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Andrew Carnegie: An Economic Biography

Author(s):Bostaph, Samuel
Reviewer(s):Rogers, Robert P.

Published by EH.Net (June 2016)

Samuel Bostaph, Andrew Carnegie: An Economic Biography. Lanham, MD: Lexington Books, 2015. xii + 125 pp. $75 (hardcover), ISBN: 978-0-7391-8983-2.

Reviewed for EH.Net by Robert P. Rogers, College of Business and Economics, Ashland University.

This book, a concise biography of Andrew Carnegie, focuses on some important issues concerning his business and philanthropy.

Carnegie’ life was a rags-to-riches Horatio Alger story but with an interesting twist.  While he was born a poor Scot, his family was well-read and knowledgeable about their surroundings.  Carnegie used a succession of seemingly prosaic but strategically placed jobs to become a major executive with the Pennsylvania Railroad.  He employed his connections there to start several businesses supplying the railroad with important inputs such as bridges and rails.  Eventually he built a steel rail firm using the Bessemer process.

His ability to obtain financing and find competent executives and engineers enabled Carnegie to develop a large efficient steel firm.  Among the people he attracted to the firm were Henry Frick and Alexander Holley.  Frick and Holley were pioneers in the development of, respectively, coke ovens and Bessemer furnaces.  Not only did the firm capitalize on the demand for rails, but it also became the leading firm in construction steel.  To do this, the firm employed another new steel furnace, the open hearth.  By the 1890s, Carnegie’s company had become the leading steel firm in the world.

Given its brevity and its focus on the issues of government intervention, firm governance, and property rights, this is the biography that I would recommend to a generalist wanting to understand Carnegie.

On three issues, however, I see problems with the analysis.  They concern tariffs, railroads, and the intertwined issues of property rights and governance.  Ironically, it is on the latter two issues that Bostaph breaks new ground, but there are still questions.

Bostaph overstates the role of tariffs in Carnegie’s success.  Fogel (1964) and Temin (1964) have ascertained that protection had some positive effect on the success of the American steel industry.  Nevertheless, it seems unlikely that absent tariffs a country as well endowed with coal, iron ore, and human capital as the United States would not have developed a large domestic steel industry.  Had a free trade regime existed in the United States, Maine might have had ten Carnegie libraries instead of fifteen.  Carnegie might have been rich anyway but not as rich.

My second quibble with Bostaph is the relationship of railroads to steel.  Many writers have correctly posited that through subsidies the government unnecessarily encouraged railroads.  Yet, it is likely that the United States would have developed a large railroad system without this government help.

I have intimated that Bostaph’s major contribution concerns firm governance and property rights.  The major issues were the Carnegie firm’s relationships between two of its human inputs — factory workers and firm executives.

Most interesting is Bostaph’s analysis of the Homestead strike.  Many workers viewed their jobs as a property right.  This idea was based on the labor theory of value that asserts that the value in an item arises from the work put into making it.  Bostaph rightly argues that this theory is wrong citing the nineteenth century marginalist economist, Karl Menger.  The marginalists posit that the value of an item arises from the utility that it gives to the user who pays for it.  Pieces of iron ore do not have any value until they are metamorphosed into items that can be used such as rails or beams.  Entrepreneurs like Carnegie figured out how to combine capital and labor to produce the items that users will buy.

Given Bostaph’s analysis, still, Carnegie might have developed an efficient job property rights system for factory jobs.  Law and accounting firms are so organized.  Other steel firms have developed with the factory job as a property right.  The above contention, however, cannot be confirmed or refuted.

Nevertheless, Carnegie did give property rights to some of his labor — managers.  By making them partners in the enterprise, he gave them a stake in the enterprise, i.e. a property right.  Until the middle 1890s, the Carnegie firm was a large complicated partnership.   It is not clear how well it worked.  Through much of the firm’s history, however, there existed extensive conflicts between the various manager-partners.  From reading Bostaph’s account of the firm in the 1890s, one has to wonder how steel got made given all the squabbling.

While this system was efficient to a degree, a better system might have been developed.  A piece of evidence is the attitude of W. J. Jones, the illustrious manager of the Homestead works (some time before the strike).  Refusing a partnership, he demanded and got a high salary (equal to the President of the United States).  Might he have seen the problems with a partnership with Carnegie?

Furthermore, there were large firms that ran more smoothly and efficiently at that time.  Among them was John D. Rockefeller’s Standard Oil.  Rockefeller has been subject to much criticism, but most scholars compliment his internal management.

Interestingly, while Bostaph does a good job describing the conflicts between Carnegie and his partners, I am not sure he understands its possible implications.  U.S. Steel, the Carnegie successor firm, was noted for lackluster management.  Many scholars have attributed it to x-inefficiency and management’s emphasis on getting along with the government (Rogers, 2009).  Perhaps, the competitive problems with the American steel industry had their start with Carnegie’s inability to develop an efficient managerial system.

I got this admittedly tentative insight from Bostaph’s book.  By putting the firm’s history into an alternative economic context, this book reveals much about Carnegie and the steel industry — maybe more than the author realizes.  I hope to see similar works from him on other historical figures.


Robert W. Fogel. 1964. Railroads and American Economic Growth: Essays in Econometric History, Baltimore: Johns Hopkins Press.

Robert P. Rogers. 2009. An Economic History of the American Steel Industry, London: Routledge.

Peter Temin. 1964. Iron and Steel in Nineteenth Century America: An Economic Inquiry, Cambridge, MA: MIT Press.

Robert P. Rogers is ( is a Professor Emeritus of Economics, Ashland University.  He has published An Economic History of the American Steel Industry (Routledge, 2009) and a number of articles on the steel industry.

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 (June 2016). All EH.Net reviews are archived at

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

Economic Thought: A Brief History

Author(s):Kurz, Heinz D.
Reviewer(s):Hébert, Robert F.

Published by EH.Net (June 2016)

Heinz D. Kurz, Economic Thought: A Brief History (translated by Jeremiah Riemer). New York: Columbia University Press, 2016.  ix + 208 pp. $27 (cloth), ISBN: 978-0-231-17258-5.

Reviewed for EH.Net by Robert F. Hébert, Department of Economics, Auburn University.

Writing a brief history of any subject requires its author to be organized and selective.  The former requires skill; the latter judgment.  Heinz Kurz, professor of economics at the University of Graz in Austria, displays his literary skill in this volume, a survey of economic thought from ancient times to the present, in less than 200 pages.  The author does a good job of linking various ideas scattered through time and space, weaving an abstruse narrative into a cohesive fabric.  This is no mean feat, and its accomplishment contributes in great measure to the readability of the present work.  His judgment, however, is more likely to be in the critics’ crosshairs, which is, not surprisingly the case here.

In Kurz’s literary time machine the reader reaches the sixteenth century after seven pages, and arrives at the eighteenth after another fifteen pages.  Kurz resists the temptation to anoint Adam Smith the “father of economics,” opting for the more defensible claim that “Smith permanently shaped the new field of political economy, both thematically and methodologically, and won it an important place in the circle of the venerable sciences” (p. 28).  Although he had numerous precursors, the long train of economic analysis that left the Smith station followed mainly the tracks he laid down.  Kurz takes us down those tracks in successive chapters on Marx, marginalism, Marshall, utilitarianism, welfare theory, imperfect competition, Schumpeter, Keynes, reactions to Keynes, general equilibrium and welfare theory, and developments in selected fields.

Clearly, publishing forces a tradeoff between brevity and depth.  Some things must be sacrificed in order to keep the narrative (and costs) within bounds.  Kurz provides a good compass for navigating the journey before us, but reviewers are duty-bound to pay attention to what is excluded as well as included.  I don’t quite know what to make of the statement (p. 7) that the difficulty of evading taxes on invisible wealth (e.g., money or interest) was a probable source of the long-lasting opposition to credit and interest by the Roman Catholic Church.  A more nuanced view is that the medieval Church’s outward opposition to credit and interest was curious and one-sided, i.e., the Vatican operated on both sides of the loan market, borrowing freely from its own merchant bankers while quietly making usurious loans to its prelates, all the while outwardly denouncing usury as a sin.[1]

The author’s interpretation of Mercantilism and Cameralism, a part of what Mark Blaug called “pre-Adamite” economics, follows tradition while either ignoring or rejecting the alternative interpretation based on public-choice theory[2], for which no explanation is given.  The spare mention of Richard Cantillon in mere passing (p. 17) can easily be overlooked, also in passing, and might be judged an opportunity lost, especially in light of Cantillon’s seminal influence on the theory and method of many economic thinkers who followed.  Karl Marx gets appropriate attention as the premier architect of a socialist system, but Kurz’s discussion of Marx’s impact stops at the twentieth century, which is a shame because so much of contemporary cultural politics in Europe and America has a distinctly Marxian odor.

Henry George is much misunderstood by historians of economics, and Kurz perpetuates the popular myth by unqualifiedly lumping George among the proponents of land nationalization (p. 43).  George in fact advocated a nuanced view of land value taxation not far removed from Alfred Marshall, who took George more seriously than other economists.[3]   Both George and Marshall recognized that taxing the “public value” of land did not require public ownership, which Marshall, not George, nevertheless qualifiedly endorsed (after a hundred years) in his lectures on George’s Progress and Poverty.[4]   It has somehow escaped historians of economics that by his own (public) admission Marshall would have been a de facto socialist after 1983!

Thünen, Rau and Gossen (Chapter 4) are appropriately singled out as forerunners of marginalism, but Kurz doesn’t explain how to reconcile his claim for Rau’s primacy “in substance (not verbatim) [regarding] the concept of marginal utility” (p. 67) with Rectenwald’s judgment that Rau “was not an original thinker.”[5]   Despite better coverage of some German predecessors, the story Kurz tells about early marginalism is incomplete, especially in regards to France.  By now Kurz should be aware of the peculiar institutional and cultural dimensions of French society that gave us Dupuit and his pioneering band of ponts engineers attached to the École des ponts et chaussées.  To be sure, Cournot formulated the demand curve, a succinct treatment of monopoly and duopoly, and the neoclassical theory of profit maximization, but Dupuit gave us a neoclassical concept of surplus (later retro-fitted by Marshall), a thorough treatment of utility and demand, novel concepts of monopoly and competition, price and product differentiation, and a clear explication of the relationship between property rights and economic welfare.[6] Continuing to ignore Dupuit and his contributions to economic science merely furthers what Jevons called “the noxious influence of authority.”

Having passed through marginalism and Marshall’s “neoclassical synthesis” Kurz capably guides us next through imperfect competition, Schumpeter and Keynes, general equilibrium theory and welfare economics, concluding with developments in the selected fields of game theory, capital theory, growth theory, spatial and urban economics, development economics and the new economic geography, behavioral and experimental economics, new institutional economics, and financial market theory.  Adequately covering the significance and impact of so many selected fields in less than twenty pages is a monumental challenge, and hence, some fields get very short shrift.  For example, public choice theory and new institutional economics are each encapsulated within a single paragraph; whereas behavioral/experimental economics and financial markets theory each get three paragraphs.  Whether this tells us something about the author’s evaluative priorities or not is left for the reader to guess.

This brief history concludes with the lofty hope that knowing the history of economics should help us resist superstition, hysteria and exuberance in economic and social questions; as well as immunize us against the naive idea that it is the privilege of living economists to articulate only correct ideas (“A Final Word,” p. 185).  If it were only that easy, perhaps courses in the history of economics would not be disappearing from university curricula at such a rapid rate.

Since the author is a seasoned scholar undoubtedly aware of the tradeoff between brevity and depth, fairness dictates that this book be evaluated primarily for what it does rather than what it does not do.  As long as the limitations of books like this are understood, there is a place for them in the field of economics.  Economics is not the dismal science claimed by historian Thomas Carlyle, unless one has little understanding of and appreciation for its complexity and relevance, which can, in large measure, be gained only from a study of its history.  For those untutored in the history of economics, this little book is not a bad place to start.


1. See Robert B. Ekelund, Jr., et al., Sacred Trust: The Medieval Church as an Economic Firm (New York: Oxford University Press, 1996), p. 120.

2. Cf., Robert B. Ekelund, Jr. and Robert D. Tollison, Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective (College Station: Texas A&M University Press, 1981); and same authors, Politicized Economies: Monarchy, Monopoly and Mercantilism (College Station: Texas A&M University Press, 1997).

3.  Robert F. Hébert, “Marshall:  A Professional Economist Guards the Purity of His Discipline,” in Critics of Henry George, ed. R. V. Andelson (London: Associated University Press, 1979), pp. 47-71.

4. Ronald Coase, “Three Lectures on Progress and Poverty by Alfred Marshall,” Journal of Law and Economics, 12 (April 1969), 184-226.

5. H.C. Rectenwald, “Rau, Karl Heinrich,” in The New Palgrave: A Dictionary of Economics, ed. J. Eatwell, M. Milgate, and P. Newman (London: Macmillan Press, 1987), IV: 96.

6. See Robert B. Ekelund, Jr. and Robert F. Hébert, Secret Origins of Modern Microeconomics: Dupuit and the Engineers (Chicago: University of Chicago Press, 1999).

Robert F. Hébert is Emeritus Russell Foundation Professor of Entrepreneurship at Auburn University.  With Robert B. Ekelund, Jr., he is the author of A History of Economic Theory and Method, sixth edition, and several other books.

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 (June 2016). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Capitalism: A Short History

Author(s):Kocka, Jürgen
Reviewer(s):Hohenberg, Paul M.

Published by EH.Net (April 2016)

Jürgen Kocka, Capitalism: A Short History. Princeton, NJ: Princeton University Press, 2016. viii + 198 pp. $27 (cloth), ISBN: 978-0-691-16522-6.

Reviewed for EH.Net by Paul M. Hohenberg, Department of Economics, Rensselaer Polytechnic Institute.

A joke from the days when stereotypes were more acceptable than they are today concerned a group of people tasked with writing about the elephant.  The Frenchman wrote about the elephant’s love life, the Englishman about hunting the elephant, etc.  As to the German, he (always he) contributed “a short introduction to the elephant” … in fifteen volumes.  Well, things change.  Just as two Americans edit a collection of essays on the history of capitalism … in 1200 pages (Neal and Williamson 2014), a German scholar produces “A Short History” of capitalism in under two hundred (smaller) pages.  Moreover, Jürgen Kocka views his subject rather more broadly than the Cambridge authors, who, a reviewer alleges, focus rather narrowly on the economic dimension (Coclanis 2016).

Short this volume by Jürgen Kocka may be, but compact writing does not necessarily make for quick reading.  The feeling of density in the text is enhanced by the language, as the translator has stayed rather faithful to the German original.  So while the book is lucid, it repays close reading.

As Kocka makes clear, the title can mean two distinct things: a history of the concept of capitalism, which has been as much a call to battle as an analytical tool, or an account of how capitalism, however defined, took over much if not all the world.  This book gives us some of both, the first chapter being devoted to the history of the term and a strenuous effort to define it, of which a bit more later.  Then comes a chronological review starting from the first stirrings of large-scale commerce, where Europe was a minor player compared with China and Arabia, and on to the medieval and Renaissance flowering of trade and towns in certain European regions.  The chapter titled “Expansion” takes the story through the early modern period (1500 to 1800), when Europe greatly extended its reach through trade and colonization.  The period also saw a slow and hesitant invasion of the sphere of production by capitalism, for example through proto-industrialization. The actual capitalist era comes next, the age of industrialization, culminating in a terrible twentieth century crisis (1914-45), then a near-miraculous recovery, and finally a renewed boost after the fall of the Soviet-based alternative and the rise of Asian tigers.

Three themes dominate the discussion.  The first is the “labor question” (quote marks in the text).  While wage labor is clearly the norm for a market-driven capitalist system, unfree labor has had a major role to play historically, particularly in the mines, plantations, and estates that furnished the goods feeding large-scale and long-distance commerce, from sugar to salt, wheat to silver, and rubber to cotton.  Yet one cannot comfortably label the areas dominated by this mode of production “capitalist.”  Otherwise one would, for example, view the southern states as more capitalist than the north in the mid-nineteenth century United States, which is certainly counterintuitive. Closely related is the issue of exploitation of labor, clearly present in many times and places, but offset, one must acknowledge, by the enormous gains in living standards over the long term in the most capitalistic settings.  Here I must interject my disappointment that the author completely omits any discussion of human capital, not only a key to recent and future sustained growth, but the one form of capital that cannot fully be separated from its laboring owner.  Does human capital substantially modify capitalist “relations of production?”  Or will the bosses find a way to capture its surplus returns as well?

A second theme, equally knotty, concerns the relationship between the capitalist economy, both in development and in its mature phase, and the state.  Clearly, the two are both rivals and complements.  Whereas conventional economic theory stresses the impediments government can place in the way of market efficiency and dynamics, Kocka focuses more on the positive contributions of politics to economics and on the necessity of political action to tame the economic excesses of capitalism and also to offset its corrosive impact on nature, culture, and community.  Historically too, European maritime expansion was driven as much by political (and religious) ambition as by the search for gain, while industrialization and state formation went hand in hand, not least in Germany.

Kocka’s third theme, one might almost say obsession, is finance.  It played a leading role in the first or mercantile phase of capitalism, when merchants and bankers were often one and the same, and it has been labeled the dominant sector in the late or mature phase of capitalism, also involving globalization.  Here one senses strongly the impact that the recent financial crisis has had on our author.  Viewed with the perspective of a few more years and from the United States rather than Europe, this focus seems a bit overdone, but who can say whether we have yet experienced the worst.

To close, I want to return to the defining characteristics of capitalism.  Kocka, like many others, stresses the key role of markets, one might almost say of the market.  However, it seems to me that he dismisses a bit too quickly the distinction Fernand Braudel drew (for the early modern period) between the market economy and capitalism (1982).   Kocka claims that Braudel’s capitalism does not require markets, which is absurd.  Instead, Braudel is saying that while one cannot have capitalism without markets, one can have markets without capitalism (though twentieth century authoritarian states have certainly tried to have rapid capital accumulation without free or even clearing markets).  The real distinction seems to me to be between the type of idealized markets we study in Econ 101, with no concentration of buyers or sellers, no pervasive economies of scale or rents, no meaningful product differences or informational asymmetries, minimal barriers to entry or exit, and thus only fleeting profits; and the real world markets where these and other imperfections are the rule rather than the exception.  In the latter, potential rewards are high enough to tempt the capitalist despite the corresponding risks.  To put the matter succinctly, I would reject any definition of capitalism that does not make a place for market power as well as markets.

Having put forward a couple of issues for further discussion, I should reiterate that this book offers a lot of material in a few pages, and a good view of economic history as seen notably from the dual viewpoints of Central Europe and the post-financial crisis moment. The reader will have to judge whether it makes a compelling case for ”capitalism” as the organizing concept for a millennium, or even half a millennium, of economic history.


Fernand Braudel, Civilization and Capitalism, 15th-18th Century. Vol 2: The Wheels of Commerce, New York: Harper & Row, 1982

Peter A. Coclanis, “Review of L. Neal and J. Williamson (2014),” Journal of Economic History, 76 (1) 2016, pp. 286-290.

Larry Neal and Jeffrey G. Williamson, editors, The Cambridge History of Capitalism, Cambridge: Cambridge University Press, 2014.

Paul Hohenberg is past president of the Economic History Association and co-author (with Lynn Hollen Lees) of The Making of Urban Europe, 1000-1994.

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 (April 2016). All EH.Net reviews are archived at

Subject(s):Economywide Country Studies and Comparative History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Purchasing Power: The Economics of Modern Jewish History

Editor(s):Kobrin, Rebecca
Teller, Adam
Reviewer(s):Chiswick, Carmel U.

Published by EH.Net (March 2016)

Rebecca Kobrin and Adam Teller, editors, Purchasing Power: The Economics of Modern Jewish History.  Philadelphia: University of Pennsylvania Press, 2015.  vii + 355 pp. $65 (cloth), ISBN: 978-0-8122-4730-5.

Reviewed for EH.Net by Carmel U. Chiswick, Department of Economics, George Washington University.

Purchasing Power is a collection of eleven well-researched and well-documented essays about the economic life of Jews in a particular industry, time period, or location, usually as producers but sometimes also as consumers.  This subject has only recently been treated seriously as an important aspect of Jewish history, earlier work typically either ignored the practicalities of earning a living or else relied on — or even generated — stereotypes that obscure rather than illuminate.   The editors of Purchasing Power, Rebecca Kobrin of Columbia University and Adam Teller of Brown University, have made a good start on rectifying the situation with this book.

Part I of this collection, “Networks and Niches,” has five historical essays on the economic activities of Jews in various circumstances.  Chapter 1 by Bernard Dov Cooperman (University of Maryland) is about Jewish moneylenders in early modern Rome.  Chapter 2 by Carsten L. Wilke (Central European University, Budapest) focuses on the Jews of the French Pyrenees who held the tobacco monopoly in seventeenth-century Spain.  Chapter 3 by Cornelia Aust (Leibniz-Institute for European History, Mainz, Germany) uses bankruptcy data from eighteenth-century Central Europe to draw insights about the credit-worthiness of Jewish merchants.  Chapter 4 by Glenn Dynner (Sarah Lawrence College) considers whether residential restrictions affected (or did not affect) the success of Jewish businesses in nineteenth-century Poland, including some interesting analysis of unintended consequences.  Chapter 5 by Adam D. Mendelsohn (College of Charleston) tells the story of a family of English Jews that exported clothing to British colonies during the nineteenth century.  Chapter 6 by Jonathan Karp (Binghamton University, SUNY) describes twentieth-century American and British Jews whose economic niche was in (phonograph) record stores catering to collectors of early Rock’n’Roll and folk music.

Together these chapters provide a nuanced view of Jewish business networking, evidence that being Jewish was neither a necessary nor a sufficient condition for inclusion in a successful business relationship.  Most if not all of these networks depended on non-Jews for certain activities, and not every Jew was sufficiently reliable and trustworthy to be included.  In each instance, a person’s good name (i.e., reputation) would be much more important than his religion when it came to building a successful business network.  Jewish businessmen operating in the larger society and belonging to the Jewish community were subject to the (sometimes conflicting) laws and ethical standards of both, and while this could be unduly restrictive it might also provide some wriggle-room for evading the less advantageous legal context.  In a hostile socio-political environment Jews might make a living in niche industries that were scorned by others, but even in friendly environments Jewish innovators created successful niches in new industries or markets.  The reader cannot help but be struck by the entrepreneurship and innovation demonstrated in these chapters.

While the chapters in Part I focus on how Jews earned a living, those in Part II give examples of how economically successful Jews used their wealth to help their less-fortunate co-religionists.  Chapter 7 by Abigail Green (Brasenose College and University of Oxford) considers the nineteenth-century appearance of international Jewish philanthropy, as increasingly high-income Jews in the liberal West tried to alleviate the poverty and powerlessness of Oriental Jews.  Chapter 8 by Derek Penslar (University of Oxford and University of Toronto) describes how Israel was able to finance its 1948 War of Independence with donations from Diaspora Jewish organizations, from wealthy Jewish philanthropists, and from the many contributions of individual middle- and low-income Western (especially American) Jews.  Chapter 9 by Veerle Vanden Daelon (Centre for Historical Research and Documentation on War and Contemporary Society in Brussels) follows the fortunes (good and bad) of Antwerp’s Jews in the diamond industry as they weathered the crises of two World Wars, struggled with the twin challenges of modernization and globalization, and interacted with Belgian governments that were sometimes friendly and sometimes not.  Chapter 10 by Jonathan Dekel-Chen (Hebrew University of Jerusalem) takes the late twentieth-century “Free Soviet Jewry” movement as an example of how financial resources and political activism greatly influenced Jewish communities in the U.S. and UK, even though it is unclear how much of this actually effected change in the Soviet Union.  Chapter 11 by Adam Sutcliffe (King’s College, London) concludes the volume with a re-examination of how Werner Sombart’s important work on Jews and capitalism reflected the popular stereotypes of his time and place, influencing the politics of Jewish economic history for decades to come.

With a few exceptions, Purchasing Power focuses on big successes, whether tracing the growth of business empires or the distribution of wealth to improve the welfare of others.  It is a welcome contribution to the growing literature on the economic activities of Jews.  Part I is myth-busting, providing evidence that the most successful Jewish commercial networks were probably not nearly so parochial as common stereotypes might suggest.  Part II deals with another stereotype, that of a few powerful Jews using their wealth to manipulate world events, but its focus is on politics within the Jewish community rather than influences on the larger society.  Each of the two Parts are composed of chapters that are themselves useful references that open new doors for further research.

As an economist interested in Jewish economic history, I welcome the (belated) entry of historians into this field.  I look forward, however, to new studies that place this literature in a broader perspective.   Most Jews would have earned their livelihood in small businesses, in crafts and trades, or in professions like medicine or clergy, and it would be interesting to know how their economic lives affected the Jewish community as well as the broader economy.  Since Jews were typically a tiny minority in their respective societies, it would be interesting to compare their philanthropic patterns with those of non-Jewish neighbors.  (Any such comparison might well consider that religious philanthropy typically occurred in the context of a state religion for non-Jews but not for Jews, an important difference explored in the growing literature on the economics of religion.)  Perhaps the greatest contribution made by the collection of essays in Purchasing Power is that each chapter is important not only for the light it sheds on the economic activity of Jews but also as a foundation for further research into the economic history of the Jewish people.

Carmel U. Chiswick is the author of Judaism in Transition:  How Economic Choices Shape Religious Tradition, Stanford University Press, 2014.

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 (March 2016). All EH.Net reviews are archived at

Subject(s):Business History
Financial Markets, Financial Institutions, and Monetary History
History of Economic Thought; Methodology
International and Domestic Trade and Relations
Markets and Institutions
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Middle East
North America
Time Period(s):16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Making of a World Trading Power: The European Economic Community (EEC) in the GATT Kennedy Round Negotiations (1963-67)

Author(s):Coppolaro, Lucia
Reviewer(s):Maneschi, Andrea

Published by EH.Net (November 2015)

Lucia Coppolaro, The Making of a World Trading Power: The European Economic Community (EEC) in the GATT Kennedy Round Negotiations (1963-67). Farnham, UK: Ashgate, 2013. xvii + 237 pp. $135 (hardcover), ISBN: 978-1-4094-3375-0.

Reviewed for EH.Net by Andrea Maneschi, Department of Economics, Vanderbilt University.

This book is a valuable addition to the economic, political and historical literature on the evolution of the European Economic Community (EEC), and how it affected — and was affected by — the contentious Kennedy Round of negotiations that took place in Geneva under the aegis of the General Agreement on Tariffs and Trade (GATT) between 1963 and 1967. Lucia Coppolaro wrote it as part of a postdoctoral program at the Institute of Social Sciences of the University of Lisbon. Her painstaking research into an important episode of European economic history is based partly on the archives of GATT; the European Union and its institutions, particularly the Council of Ministers and the European Commission; American, British, French and German archives; and interviews with officials and politicians who participated in the Kennedy Round.

As Coppolaro notes, President John Kennedy proposed this GATT Round, later named after him, partly in response to the creation of the EEC. Its member countries were still learning how to interact with each other, and the world at large, in their decade-old customs union. The EEC then consisted of France, the Federal Republic of Germany, Italy, Belgium, Luxembourg, and the Netherlands, known as “the Six.” In addition to eliminating tariffs on each other and creating a Common External Tariff, their attention was focused on the difficult task of devising a Common Agricultural Policy (CAP), a vital component of their union. Hence two sets of negotiations took place concurrently: among the EEC member countries, and within the GATT itself. The other members of the GATT viewed the EEC with some suspicion because of the opportunities for trade diversion that their customs union might engender, when EEC countries shifted their import purchases from cheaper world suppliers to their EEC partner countries. The CAP gave the EEC a great bargaining advantage in the GATT, since its proposals (once reached after much arduous intra-EEC bargaining) could not be modified, and the U.S. did not wish to challenge the CAP.

Kennedy’s initiative forced the EEC to take the important steps of formulating a common commercial policy, and anticipating the creation of the CAP in order to participate from a position of strength in a possible liberalization of agricultural trade in the GATT. While learning to organize trade among themselves, the Six were under pressure to limit trade diversion from their trade partners in America, the Commonwealth countries, the European Free Trade Association, their former colonies, and other less developed countries (LDCs). In addition, they were faced with the United Kingdom’s application to join the EEC, which again complicated their task.

Coppolaro focuses on three main issues: the thorny bargaining among the Six, as they sought to establish a common position in the Geneva negotiations; the roles of the six member states and of the EEC institutions (primarily the European Commission and the Council of Ministers of the EEC) in formulating a common position in Brussels and conducting negotiations in Geneva with other GATT countries; and the impact that the evolving EEC played in the GATT negotiations and their final outcome.

The European Commission achieved an increasingly important role in the EEC’s trade policymaking. Coppolaro describes how the policies of the EEC member states interwove with those of the EEC’s Council of Ministers, which was subject to the interests of its member states, and of the supranational European Commission. Social scientists have debated whether the Council or the Commission was the more powerful of the two. The Commission was subject to a strict oversight by the six member states from 1963 to early 1967. Coppolaro convincingly argues that, in the concluding phase of the Kennedy Round, the Commission gained new capacities and much greater discretion, and ended up as a strong and independent agency.

The creation and evolution of the EEC and its CAP played important roles in the GATT negotiations and their final outcome. The dramatic events in the history of the EEC’s trade policy that Coppolaro describes include the “Chicken War,” a commercial war that broke out in 1962 between the EEC and the United States over American chicken exports. It was concluded in 1963 just as the Kennedy Round talks were starting, with the U.S. imposing retaliatory duties on EEC exports. This first test of the acceptability of the CAP by the EEC’s trade partners showed how seriously the EEC intended to defend its CAP. Another crisis became known as the “Empty Chair Crisis,” when France in 1965 withdrew from the Council of Ministers, causing the Kennedy Round negotiations to grind temporarily to a halt.

International trade economists have long debated whether preferential trade agreements such as the European Union or NAFTA are stepping stones or stumbling blocks toward the multilateral liberalization of global trade achieved in successive GATT negotiating rounds. Coppolaro argues that the EEC acted as a stepping stone to liberalization with regard to industrial products, where its industries could compete advantageously with those of its GATT partners. With regard to agriculture the EEC was instead a stumbling block, since it was so busy setting up its own CAP that it did not wish to explore the possibility of trade gains for its own farm exports in the GATT round, and instead favored protection.

Negotiations among GATT members, and among the EEC member states, during the Kennedy Round were motivated by neomercantilism, not by a free trade ideology based on the advantages of mutual specialization. Coppolaro repeatedly points out that the GATT, including the Six EEC countries, worked “like a bazaar.” To obtain trade concessions from other countries, member countries needed to grant them reciprocal favors on a pragmatic basis. An important exception to this self-serving behavior was that of the United States until the conclusion of the Kennedy Round. After the success of the Marshall Plan, the U.S. strongly supported the creation and further development of the EEC, first under the Eisenhower administration and then under Kennedy’s, despite the fact that the CAP ran counter to the interests of American farm exporters. As Coppolaro puts it, “The CAP was considered the price the United States had to pay for European integration.” She argues that the U.S. was the only true leader in promoting GATT rounds and upholding worldwide integration, a role that the EEC never wished to claim. However, the GATT acted like a “rich-man’s club” vis-a-vis the LDCs, since it failed to liberalize trade in the commodities (such as textiles and farm products) of greatest interest to them. To the LDCs’ dismay, the EEC became a major exporter of agricultural products thanks to its CAP.

The EEC turned out to be a primary beneficiary of the Kennedy Round, since the GATT negotiations forced it to make the compromises necessary to become a trading bloc with common commercial and agricultural policies, which converted it (as the “European Union”) into a trading power comparable to the United States in international economic clout and geopolitical importance.

Andrea Maneschi is the author of Comparative Advantage in International Trade: A Historical Perspective (1998) and of articles on David Ricardo’s trade theory.

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
North America
Time Period(s):20th Century: WWII and post-WWII

Macroeconomics and the Phillips Curve Myth

Author(s):Forder, James
Reviewer(s):Mazumder, Sandeep

Published by EH.Net (June 2015)

James Forder, Macroeconomics and the Phillips Curve Myth. Oxford: Oxford University Press, 2014. ix + 306 pp. $90 (hardcover), ISBN: 978-0-19-968365-9.

Reviewed for EH.Net by Sandeep Mazumder, Department of Economics, Wake Forest University.

The Phillips curve has long been considered a workhorse of modern macroeconomics, and the term is thrown around frequently by both academics and central bankers alike, without much consideration as to its origin. In his book, James Forder forces us to reconsider the inception of this term, and how the model itself developed in the 1960s and 1970s in the macroeconomics literature.

In particular, in response to the foundational work of A.W.H. Phillips (1958) — where the negative relationship between inflation and unemployment is posited — three other papers stand head and shoulders above the others in the formation of the literature. Namely, Paul Samuelson and Robert Solow (1960) who argue that policymakers can choose a point along the Phillips curve, and then Edmund Phelps (1967) and Milton Friedman (1968) who introduced the movement of the curve itself via changes in inflation expectations.

At least, this is how the story goes according to the current literature. The author of this book argues that the true account of proceedings did not evolve in this aforementioned way at all. Further still, all of these so-called new findings to the literature were already widely known. Thus the term “myth” is used alongside “Phillips curve.”

In this book, James Forder successfully convinces the reader of many points, which indeed should force the current state of the inflation-unemployment literature to treat the formation of the story more carefully. For example, Phillips was not the first to discuss inflation-unemployment tradeoffs (David Hume, Irving Fisher, and Jan Tinbergen had already done so), while there is evidence that Phillips himself disregarded much of his own 1958 paper. Forder does an excellent job of highlighting Phillips’ key contributions, which does not include the discovery of an inflation (or wage change)-unemployment tradeoff. Namely, Phillips suggested that this relationship would be stable over time, and he was even revolutionary with his claims that wages were being driven by supply and demand without the need of considering social forces. Arguably, Phillips’ biggest contribution was the idea that an observable “law of motion” in economics might actually exist.

Likewise, Forder does a thorough job of convincing the reader that Samuelson and Solow (1960) were not pursuing “inflationism” in their paper, while Friedman (1968) was not the first to discuss expected price changes with regards to wage bargaining. Moreover, a persuasive case is made that Richard Lipsey (1960) is a paper that possibly belongs in the “hall of fame” when it comes to the formation of the Phillips curve as we know it today.

That being said, the book suffers from several problems with its arguments. One such problem is that the author condemns the literature for using the term “Phillips curve,” both in the past and today, in a way that does not resemble what Phillips had originally intended with his research back in 1958. Indeed it is true that the term “Phillips curve” can be used in a variety of different settings. But surely this makes Phillips’ contribution vital, not trivial. Yes, the model may not be used in the exact way he was originally thinking, but arguably he (and others) crucially began a new genre of the study of inflation-unemployment tradeoffs that has evolved in many different ways over the past few decades to what we have today. Another way of putting it is this: the curve today may not resemble what we find in Phillips (1958), but that does not mean that Phillips was not instrumental (whether by intention or fluke) in putting the subject matter at the forefront of macroeconomics, regardless of whether it happened a few years after he wrote or a few decades afterwards.

At times, the book also suffers from putting forth trivial arguments in too strong of a manner. For instance, the lack of self-citation of authors such as Samuelson, in no shape constitutes that they did not believe in their own previous work. Many economists simply prefer not to self-cite. Additionally, one could argue that many of the cited papers in this book are done so in a misguided and confused way. For example, the author says in chapter 7 that Guillermo Calvo “did not use the [New Keynesian Phillips Curve] expression.” Calvo’s pricing work was a foundational assumption that eventually led to the NKPC — he was not the originator of the model himself — so there is no reason to expect references to the NKPC in his work.

Furthermore, the author argues that several other researchers use Phillips curves without citing the original Phillips (1958) paper. This again in no way means that authors are not using Phillips’ work, but rather that it has become status quo in the literature to take the term “Phillips curve” for granted. Moreover, the author tries to argue that the Phillips curve was not relevant to policymaking, despite being used frequently in reports such as the Economic Report of the President. Does not the appearance of the term in the report in of itself constitute use by policymakers?

Another recurring problem in the book is that the author often makes strong arguments out of situations that do not warrant it. For instance, while the case for Friedman not being the first to bring inflation expectations to the model is well made, the fact remains that Friedman almost definitely is responsible for bringing the idea to the forefront of macroeconomic thinking given his prominence in the profession. Further still, in chapter 5 of the book, the author argues against the “inflationist” movement of the Phillips curve by presenting the case of those who were “anti-inflationists.” Is it any surprise, especially among macroeconomists, that there were people on either side of the debate? This does not represent a rejection of the Phillips curve, but rather a healthy debate about the merits of some of its implications. Indeed, the absence of “inflationist” ideas from policymakers’ own words (chapter 6) should also not be a surprise, and certainly does not constitute evidence against the Phillips curve. When would we ever expect a Federal Reserve official to publicly declare the benefits of inflation, even if they really thought it was true? Doing so would almost certainly be a death sentence on their own central banking career.

In conclusion, Forder has compelled me to consider Phillips’ role in the formation of the current model as we know it today more carefully, as well as the contributions of Samuelson, Solow, and Friedman. But I would imagine that this is true of almost anyone in history: if you look back in time, we probably frequently attribute more praise to certain individuals and not enough to others. Just ask Trevor Swan about his work on growth models! Regardless of whether this happened or not, the Phillips curve to this day remains a workhorse in macroeconomics when considering issues of price stability and full employment. Indeed, the policy implications are as vital as ever — not for picking a point on a menu of choices — but in terms of using the model to compute forecasts of possible future inflation rates, a point which is completely missed by the author. For these reasons, the Phillips curve is far from being a “myth.”


Calvo, G.A. (1983) “Staggered Prices in a Utility-Maximizing Framework,” Journal of Monetary Economics, 12(3): 383-398.

Friedman, M. (1968) “The Role of Monetary Policy,” American Economic Review, 58(1): 1-17.

Lipsey, R.G. (1960) “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1862-1957: A Further Analysis,” Economica, 27(105), 1-31.

Phelps, E.S. (1967) “Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time,’ Economica, 34(135): 254-281.

Phillips, A.W. (1958) “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957,” Economica, 25(100): 283-299.

Samuelson, P.A. and R.M. Solow (1960) “Analytical Aspects of Anti-Inflation Policy,” American Economic Review, 50(2): 177-194.

Sandeep Mazumder in an Associate Professor of Economics at Wake Forest University. His recent research has focused on inflation dynamics in the United States.

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

The Political and Economic Thought of the Young Keynes

Author(s):Cristiano, Carlo
Reviewer(s):Shilts, Wade E.

Published by EH.Net (January 2015)

Carlo Cristiano, The Political and Economic Thought of the Young Keynes.  London: Routledge, 2014. xvi + 262 pp.  $140 (hardcover), ISBN: 978-0-415-65926-0.

Reviewed for EH.Net by Wade E. Shilts, Department of Economics and Business, Luther College.

The sixty-ninth volume in Routledge’s Explorations in Economic History series  provides a needed addition to the story of that icon of modern interventionist economics, John Maynard Keynes.  However, while scholars of Keynes will find Carlo Cristiano’s monograph especially valuable, The Political and Economic Thought of the Young Keynes is not merely a book for specialists.

Cristiano delves into the puzzle, even contradiction, about Keynes encountered whenever one tries to reconcile the young “philosopher” of Cambridge and Bloomsbury with the older  “political” man who wrote The Economic Consequences of the Peace and The General Theory of Employment, Interest, and Money.  Whether one starts in the first volume of Skidelsky’s magisterial biography (1983) or elsewhere in the “new Keynes scholarship,” Keynes before World War I appears as a Cambridge Apostle and an idealist, a follower of the analytic philosopher George Edward Moore and a member of the Bloomsbury Group; after the war, however, he has become a political economist and an advisor to monetary authorities, a recommender of specific policies regarding gold exchange standards and liquidity traps and a pragmatic advocate of intervention in the short run.  The dominant explanation has Keynes transformed by his service at Treasury during the war (“I work for a government I despise for ends I think criminal,” went one 1917 letter to fellow Bloomsbury member, Duncan Grant), and by anger at the heavy-handedness of Versailles.

Cristiano’s close examination of Keynes’ choices between 1902 and 1914, however, shows any discontinuity between the young “philosophical” Keynes and the older “political” Keynes was more nominal than real.   The Cambridge Keynes was indeed a committed Apostle, but he was also a regular participant in the political debates of the Cambridge Union.  His philosophy was heavily influenced by Moore, but also by the example of Edmund Burke.  The India Office clerk was part of the Bloomsbury Group, but he also joined the Royal Economic Society and attended the Economic Club at University College.  Young Keynes entered Treasury already possessing deep interests in politics, in empire, and the choices of economic policymakers.

By no means was Keynes’ path to membership in the political Establishment inevitable when he matriculated at King’s College in 1902.  But neither were his interests in the choices of monetary economics merely “passions” of a youth that “were not importantly political at all” (Skidelsky, 1983, p.3).  Young Keynes was an earnest Apostle of strong convictions and great certainties.  He was a brilliant student, of course, but still a student whose convictions could and were pulling him in multiple directions.  Whether Keynes would have been typical of all brilliant sons of privilege reading for the math Tripos at Edwardian Cambridge, I do not know, but his certainties would be familiar to any today who have been fortunate enough to teach or advise honors-level twenty-year-olds.  Some of Keynes’ fellow Apostles may have settled upon a single worldview at 18.  Keynes had not.

Cristiano, an independent scholar most recently at the University of Pisa, has dug deep into both the Collected Writings and the Keynes Papers archived in the King’s College Modern Archives Centre.  Adding to these the diary of Keynes’ father, John Neville Keynes, the official papers of Alfred Marshall and other archival sources, as well as mastery of the secondary literature, he weaves a new and complex tapestry of Keynes’ early years, dividing the story into two periods, with Cambridge and India providing dual foci for both.   The first period comprises his undergraduate years (1902-1905) and his early years at the India Office (1906-1908), and the second begins with his decision to become an economics lecturer at Cambridge in 1908 and ends with the long days of August 1914.

In the opening chapter, “Portraits of Keynes as a Young Man,” Cristiano tracks the evolution of the story of the young Keynes since the first obituaries and Roy Harrod’s biography (1951).  His critical synthesis, much more than a mere “literature survey,” by itself will provide great value to any non-specialist.  Indeed, a stranger to the last three decades of the “new Keynes scholarship” need look no further than the basic references listed in Cristiano’s first two endnotes (p. 30).

Five more chapters and an epilogue then set forth how Keynes’ worldview on the eve of the War had developed along three dimensions of historical context: one provided by the ideas of imperialism and the New Liberalism; a second provided by probability theory and Alfred Marshall; and the third provided by his ever-growing network with central government and the civil service.  Each chapter solidifies one or more of the three dimensions.

“‘Liberal Imperialist,’ 1902-1905” (chapter two) shows the maths undergraduate and regular debater at the Union.  President of the Liberal Club, Keynes was neither a Gladstonian nor a New Liberal.  Rather, he was an elitist believing strongly in the civilizing effects of empire, but who also believed in an active role for the state in bringing about moderate progressive reform.

“Keynes, Marshall, and Cambridge Economics in 1905” (chapter three) and “From Apprentice to Lecturer” (chapter four) show Keynes studying index numbers under A.C. Pigou and monetary economics under Alfred Marshall.  Because Marshall would not publish his refined work on the demand and supply of money and his re-elaboration of the quantity theory until much later (1923), that part of his work was not widely known.  But Keynes was at Cambridge, with the kind of certainties that made him both receptive and willing to disagree (and thereby an ideal fit to Marshall’s pedagogic philosophy), giving him a real comparative advantage to trade with those in government who would pursue empire and reform.

“Lecturing and Electioneering” (chapter five), and “India” (chapter six) show Keynes deepening that comparative advantage as an academic, and then exercising it for the management of empire.  Two years before starting at Treasury, Keynes had already written his first major work in economics, Indian Currency and Finance, and before it was published he had joined (and authored the report of) a Royal Commission on the same subject.

Self-deprecatingly, Cristiano describes his work as if he were merely connecting the dots, merely basing it “solidly on precisely that which should surprise us least about Keynes” (p. xiv): “In fact, none of these elements — the civil servant, the liberal activist, the Marshallian monetary economist — has ever been denied.  There is not very much in this book that has not hitherto been mentioned by at least one of Keynes’ primary biographers” (p. 9).  But the author is too modest.  The detail he describes as “not very much … that has not hitherto been mentioned” is original scholarship, and it is very good.

The Political and Economic Thought of the Young Keynes is not a quick read.  As the author notes in his preface (p. xv), the book builds upon a doctoral thesis (University of Florence); and he has mastered the Monographic Voice:  staid title, long paragraphs, passive sentence constructions.  In our zeal for scholarly detachment and precision, we have unfortunately ensured few important monographs in economics or history (or I expect any other discipline) ever demonstrate the elegance and readability of Keynes’ works.  And as a result, we see the unintended and unfortunate consequence of too little diffusion of the increased knowledge that scholarship like Cristiano’s represents: for whether we are researchers in other areas, teachers of honors students or ordinary ones, or like Keynes, givers of advice to citizens and policymakers, our time becomes too scarce.

But that is a general gripe of this reviewer, not one peculiar to the book at hand.  Cristiano’s careful work here should not be ignored merely because he writes in the style that we academics demand from young scholars wishing to publish, a style that, as this review itself demonstrates, we all practice.  Cristiano’s is a book well worth the time of anyone interested in Keynes or the evolution of Keynesian ideas.

Young Keynes should be a part of any serious research collection, institutional or personal.  Though that monographic voice means non-honors undergraduate writers of term papers will try to avoid it, the book should also be in any undergraduate collection which serves courses in intellectual history or the history of economic thought. It is a book that will reward either a single sampling or multiple readings, one which will yield insight each time it is opened.


Roy F. Harrod, The Life of John Maynard Keynes.  New York: Harcourt, Brace, 1951.

John Maynard Keynes, Indian Currency and Finance.  London: Macmillan, 1913.

John Maynard Keynes, The Economic Consequences of the Peace.  London: Macmillan, 1919.

John Maynard Keynes, The General Theory of Employment, Interest, and Money. New York, Harcourt, Brace, 1936.

John Maynard Keynes, Letter to Duncan Grant, December 15, 1917.  Quoted in Skidelsky (1983), xix.

Alfred Marshall, Money, Credit, and Commerce.  London: Macmillan, 1923.

Robert Skidelsky, John Maynard Keynes: A Biography. Volume I: Hopes Betrayed, 1883-1920. London, MacMillan, 1983.

Wade Shilts is Associate Professor of Economics at Luther College.  His research interests include the history of the joint stock company in Great Britain, the history of gambling in America, and the future of undergraduate economic education everywhere.  He is currently working on two books, How Big is ‘Big’?  Economic Numeracy for Citizens of an Anarchic World, which he plans to finish in 2015, and Barriers of Faith: Listening and the Future of Economic Education.  He may be reached at

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

British Mail Steamers to South America, 1851-1965: A History of the Royal Mail Steam Packet Company and Royal Mail Lines

Author(s):Forrester, Robert E.
Reviewer(s):Kaukiainen, Yrjö

Published by EH.Net (December 2014)

Robert E. Forrester, British Mail Steamers to South America, 1851-1965: A History of the Royal Mail Steam Packet Company and Royal Mail Lines. Farnham, UK: Ashgate Publishing, 2014. xiii + 248 pp. £70 (hardcover), ISBN: 978-1-4724-1661-2.

Reviewed for EH.Net by Yrjö Kaukiainen, Department of History, University of Helsinki.

Royal Mail ships played a prominent role in the early history of steam shipping. Around the middle of the nineteenth century, in particular, the subventions paid by the British government were of vital importance for the success of the companies in question; gradually, however, the economic importance of mail contracts diminished and RMS vessels rather became just a special — albeit prestigious — category of passenger liners.

Forrester’s book is of special interest because it describes the history of a company which started in 1840 and lived until 1965 — a period which almost perfectly coincides with the rise and decline of what we could call traditional liner shipping. Thus the RMSP/Royal Mail Lines lived through most of the great revolutions which totally changed the outlook of international shipping in the course of a “long century.”

Overall, the book is a sound example of the British business history tradition. Its significant strength is the practical expertise of the author who — before moving to the publishing business and finally to maritime history studies — worked for two decades as a ship officer. Accordingly he can competently describe and discuss the technical and navigational aspects of his story. In this sense, Chapter 2 is particularly valuable for vividly describing the teething troubles of early steam shipping. In the 1830s and 1840s, there was no infrastructure to support power-driven vessels and the pioneering companies had to build it by themselves. This included coaling stations — which were particularly important in the period before compound engines started to decrease fuel consumption — as well as networks of foreign offices and agents, and sometimes even harbor development. I think this is something which every scholar working with cliometric analysis concerning the transition from sail to steam should read. However, to put things into a perspective, quite similar lack of infrastructure was faced by early container shipping.

The author presents a rather detailed picture of the development of the fleet as well as of passenger and freight volumes, which were particularly fast before First World War. This period of growth even included the beginning of refrigerated transportation of meat.  A good background for these developments is provided by overviews of relevant markets: imports and exports of South American countries, as well as the competition with other shipping lines. One of the author’s main arguments is that the mail steamers were important in instituting and maintaining the considerable British financial, commercial and industrial presence in Latin America.

As the book can be characterized as narrative rather than analytical it may not fully meet the expectations of scholars who are interested in a macro perspective. Its outline consists of strictly chronological chapters which makes it difficult for a reader to perceive an overall picture of different long-terms trends. For example the role of transoceanic postal services in information transmission — which is specifically referred to in the back-cover blurb — as well as their improvement, receives no systematic analysis. Regarding the continuous decline of postal subventions for the company’s economy this, however, cannot be regarded a fatal omission. Moreover, such aspects, at least as far as the period until 1875 is concerned, have already been quite sufficiently analyzed in a Finnish doctoral dissertation published in 2007.

The scope of the book is fairly Britain-centered, which can even be seen in the bibliography. Thus, comparisons with French, German or American mail lines (or other competing shipping) are quite infrequent. One more limitation is already indicated by the title of book: while the Royal Mail lines sailed both to the West Indies and South America, the former area has in practice been excluded. This obviously was a personal choice of the author — he served for ten years, until 1965, as a deck officer on the company’s South American ships. The limitation, however, involves practical problems. Since the company’s accounts did not differentiate between various destinations (which is not really surprising because a number of ships sailed both to the West Indies and South America) the specific economic returns of South American, or Brazil and Argentine traffic cannot be found in the relevant source material. In business history terms, a sounder alternative would have been to deal with the entire RMSP-company right from its beginning (as the subtitle of the book actually suggests).

It is clear that a book with a wide chronological scope is able to offer interesting data for further research. A good example of valuable information can be found in a quotation of freight rates to and from South America in the 1850s (p. 22) which fully confirms the surmise that shipping goods on early steamers was expensive. The description of the company’s economic decline, collapse and reorganization in the late 1920s presents a rather typical case of the difficulties faced by ocean shipping after the First World War. Even the final downturn and demise of the Royal Mail Lines in the 1960s is a good example of a general trend. When the United Nations Conference of Trade and Development (UNCTAD) was instituted in 1964 it almost immediately became the organ of developing countries requiring more equal rules of the game (vis-a-vis the industrial world) for liner shipping. While the actual liner code was adopted only after twenty years, South American countries were very active in developing, with subventions, their own merchant navies already in the 1960s. This harmed not only British lines but even the South America lines of other West and North European countries. Finally, I would like to point out that the Fleet list published as an appendix, offers valuable data of technical development across 120 years.

Yrjö Kaukiainen, Professor Emeritus of European History, University of Helsinki, recently published “The Role of Shipping in the ‘Second Stage of Globalisation,’” International Journal of Maritime History (2014).

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Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):Europe
Latin America, incl. Mexico and the Caribbean
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

A History of Ottoman Economic Thought: Developments before the Nineteenth Century

Author(s):Ermiş, Fatih
Reviewer(s):Coşgel, Metin

Published by EH.Net (December 2014)

Fatih Ermiş, A History of Ottoman Economic Thought: Developments before the Nineteenth Century. New York: Routledge, 2013. xv + 218 pp. $140 (hardback), ISBN: 978-0-415-54006-3.

Reviewed for EH.Net by Metin Coşgel, Department of Economics, University of Connecticut.

What we know about pre-modern economic thought is little enough to fit into a short chapter in most textbooks on the history of economic ideas.  The problem is magnified for economic thought in the Ottoman Empire because only a small fraction of the archived writings of intellectuals and bureaucrats, the only sources available for the period before the nineteenth century, have been uncovered and translated to modern languages. By attempting the first book-length manuscript on economic thought in the Ottoman Empire, Fatih Ermiş has made a significant contribution to the literature that has thus far consisted of a few commentaries and journal articles.

The book is a revised version of Ermiş’s doctoral dissertation, submitted to the Max Weber Center for Advanced Cultural and Social Studies in Germany. It is based on primary sources obtained in archives and libraries in Austria, Germany, and Turkey. These sources include the chronicles of Ottoman bureaucrats, writings giving counsel to the ruler (siyāsatnāme), political writings (lāyiha), reports of Ottoman ambassadors (sefāretnāme), and the correspondence between the ruler and high bureaucrats (hatt-ı hümayūn). Offering translations from original sources, Ermiş provides lengthy excerpts and summary discussion of the views of Ottoman intellectuals and bureaucrats on the organization of society, organization of production, and economics of regulation. The volume consists of eight chapters that include an introductory chapter and a conclusion. Although the coverage of the book is given in the title as the period before the nineteenth century, the majority of the discussion is devoted to the sixteenth and seventeenth centuries.

In the introductory chapter, Ermiş summarizes the main objectives, historical context, important questions, and primary sources of the book. The next chapter offers a brief description (in an encyclopedic style) of some of the basic elements of the Ottoman economy and introduces the terms and concepts that will be used in the discussion of economic ideas in subsequent chapters. For example, Ermiş describes the Ottoman land and tax regime, units of accounting, and administrative structure, and he typically uses both the Ottoman terms and English equivalents to facilitate common understanding. Since the book does not include a separate glossary, this chapter serves an important purpose for the non-specialist reader to form a basic understanding of relevant Ottoman institutions and to gain a conceptual framework of reference.

In Chapter 3, Ermiş discusses the Ottoman theory of the state, more specifically how the intellectuals and bureaucrats conceptualized the groups comprising society and legitimized the authority of the ruler. According to them, the Ottoman subjects consisted of scholars, bureaucrats, merchants, and peasants. The ruler’s responsibility was to maintain the balance between these groups because they could not realize order if left on their own. In discussing the nature of the ruler’s authority, Ottoman intellectuals adopted a “humour theory of the state” to explain the balance between the four groups of the society based on an analogy between the body and the society, an analogy that was also used by ancient Greek philosophers and previous Islamic scholars. According to the analogy, scholars were like blood, merchants were like yellow bile, peasants were like black bile, and bureaucrats were like phlegm. The function of the ruler in this setup was to ensure social order between the groups as the society went through stages of social development, just as the physician ensured the balance of the body as individuals went through stages of physical development. At the end of the chapter, Ermiş discusses how the concept of balance is closely related to justice. Once again using an analogy that goes back to Greek philosophers, Ottoman intellectuals formulated the concept of “the circle of justice” to illustrate the interconnectedness between social groups and how the balance between them is a prerequisite for justice.

Chapter 4 is about the economy of the household, the basic unit in the division of labor in the society, also a concept applicable to the society as a whole, the “household” of the ruler. Ermiş discusses the historical origins of the concept of household economy and how the Ottoman intellectuals used this framework to understand the economy. He gives examples from the writings of Ottoman thinkers on the role of money, division of labor in society, and savings and expenditures.

In Chapter 5, Ermiş offers a brief survey of the views of Ottoman thinkers on state intervention in markets. Ottoman rulers regulated the markets through price controls and market supervisors. He reviews the debate among Ottoman thinkers on whether price controls could be justified under Islamic Law and what conditions required the state to undertake such control. Prices and other government regulations were enforced through the market supervisor, an official who was responsible for making sure that the sellers did not exceed the ceiling prices, their scales and measures were accurate, and in general buyers and sellers observed the regulations in market transactions.

Chapters 6 and 7 are devoted to discussing how economic thought and its applications changed at the end of the eighteenth century. This was a difficult period for the Ottoman Empire because of lost wars and the growing challenges of economic and political developments in western Europe. These changes prompted Ottoman intellectuals to debate how to reform the state to ensure its health and continuity. In Chapter 6, Ermiş discusses the debates surrounding the conception of the state, the legitimacy relationship between the ruler and subjects, bureaucratic reforms and corruption, and trade and monetary policies.  Turning attention to applications of these ideas in reality in Chapter 7, Ermiş examines money in circulation, state interventions in markets, and the treatment of merchants. Chapter 8 consists of a brief account of the book’s arguments and concluding comments.

We must applaud Ermiş for taking a significant step towards building a comprehensive survey of economic thought in the Ottoman Empire. This book contributes significantly to cataloging the views of leading intellectuals, describing their methods and concerns, and identifying the genesis of their ideas. It is particularly useful that Ermiş has quoted extensively from the writings of Ottoman bureaucrats and intellectuals, making them available to an international audience.

Given the paucity of sources on Ottoman economic thought and the linguistic and other obstacles that prevent their widespread availability, the completion of a satisfactory survey will clearly require several other steps. So while we applaud this first attempt, we must also identify its shortcomings for future studies to improve. The most immediate and obvious are the need for a serious revision of the text toward better clarity and comprehension and a careful reorganization of the material toward greater coherence. In future editions, the author and the editors would be well advised to take additional steps to transform the doctoral dissertation into a quality manuscript aimed at a broad audience.
The author could have improved contents by covering all periods comprehensively and by choosing topics more systematically and consistently. In the early chapters the author has focused primarily on the sixteenth and seventeenth centuries, with additional references to Ibn Khaldun — not an Ottoman scholar — possibly because of the greater availability of sources for this period, despite advertising the coverage as being “the classical period.” Since Chapter 6 is devoted to changes in economic thought in the eighteenth century, one would need to identify systematic changes prompted by the challenges of modernity beyond the conventional discussion of the views of Ottoman intellectuals on the state’s need for bureaucratic reforms. It’s useful that this chapter introduces new topics, such as trade, corruption, and monetary policy, but it would be a further improvement to include these topics in earlier chapters for continuity or to clarify why they emerged as topics of new interest in the later period.

There is also the problem of coverage being dictated by the sources, which may result in overrepresentation of topics that were of great interest to the rulers and bureaucratic intellectuals. This may explain this book’s extensive coverage of the ruler’s legitimacy, his ability to maintain social order, and his reasons for market regulation. It likely causes the exclusion of other important topics, such as the Islamic law of taxation and the provision of public goods, which could be just as important for public finance but does not receive as much attention in the set of archival sources examined by the author as they do elsewhere. Moreover, it also likely causes the exclusion of various other topics of private economy, such as the guilds, financial markets, and the organization of production, which were likely discussed by Ottoman intellectuals but possibly left little trace in the sources examined here.

By having a clear methodological position and a coherent analytical framework, the author could have better categorized the quoted sources and interpreted their meaning and intention more appropriately. The author seems to have taken the writings of Ottoman bureaucrats and intellectuals at face value, without questioning how their proximity to the ruler and official positions likely affected their ideas and writings. For example, did any of these ideas represent rent-seeking behavior, the same way that western mercantilism was argued to be the outcome of rent-seeking behavior rather than a school of thought based on pure ideology? Regarding the notion of circle of justice, was this a framework that justified the legitimacy of the ruler and surrounding bureaucracy, or was it pure ideology that grounded the true care of Ottoman rulers for justice in the society? To appraise competing ideas, one could have asked whether there were serious challenges to the views expressed by covered bureaucrats on the circle of justice. If not, why not? Likewise, were there any writings that represented the interests of other groups, such as the merchants and the guilds? If not, why not?

To put the Ottoman economic thought in context, the author could have compared it to other schools or related it to broader debates in intellectual history. What were the contributions of Ottoman intellectuals to Islamic or western schools of thought, for example Scholasticism? Ermiş discusses the historical background to the ideas of Ottoman intellectuals and how their origins could be found in Greek philosophers and Islamic scholars, but he does not discuss systematically how the Ottomans differed from their predecessors. Nor does he discuss how the Ottoman economic thought differed from that of contemporary Islamic empires or western states. Instead, seemingly subscribing to an outdated and problematic notion, he simply asserts (but does not fully argue) the uniqueness of the Ottoman economic experience and its interconnectedness with the social, political, and religious spheres. Although the Ottoman experience was certainly unique in many ways, this does not mean that the ideas of Ottoman intellectuals cannot be productively compared to others to identify systematic similarities and differences.

Ermiş’s book is a good start to including economic ideas of Ottoman bureaucrats and public intellectuals in the stock of knowledge about the history of economic thought prior to the nineteenth century. Being the first attempt towards a comprehensive survey of Ottoman thought, it is incomplete, but there is much in it to form the foundation for future scholars to build on.

Metin Coşgel is Professor and Head, Department of Economics at the University of Connecticut.  In recent research on the economic history of the Ottoman Empire, he has studied the system of taxation, transmission and inequality of wealth, resolution of disputes in courts, and the organization of law enforcement.  His publications have appeared in the Journal of Economic History, Explorations in Economic History, Economic History Review, History of Political Economy, Economics and Philosophy, and other economics and history journals. His recent book, coauthored by Boğaç Ergene, titled A Court in Time: An Economic Approach to Settlement and Trial in an Ottoman Court is nearing completion. See

Copyright (c) 2014 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 (December 2014). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Middle East
Time Period(s):16th Century
17th Century
18th Century

Revealed Biodiversity: An Economic History of the Human Impact

Author(s):Jones, Eric L.
Reviewer(s):Kanazawa, Mark

Published by EH.Net (November 2014)

Eric L. Jones, Revealed Biodiversity: An Economic History of the Human Impact.  Singapore: World Scientific, 2014.  xxxiv + 257 pp. $99 (hardcover), ISBN: 978-981-4522-56-4.

Reviewed for EH.Net by Mark Kanazawa, Department of Economics, Carleton College.

Revealed Biodiversity is an ambitious attempt to tackle a big topic: the impact of human activity on long-term trends in biodiversity.  What makes this book of general interest to biologists and economists interested in the environment is the fact that there is a powerful prevailing wisdom out there — that ongoing economic growth is responsible for an inexorable, and perhaps universal, decline in non-human species, which is already being manifested in massive species extinctions and the likelihood of many more in the future.  The premise of the book is that an economic historian, taking a long-term approach, may be able to document and analyze trends in biodiversity to enable us to contextualize and critically evaluate a number of claims commonly made in public debates about biodiversity.  Properly done, such a book could be an important contribution to our understanding of the factors that influence biodiversity and the prospects for the future.

I need to say from the outset that I was prepared to be sympathetic to the arguments of this book.  As Eric Jones correctly points out, there are a great many simplistic, unfounded assertions about declining biodiversity out there.  The enduring notion that things were better in the good old days and that the earth is going to heck in a hand-basket often substitutes for critical thought.  Preservation at all costs is another persistent notion and economists, with their focus on tradeoffs and opportunity costs, are perhaps uniquely equipped to contribute productively to public debates.

Unfortunately, this book did not live up to the high expectationrs that this reader, for one, held out for it.  Consider, as the book does, wanting to make the following case.  Contrary to the beliefs of many (non-economists), policy regarding biodiversity involves tradeoffs — we simply cannot, nor should we necessarily want to, save everything.  Even if we did, economic development has highly complex and often unforeseeable impacts on wild populations, making it extremely challenging to evaluate its overall impact.  Sometimes its effect on certain populations is even positive.  Furthermore, it is likely that different forms of economic development at different points in time have widely varying impacts on wild populations.  Indeed, it is difficult to even know the basic facts concerning such fundamental questions as how much have wild populations declined over time, and how generalized has been the loss of species.  Answering these questions requires that we establish baselines from which to measure decline.  But baselines vary depending upon timeframe, and people are in general susceptible to believing that the appropriate baseline is “how things used to be.”  Furthermore, baselines are themselves very much a function of situational economic factors, which make it unclear whether you are measuring a trend or some cyclical fluctuation.  And anyway, the number of species out there is beside the point, as what is really important is our capacity to actually observe species in the wild (what the author refers to as revealed biodiversity).

What I like about this strategy is that it attempts to go beyond simplistic notions of biodiversity trends to take a more nuanced approach.  Instead of being saddled with asking the simplistic question — what is the human impact on non-human species — the question becomes under what conditions will the human impact be more (or less) adverse to non-human species?  Answering this latter question is likely to be much more useful for formulating practical policy regarding biodiversity.  I will add that I agree with Jones’ premise that much public debate about biodiversity is largely ahistorical, because many (most?) biologists and economists do not make explicit assumptions about exactly what they are measuring, over what period they are measuring, and from what starting point.  Here is a potentially fruitful area of inquiry for economic historians, in at least helping us to understand what data there is.

But herein lies an important interpretive point.  Regardless of the assumptions one makes, just about everyone would probably agree that the trends, whatever they turn out to be, have both secular and cyclical components.  The cyclical feature is evidenced by the recent (short-term?) recovery of some species from dangerously low levels, like the California condor, American bison, and the Minnesota grey wolf.  One way to interpret Jones is that he is focusing on the cyclical component when he argues that human impacts can cause some species (locally) to flourish.  But I suspect that taking the big picture outlook, many biologists and naturalists would not share the implied optimism about the future of biodiversity.  If the secular trend is inexorably downward, they might argue, what does it really matter that some species have enjoyed a temporary reprieve when, as Keynes might have put it, in the long run they are all dead?  And with ongoing economic growth, climate change, and the world population projected to increase to over nine billion by 2050, who can really doubt that without absolutely heroic measures, the secular declines are going to vastly dominate the cyclical fluctuations?

I need to emphasize that much of me appreciates and applauds the exercise that Jones went through.  But if secular dominates cyclical, then taking so much time and energy simply to document economic impacts on local baselines, over whatever period and under whatever economic conditions, seems somewhat misplaced.  It is a little bit like spending a lot of time identifying where the last peak of the business cycle occurred when the economy is slipping into a massive, sustained depression.  By the end of the book, I found myself believing Jones had spent too much time illustrating, and too little time systematically analyzing, the connection between economic activity and the health of local species.  As a result, it is not entirely clear what the practical take-away message is.  I am convinced that contained in the approach taken by the book are implications — important ones — for what sorts of policies to pursue, but the book itself provided me with too little sense for exactly what they are.

Perhaps it is best to view Revealed Biodiversity as a starting point for future studies of biodiversity that take seriously the mutual interaction between the economy and the surrounding environment.  In this respect, the book is in the best tradition of environmental histories by such authors as Patricia Limerick, William Cronin, Kathryn Morse, Mark Fiege and others, which examine the complex interplay between the economy, society, and the environment.  But future studies need to go much further in helping us understand the overall picture, the likely trends, and the nature of the human impact on non-human species.

Mark Kanazawa is professor of economics and former director of environmental studies at Carleton College in Northfield, MN.  His forthcoming book, Golden Rules, examines the origins of western water rights in the California Gold Rush.

Copyright (c) 2014 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 2014). All EH.Net reviews are archived at

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economywide Country Studies and Comparative History
Geographic Area(s):General, International, or Comparative
Time Period(s):17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII