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The Visible Hand: The Managerial Revolution in American Business

Author(s):Chandler, Alfred D. Jr.
Reviewer(s):Landes, David S.

Project 2000: Significant Works in Twentieth-Century Economic History


Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Harvard Belknap, 1977. xvi + 608 pp.

Review Essay by David S. Landes, Departments of Economics and History, Harvard University.

Alfred Chandler: World Master of Institutional Business History

Alfred Chandler is the world master of institutional business history. He began his career as scholar and researcher innocently enough, with a doctoral monograph (1952) on the life and career of Henry Varnum Poor, railway pundit of the nineteenth century. But then he went on to work in the business and personal archives of the du Ponts of Delaware, to whom he was related by family and friendship, and the result was a first-class company and entrepreneurial history, written with the aid and collaboration of Stephen Salsbury: Pierre S. Du Pont and the Making of the Modern Corporation (New York: Harper & Row, 1971.). As the title indicates, he was already interested in the larger question of the structures and evolution of corporate enterprise.

Then, in the mid 1970s, he brought out the first of a series of major works on this subject, his Visible Hand, which won the Pulitzer and Bancroft prizes in 1978. The title reference is to deliberate organizational arrangements designed to make big business work. Chandler was not the first to write on this. As his introductory text and references make clear, the topic is one that has interested economists and essayists going back at least to Adam Smith, that incredible seer into past, present, and future. More recent predecessors (over the last century) would include Werner Sombart, James Burnham, Ronald Coase, Douglass North, and Oliver Williamson. But all of these dealt with the problem as part of larger agendas. It was Chandler who, focusing on the theme, rewrote in effect the course of American economic history and laid the basis for comparative international explorations.

The book lays out the task and theme by stating a number of propositions: 1. Modern business enterprise came in when administrative coordination did better than market mechanisms in enhancing productivity and lowering costs. 2. The advantages of coordinating multiple units within a single enterprise could not be realized without a managerial hierarchy. 3. It was the growing volume of economic activities that made administrative coordination more efficient than market coordination. 4. Once a managerial hierarchy does its job, it becomes its own source of permanence, power, and continued growth. 5. Such hierarchies tend to become increasingly technical and professional. 6. Over time, such professional structures become separate from ownership. 7. Professionals prefer long-term stability and growth to short-term gains. 8. Big businesses grew to dominate branches and sectors of the economy, and so doing, altered their structure and that of the economy as a whole.

So much for the United States. Much of the book is a historical review of these processes, beginning with the colonial era and the early decades of independence. In those days, business structures were not so different from what they had been several centuries earlier, in Renaissance Italy or, later, in the Low Countries and England. Chandler offers here an overview exceptional for its coverage through time and space, its attention to the variety of economic activity and commercial specialization. One of the most striking features of this presentation is his attention to the precocity of American development: a colonial, frontier area, low in density, handicapped in matters of inland transport, yet rich in human capital and opportunity. One silent evidence of this modernity: the large number of watch and clock dealers and repairers.

None of this, though, generated the modern corporate business structure, for reasons implicit in Chandler’s propositions. The economy and its business units were not yet big enough. That came with the railroad in the 1840’s and 1850’s. Here for the first time one had large enterprises dispersed in space, requiring heavy investment and maintenance in road, rails, tunnels, and bridges, tight organization of rolling stock, and all kinds of passenger and freight arrangements including timely service, mobilization of capital and handling of money income and outlays — in short a world of its own. Chandler noted here the critical contribution of men trained in the military academies, for armies were even earlier enterprises of vast scale, though more improvisational and transitory in character, and with destructive-predatory rather than constructive objectives. (The only comparable commercial enterprises to the railroads were the canals, but for topographical reasons, these were less important in the United States than in Europe. The one exception was Erie, but even there the waterway was soon lined with railroads. Chandler notes that in the 1840’s, only 400 miles of canal were built, to make the nation’s total canal mileage something under 4,000. In that same decade, over 6,000 rail miles were completed, making the national total 9,000. Time counted, and railroads were faster and more efficient.)

The introduction of such managerial and organizational techniques into industry waited on gains in scale of enterprise. The traditional manufacturing firm, for example, was a personal or familial operation, assisted by outside supply and demand facilities and initiatives — the shop writ large. Past a certain threshold, however, ways had to be found to pull the parts together, to oversee, coordinate, and control. In the United States, it was the chemical and even more the automobile manufactures that led the way. Chandler is particularly well informed here because of his earlier work on Du Pont, with its subsequent ownership of a controlling share of General Motors. GM itself tells a fascinating story of transition from personal to corporate enterprise. It started with William C. Durant, a kind of freebooter who pulled together a number of independent manufacturers – Buick, Oldsmobile, Cadillac, Chevrolet et al. — and did his best to stay on top but ran into impossible financial impasses, personal and corporate. It then fell into the hands of the bankers and moneymen: J.P. Morgan and Company and Pierre du Pont (rich from wartime earnings). And with the aid of manager Alfred Sloan, Jr., they set up a command structure that became a model for all manner of industrial enterprises.

Chandler’s analysis would have been even richer had he made an explicit comparison between GM and the Ford Motor Company, because the latter is an exquisite, tortuous example of industrial gigantism under personal autocracy gone astray and awry. Ford was just the opposite of the Chandler prescription: all manner of organizational improvisation in the face of arbitrary whimsy. What the costs to Ford, no one will ever know: this was a company that estimated income and outgo by the height of piles of paper and had only an approximate idea of its debts and credits. When in money trouble, it taxed its dealers.

The move to a rational managerial system was bound to encourage professionalization. One of Chandler’s merits was not only to call attention to new schools and curricula, but also to show how much could be achieved in the strangest places. Here again, his later comparative work filled out the American story along lines already explored by European scholars: the creation and transformation of professional schools to meet the needs of state bureaucracies; the differences in national achievement; the implications for the larger process of economic growth and development. Again, each industry had its own requirements and opportunities, just as each society had its own areas of preference. The British, who had accomplished much on the basis of apprenticeship and bench learning, were slow to adopt formal class and lab instruction. The Continental countries, especially the Germans, French, and Scandinavians, strained to catch up and learned not only to transform the older branches but to advance in new areas of production.

The growing reliance on professionally trained managers entailed an assault on the structures and habits of personal and familial enterprise. This was particularly true of technologically complex branches of production, which found it easier to hire good people than to tame them. Inevitably, the people who ran the show nursed aspirations that contradicted family control, the more so as such experts often were remunerated by share options that gave them a piece of ownership. Growth, moreover, entailed mobilization of funds, whether via bank loans or public sales of ownership shares, and this too often countered family interests.

By the same token, the success and resources of managerial corporations have made them the arch seducers of the business world. This is a new, major aspect of the shift away from family control: how can a family firm say no to such generous offers, often exceeding the prospect of immediate gains? The recent sale of Seagram by the Bronfman interests to the French conglomerate Vivendi is an excellent example of money trumping blood, marriage, and personal aspirations. Another is the purchase by LVMH (Mo?t Hennessy Louis Vuitton SA) of a number of Swiss watch manufacturers by way of establishing itself as a major player in the luxury watch trade. These acquisitions exemplify “what can happen to a small, family-founded business under the umbrella of a global corporate superpower with plenty of financial resources. The chairman and chief executive of LVMH, Bernard Arnault, is known for sparing no expense to gain dominance in luxury brands as diverse as champagne and handbags.” The manger of one of these family brands put it straight: “LVMH is prepared to overinvest in Ebel without short-time return. They know that to build up a luxury brand you need time and money.” (Quoted in the International Herald-Tribune, February 5, 2001, p. 11.)

Chandler’s model, like most powerful syntheses, simplifies reality. The world of enterprise is full of variants, of diverse responses to the tensions and conflicts implicit in entrepreneurial strategy and in the personal circumstances and histories of business endeavor. The family firm has not disappeared and will not. New ones are created all the time. There is even an international fraternity of family firms that go back more than two hundred years, Les Henokiens, named after the biblical patriarch Enoch. And there are enterprises that somehow seem to blend the personal and managerial with such art that one is hard pressed to classify.

But Chandler’s model, in combination with Chandler’s extraordinary energy, has served as the standard, the measure, the incentive to further inquiry. A small library has appeared on this subject, and one has only to read the book Chandler edited with Herman Daems, Managerial Hierarchies: Comparative Perspectives on the Rise of Modern Industrial Enterprise (Cambridge, MA: Harvard University Press, 1980), to appreciate the quality and versatility of the collaborators, (Leslie Hannah, Jurgen Kocka, Maurice Levy-Leboyer, Morton Keller, Oliver Williamson), the range of the scholarship, and the opportunities for thought and reconsideration. The Chandlerian model is a monument to present and future scholarship, and the Visible Hand an example and encouragement to scholars everywhere.

David S. Landes is professor emeritus of history and economics at Harvard University and the author of several books including The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present (1969) and The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (1998).

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Erasing the Invisible Hand: Essays on an Elusive and Misused Concept in Economics

Author(s):Samuels, Warren J.
Reviewer(s):Kennedy, Gavin

Published by EH.Net (February 2012)

Warren J. Samuels (assisted by Marianne F. Johnston and William H. Perry), Erasing the Invisible Hand: Essays on an Elusive and Misused Concept in Economics. New York: Cambridge University Press, 2011. xxviii + 329 pp. $95 (hardcover), ISBN: 978-0-521-51725-6.

Reviewed for EH.Net by Gavin Kennedy, Edinburgh Business School, Heriot-Watt University, Edinburgh (Professor Emeritus).

Warren Samuels was an American historian of economic thought located at the top of its first division.? He started work for this book in 1983 and took 28 years to complete.?? This was no rushed job and it shows in his meticulous and, therefore, authoritative scholarly account of the now widely quoted ?invisible hand? (pp. 20-26). Smith did not ?coin? the phrase. It was prevalent in classical times from Aeschylus through to St Augustine, and later, in numerous seventeenth- and eighteenth-century theological texts, sermons, plays (Shakespeare), poems, and novels (Defoe, Walpole), and in political rhetoric (George Washington).??
Adam Smith used it only twice as a metaphor in his Theory of Moral Sentiments (1759) and Wealth of Nations (1776), and once in his History of Astronomy (1795, posthumous). After Smith, there was an absence of mentions of the invisible hand metaphor among economists to 1875 and near silence thereafter until it was rediscovered and re-invented into the ?founding concept? of modern economics from the 1940s.

Samuels reports Amazon listing 33,888 books discussing the invisible hand (2009). The annual rate of mentions rose from ?very low? (1816-1938), but the decade (1990-1999) recorded eight times the level of mentions between 1942-1974 and nearly 20 percent higher than for 1980-89 (p.18-19). In consequence, the invisible hand is now widely believed to be significant, and it has spread to other disciplines. Samuels dissects forensically this phenomenon of belief, though he understates the unique role of Paul Samuelson (from 1948) in popularizing modern notions of Adam Smith?s ?invisible hand.??

Samuels discusses Adam Smith?s supposed use of the invisible hand in his political economy.? Essay 3 examines the numerous modern identities of the invisible hand and Essay 4 discusses Smith?s argument that philosophical ideas help to ?soothe the imagination.? Essay 5 examines conceptual problems associated with ?naturalism? and ?supernaturalism? in philosophy.? Essay 6 examines the invisible hand as a ?figure of speech,? which for me is Samuels? most disappointing essay.? Samuels continues with his examination of the invisible hand as ?Knowledge? (Essay 7) within the economic role of government, while Essay 8 addresses misconceptions that Smith was a doctrinaire advocate of ?laissez-faire.?? Samuels continues in Essay 9 on claims that Smith?s ideas led to the welfare theorem.? Samuels? conclusions in Essay 10 are best summarized by his question: ?what is left of the invisible hand? (p. 293) and by his answer: ?There is no invisible hand as that term is used in economics.? Its continued use must at its base constitute an embarrassment.? Almost all uses of the term add nothing to substantive knowledge? (pp. 290-91).

There are two parts to the enigma of ?an invisible hand.?? There was Adam Smith?s use of the invisible hand metaphor (what did Smith mean?) and second, there is how modern economists use the same figure of speech (what do they mean?). Samuels? otherwise excellent and thorough account produces an ambiguous answer. He says that his ?account clearly does not conclude the conventional view(s) of the invisible hand is (are) wrong, in whole or in part? (p. 295). However, ?Conventional views? may well be true, if judged strictly as beliefs. Simultaneously and separately, beliefs in attributions to Adam Smith that assert his complicity in those conventional views are false.

Samuels? problem is sourced in Essay 6 on ?uncertain language.?? He identifies ?one dozen major responses? to the question of ?what is the invisible hand?? plus ?some four dozen identities? (p 135).? However, his analysis of the role of metaphors is particularly disappointing because, while he provides an authoritative survey of the modern use of metaphors and associated figures of speech, he does not acknowledge Adam Smith?s own teaching on metaphors. Instead, Samuels sources his ?conclusions? from eight twentieth-century linguistic authorities (from 1979 and 1993) and Samuel Johnson?s Dictionary (1755), of which Smith published a scathing critical review. Samuels makes no mention in the text nor in the bibliography of surely the prime witness as to what Smith meant by ?an invisible hand,? that is, Adam Smith himself!

Smith discussed the role of metaphors clearly in his ?Lectures on Rhetoric and Belles Lettres? ([1762] 1983): ?Now it is evident that none of these metaphors can have any beauty unless it be so adapted that it gives the due strength of expression to the object to be described and at the same time does this in a more striking and interesting manner? (Smith, LRBL, Lecture 6, p. 29; see also Oxford English Dictionary, 1983).

Smith used the metaphor of ?an invisible hand? to ?describe in a more striking and interesting manner? their particular objects: it was the absolute mutual dependence of the ?unfeeling landlord? on his serfs, servants, and tenants (?no food, no labour?), and their mutual dependence on him (?no labour, no food?), which mutual dependence led him to share his crops with them, unintentionally benefiting humanity through the ?propagation of the species? (Theory Moral Sentiments, 1759, p. 185); and it was the insecurity felt by some, but not all, merchant traders, that led them to prefer to invest in ?domestick industry? (mentioned four times), rather than risk the ?foreign trade of consumption? (Wealth Of Nations, 1776, p. 456), also unintentionally benefiting society by adding to domestic revenue and employment.? Smith?s use (History of Astronomy, 1795, p. 49) of the ?invisible hand of Jupiter? simply states the pagan beliefs of Romans about their god, Jupiter, whom they believed (but never witnessed) cast his lightning bolts at humans.?? In all three cases, it is evident that for Smith the ?invisible hand? does not exist; it is an imaginary figure of speech and an imagined pagan belief.? We cannot see, but we can imagine; we may choose to believe or not to believe.? The ?invisible hand? ?corresponds to nothing in reality,? it ?contributes nothing to knowledge,? and is a ?distraction and a diversion, (Samuels, p. 146).

Samuels simultaneously announces that ?designating something ? for example, the market, the price-mechanism, an entrepreneur, or anything else? ? as the function ostensibly performed by something called ?the invisible hand? literally adds nothing.?

Warren Samuels has written an authoritative, detailed and mainly original contribution to scholarship, ably assisted by his collaborators, Marianne Johnston and William Perry.

Gavin Kennedy, professor emeritus, Heriot-Watt University, Edinburgh (, is the author of Adam Smith: A Moral Philosopher and His Political Economy, second edition, (Palgrave, 2010) and

Copyright (c) 2012 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 (February 2012). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
20th Century: WWII and post-WWII

Slapped by the Invisible Hand: The Panic of 2007

Author(s):Gorton, Gary
Reviewer(s):Moen, Jon R.

Published by EH.NET (October 2010)

Gary Gorton, Slapped by the Invisible Hand: The Panic of 2007. New York: Oxford University Press, 2010.? v + 223 pp. $35 (hardcover), ISBN: 978-0-19-973415-3.

Reviewed for EH.NET by Jon R. Moen, Department of Economics, University of Mississippi

Gary Gorton has written an important book, one that clearly identifies the issues surrounding the recent financial crisis and separates them from the ongoing macroeconomic policy turmoil.? Even though parts of it were written close to if not during the financial collapse, it nevertheless provides perspective on what happened and why.? This is quite an accomplishment, given that many of us are still trying to figure out happened in earlier panics and crises.

The book has six chapters, four of which are drawn from papers previously presented or published.? The first chapter is a new introduction that presents the issues Gorton will discuss in more detail in subsequent chapters. These include defining a systemic panic and drawing parallels from National Banking Era panics to the current crisis.? He then explains that the rest of the book is all about how the overnight repo market and the subprime mortgage market were intertwined ? and how that led to a bank panic.

The second chapter is based on a paper presented at a conference sponsored by the Federal Reserve Bank of Atlanta in 2009 at Jekyll Island. This chapter is perhaps the most accessible to economists not familiar with banking history and modern financial instruments and structures, and it provides a remarkably transparent discussion of the complex mortgage-backed financial derivatives of the recent crisis.? Gorton argues that the current financial crisis is not that much different from the earlier National Banking Era panics, particularly the Panic of 1907.? I think he is correct on this point in that during both crises disruption to short-term, overnight lending led to more serious financial and real disturbances.? In both panics this disruption took place in what Gorton refers to as the shadow banking system, a banking system arising outside normal commercial banking structures to accommodate the banking demands of very large institutional ?depositors.?? The overnight repo market comprised much of the shadow banking system until very recently, while during the National Banking Era the New York call loan market played a similar role a century ago. I feel that Gorton could have made the parallel stronger by clearly identifying the overnight repo market of today with the New York call loan market of the National Banking era.? New York City trust companies and out of town lenders in the call loan market are the counterpart to today?s shadow banking system.? The near collapse of the call loan market threatened to bring the New York money market to a complete halt had big bankers like J.P. Morgan and the big six New York national banks not intervened.? To a great extent they were the lender of last resort in 1907.? There was no one around to prevent the collapse of the overnight repo market this time around, as investment banks like Lehman Brothers had no lender of last resort.

Chapters three and four are from a long paper presented at the Kansas City Federal Reserve Bank?s Jackson Hole Conference in 2008.? Chapter three goes into great, if not excruciating, detail on the derivatives built on top of the securitization of mortgage-backed securities.? You will have to do a lot of work on your own to get through this chapter, as it assumes that you already are quite familiar with these complex instruments.? While it is not mathematically complex, keeping track of the terminology and jargon is.? But working through it pays great rewards in the end, and it becomes painfully clear just how hard it was to value these instruments.

Chapter four offers some relief from the technical onslaught of chapter three, but not much.? It traces out the chain of events in the Panic of 2007 and provides an excellent account of what happened in the overnight repo market starting in August 2007.? Gorton also examines critically a few explanations for the Panic of 2007, including the ?originate to distribute? view, the misalignment of incentives in securitization, and the decline in underwriting standards.? All three are found lacking.? Rather, it is the fact that the viability of the pyramid of derivatives ultimately backed by subprime mortgages was based on ever-rising housing prices, and subprime mortgages were designed to work only if housing prices kept rising.? Not all securities are designed this way, making subprime mortgages unique.? The pyramid collapsed when housing prices stopped rising.? The conclusion to chapter four is especially illuminating, arguing that it was the structure of subprime mortgages and not securitization that was the root of the problem.

Having survived chapters three and four, we get to chapter five, originally published in 1994.? It nicely describes the role of banks and what happens when banking is undertaken by intermediaries who are innovating around increased bank regulation, leaving a chunk of banking activities outside the purview of regulators.? While this chapter does not directly deal with recent events, it sets out areas of concern for regulators, the most important of which seems to be identifying intermediaries that are taking in what in effect are deposits and making bank-like loans even though they do not have a bank charter.? The recent overnight repo market is one such example.? Chapter six is a note to folks reading the book in 2107, hoping they may have learned something from 2007 (and 1907?), that is, panics are dangerous but not that mysterious.

There is a lot to take in and learn in this deceptively brief book, and I suspect I will have to read it several times to capture all that it contains.? There is not a great deal related to specific regulatory recommendations other than some type of deposit insurance for securitizations; intermediaries engaged in securitization should be viewed as banks and treated as such and supervised; and that entry into securitization should be limited.? Gorton mercifully stays away from the current fiscal policy versus monetary policy debate, leaving macroeconomic policy to others.? By narrowly focusing on the events and institutions of the Panic of 2007, how the economy got to where it is today becomes much clearer.

Jon R. Moen is Associate Professor of Economics and Chair of the Economics Department at the University of Mississippi. He has published several articles on the Panic of 1907 and is currently working on a detailed study of the Panic with Ellis Tallman of Oberlin College.

Copyright (c) 2010 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 (October 2010). All EH.Net reviews are archived at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas

Author(s):Medema, Steven G.
Reviewer(s):Horwitz, Steven

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Published by EH.NET (June 2010)


Steven G. Medema, The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas.? Princeton, NJ:? Princeton University Press, 2009. xiii + 230 pp.? $35 (hardcover), ISBN:? 978-0-691-12296-0.


Reviewed for EH.NET by Steven Horwitz, Department of Economics, St. Lawrence University.



With The Hesitant Hand_ Steve Medema, professor of economics at the University of Colorado at Denver, has given us what will likely be seen as the definitive history of the relationships among self-interest, markets, and government, particularly as they evolved in the twentieth century from Marshall to Pigou to Coase, Buchanan, and Posner. Medema takes the reader from Adam Smith?s invisible hand through the nineteenth century utilitarian pushback and on through the evolution of welfare economics, the Coase Theorem, public choice, and the law and economics movement in the twentieth century.? The focus along the way is how economists have tried to answer the question of whether, and under what circumstances, self-interest could be relied on to produce beneficial economic outcomes for all.?


One of the most interesting themes of the book is that most of the major economists who tried to answer these questions were not as far apart as our modern caricature of them might suggest.? Where Medema is at his best in this book is suggesting that what we think of as Smithian laissez-faire, Pigovian welfare economics, and Coasean analysis do not have nearly as much to do with what Smith, Pigou, and Coase actually said as the adjectives might suggest.? All of them had at least some understanding of the advantages and disadvantages of both markets and government as allocation processes, and all of them recognized that whether or not self-interest ?worked? depended on the institutional environment in which it operated.?


In the opening chapter on Smith and pre-Smithian thought, Medema is careful to note both the originality and importance of Smith?s argument for the invisible hand and the various exceptions that Smith discussed.? The following chapter focuses on J. S. Mill and Henry Sidgwick and the utilitarian reaction to Smith.? Medema notes that although they both rejected a strong rule of laissez-faire in favor of more pragmatic, utilitarian judgments of particular cases, Mill was still fairly skeptical of whether government could be relied upon to improve on the imperfections of markets, while Sidgwick had greater faith in the ability of government to do so.


Out of that Sidgwickian tradition comes the focus of the third chapter, the early development of welfare economics in the hands of Marshall and Pigou.? Medema?s treatment of Pigou is particularly valuable as he makes clear Pigou?s view that market failures created a ?prima facie case? for government intervention, rather than an automatic rule favoring government intervention as is often associated with ?Pigovian? analyses.? Medema offers a careful reading of Pigou?s ?State Action and Laisser-Faire,? from 1935, in which Pigou analyzes the viability of interventionist solutions.? Pigou concludes, in Medema?s words, ?that there is no definitive answer that one can give, a priori, about the magnitude of the problems associated with state intervention? (p. 71).? This is not the Pigou of Pigovian welfare economics.


Medema?s chapter on the Italian public finance theorists and Wicksell that follows is one of the better overviews of that literature that I?m aware of and nicely places it in the context of the larger story he?s telling, particularly given its influence on modern public choice economics, the subject of a later chapter.


The chapter on Coase is in many ways the centerpiece of the book.? Medema brings together both the history of economic thought and the history of economics to tell the story of the evolution of the ideas in ?The Problem of Social Cost.?? Medema tries to get at what Coase was actually trying to do, which was to suggest that under the assumption of zero transaction costs and well-defined property rights, market participants will always be able to bargain away what at first appear to be externality problems requiring government intervention.? Medema is also clear that Coase did not think those assumptions were realistic descriptions of economic reality. The point of the paper was to show that the Pigovian system was ?empty? and to indicate that the really interesting questions about externalities and self-interest took place in a world where transactions costs were positive and where such rights were not well-defined.? As Medema notes later in the book, it is for this reason that Coase?s work is best understood as part of New Institutional Economics rather than the Chicago school more narrowly.


With Coase having poked holes in the Pigovian framework and suggesting that examining how easily market participants could bargain was the real question, his University of Virginia colleague James Buchanan and his associates were working the other side of the fence, developing public choice economics.? Its lesson for this history, Medema argues, is that even if transactions costs meant that private bargaining would not produce optimality, self-interest in politics gave us reason to be skeptical that intervention could improve on those outcomes.? In this chapter as well, Medema combines close readings of texts with archival material to tell a rich story.


The book ends with a look at the modern law and economics movement and its evolution to what is now ?the economic analysis of the law.?? The emphasis for Medema is the role played by the Coase Theorem, or at least the theorem attributed to Coase.? In the end, Medema concludes that Coase?s own understanding of his contribution takes us back to the more utilitarian calculations of the classical economists:? ?The task for legal-economic policy here becomes the assessment of the magnitude and influence of the relative costs of coordination across alternative institutional structures and the resulting implications for alternative institutional-policy arrangements? (p. 187).? The Coase of 1960 is best understood as an extension of the positive transaction costs world of 1937?s ?The Nature of the Firm.?


Steve Medema?s book is a model of fair-minded scholarship and how to make use of both the history of ideas and the archives to weave together a somewhat grand narrative on the evolution of the role of self-interest in economic thought.? Already having won the 2010 ESHET Best Book Prize, scholars exploring these issues in the coming years ignore Medema?s contributions at their own grave peril.



Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY and his currently working on a book on classical liberalism and the family.


Copyright (c) 2010 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 (June 2010). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy

Author(s):Langlois, Richard N.
Reviewer(s):Diamond Jr., Arthur M.

Published by EH.NET (August 2009)

Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy. London: Routledge, 2007. ix + 122 pp. $140 (hardcover), ISBN: 978-0-415-77167-2

Reviewed for EH.NET by Arthur M. Diamond, Jr., Department of Economics, University of Nebraska at Omaha.

Fritz Machlup said of his old friend Joseph Schumpeter that his method was one of ?methodological tolerance? (1951, p. 95). The same seems to be true of Schumpeterian Richard Langlois, whose recent book displays a wide range of toleration and erudition in issues addressed, methods respected, and fields of research perused. To pull so much together, so well, is impressive. Equally impressive are Langlois? credentials as a Schumpeter scholar: he was invited to deliver the Graz Schumpeter Lectures, which serve as the basis for the current succinct monograph. And in 2006, the manuscript was named a co-winner of the Schumpeter Prize from the International Schumpeter Society. Hopefully the accolades will be enough to overcome the book?s high price, in order to bring the book the wide readership that it deserves.

Langlois seeks to understand the changes in the role of the corporation in capitalism over the past two centuries. He is an eclectic scholar who makes use of theories and evidence from several periods and disciplines. So on one page Langlois illustrates a point by mentioning the importance of ?aero-derivative combined cycle generating technology? (p. 86), while on the next page, he refers to the ?Hegelian? (p. 87) turns of an argument. He also frequently (and cheerfully) avails himself of work done on the ?fringes? of the mainstream (e.g., p. 84).

He is himself mainly a theorist, whose method is somewhat akin to that of many neo-Austrians. He generally eschews formal mathematical analysis in favor of careful, almost philosophical, reasoning. Like Schumpeter, Langlois places very high value on research in economic history, although his goal is mainly to use such research, rather than to contribute to it. He makes many brief references to findings from economic history research; and recounts one long example: the history of the Swiss watch industry.

Langlois? book is about the role the large corporation plays in economic growth (pp. 6-7). He favorably cites many scholars, but finds most value in the economist Joseph Schumpeter and the economic historian Alfred Chandler. He starts off with the relatively simple claim of Chandler and (sometimes) Schumpeter that as capitalism matures, the large corporation plays a large and continuing role as the source of efficiency, and maybe of innovation. One way to express the goal of the book is to say that Langlois is attempting ?to reinterpret Schumpeter and Chandler in a way that preserves the essence of their contributions while placing those contributions in a frame large enough to accommodate both the rise and the (relative) fall of the large managerial enterprise? (p. 9).

Chapter 1 discusses what it means for capitalism to become progressively ?rational.? Chapter 2 discusses the rationality of capitalism mainly in the context of Schumpeter, and Chapter 3 discusses it mainly in the context of Chandler. Economic history is given more attention in Chapter 4 which discusses the rise of the corporation, and in Chapter 5 which discusses the return of the entrepreneur.

Langlois broadly divides industrial capitalism into three stages, which he characterizes as the invisible hand (pre-1880), the visible hand (1880-1990), and the vanishing hand (post-1990). During the stage of the invisible hand, production was local, small-scale and entrepreneurial. During the stage of the visible hand, Alfred Chandler?s hierarchical, multi-functional corporation dominated. During the stage of the vanishing hand, the entrepreneur, and small-scale firm return to dominance, although some corporations survive, especially in providing some general purpose technological infrastructure in areas like communication, transportation and fabrication.

Langlois believes that during the stage of the visible hand, increases in the extent of the market in the United States gave the large scale corporation a temporary advantage. But new technologies, notably in information technology and computers, have returned the advantage to the small scale firm operating in the market. In Langlois? extended account of the history of the Swiss watch industry it is the modern entrepreneur Nicolas Hayek who saves the industry by finding a way to restructure it. Entrepreneurial capitalism is not obsolete.

The broader lesson is that conditions change, and when they do, new institutional forms may be better able to deal with them than are the current institutional forms. Langlois sees the changing institutions of capitalism as evolving solutions to a ?design problem? of how best to ?buffer uncertainty? as conditions such as population, income and technology change (pp. 66-67). The entrepreneur solves this problem through an experimental, intuitive, trial-and-error kind of rationality, rather than a formal, calculating, rule-bound kind of rationality. But because there are many vested interests that oppose such changes, the charisma of the entrepreneur often is required to make the change happen.

I believe that there is much that is plausible and useful in Langlois? account. My reservations are more of nuance and emphasis. For example, I prefer my arguments a little thicker with the evidence, and a little thinner with the conceptual parsing. And Langlois often sees the innovative entrepreneur as responding to opportunities presented by exogenous changes in the business environment, where I suspect that ?high level? entrepreneurs often are driven by their own visions of what can be created.

We have over 200 years of capitalism so far. Langlois goes a long way to help us to understand what has happened. He gives plausible, nuanced, judicious accounts, always trying to fairly present alternative views, even when he ultimately rejects them. He is well-aware that path-dependent contingencies, the choices of policy-makers, and the creativity of entrepreneurs can all make a difference in the form that the institutions of capitalism take. In the end he puts most weight on institutions as solutions to changing ?problems? posed by often exogenous changes in technology, incomes, population, and the like. He worries that such an account may verge on historicism (and he is right to worry). But even those (like me) who place greater weight on contingencies, choices and creativity, will find in Langlois a very erudite, intelligent, plausible, and clearly-written account.


Fritz Machlup, ?Schumpeter’s Economic Methodology.? In Schumpeter: Social Scientist, edited by Seymour Harris, 95-101. Cambridge, MA: Harvard University Press, 1951.

Arthur M. Diamond Jr.?s publications are mainly in the areas of labor economics, economics of science, economic methodology, and the history of economic thought. He has recently published several papers related to Schumpeter?s process of creative destruction, and is at work on a book entitled Openness to Creative Destruction.

Copyright (c) 2009 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 2009). All EH.Net reviews are archived at

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Invisible Giants: The Empires of Cleveland’s Van Sweringen Brothers

Author(s):Harwood Jr., Herbert H.
Reviewer(s):Smith, Fred H.

Published by EH.NET (August 2003)

Herbert H. Harwood, Jr., Invisible Giants: The Empires of Cleveland’s Van Sweringen Brothers. Bloomington: Indiana University Press, 2003. xii + 342 pp. $49.95 (cloth), ISBN: 0-253-34163-9.

Reviewed for EH.NET by Fred H. Smith, Department of Economics, Davidson College.

Americans do not think of Cleveland, Ohio as one of the nation’s great cities. Indeed, many — perhaps most — Americans think of Cleveland as “the mistake by the lake.” Although twenty-first century Cleveland is a small city battling urban decay, this has not always been the case. Cleveland was once the fifth largest city in the United States, and, in 1930, it appeared that Cleveland was poised to become one of America’s premier cities. Few people know of Cleveland’s flirtations with greatness; fewer still know the story behind the city’s rise and fall. Ultimately, Cleveland’s path parallels that of two of its most influential sons, Oris and Mantis Van Sweringen. The Van Sweringens (along with Cleveland mayor Tom Johnson) remade downtown Cleveland into what it is today. Thus, in order to understand modern Cleveland one must know the story of the Van Sweringen brothers. In Invisible Giants: The Empires of Cleveland’s Van Sweringen Brothers, Herbert Harwood expertly tells us their story.

Invisible Giants contains twenty-five chapters, yet there are actually three distinct sections in the book. The first section, chapters one through six, provides the reader with an overview of the Van Sweringen family history as well as a comprehensive discussion of the foundation of the their business empire. It is also in this section that Harwood introduces the reader to the fundamental Van Sweringen paradox: The brothers were shy, unassuming men who loathed attention, yet they were also forward-thinking businessmen who created the nation’s first planned community and who nearly succeeded in controlling the first coast-to-coast railroad network.

The second section of the book, chapters seven through nineteen, tells the story of how the Van Sweringens created and operated one of the nation’s largest railroad networks. Harwood pays special attention to the methods they used to finance the railroads they acquired for their network, for he argues that they were early pioneers in the use of the leveraged buyout. This section of the book also reveals Harwood’s expertise as a railroad historian. Specifically, he uses his extensive knowledge of American railroads to describe the Van Sweringens’ railroad empire in painstaking detail. By the end of the second section of the book the reader is intimately acquainted with the Van Sweringens’ railroad and financial empires, and having a thorough understanding of how they built these empires makes the story of their collapse, told in the third section of the book, much more poignant.

Ultimately, the Van Sweringens’ financial empire collapsed because of the Great Depression, and Harwood does an excellent job of linking the Van Sweringens’ fortunes to the economic conditions of the day. The great irony of the Van Sweringens’ story is that the collapse of their financial empire came at the same time as the completion of their projects to remake downtown Cleveland. Thus, the Van Sweringens faded from the scene just as their most significant physical monument — the Terminal Tower complex — reshaped Cleveland’s skyline.

Invisible Giants is well written and expertly researched. It successfully achieves the goal that Harwood has set out for himself — to tell the story of the brothers Van Sweringen. Nonetheless, after completing the book I was left wanting more. There are two changes that I would like to have seen Harwood make.

First, the book does an excellent job of laying out the facts of the Van Sweringen story, but it does not solve the fundamental Van Sweringen puzzle. Namely, how is it possible that these two men — so forward thinking in the majority of their business dealings — failed to understand how profoundly the automobile would change America? The Van Sweringens were pioneers of the leveraged buyout, they created Shaker Heights — the nation’s first planned community — and yet they failed to grasp the impact that the automobile would have on urban spatial structure. So, as the automobile was becoming more and more popular with Clevelanders, the brothers were busy building the Terminal Tower complex to handle train and rapid transit passengers. It seems impossible that these intelligent, perceptive men would not have seen that passenger trains and public transportation were destined to diminish in importance.

While Harwood very explicitly states at the outset of the book that he will not speculate on the reasons behind the Van Sweringens’ actions, his decision makes the book feel incomplete. Harwood surely has as good an understanding of the Van Sweringens as any historian alive, and it would have been interesting and very worthwhile to hear his thoughts on why they failed to understand the importance of the automobile. For example, in chapter sixteen Harwood tells us of the brothers’ paradoxical behavior in Cleveland and Shaker Heights. On the one hand, they actively tried to find a tenant for the new department store they planned to build in the terminal tower complex. (In fact, they ended up overpaying for the Higbee department store in order to ensure that they would have a tenant.) Yet, on the other hand, they were simultaneously engaged in laying out Shaker Square as a “local” retail center for residents of Shaker Heights. It seems incomprehensible that the Van Sweringens failed to recognize that they were sowing the seeds of destruction for their downtown department store when they created Shaker Square. Harwood might feel uncomfortable speculating on the reasons behind the Van Sweringens’ paradoxical behavior, but his insight would surely have added a great deal to the book. At a minimum, he should have alerted the reader to the contradictory nature of the brothers’ actions.

The second change I would like to have seen is an expanded discussion of the impact that the Van Sweringens had on the city of Cleveland. The second section of the book, chapters seven through nineteen, focuses on the formation and operation of their railroad empire. It is understandable that Harwood chose to focus so much of his energy on the story of Van Sweringens’ railroad empire, for he is an expert on railroad history. Harwood’s thirty years of experience in the railroad industry, and the vast knowledge of the American railroad system he has obtained while researching the eleven other books he has written on railroad history, serve this story well. The chapters covering the railroad empire are clear and concise, and they make for interesting reading. However, after the first section of the book, the chapters covering the brothers’ activities in Shaker Heights and downtown Cleveland feel almost tangential to the story. If Harwood had structured the book differently, then his choice to focus on the railroad empire might have been understandable. But, the introduction and chapters one through six seem to promise equal treatment of the Van Sweringens’ impact on Cleveland and the nation’s railroad system. This promise goes unfulfilled.

Nonetheless, this book is a great success. Harwood tells the fascinating story of two of the most influential figures in the history of Cleveland, and he does so in a way that makes his book an entertaining and informative read. Invisible Giants is essential reading for anyone who wants to understand early twentieth century Cleveland.

Fred Smith is an assistant professor of economics at Davidson College. His most recent publication is “Decaying at the Core: Urban Decline in Cleveland, 1915-1980,” Research in Economic History (2003).

Subject(s):Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Kimono in the Boardroom: the Invisible Evolution of Japanese Women Managers

Author(s):Renshaw, Jean R.
Reviewer(s):Hinz, Christienne L.

Published by EH.NET (September 2001)

Jean R. Renshaw. Kimono in the Boardroom: the Invisible Evolution of

Japanese Women Managers. Oxford, England and New York: Oxford University

Press, 1999. x + 289 pp. Illustrations, notes, bibliography, glossary, and

index. $35.00 (Cloth), ISBN 0-19-511765-4.

Reviewed for EH.NET and H-BUSINESS by Christienne L. Hinz, ,

Department of Historical Studies, Southern Illinois University Edwardsville.

Jean Renshaw’s Kimono in the Boardroom, the Invisible Evolution of Japanese

Women Managers, attempts to bring to light the lives, character traits,

motivations, and methods for success found among a small but growing cohort of

Japanese women managers who are struggling to make or find a place for

themselves in a society in which the very existence of the female managers is

oxymoronic. Renshaw, a self-described “manager, business owner, and professor

of management,” clearly states that her research goal is an applied one. Her

work attempts to create a concrete number of suggestions to help Japanese

businesses tap the human resource potential represented by underutilized

Japanese women. Renshaw argues that the presence of Japanese women at the very

highest levels of management would both necessitate and drive the

transformation of Japanese managerial techniques and Japan’s business world,

giving birth to a more holistically human, more humane corporate citizen.

Renshaw’s research questions are timely, apt, and yet deceptive in their

simplicity: who are Japan’s female managers? In which industries do they tend

to congregate? How have they negotiated cultural, institutional, legal, or

personal barriers which typically exclude the vast majority of Japanese women

from managerial hierarchies? Why are Japanese women managers invisible? What

character traits, organizational or institutional environments, laws, or

cultural trends help Japanese women managers to succeed in their chosen


The crux of Renshaw’s argument is that Japanese women managers do, indeed,

exist despite the assertions of Japanese nay-sayers, most of whom are male.

Moreover, these women share certain traits and experiences; and these

predispose them for non-conformist behaviour and life-choices. For example,

Renshaw argues that birth order is an important variable. Supporting her

argument with the secondary work of Frank Sulloway’s Born to Rebel,

Renshaw observes that eldest daughters without male siblings and youngest

daughters are disproportionately represented in her interview sample. Another

common experience that Japanese women managers share, according to Renshaw, is

a relatively permissive, achievement-oriented, gender-neutral socialization as

children. Successful female managers also seem to share non-sexist, foreign,

or otherwise strong childhood role-models such as the cartoon character Sailor

Moon. Renshaw cites post-secondary education or considerable experience

abroad, and bilingualism as experiences common to successful women managers.

Perhaps most interesting, she finds that Japanese women managers tend to fall

into one of two age cohorts, either the 20 to 30 year cohort, or the 40 to 50

year cohort. She theorizes that both 20 to 30 year old and 40 to 50 year old

women experienced a Japan whose dominant paradigms were in flux, either as a

result of the devastation of the Second World War, or because of the

unprecedented wealth of the 1970s and 1980s or because of new and popularly

held notions of basic gender equality, as represented by the 1986 Equal

Employment Opportunity Law. Women between the ages of 30 and 40, however, were

not similarly influenced. Although Renshaw does not interview broadly among

non-managerial or unsuccessful managerial women, she nevertheless argues that

their conformity to traditional gender roles is the result of having been

raised by parents who “lived through the difficult war and postwar years and

wanted the ‘good life’ as they remembered it, for their children. Part of that

remembered good life had included homemakers, full-time wives and mothers,

taking care of the house and children while men, the samurai economic

warriors, went off to battle the corporate world” (p. 100).

Kimono in the Boardroom also attempts to classify the methods by which

Japanese women succeed in management. Renshaw asserts, although she does not

supply supporting evidence, that “[w]arlords and samurai provided the models

for current management in Japanese male-defined corporations” (p. 157). Making

liberal use of the exotic image of feudal Japan, Renshaw sustains the analogy

between modern managers and the samurai class of the medieval period when she

explains the paths by which women seek the exclusively male-defined world of

business: “Family-business warriors” are women who inherit businesses from

their parents. “Warrior entrepreneurs,” are women who begin their own

businesses after repeatedly encountering “glass ceilings and sticky floors,”

that is, institutional barriers preventing female career advancement.

“Warriors taking over,” are women who find means to purchase defunct

businesses and revive them. “Warriors breaking out” are women who choose to

seek upward managerial mobility in foreign corporations, within Japan or as


Renshaw argues that Japanese women managers have remained invisible despite

their slowly increasing numbers because of social and cultural norms which on

the one hand, deny their existential reality, and on the other, force them to

manage from behind a “shoji screen,” in low-profile positions. As marginalized

people, Japanese women managers, respond to their circumstances by engaging in

a range of coping behaviours (adopting, adapting, and transforming) which mask

the reality of their power from male peers, from society in general, from

other women seeking access to the upper echelons of management, and even from

the women managers themselves (p. 139).

Kimono in the Boardroom is a timely study. Renshaw’s research questions

have been only inadequately, if at all, answered by scholars of Japan,

scholars of Japanese business, scholars of Japanese women, or scholars of

women in business. However, as an academic work it stumbles in a number of

critical areas. The most fundamental is, perhaps, its uncomfortable and

unresolved treatment of audience. Exactly to whom Renshaw intends to read her

work is unclear. It hovers awkwardly between serious academic scholarship and

the popular journalism that is more commonly consumed by the

quasi-to-uninformed Japanophilic and Japanophobic reading public.

Because the reviewer is an academic speaking to a largely academic readership,

and because certain aspects of the work are explicitly structured as

scholarship, the reviewer has chosen to frame her commentary accordingly. It

is to preface the reviewer’s more critical remarks by underscoring her

awareness of the many technical, linguistic, and hermeneutical difficulties

that a study like Ms. Renshaw’s presents. Kimono in the Boardroom is a

bold transgression of the quite arbitrary boundaries separating the

humanities, the social sciences, and applied business administration.

Renshaw’s questions cannot be answered from within the boundaries of any

single academic discipline. Such work requires no mere familiarity with the

relevant secondary literatures; rather it requires a real fluency across the

total range of related fields. The reviewer hopes that all scholars with

broad, multi-faceted questions would be encouraged by Renshaw’s study; and

that they would also come away from it with a heightened awareness of and

respect for the complexities and problems inherent in doing cross-cultural,

multi- and inter- disciplinary research.

In the opening chapter of the work, Ms. Renshaw minimizes the importance of

statistical sampling in the following way: “In the course of my travels within

Japan and Korea, I found successful Japanese women managers in every

industrial category, and I interviewed over 160 of them. The interviews were

conducted in English with a Japanese speaker at hand to clarify if necessary.

While this approach introduced the danger of a biased sample, it also had

advantages. Most Japanese women at management level understand English, and as

an evaluator on scholarship committees in Japan, I observed that the same

person spoke more freely in English than in Japanese, an observation

corroborated by other Japanese” (p. 5).

It is common for scholars in the humanities to demonstrate their discomfort

(generally disguised as contempt) for the social sciences by drawing the

weapon most easily drawn, cocked and fired: the dreaded criticism of

“unrepresentative sample.” This reviewer has little patience with the typical

historian’s cheap and easy slander of the research method basic to social

scientific inquiry. Nevertheless, it must be stated that Renshaw’s inadequate

statistical sample deals a critical blow to the remainder of the project.

Renshaw’s core informants were drawn from “a preselected sample of successful

women managers … found in the members of Keizai Doyukai, the Association of

Corporate Executives, which is one of four powerful industrial organizations

in Japan” (pp. 97 – 99). Based upon these contacts, she then expanded her

informant pool through series of cascading personal introductions.

Apparently neither Ms. Renshaw nor her editors appreciated the painful

circularity of the work’s introductory arguments, which are the result of the

aforementioned methodological errors: 1) the project was based upon women

informants belonging to an elite and extremely discriminating organization; 2)

the informants were all, to some degree, bilingual; and 3) the author was

referred by these informants to others who were also bilingual. From this

incestuous sampling, Renshaw reports that “[s]eventy percent of the women

managers… interviewed went to school or lived abroad at some time in their

lives. Many had gone abroad as children with their families when their fathers

worked or served in the military in another country” (p. 123). She continues,

“[a]nother route to the awareness of alternative culture is language. Women

said they seemed to learn second languages more easily than their brothers,

and research substantiates this tendency for girls. The learning of a second

language is related to expanding thought patterns, creativity, and innovation”

(p. 124). That Renshaw concludes that Japanese women managers share similar

family cultures and formative childhood experiences should surprise no one.

After all, she interviewed people who were friends and colleagues. The only

surprise is that despite her apparent awareness of the dangers inherent in

statistical sampling, Renshaw failed throughout the text to match her analysis

to the extremely narrow scope of her data.

Secondly, Renshaw neglects to rationalize her statistical material with a

cogent definition of the manager. She asserts that a “manager focuses the

energy of a group and mobilizes resources of money, people, information,

plant, equipment, and markets to accomplish goals…. The Japanese women

interviewed for this book meet the definitions of manager as they successfully

direct organizations, carry on business within the national and international

economy, and handle affairs of state, of corporations, of small home

businesses, and of families (p. 97).” However, her statistical treatment of

female managers by industrial category is based on data drawn from labour and

gender studies published in the International Labor Organization’s Yearbook

of Labour Statistics, and in the Japanese Census. She does not investigate

the standards which produced these data, or offer even the briefest commentary

upon whether or not (or to what degree) they reflect Japanese managers as

defined in the study.

Furthermore, Renshaw’s research sample does not adequately represent the range

of managerial roles included within her definition. Small home businesses are,

for the most part, absent in her qualitative analysis because so many of her

interviews seem to have been conducted with executives in national,

international, or multinational firms. The Japanese definition of “success” in

business no more reflects Japanese women’s participation in the economy than

would Western definitions of “success.”

Even more problematic than her management of statistical sampling, Renshaw’s

project is crippled by her inability to speak or read Japanese. She breezily

minimizes this problem by claiming that Japanese scholarship interviewees tend

to speak more frankly in English than in Japanese (p. 5). She does not

question the meaningfulness of such frankness, nor does she problemetize

Japanese self-representation to a foreign interlocutor. She does not consider

the impact of the Japanese translator’ s presence on her interviews. Finally,

Renshaw seems completely unaware of the fact that the problem of translation

is not whether or not her informants can understand her, but whether or not

she can understand as well as correctly interpret their utterances in English.

There are many places in the text where, in this reviewer’s experienced,

informed, and carefully considered opinion, Ms. Renshaw has incorrectly

understood the intent and nuance of her informants’ utterances.

Among the most damaging flaws in Kimono in the Boardroom is the

author’s failure to correctly contextualize her subject matter within the

greater history of Japanese women, and within the history of Japanese

business. She seems unfamiliar with current secondary scholarship on Japanese

history, the changing roles of Japanese women, and abundant anthropological

and sociological studies of Japanese culture. She repeatedly and inaccurately

interprets national mythology as historical fact. For example, in chapter

three, titled, “Sex Roles, Creation Myths, and Worldview: Japanese and Western

Historical Perspectives,” Renshaw mixes and matches mythology and history to

create a narrative intent on locating powerful female role models for modern

Japanese women:

“Evidence of prehistoric society in Japan indicates that, like most

prehistoric societies, it was probably matriarchal…. The temple at Ise is

still honored as the temple of the supreme goddess, Amaterasu …. The Goddess

of Creation, Amaterasu Omikami… survived as the ancestor of all Japanese….

[T]he gleam of feminine possibility hides in the dimmest recesses of the

memory bank for both men and women…. In the West,… collective societal

memory of feminine goddesses had been buried and denied…. In the Japanese

memory bank, there is more recent knowledge of women as leaders.” (p. 60 –


The only primary historical evidence provided to support this extravagant

psycho-mythology of the Japanese is Hiratsuka Raicho’s oft-quoted essay which

begins, “in the beginning, woman was the sun.”[ ] Furthermore, the secondary

works upon which Renshaw’s analysis rests are two: a single quote by Motoori

Norinaga, as translated and reprinted in deBerry and Keene’s textbook

Sources of Japanese Tradition, Volume II, and Marija Gimbutas’

controversial monograph The Civilization of the Goddess: the World of Old

Europe. Ms. Renshaw either did not know or failed to mention that Motoori

Norinaga’s construction of Japanese history served his own intellectual

objectives, as well as those of the Tokugawa Shogunate; his work is not

understood by contemporary historians as being “factual,” as representing

anything approaching an “objective” truth. And while this reviewer was

spiritually stimulated by Gimbuta’s theory of primeval European matriarchy and

matrifocality, this work is of debatable applicability to the Japanese case,

to say the least.

In fact, Renshaw’s control over the basic secondary literature behind her

subject is painfully inadequate. Although she drops the names of several

well-respected Japan specialists, like Takie Sugiyama Lebra, Takeo Doi,

Kathleen Uno, and Mary Brinton, she seems unable to actually incorporate such

scholarship into a coherent theory within her own work. Furthermore, the truly

interested reader will be continually frustrated by the paucity of footnotes,

and by faulty bibliographic citations which chronically omit the actual page

numbers corresponding to referenced arguments and data. It is, therefore,

almost impossible for readers to utilize this text as a research tool, to

corroborate, correct, or even to enter into a stimulating dialogue with the

author about her interpretation of the academic works with which her own

research is engaged.

Indeed, Renshaw’s theoretical analysis relies far too heavily upon the writing

of popular Japan commentators like Norma Field (In the Realm of the Dying

Emperor), Masao Miyamoto (Straightjacket Society), and Christopher

Wood (The End of Japan, Inc.). She also supports her theoretical

analysis of Japanese culture using such New York Times Best-Selling books as

John Gray’s Men are from Mars, Women are from Venus, and Leonard

Schlain’s The Alphabet vs. the Goddess. Some of Renshaw’s analytical

examples are based upon her own primary interview data, but also includes

disorienting cameos from Hillary Rodham Clinton, Barbara Bush, and Connie

Chung. The overall result is a somewhat surreal mixture of Japanese culture,

fantasy, stray facts, and shocking historical error, such as “feudal Asia was

roughly parallel in time to feudal Europe, but the Asian form of feudalism was

more complex and highly evolved, and it continued into the nineteenths

century, deriving structure from the sophisticated and hierarchical Chinese

civilization,” or “Japan officially abolished the class system with its

postwar constitution of 1946.” Unfortunately, Renshaw’s hard work in the field

is imperfectly, and inappropriately supported by this veritable mosh-pit of

half-baked information, misinformation, and blatant oriental exoticism as

generated in popular literature.

In Kimono in the Boardroom Ms. Renshaw has asked a series of pertinent,

potentially paradigm-challenging questions. She has brought quantitative and

qualitative research methods together despite the mutual hostility that has,

at times, informed the relationship between their proponents. Lastly, she has

attempted to move beyond theory into applied research in order to offer

concrete solutions to the cultural barriers which deny Japanese women access

to managerial leadership. Although this particular work does not succeed in

achieving its goals, Ms. Renshaw has nevertheless set worthy guideposts for

herself, and for others who are working in the field.

Christienne Hinz is assistant professor in Asian history at Southern Illinois

University, Edwardsville. Her research interests are modern Japanese history,

comparative business history, and the history of Japanese women. She has just

completed her dissertation, entitled “Dismembered Remembrance:

Entrepreneurship Among Japanese Women and the Creation and Marketing of

Japanese National Identity,” which she hopes to publish soon. She has also

reviewed for several hard-copy journals.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Asia
Time Period(s):20th Century: WWII and post-WWII

Invisible Fuel: Manufactured and Natural Gas in America, 1800-2000

Author(s):Castaneda, Christopher J.
Reviewer(s):Jenkins, Andrew

Published by EH.NET (July 2001)

Christopher J. Castaneda, Invisible Fuel: Manufactured and Natural Gas in

America, 1800-2000. New York: Twayne Publishers, 1999. ISBN:

0-8057-9830-7. xx + 250pp.

Reviewed for EH.NET by Andrew Jenkins, Institute of Education, University of

London, UK

Invisible Fuel appears in a series which aims to provide concise overviews of

the evolution of a variety of industries and major firms in the United States.

There is certainly a gap in the market for an up-to-date survey of the history

of the US gas industry and Dr Castaneda, the author of several monographs on

aspects of the history of the gas business, is well-placed to fill the gap. He

has succeeded in producing a balanced account, wide-ranging in its coverage,

which draws extensively on both secondary and primary sources, while always

remaining clearly structured and readable.

The material is organised chronologically. After a brief introductory section

outlining the European origins of gas manufacture, the second part of the book

covers the nineteenth century development of the gas industry in America in

about 60 pages. The first gas company in America was established in Baltimore

in 1816 and by 1850 some 50 cities had manufacturing plant for producing gas

from coal. Gas was mainly used for lighting, and because of the high price its

use was confined to the wealthiest of citizens, and to the business

community. For the latter part of the nineteenth century, Castaneda documents

the main developments including the origins and growth of the natural gas

industry, the remarkable increase in the use of manufactured water gas and the

beginnings of competition from electricity, when gas was ousted from the

provision of lighting and had to turn increasingly to the heating and cooking


The chapters on the first forty years of the twentieth century show that

merger waves and the involvement of companies such as Standard Oil in the gas

business soon created some large and powerful corporations. The trend towards

increased industrial concentration continued into the 1930s, with the

development of combined gas and electric companies, and of holding companies

controlling many subsidiary firms. Some companies owned long-distance

pipelines crossing several state boundaries, making it impossible for them to

be regulated at the state level. Anti-competitive practices led to calls for

new legislation at the Federal level to control the utility industries. The

1935 Public Utility Holding Company Act abolished the large pyramid-structured

holding companies and also required the separation of natural gas and

electricity operations. The 1938 Natural Gas Act enabled the Federal Power

Commission to approve or set the prices to be charged by natural gas


Part 4 of the book covers the era of federal regulation from the late 1930s

through to the 1980s. For more than twenty years after World War II the U.S.

natural gas industry enjoyed unrivalled growth and prosperity. The regulatory

framework delivered price stability for consumers while strict limits on entry

into the industry enabled the established gas supply companies to earn

satisfactory profits. Improvements in pipeline technology meant that gas from

the large natural gas fields in the south-west of the country could be piped

into large north-eastern cities such as Boston, New York and Philadelphia

which had been the last bastions of manufactured gas in America.

But the seeds of future problems were sown in this era of prosperity. The

regulatory framework established in the 1930s did not allow for controls on

the prices of natural gas production, only transmission. Since there were

large numbers of producers, many of them small-scale, there was not a

compelling economic logic for the regulation of production. On the other hand,

it was difficult for regulators to set fair prices for consumers without some

control of the wellhead price, especially for integrated companies. The

extension of regulation into gas production, after the Phillips decision of

1954 in the US Supreme Court led eventually to serious shortages of natural

gas. Regulated wellhead prices were too low to encourage sufficient

exploration and new production. By the late 1960s, gas production was running

well ahead of the discovery of new reserves, and by the 1970s producers were

unable to meet their contract obligations in full.

The book concludes with a discussion of how successfully the deregulation of

the American gas industry from the 1970s to the present day has been at

overcoming these problems, and also provides some apposite comparisons between

the large utility combines of the 1930s and those which have emerged in recent

years as one of the more worrying aspects of deregulation.

Overall, the book is at its best on matters of business history, supplying in

concise narrative form information on particular entrepreneurs, technological

and organisational innovations, and changes in the competitive environment

faced by gas businesses. There is a lack of emphasis on regulatory issues,

especially for the period before Federal regulation. The origins of regulation

in the utility and transport industries in this period have been widely

debated by a range of commentators, from left-wing historians such as Gabriel

Kolko through to Chicago economists, who have analysed the role of interest

groups, consumers and of the companies themselves in establishing regulatory

bodies. It would have been fascinating to have had a blow-by-blow account of

the main developments in the case of the gas industry, but this would have

required considerably more space than the one or two very brief paragraphs

provided here.

Some comparisons with other countries would have been valuable. Other

developed economies have also witnessed the decline of a long-established

manufactured gas sector, as well as competition with electricity, and battles

in the political arena with oil and coal producers. On the other hand, some

features of the American gas industry, such as the lack of municipal or

government ownership appear more unusual. Comparisons with other countries

could have sharpened the analytical focus.

The book is generally well-provided with graphs and statistical tables but a

few more would have been useful. The author tells us that electric lighting

supplanted gas lighting rapidly, but no figures are provided. Similarly some

data on the extent of use of manufactured and natural gas in the nineteenth

century and the first half of the twentieth century would have helped to

clarify trends in these two sectors of the industry.

Such omissions as there are stem mainly from the concise format of the book:

surveying 200 years of the history of such a major industry in about 200 pages

of text is no easy task. Castaneda has accomplished it very well and Invisible

Fuel is an excellent starting-point for all students and researchers

interested in the history of the American gas industry.

Dr. Andrew Jenkins is a research officer at the Institute of Education. He

completed his doctorate at Bristol University in 1999, writing about the

nationalized British gas supply industry between 1945 and 1980. His most

recent publication is an article in the Journal of Industrial History

summarizing some of this research.

Subject(s):Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Breaking Rockefeller: The Incredible Story of the Ambitious Rivals Who Toppled an Oil Empire

Author(s):Doran, Peter B.
Reviewer(s):Whaples, Robert

Published by EH.Net (July 2016)

Peter B. Doran, Breaking Rockefeller: The Incredible Story of the Ambitious Rivals Who Toppled an Oil Empire.  New York: Viking, 2016. xii + 337 pp. $28 (hardcover), ISBN: 978-0-525-42739-1.

Reviewed for EH.Net by Robert Whaples, Department of Economics, Wake Forest University.

To understand an economy it is important to examine the figures found in volumes like Historical Statistics of the United States.  As cliometricians know, it also important to use sound economic theory to help explain such numbers.  But it is also important to consider the lives of the people who were the economy — especially the entrepreneurs whose decisions developed and redirected the economy’s resources.  For example, one cannot ignore the lives of business leaders such as Cornelius Vanderbilt, Andrew Carnegie, John Rockefeller, Henry Ford, and Steve Jobs, if the goal is to have a clear view of what made the U.S. economy tick.  And these lives are often utterly fascinating, as one soon discovers by reading biographies such as T.J. Stiles’ The First Tycoon (on Vanderbilt), Ron Chernow’s Titan (on Rockefeller), David Nasaw’s Andrew Carnegie, Steven Watts’ The People’s Tycoon (on Ford), or Walter Isaacson’s Steve Jobs.

Alongside these masterpieces is a great body of entrepreneurial biographies that inform and engage the reader.  Peter Doran’s Breaking Rockefeller is such a book.  Its focus is on the men who built what became Standard Oil’s chief overseas rival in the late 1800s and early 1900s, the Royal Dutch Shell Company.

The volume begins with a chapter outlining the career of John Rockefeller — casting him and Standard Oil (SO) as the villain of the piece.  Gamely battling against SO and against the odds are Marcus Samuel who built Shell Oil (and later became a Viscount) and the men who built Royal Dutch — Aeilko Jans Zijlker, Jean Baptiste August Kessler, and especially Henri Deterding.  The chapter detailing how Samuel launched Shell on an entrepreneurial bet that he could construct a fleet of oil tankers safe enough to be granted passage through the Suez Canal is one of the best in the book — because it carefully shows the obstacles to his bold plan, how he worked with others to overcome them, and how he thwarted SO’s attempts to scuttle them.  But, like other chapters, it is prone to hyperbole, including the statement that these actions “flipped the oil world on its head” (p. 95).  Rather, these actions seem to have barely put a dent in Standard’s growing profits.

Also well done is the chapter on Royal Dutch’s early operations in Indonesia — the persistence and innovation with which obstacles, including the intense climate and geography, were overcome. This was an oil market where luck played a much bigger role than today.  Doran reports that drilling success rates were incredibly low — at one point Royal Dutch bored more than one hundred wells in its Indonesian fields without a single success — until geologists began to learn how to better find oil.  Today close to half of exploratory wells and about 90 percent of development wells are successful.

The downside of Doran’s book is that, in an effort to build up the drama of the battle between SO and its rivals, exaggerations are made.  Doran portrays Rockefeller as ruthless, unscrupulous and greedy, somehow bullying and conniving his way to a position of dominance — but leaving out keys to his success, such as relentless cost cutting and efficiency improvements, boldness in betting on the long-term prospects of the industry while others were willing to take quick profits, and impressive abilities to spot and reward talent, delegate tasks, and manage a growing empire.  Rockefeller’s scruples, along with the endearing facets of his personality — seen so clearly in Chernow’s biography — are ignored or mocked.  Standard is repeatedly referred to as a monopoly — even when it’s clear to the reader that it faced competition in many markets — and the roots of its domestic monopoly power, the barriers to entry that it struggled to build and maintain, are never considered.  Questionable economic logic seeps into the analysis, such as when Doran asserts that if Standard’s profits fell due to increased competition in the international market, it would respond by increasing its price in its domestic market.  Is this something a profit-maximizing monopolist would do?  If it had a domestic monopoly and already charged the profit-maximizing price there, why would it then increase the price above the profit-maximizing price?  Events overseas wouldn’t increase its marginal costs or demand domestically, so increasing the price at home wouldn’t make sense.

The volume is especially frustrating when it misrepresents important facts.  Doran repeatedly makes the claim that until the Spindletop gusher in early 1901, “the U.S. oil industry had been spiraling into a phase of terminal decline. … Each year they were pumping less crude” (p. 150, see also p. 108 and 143).  Such statements add drama to the story, but official statistics belie them. Historical Statistics (4:335) shows that crude petroleum production in the U.S. rose from 266 trillion BTUs in 1890 to 307 trillion in 1895 to 369 trillion in 1900, while exports of petroleum (4:298) rose most years during the decade — with an increase of 43 percent from 1890 to 1900.

Almost any successful market response against SO is made to sound heroic and improbable.  The brute fact is that petroleum was being discovered all over the world and Standard didn’t have the wherewithal to buy up and refine all of this oil.  So much oil was being discovered, especially in Russia, that it was bound to reach the market in competition with Standard.  And Standard’s competitors were backed by some pretty deep-pocketed groups — such as the Rothschilds — which Standard wasn’t going to be able to put out of business or buy up.

I’m also disappointed that — by focusing almost exclusively on Shell and Royal Dutch — Doran did not include more on SO’s American rivals.  As Alfred Chandler points out in The Visible Hand (1977, p. 350), before the 1911 court-ordered breakup of Standard, “a number of oil companies besides Standard Oil were among the largest business enterprises in the nation,” such as the Texas Company (Texaco), Gulf Oil, Associated Oil (Tidewater), Union Oil, and Sun Oil. Standard’s share of American refining fell from 86 percent to 70 percent in the five years before the breakup (Chernow, p. 555).  It simply couldn’t erect the barriers to keep competitors out.  Instead of exploring these rivals of Standard in greater detail, Doran takes the reader on numerous tangential asides.  Some of this makes for enjoyable, informative reading, but he certainly goes overboard in places.

The biggest irony, which Doran points out in the text but not in his title, is that despite this swarming competition and the Supreme Court ruling that broke up Standard into dozens of smaller companies, Rockefeller wasn’t ever really “broken.”  After the dissolution of Standard, Rockefeller’s wealth soared (buoyed by increasing demand for gasoline), he became the wealthiest man in the word, and then he gave almost all of it away — continuing the philanthropy he had practiced before his retirement from the oil business.

Robert Whaples is the co-editor of four recent books: The Future: Economic Peril or Prosperity? (with Chris Coyne and Michael Munger, 2016), The Routledge Handbook of Modern Economic History (with Randall Parker, 2013), The Routledge Handbook of Major Events in Economic History (with Randall Parker, 2013), and The Economic Crisis in Retrospect: Explanations by Great Economists (with G. Page West, 2013).

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):Agriculture, Natural Resources, and Extractive Industries
Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII

Project 2000/2001

Project 2000

Each month during 2000, EH.NET published a review essay on a significant work in twentieth-century economic history. The purpose of these essays was to survey the works that have had the most influence on the field of economic history and to highlight the intellectual accomplishments of twentieth-century economic historians. Each review essay outlines the work’s argument and findings, discusses the author’s methods and sources, and examines the impact that the work has had since its publication.

Nominations were received from dozens of EH.Net’s users. P2K
selection committee members were: Stanley Engerman (University of
Rochester), Alan Heston (University of Pennsylvania), Paul
Hohenberg, chair (Rensselaer Polytechnic Institute), and Mary
Yeager (University of California-Los Angeles). Project Chair was
Robert Whaples (Wake Forest University).

The review essays are:

Braudel, Fernand
Civilization and Capitalism, 15th-18th Century Time
Reviewed by Alan Heston (University of Pennsylvania).

Chandler, Alfred D. Jr.
The Visible Hand: The Managerial Revolution in American Business
Reviewed by David S. Landes (Department of Economics and History, Harvard University).

Chaudhuri, K. N.
The Trading World of Asia and the English East India Company, 1660-1760
Reviewed by Santhi Hejeebu.

Davis, Lance E. and North, Douglass C. (with the assistance of Calla Smorodin)
Institutional Change and American Economic Growth.
Reviewed by Cynthia Taft Morris (Department of Economics, Smith College and American University).

Fogel, Robert W.
Railroads and American Economic Growth: Essays in Econometric History
Reviewed by Lance Davis (California Institute of Technology).

Friedman, Milton and Schwartz, Anna Jacobson
A Monetary History of the United States, 1867-1960
Reviewed by Hugh Rockoff (Rutgers University).

Heckscher, Eli F.
Reviewed by John J. McCusker (Departments of History and Economics, Trinity University).

Landes, David S.
The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present
Reviewed by Paul M. Hohenberg (Rensselaer Polytechnic Institute).

Pinchbeck, Ivy
Women Workers and the Industrial Revolution, 1750-1850 
Reviewed by Joyce Burnette (Wabash College).

Polanyi, Karl
The Great Transformation: The Political and Economic Origins of Our Time
Reviewed by Anne Mayhew (University of Tennessee).

Schumpeter, Joseph A.
Capitalism, Socialism and Democracy 
Reviewed by Thomas K. McCraw (Harvard Business School).

Weber, Max
The Protestant Ethic and the Spirit of Capitalism
Reviewed by Stanley Engerman.

Project 2001

Throughout 2001 and 2002, EH.Net published a second series
of review essays on important and influential works in economic
history. As with Project 2000, nominations for Project 2001 were
received from many EH.Net users and reviewed by the Selection
Committee: Lee Craig (North Carolina State University); Giovanni
Federico (University of Pisa); Anne McCants (MIT); Marvin McInnis
(Queen’s University); Albrecht Ritschl (University of Zurich);
Winifred Rothenberg (Tufts University); and Richard Salvucci
(Trinity College).

Project 2001 selections were:

Borah, Woodrow Wilson
New Spain’s Century of Depression
Reviewed by Richard Salvucci (Department of Economics, Trinity University).

Boserup, Ester
Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure
Reviewed by Giovanni Federico (Department of Modern History, University of Pisa).

Deane, Phyllis and W. A. Cole
British Economic Growth, 1688-1959: Trends and Structure
Reviewed by Knick Harley (Department of Economics, University of Western Ontario).

Fogel, Robert and Stanley Engerman
Time on the Cross: The Economics of American Negro Slavery
Reviewed by Thomas Weiss (Department of Economics, University of Kansas).

Gerschenkron, Alexander
Economic Backwardness in Historical Perspective
Review Essay by Albert Fishlow (International Affairs, Columbia University).

Horwitz, Morton
The Transformation of American Law, 1780-1860
Reviewed by Winifred B. Rothenberg (Department of Economics, Tufts University).

Kuznets, Simon
Modern Economic Growth: Rate, Structure and Spread
Reviewed by Richard A. Easterlin (Department of Economics, University of Southern California).

Le Roy Ladurie, Emmanuel
The Peasants of Languedoc
Reviewed by Anne E.C. McCants (Department of History, Massachusetts Institute of Technology).

North, Douglass and Robert Paul Thomas
The Rise of the Western World: A New Economic History
Reviewed by Philip R. P. Coelho (Department of Economics, Ball State University).

de Vries, Jan
The Economy of Europe in an Age of Crisis, 1600-1750
Review Essay by George Grantham (Department of Economics, McGill University).

Temin, Peter
The Jacksonian Economy
Reviewed by Richard Sylla (Department of Economics, Stern School of Business, New York University).

Wrigley, E. A. and R. S. Schofield
The Population History of England, 1541-1871: A Reconstruction

Project Coordinator and Editor: Robert Whaples (Wake Forest