina’s three phosphate-related industries — land mining, river mining, and fertilizer manufacturing” (p. 3) — which emerged in the lowcountry in the aftermath of the Civil War. Shepherd W. McKinley provides a thorough account of the origins and early development of the industries, from the late 1850s into the mid-1880s.  The book is an interesting blend of business history (focused on companies and their leaders) and southern social history (with attention to ex-slave workers and to the “New South” context).  Some economic historians researching the post-Civil War South will want to draw on Stinking Stones and Rocks of Gold, but I suspect the book’s main audience will be a wide range of historians.

Chapter 1 provides an overview of “Antecedents, Precedents, and Continuities, 1800-1865,” years identified as the “gestational period for the three industries” (p. 10). The chapter starts with a brief history of fertilizer in the antebellum U.S., focusing first on the North and drawing on Wines (1985). McKinley sees slavery as an obstacle to fertilizer use in the antebellum South, but that is a minor point in a story of increasing fertilizer supply that came after emancipation. A major contribution of the chapter is a thorough and engaging account of how “gentleman-scientists” (most notably, the planters Francis S. Holmes and St. Julien Ravenal) and professional scientists (such as Charles U. Shepard Sr. and Nathaniel A. Pratt) contributed to the discovery (in the late 1850s) that the lowcountry’s “stinking stones” were a valuable raw material for fertilizer production, and a replacement for increasingly costly guano imports. By 1860, at least two businesses were looking to use lowcountry rock to produce fertilizer, so the phosphate-related industries seemed poised to take off when secession and war intervened. McKinley suggests that “the Civil War was both a catalyst and an obstacle to the development” of the lowcountry’s trio of phosphate-related industries. And he provides examples of how wartime contacts and experiences were advantageous to some of the key players founding the industries in the wake of the Civil War.  But whatever the gains to those individuals, on my reading the war simply delayed the emergence of phosphate mining and fertilizer manufacturing in South Carolina.

Chapter 2 describes the emergence of the lowcountry’s phosphate-related industries in the years 1865 to 1870. It focuses on two firms, the narrowly southern, and small, Wando Fertilizer Company, and the much larger, and northern-financed CMCC (Charleston, SC, Mining and Manufacturing Company).  Starting in November 1866 as a partnership including Ravenal, Wando focused on fertilizer manufacturing and pursued a “cautious” approach to business.  Founded in September 1867, the “northern-dominated CMCC” (p. 56) focused on land-mining, shipping the phosphate rock north to fertilizer manufacturers. Southerners Holmes and Pratt played prominent roles in the early years of CMCC, providing the company a southern face for extensive purchases of phosphate-rich lands in the lowcountry. McKinley notes that “CMCC was active in pioneering public relations through the local press” — a compliant press that distracted attention from the northern financing and control of CMCC (p. 52). After less than two years CMCC had concluded the phase of land acquisition; Holmes and Pratt “dropped out of active participation” (p. 54), and the company headquarters moved to Philadelphia. “By 1870, phosphate land mining was well-established as a substantial industry in the lowcountry” (p. 63), with a wide range of southern and northern companies, even if “Philadelphia-based CMCC was the largest, best-financed, and most productive firm.” McKinley emphasizes the role of “Charleston’s business elites and local planters” (p. 64) in these early years of land-mining and fertilizer-manufacturing in order to challenge views of the New South as a colonial economy of the North.

Chapter 3, “Land Miners and Hand Mining, 1867-1884,” approaches the land-mining industry from the workers’ point of view.  McKinley suggests that ex-slaves built on the lowcountry’s tradition of task-based slavery to create (p. 96) “a relatively autonomous labor system” that featured “good wages” and flexible timing. Of particular interest is McKinley’s suggestion that land-mining was a complement to the “two-day system” (p.77) of part-time sharecropping, which serves to remind that we have much to learn about work arrangements in the postbellum South. The chapter’s section on “Middleton Place” (pp. 85-91) skillfully draws on archival materials to illustrate the challenges a former planter faced in terms of recruiting, retaining, and managing ex-slave workers in the early years of the Ashley Mining and Phosphate Company (the origins of which are covered on pp. 47-48). Moving beyond the immediate postwar years, McKinley highlights limitations of census data for evidence on land miners and land mining, arguing there was a substantial undercount in both 1870 and 1880 (pp. 83, 95-96).

McKinley’s quantitative research on the land-mining labor force could have been more useful to   economic historians researching and teaching about the post-Civil War South; as it is they will find it difficult to build on his work.  McKinley scoured the census manuscripts (1870 and 1880) for evidence on phosphate miners but the book does not give citations to census manuscript pages, so subsequent scholars trying to make sense of the enumerations will probably duplicate McKinley’s efforts, instead of building on them. This is unfortunate because the census manuscripts are now online and easily browsed, creating a range of opportunities for researchers and students. McKinley’s assessment of the size of the land-mining work force also could have been improved, by referring to William Rowland’s “Report on the Manufacture of Chemical Products and Salt,” in the published Manufactures volume of the 1880 census.  Rowland’s “Report” includes sections on “Manufactured Manures” (p. 16-17) and “South Carolina Phosphates” (pp. 17-19). The evidence there would have been a useful starting point for discussing employment and production in South Carolina’s phosphate-related industries. Working from the 1880 manufacturing census manuscripts, McKinley suggests that land-mining employed “at least 1,685 workers,” which is not too far from the published census value of 1,350 hands (Rowland, p. 18).  However, McKinley’s discussion of the sector’s size would be more convincing if it referred to the published census data (which reflect contemporaries’ efforts to make sense of the census manuscripts). Similarly, the discussion might have benefited from attention to Edward Willis’s report titled “Phosphate Rock” in the 1890 census’s Report on Mineral Industries in the United States, which includes data on phosphate mining employment in 1880 (and annual production estimates from 1867 to 1889). McKinley’s primary sources do include two archival items by Willis (an industry insider, see e.g. p. 47), but the published material in 1890 census may provide additional evidence. That said, the quantitative dimensions of the phosphate industries are not central to McKinley’s narrative, so these quibbles of an economic historian are not major criticisms.

Chapter 4 is “River Mining and Reconstruction Politics, 1869-1874.”  Because rivers were public domain, the emergence of river mining raised a number of contentious policy issues that were bound up in “questions of ideology, sectionalism, party politics, race, class, and corruption” (p. 107).  River mining started as “an outgrowth of the land-mining bonanza” (p. 99), an informal industry of individuals gathering phosphate rocks from tidal flats and shallow waters, supplementing the phosphate supply for manufacturers and dealers. But the mining of state-owned waterways soon attracted legislative attention, from two directions: royalties were a potential source of revenue for the state government, and river-mining rights were a potential source of private profit.  Over the course of five years, with heated editorial debates, contentious legislation, and court battles, there emerged three companies that dominated river-mining (p. 122). The three used heavy equipment to break up and process large deposits of “stratum rock” (p. 115) from below the river beds, a year-round industry. Their production was supplemented by a wide range of independent operators and subcontractors with hand tools and small boats, who worked “from April through September” (p. 119).

McKinley’s account of the interplay of issues of race, party, and corruption, will be useful to historians of reconstruction politics. The establishment and enforcement of property rights in the river rock could provide a useful case study for those interested in law and economics or institutional economics.

Chapter 5 is “Convergence and the Fertilizer Industry, 1868-1884.” A history of the third phosphate-related industry of the South Carolina lowcountry, with detailed attention to eight Charleston firms, the chapter may be most useful to business historians. McKinley emphasizes the role of the Charleston elite in the emergence of the fertilizer industry, but generally the industry drew heavily on northern capital and management. Firms downplayed any connections to the North and appealed to regional loyalty and “southern patriotism” (p. 127).  The first plants were located in the city of Charleston, but the “noxious fumes associated with fertilizer manufacturing” (p. 131) made it unsuited to urban areas. Early in the 1870s firms began establishing larger-scale plants on “the Charleston Neck, a sparsely settled area north of the city” (p. 125).  Some of the firms developed vertically integrated operations, from mining to marketing.  Most firms built “acid chambers” to produce the sulfuric acid that dissolved the phosphate rock to make fertilizer. The resulting pollution from the fertilizer plants would end up displacing truck farming from the Neck, as local farmers’ legal challenges failed (p. 148).  According to the South Carolina Department of Health and Environmental Control (SC DHEC), the acid chambers that McKinley refers to were made with lead and arsenic which ended up contaminating the soil and groundwater of the Neck.

McKinley’s “Conclusions and Epilogue” complete the text. He sees the emergence of the lowcountry phosphate-related industries as an early example of “a longer-term change in agriculture and industry ambiguously labeled modernization” and as “a break from the Old South” (p. 154).  He sees continuity however, with members of “Charleston’s antebellum economic elites” (p. 155) taking a leadership role in the new industries. Similarly, McKinley identifies elements of both continuity and change for lowcountry African-Americans. With emancipation, “freedpeople gained mobility and a host of partial freedoms” (p. 161), but ex-slaves “predominated as the working class” while “white elites retained control of the land and the business world” (p. 161). McKinley argues for the long-term impact of the phosphate industries, and against Shick and Doyle’s (1985) characterization of the “South Carolina Phosphate Boom” as part of “the Stillbirth of the New South.” While acknowledging that phosphate mining (land and river) declined in the 1890s, and that the “control and profits” (p. 164) of lowcountry fertilizer manufacturing shifted north, McKinley argues that “the three industries led to sustained economic development” in the Charleston area (p. 162).  In his account, fertilizer manufacturing was the basis for lowcountry industrialization that lasted until the 1970s (pp. 163-64).

McKinley notes some downsides to the phosphate/fertilizer industries, most simply, a legacy of severe pollution: in 1999, “EPA officials named the Neck ‘one of the most concentrated areas of contamination’ in America’” (p. 164).  In his paragraph on the pollution legacy, McKinley mentions “phosphorus leaching from abandoned fertilizer factories.” Interestingly for economic and environmental historians, the key pollution left by the fertilizer plants is “lead and arsenic contamination of soil and groundwater” (SC DHEC), where lead and arsenic are pernicious threats to human health.  Identifying another downside, McKinley speculates that “The sheer tonnage of fertilizer produced in the area altered agricultural production patterns” because it provided “the means for southerners to overproduce” cotton. If so, perhaps “Charleston’s peculiar industrialization” (p. 166) retarded the transition out of agriculture in the South more generally, and contributed to the persistence of southern poverty.  Be that as it may, in most of McKinley’s presentation the lowcountry’s phosphate-related industries come across as net positives for the region, and for both the workers and the firms.

Regardless of whether that assessment stands up over time, McKinley’s fine monograph is a valued addition to the history of the low-county and the post-slavery South more generally. I hope that subsequent scholars will follow his lead and give us histories of “other understudied southern industries emerging in the shadow of the Civil War” (p. 3).


Ellis, Edward, “Phosphate Rock,” in U.S. Census Office,  Report on Mineral Industries in the United States at the Eleventh Census: 1890, Washington DC, GPO, 1892 (pp. 679-691), Volume 7 of the 1890 Census Final Reports.

Rowland, Wm. L., “Report on the Manufacture of Chemical Products and Salt,” in U.S. Census Office, Report on the Manufactures of the United States at the Tenth Census, Washington: GPO, 1883, Volume 2 of the 1880 Census Final Reports.

Shick, Tom W., and Don H. Doyle, “The South Carolina Phosphate Boom and the Stillbirth of the New South, 1867-1920.” South Carolina Historical Magazine (1985): 1-31.

South Carolina Department of Health and Environmental Control (SC DHEC), “Historic Superphosphate Fertilizer Industry in S.C.” Webpage, accessed January 2015,

Wines, Richard A., Fertilizer in America: From Waste Recycling to Resource Exploitation. Philadelphia: Temple University Press, 1985.

James R. Irwin is Professor of Economics at Central Michigan University. His current research draws on probate and deed records to explore wealth and income in Virginia and the rest of North America in the period 1650-1860.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (January 2015). All EH.Net reviews are archived at

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):19th Century