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

Handbook of Cliometrics

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

Published by EH.Net (July 2016)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

Money Changes Everything: How Finance Made Civilization Possible

Author(s):Goetzmann, William N.
Reviewer(s):Neal, Larry

Published by EH.Net (July 2016)

William N. Goetzmann, Money Changes Everything: How Finance Made Civilization Possible.  Princeton: Princeton University Press, 2016. x + 584 pp. $35 (cloth), ISBN: 978-0-691-14378-1.

Reviewed for EH.Net by Larry Neal, Department of Economics, University of Illinois.

Long awaited by other financial historians, myself included, William N. Goetzmann’s book has finally appeared! This, after years of research and teaching during which Goetzmann allowed anyone interested in financial history to view his chapters in progress on-line at: (The website is well worth visiting in any case for the wide selection of primary source materials he has made readily available there for the rest of us.)  The printed product covers defining episodes in the history of finance from ancient Mesopotamia to the sub-prime crisis of 2008.  The introduction explains the themes that underlie the chest-thumping title despite his modest initial disclaimer that, “This book is a somewhat personal narrative about the people, places, and things that, in my view, shaped the history of finance as a technology of civilization” (p. 3). To motivate the structure of the book chapters that follow Goetzmann summarizes the key elements of finance as:
1. Reallocating economic value through time
2. Reallocating risk
3. Reallocating capital
4. Expanding the access to, and the complexity of, these reallocations

After explaining and extolling the virtues of each financial element, however, he broadens and deepens the implications of financial innovations that have occurred through history under each element.  The first element, the re-allocation of economic value through time, he sees as the fundamental feature that allowed civilizations to arise in the first place, wherever and whenever they occurred. Drawing on earlier work by his father, the late historian William H. Goetzmann, he distinguishes cultures as “structures of interrelated institutions, language, ideas, values, myths and symbols.  They tend to be exclusive, even tribal.  Civilizations, on the other hand, are open to new customs and ideas. They are syncretistic, chaotic, and often confusing societal information systems.  They continue to grow in the richness, variety and complexity of societal experience” (p. 9).

Goetzmann concludes with the optimistic view that: “financial technology allowed for more complex political institutions, enhanced social mobility, and greater economic growth – in short, all the major indicators of complex society we call civilization” (p. 14). Following this upbeat overview, there are four major sections, each with a separate introduction to explain the motivation.  Part 1, “From Cuneiform to Classical Civilization,” starts with Babylon and ends with Roman finance making a transition from informal securities markets in the Republic to central control of the money supply and its uses under the Empire.  Part II, “The Financial Legacy of China,” is a thoughtful diversion about the different routes that financial engineers can take, depending on the nature of political controls and contract enforcement.  Part III, the bulk of the book in two hundred pages, describes in loving detail “The European Crucible,” beginning with sovereign debt in Venice and concluding with American substitutes for sovereign debt, often underwritten by Dutch financiers.   Part IV, “The Emergence of Global Markets,” takes the reader into the maelstrom of the late nineteenth, twentieth, and early twenty-first centuries as global finance made its way among competing political visions in the world, all the while becoming increasingly complex — and disruptive.

Part I, “From Cuneiform to Classical Civilization,” focuses on lasting contributions to the rise of civilizations in the West, starting with writing, then cities, and culminates with a “financial architecture” based on record keeping, contract enforcement, a numerical system that permitted compound interest calculations, and astronomical observations based on a calendar year of 360 days (to make interest calculations easier).  This financial architecture held congeries of cities together in mutually beneficial trade networks, but then also allowed the rise of empires and their disruptive consequences.  Especially poignant is the interpretation of the Muraŝu archive discovered in the ruins of ancient Nippur, which must have been one of the financial centers of the Persian Empire.  Three generations of the Muraŝu family maintained their clay tablets recording outstanding claims on property and business ventures, concluding with their aid to a usurper who overthrew the reigning emperor, Sogdianus.  The Muraŝu family organized the financing of the army of his half-brother, Ochus, who became Darius II.  After which, however, the archive testifies to continuing indebtedness and foreclosures of the various financiers.  Goetzmann concludes, “finance could rapidly and powerfully focus economic assets in one time and place for political gain” (p. 68).

The historical record of finance in the ensuring centuries remains largely to be decoded from the millions of clay tablets now dispersed in museums throughout the world, but the Mesopotamian innovations persisted into Grecian times.  The famed orator, Demosthenes, was often hired to express eloquently and convincingly the case of his client, whether an aggrieved creditor or debtor, before a mass jury of Athenian citizens.  His various speeches demonstrate the sophistication and complexity of Athenian private finance. Goetzmann concludes, “The Athenian state was able to induce investors into the equally risky venture of prospecting and mining through mechanisms for dispute resolution and the means by which the state fairly and transparently allotted property rights” (p. 91).

Roman finance, he argues, laid the basis for later development of corporate enterprises and secondary markets in mortgages as the Roman Republic expanded at the expense of Grecian (and Phoenician) city-states, while adopting their most successful and proven financial techniques, including the use of standardized coins to facilitate impersonal exchanges throughout the unified empire.  Why some forms of private finance, annuities based on rental properties, disappear from the historical record after the rise of the Empire remains a mystery.  The later travails of the Roman Empire with increasingly desperate measures for war finance, moreover, elicit a comparison with the contemporaneous Han Empire in China.

Part II, “The Financial Legacy of China,” basically resolves the so-called “Needham Paradox,” the failure of the technology advances of the Song Dynasty to generate an industrial revolution or further scientific advances that occurred much later in Europe, to the financial divergence between China and Europe. The key factor was the failure of China to develop sovereign debt, whether for its magnificent cities or for the central government.  Only with the opening of China’s treaty ports in the nineteenth century did the Chinese government finally resort to state debt, and even then the first Chinese government bonds were floated on international debt markets rather than in China itself.  But when China did enter global markets of the late nineteenth century, it did so with a vengeance. Shanghai rapidly became one of the great banking centers of the world in the 1920s, but only by discarding the imperial legacy of centuries before.  Goetzmann notes, “There was great debate in the Han over the role of private enterprise versus state ownership [especially regarding salt, iron, and maritime trade] and state ownership won” (p. 174).  Thereafter, the state provided credit to merchants and warlords when it needed to mobilize resources, eventually creating fiat paper money in the Song Dynasty.  Goetzmann concludes, “It is impossible to create fiat money without complete fiat.  Thus, the value of the currency rose and ultimately collapsed with the state” (p. 202).

Part III, “The European Crucible,” develops the logic that led small, competing, and warring city-states scattered across Western Europe to create viable forms of finance that led, with many well-known missteps but also with a few underappreciated financial successes, to modern, global finance.  Goetzmann sees the stages of financial development in Europe as: “first, the emergence of financial institutions; second the development of securities markets; third, the emergence of companies; fourth, the sudden explosion of stock markets; fifth, the quantification of risk; and finally, the spillover of this system to the rest of the world” (p. 203). The next twelve chapters explore both the missteps and the occasional successes that lay the foundations for modern finance.

After 219 pages of fascinating historical episodes, often interleaved with personal accounts of Goetzmann’s encounters with archaeological digs or archival sites, he sums up the lessons of history from the European example.  “Financial technology is redundant, adaptive, and sometimes mercurial.  The institutions we take to be sacrosanct, inevitable, and indispensable are probably not.  Given the random outcome of historical events, another set of institutions might have emerged to solve the same financial problems.  Financial innovation is thus a series of accidents of history — the caprice of time, location, and opportunity” (p. 219).  Consequently, his treatment of the technical advances in probability theory and actuarial science, starting with Fibonacci, Bernoulli and Pascal, contrasts sharply with that of Peter Bernstein’s Against the Gods: The Remarkable Story of Risk (New York: Wiley, 1996).  For Bernstein, the practical application of the Black-Scholes model for pricing options, built on the assumption that past distributions of asset prices could persist over the near future, had created the modern, efficient, global financial market.  For Goetzmann, however, the successes of the early financial markets led to the formalization in mathematical terms of the underlying processes.  He notes with approval the possibilities of non-linearities formalized by his Yale colleague Benoit Mandelbrot and erratic market movements highlighted by another Yale colleague, Robert Shiller.  Both scholars were inspired by observing anomalies in the price discovery processes revealed in the securities markets of the 20th century.

The final success of the European Crucible, according to Goetzmann, however, arose in the American colonies, first with their experiments with land banks (until outlawed by the British Parliament) and then with land companies backed usually by Dutch and British investors.  With all the current fervor surrounding the role played by Alexander Hamilton, thanks to the Broadway musical based on Ronald Chernow’s biography, Goetzmann instead gives Abraham Van Ketwich and a number of other Dutch bankers primary credit for having securitized the early debt of the United States.  True, “Dutch investors made out well when the debt of the United States was reorganized by Alexander Hamilton and the young nation made good on its financial commitments” (p. 386).  So, real credit for America’s success should go to the eighteenth century Dutch investors who developed the financial innovation of closed end mutual funds, which allowed small investors to share the returns from risky assets.

Part IV, “The Emergence of Global Markets,” begins with an interesting discussion of Marx, especially his insights into contemporary finance as demonstrated in his newspaper columns in the New York Daily Tribune in the U.S.  Goetzmann writes, “His prose is terse, witty, and convincing.  When I read these lively columns I can almost forgive him” (p. 411). The Tribune articles by Marx portray a world of “global linkages and geo-political dynamics” and that is what excites Goetzmann about this period of financial history. Especially noteworthy is the amount of information contained in the Investor’s Monthly Manual “quoting thousands of prices for securities from all over the world” (p. 412).  (And it’s available on downloadable pdf files from Goetzmann’s website given above.)  He extols The London Stock Exchange in 1870 as “giant economic lever with the fulcrum planted in the present, balancing past savings and future promises” (p. 413).

There follow fascinating insights into the experiences in pre-revolutionary China (“China’s Financiers”) and pre-World War I and early revolutionary Russia (“The Russian Bear”). Each country attempted to adopt financial innovations and capital from abroad while trying to establish legitimacy for a new government.  Both lapsed into authoritarian regimes espousing Marxian ideology, demonstrating again the historical contingencies under which financial innovations arise or meet their demise.  Chapter 26, “Keynes to the Rescue,” contrasts Keynes’ macro-economic recommendations, familiar to all from his General Theory, with his microeconomic investment strategies in handling the endowments of King’s College at Cambridge University.  At the macro-level, Keynes prescribed governmental spending whenever the animal spirits motivating private investment flagged while at a micro-level he switched from speculating on price movements in equities or foreign exchange (with dismal results) into equity investments in firms with sound management and robust markets.

“The New Financial World” emerged after World War I, not World War II, on Goetzmann’s account.  Highlighting the leadership of the U.S. in finance were skyscraper bonds, which he sees as an application into vertical space of the early American land companies dealing with wide, open horizontal spaces.  Financial architecture mimicked in many ways the new architecture that created a building boom toward the sky.  It is their eventual demise at the end of 1926 that Goetzmann sees as the collapse of a real bubble as “skyscrapers built in Manhattan were … driven by a demand for bonds that backed them rather than by a demand for the amazing new machine to make the land pay” (p. 480). Following the collapse of the urban real estate market in the U.S., returns from applying other new technologies such as radios, autos, and electrical appliances were delayed by a decade of more and equity prices in their companies collapsed, destroying the American public’s craving for investing in the stock markets.

Out of the Great Depression that followed, however, Goetzmann sees the emergence of useful financial innovations, starting with government regulation of the securities markets, implementation of a national Social Security plan, and improvements in mutual fund designs, all leading to post-war developments in financial theories, as well as intense empirical research into the varieties of movements in equity prices.  The challenges of the future, in a global financial system with confidence badly shaken from the 2008 financial crisis, lie in providing assurances to the current working age populations around the world that their future medical expenses and pension benefits can be financed. Attempts to meet these challenges with new financial innovations, whether from private or public initiatives, should be encouraged, as history shows that the consequences of disappointing the public’s expectations have always been disastrous for a civilization.

Larry Neal is the author of A Concise History of International Finance: From Babylon to Bernanke (Cambridge University Press, 2015).

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):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Why Did Europe Conquer the World?

Author(s):Hoffman, Philip T.
Reviewer(s):Eloranta, Jari

Published by EH.Net (April 2016)

Philip T. Hoffman, Why Did Europe Conquer the World? Princeton: Princeton University Press, 2015. vii + 272 pp. $30 (cloth), ISBN: 978-0-691-13970-8.

Reviewed for EH.Net by Jari Eloranta, Department of History, Appalachian State University.

Philip Hoffman, Professor of History and Business Economics at California Tech and recent president of the Economic History Association, is a prolific scholar, whose work has primarily focused on early modern Europe, especially French economic history and financial markets. Hoffman’s new book focuses on a pivotal issue in world history, namely how Europe came to rule the world. This is, needless to say, a hugely ambitious book and one that no scholar analyzing transitions in global history can overlook. It is a daunting task to attempt such an endeavor, let alone succeed as Hoffman has. This book will change interpretations of European warfare, the financing of conflicts, transitions in other regions of the world, the causes of the Industrial Revolution, and the Great Divergence — topics that are at the forefront of history, economics, and political science today.

Hoffman takes on big theories of history and development in this book, similar to other grand theorists like Jared Diamond (1999), Charles Tilly (1992), David Landes (1998), Joel Mokyr (1992), and Daron Acemoglu and James Robinson (2005). The pivotal question for all social scientists remains: Why are some so rich and some so poor? Whereas explanations for the different development paths have ranged from biological (Diamond) to geographical and cultural (Landes) and institutional (see e.g. North 1990), Hoffman follows a similar path as Tilly, Larry Neal (2000), and Niall Ferguson (2001), who argue that understanding the costs and impacts of warfare is the key to this puzzle. Tilly (1992) pointed out that capital and coercion are pivotal components in the rise of Europe over the last thousand years and that the constant need to fund warfare led to the creation of public debt and sharing of power between sovereigns and merchants. And, as Ferguson (2001) argues, military spending was the crucial component in this transition, since it led to other financial, fiscal, and institutional innovations. Hoffman is able to go a step beyond these somewhat blunt insights to provide a theoretical and (partially) empirical foundation that fills in many of the gaps and challenges the other “big” historical frameworks.

Hoffman poses a question for a potential time traveler similar to the one asked by Landes: How did Europe go from a patchwork of small and seemingly powerless communities one thousand years ago to a position of military and political dominance by the end of the millennium? Why did the world not become dominated by the Chinese or some of the other worthy contender? He answers the question by turning to a model of tournaments — the “tournament” for domination in Europe in conjunction with other cultural and historical developments explains Europe’s global success. Ultimately, the key to Hoffman’s explanation is warfare. As he correctly points out, Europeans have been almost constantly at war. Historically, most of their sovereigns’ spending went toward military purposes, and even lavish palaces like Versailles represented only a minuscule part of the state budget. His model links the high probability that European rulers would go to war to the high value of the victor’s prize, and similarity of resources, military technology, and ability to mobilize those resources (absence of a hegemon is crucial). Moreover, the political cost of attempting to win the prize must have been fairly low, and rulers were willing and able to learn from these conflicts. Thus, Hoffman’s four conditions for Europeans’ path toward global dominance include frequent war, high (and consistent) military spending, adoption and advancement of gunpowder technology, and relative lack of obstacles to military innovations. Europeans enjoyed low fixed costs for going to war, distances were small, variable costs for mobilization were low, and there was a merchant base that helped with the financing of conflicts.

One of the key elements in Hoffman’s explanatory framework is the ability of rulers to extract revenue from the society. His comparative data — which are by necessity a bit sporadic for China and other states around the globe — prove that European rulers collected, in per capita terms, much higher revenues and invested them into warfare. He also shows, based on his research into early modern European revenue systems and military producers, that the high military spending in Europe also translated into sustained productivity growth in the military sector. He even goes further to suggest that this was linked to the eventual Industrial Revolution, which is a bit harder to verify. Positive technological externalities may arise from military technologies, but significant crowding out effects cannot be ignored.

This book is particularly interesting when Hoffman engages in comparative research to examine various empires and regimes around the world in this period. While specialists in the histories of these polities may find details that they disagree with, the overall argument about China’s stagnation from the fifteenth century onward (or later, depending on whether one ascribes to the views of Pomeranz (2000) or Broadberry and Gupta (2006)) is quite convincing. Eschewing some of the more traditional explanations, for example China’s turn inwards in the fifteenth century, Hoffman makes a case for the tournament model here as well. He shows that Chinese tax collection rates were low, and that the focus on defending against nomads meant lower military spending on navies. Also, the investment in gunpowder technology was not consistently high, and thus the Chinese eventually fell behind the Europeans, which was displayed amply in the Opium Wars of the nineteenth century. Similar arguments can be made as to why Japan and India also stagnated, although some of the reasons differed. Interestingly enough, Hoffman also assigns a large role in Europe’s bellicosity to Christianity; rather than pulling European nations together, Christianity became a source of almost constant conflict, starting with the Crusades, divisions within the Catholic Church, and then the wars of religion in the sixteenth and seventeenth centuries.

In general, Hoffman’s model and the empirical support presented in the book are impressive and persuasive. One could, of course, offer some counterarguments. For example, Hoffman’s model is probably not as all-encompassing as he suggests; in many ways his framework complements the broader models about the role played by geography, nature, climate, and human interactions. Moreover, he inordinately downplays the role played by the modes of financing wars — why it may make a difference whether tax revenue or loans were used to extend conflicts. Ultimately the European (or originally Dutch/British) model of financing wars with the support of domestic merchants and markets with low interest rate loans was a huge advantage when Europe entered the age of total wars at the end of the eighteenth century. Finally, it is hard to discount the role raw materials and other natural resources played in assigning winners and losers in these tournaments. The classic argument by Pomeranz (2000) about the lack of coal near developing urban centers in China as a major hindrance to its industrialization is a good example of this line of thinking. Regardless of these small reservations, this book is a classic of economic history, which should be required reading by scholars everywhere, and will be a starting point for many debates about the role conflicts and military spending have played in historical processes.


Acemoglu, D. and J.A. Robinson (2005) Economic Origins of Dictatorship and Democracy, Cambridge University Press.

Broadberry, S. and B. Gupta (2006) “The Early Modern Great Divergence: Wages, Prices and Economic Development in Europe and Asia, 1500–1800,” Economic History Review, 59(1), 2-31.

Diamond, J. (1999) Guns, Germs, and Steel: The Fates of Human Societies, W.W. Norton.

Ferguson, N. (2001) The Cash Nexus: Money and Power in the Modern World, 1700-2000, Basic Books.

Landes, D. (1998) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, W.W. Norton.

Mokyr, J. (1992) The Lever of Riches: Technological Creativity and Economic Progress, Oxford University Press.

Neal, L. (2000) “How It All Began: The Monetary and Financial Architecture of Europe during the First Global Capital Markets, 1648–1815,” Financial History Review, 7(2), 117-140.

North, D. C. (1990) Institutions, Institutional Change and Economic Performance, Cambridge University Press.

Pomeranz, K. (2000) The Great Divergence: China, Europe, and the Making of the Modern World Economy, Princeton University Press.

Tilly, C. (1992) Coercion, Capital, and European States, AD 990-1992, Blackwell.

Jari Eloranta ( is a Professor of Comparative Economic and Business History at Appalachian State University and author of several articles on military and government spending, including (with Andreev Svetlozar and Pavel Osinsky) “Democratization and Central Government Spending, 1870–1938: Emergence of the Leviathan?” Research in Economic History (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 (April 2016). All EH.Net reviews are archived at

Subject(s):Economywide Country Studies and Comparative History
Financial Markets, Financial Institutions, and Monetary History
Military and War
Industry: Manufacturing and Construction
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Emile and Isaac Pereire: Bankers, Socialists and Sephardic Jews in Nineteenth-century France

Author(s):Davies, Helen M.
Reviewer(s):Redmount, Esther

Published by EH.Net (January 2016)

Helen M. Davies, Emile and Isaac Pereire: Bankers, Socialists and Sephardic Jews in Nineteenth-century France. Manchester: Manchester University Press, 2015.  x + 260 pp., $100 (hardback), ISBN: 978-0-7190-8923-7.

Reviewed for EH.Net by Esther Redmount, Department of Economics, Colorado College.

While Emile and Isaac Pereire: Bankers, Socialists and Sephardic Jews in Nineteenth-century France was not written for economic historians, the topics it covers cannot help but be of interest to those who study economic and financial development, the Industrial Revolution, entrepreneurship and the history of economic thought.

The brothers Emile and Isaac Pereire rose from extreme deprivation in the Jewish community of Bordeaux to the pinnacle of the grande bourgeoisie in Paris during the Second Empire as founders and directors of the Crédit Mobilier.  Their meteoric rise and the roles they played in nineteenth-century economic development in Europe are not unlike those of other only recently emancipated (though still largely unenfranchised) Jewish financiers of the period including the Rothschilds, the Bleichröders and the Ephrussi.  Helen Davies’ monograph is the first biography of the brothers Pereire in English and it makes extensive use of archival sources, relying, in particular, on the Archives de la Famille Pereire, in Paris.  This gives Davies access to letters and other communications that shed new light on the network of relationships among the Pereires, the Saint-Simonians, the Rothschilds, Napoleon III and others influential in the political and economic development of France.  Her book serves as an interesting complement to more standard economic histories of nineteenth-century France.

Several themes play out in the lives of Emile and Isaac Pereire.  Both men grew up poor, but closely attached to a network of cousins and in-laws who helped them on their way.  As young men, both were effectively apprenticed as bookkeepers in the banking and maritime establishments of Bordeaux. When they subsequently relocated to Paris, those same networks provided housing and social support as well.  Most importantly, their connection to Olinde Rodrigues brought them into contact with Claude Henri de Rouvray, comte de Saint-Simon, whose writings on the possibilities for economic and moral enhancement attendant on the careful and deliberate direction of economic activity became their guiding light in the decades to come.

It is easy now to underestimate how influential Saint-Simon’s utopian socialism was during this period.  Davies reminds us of how many politicians, social theorists and economic analysts were influenced by the writings of de Rouvray and those who surrounded him, including Napoleon III.  She can do little more than remind us, since that topic is well beyond the scope of the present book and would require at least another whole treatise to address.

The brothers spent considerable time and energy writing and lecturing on the major economic tenets of Saint-Simonianism before the movement dissolved.  Davies argues convincingly that the work they did actually laid the foundation for their own forays into industrial capitalism. From articles they had written, the Pereires foresaw what a system of railways could do for France and how urban renewal might transform what was still primarily a medieval city into the new Paris.  In 1832, Emile Pereire developed a proposal to build a passenger railway between Paris and St. Germain and the family became small investors in the project that included James de Rothschild among others.  At this stage, relations between the two were cordial, though they would not remain so.

When the Paris-St. Germain concession was granted, Emile Pereire became a director and four bankers comprised the board.  With the inauguration of the line, the Pereires achieved political as well as economic influence, but having seen the power bankers could wield, they strove to be the chief brokers of their own dreams.  Davies deftly shows how they managed this through the creation of a financial institution that bought shares or invested directly in the acquisition and building of infrastructure.  That bank, the Crédit Mobilier, was to be the great work of their lives.

The lives of the Pereires and their enterprises intersect the great political upheavals in France mid-century.  Davies walks us through how the Revolution of 1848 and its aftermath opened opportunities for the Pereires to work with Louis-Napoleon.  Indeed in 1852, the man who was to become Emperor formally established the Crédit Mobilier.  Davies describes this bank as “a powerful instrument in the expansion of French capitalism, the lynch-pin which facilitated a revolution in banking and heavy industry.”  Because her book is not an economic history, per se, she does not attempt to assess the strengths and weakness of this institution.  Rather she gives readers a view of this financial institution as it evolved and was discussed in the correspondence of its principals.  Historians such as Rondo Cameron, Alexander Gerschenkron and Niall Ferguson have all weighed in on the impact of the Crédit Mobilier and those interested in the broader ramifications of this form of state-sponsored development might begin a study of the larger question with their works.

The Crédit Mobilier collapsed in December of 1867.  Its capital was raised primarily by issuing bonds. The funds from those issues were then used to buy shares in the industrial enterprises in which it was interested or to establish and then run and manage those enterprises directly.  When those enterprises were profitable or when share values were high, the bank was highly liquid and profitable.  In downturns or in the face of increasing competition, the bank became insolvent. By the time of its most serious distress in 1867, as the correspondence among family members and business associates makes clear, the Rothschilds were no longer allies and the willingness or ability of the Emperor to come to the Pereires’ aid was waning. The bank was unable to find funds to pay its creditors.  Charges of malfeasance were levied, but Davies finds support for mismanagement rather than fraud.

Even if the Crédit Mobilier was no longer financially sound, it had, in addition to railroads, created or reorganized public utilities (gas and omnibus services within Paris).  It owned industrial laundries, housing developments and significant tracts of land, grand hotels and opera houses.  What remained Davies notes, even after the financial institution was swept away, established France as a modern, industrial and commercial powerhouse, second only to Great Britain in the period.

This book is not a substitute for a standard history of French economic development.  Nor is it a substitute for a thorough treatment of utopian socialism as outlined by Saint-Simon and his followers.  It is, however, a well-written and useful addition to the literature on economic development because it makes clear how macroeconomic outcomes arise from the actions of individual agents, how theory and ideas can be influential, and how entrepreneurship crops up in unlikely places to transform the society from which it arises.  Were this book to go to a second edition, I would welcome a time-line of French political history and a map of railway lines developed by the Pereires and their enterprises in France at this time.

Rondo Cameron (1953), “The Crédit Mobilier and the Economic Development of Europe,” Journal of Political Economy, 61:6, 461-488.

Niall Ferguson (1999), The House of Rothschild: The World’s Banker, 1849-1999, New York: Viking.

Alexander Gerschenkron (1962), Economic Backwardness in Historical Perspective: A Book of Essays, Cambridge, MA: Harvard University Press.

Fritz Stern, (1979), Gold and Iron: Bismarck, Bleichröder and the Building of the German Empire, New York: Vintage.

Esther Redmount is the editor of The Economics of the Family: How the Household Affects Markets and Economic Growth (Praeger, 2014) and “The Effect of Wage Payment Reform on Workers’ Labor Supply, Wages, and Welfare,” Journal of Economic History, 2012 (with Arthur Snow and Ronald S. Warren Jr.).

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

Subject(s):Business History
Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Europe
Time Period(s):19th Century

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

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

Published by EH.Net (November 2015)

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

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

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

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

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

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

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

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

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

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

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

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

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

Published by EH.Net (September 2015)

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

Nathan Rosenberg – 1927-2015



written by Joel Mokyr

The economic history profession has lost one of its most original, creative, and wide-ranging minds in the passing of Nathan Rosenberg on Aug. 24, 2015. Rosenberg was one of the founding fathers of Cliometrics, a member of the first group of Cliometricians that congregated at Purdue University in the late 1960s, and which included other luminaries among them Lance Davis, Jonathan Hughes, and Stanley Reiter (who is widely credited with coining the term “Cliometrics”). By 1970, this group had moved away from West Lafayette and dispersed to institutions such as Northwestern and CalTech. Rosenberg was hired by the University of Wisconsin, and was a member of a different group of influential and distinguished economic historians in Madison, including at one time or another Jeffrey Williamson, Peter Lindert, Morton Rothstein, Rondo Cameron, and Claudia Goldin. While at Wisconsin, Rosenberg was the editor of the Journal of Economic History and instrumental in its growing focus on the new economic history that was theoretically informed by economics and quantitatively more sophisticated — the very essence of the Cliometric Revolution.

In 1974, Rosenberg moved to Stanford, where he taught for more than a quarter century until his retirement in 2002. As department chair at Stanford  between 1983 and 1986 he helped build  the department and maintain its position as one of the top economics departments in the country. Moreover, his leadership guaranteed that economic history remained an integral part of the undergraduate and Ph.D. programs and includes some of its most distinguished practitioners such as Gavin Wright and Avner Greif, as well as younger and promising scholars. Today, thanks  to Rosenberg’s initiative and entrepreneurship, the Stanford department is housed in a gorgeous building named after Ralph Landau, whose support for research and teaching in  economics was first stimulated by a fortuitous meeting with Rosenberg. The partnership with Landau, a chemical engineer and entrepreneur fascinated by economics, led to a fruitful scholarly collaboration between him and Rosenberg, especially in two well-regarded collections they edited together. Thanks in large part to Rosenberg’s resourcefulness, the graduate program at Stanford has thrived and produced many distinguished members of the economic history profession and applied economists working on innovation. While not all of them worked with him directly, his influence on the flourishing of economic history at Stanford was undeniable. Many of the former graduate students he trained and inspired co-authored and co-edited papers and books with him, such as David Mowery with whom he wrote Technology and the Pursuit of Economic Growth (Cambridge University Press, 1989). Without exception these young economists admired and adored him; two of them, Scott Stern and Shane Greenstein, were my former colleagues, and the three of us were instrumental in Northwestern awarding him an honorary doctorate in 2006, in the same class of honorary degrees as the then little known junior senator from Illinois. If ever there was an academic conspiracy that can be called a true labor of love, this was it.

As a scholar, much of Rosenberg’s most important and influential work is captured by the
title of his Inside the Black Box, a collection of essays on the nature of technology (Cambridge
University Press, 1982). In it, he stated from the onset that “economists have long treated
technological phenomena as events transpiring inside a black box…the economics profession has
adhered rather strictly to a self-imposed ordinance not to inquire too seriously into what transpires
inside that box. The purpose of this book is to break open and to examine the contents of the black
box” (p. vii). That metaphor captures the central theme of Rosenberg’s career.

What, then did Rosenberg find inside that black box? In his typical self-deprecating way, he once remarked to me that once you open the big black box of technology, you find inside a smaller black box, and so on, much like Russian matryoshka dolls. Maybe, he reflected, in the end this is what scientific progress really consists of? But of course, opening the black box led Rosenberg to considerably more important insights on the nature of technological change. I will list only a few that I find the most insightful — others can have other preferences. One is his emphasis on the subtle and complex interplay between science and technology stressed in his magnificent essay “How Exogenous is Science?”. In it he points out the many feedback effects that run from technology to science, and debunked the “linear model” that draws the main arrow of causality from Science to Applied Science to Technology. Since Rosenberg’s work, historians of technology have heaped scorn on the linear model. Technology in his view is not the mechanical “application of science” to production; it is a field of knowledge by itself, quite different in its incentives, its modes of transmission, and its culture. It is affected by science, but in turn provides “pure research” with its instruments and much of its agenda. In many cases, he noted, scientists were confronted by the fact that things they had previously declared to be impossible were actually carried out by engineers and mechanics and had to admit somewhat sheepishly that were possible after all. More than a decade later, in his later book Exploring the Black Box, he returned to the important but often-neglected link between technology and scientific progress, provided by scientific instrumentation.

A second item Rosenberg found inside his black box early on was the importance of the machine
industry in the generation of technological change and economic growth, a topic he explored early
in his career in his influential 1963 Journal of Economic History paper, “Technological Change in
the Machine Tool Industry” reprinted in his Perspectives on Technology (Cambridge University
Press, 1976). The paper stressed the crucial importance of machine tools in creating the
mechanization that was at the heart of the Industrial Revolution in the United States and Britain, and showed that without the improvements in lathes, planers, milling machines and precision grinders, much of the growth of modern manufacturing could not have happened. In his later book Technology and American Economic growth (Harper & Row, 1972) he explained how the ever-growing specialization, and not just the quality improvement and lower prices of these precision metal-cutting and shaping devices, stimulated and supported the rise of modern industry. In his citation for the Leonardo Da Vinci medal that the Society for the History of Technology awarded Rosenberg in 1995, David Hounshell wrote that “His 1963 article remains to this day perhaps the single most influential essay ever written in our discipline. In it, Rosenberg grasped the essential nature of the technical knowledge embedded in the machine tool industry and recognized how that knowledge would not fit easily into existing economic models.”
A third item that many historians of technology, whether economists or not, have found extremely
insightful in Rosenberg’s black box is his concept of “focusing devices,” first enunciated in his 1969
Economic Development and Cultural Change paper “The Direction of Technological Change,”
(reprinted in Perspectives on Technology). It is an intuitively powerful concept that essentially
proposes that much of technological progress occurs because a firm, a group, or the government
realizes that there is an urgent need for a clear solution to a pressing and well-defined social issue
or bottleneck in production. The solution is not always forthcoming of course — Rosenberg cited
with great glee Hotspur’s decisive riposte to Glendower’s claim that he could call the spirits from
the vastly deep: “why, so can I, so can any man; but will they come when you call for them?” (see
his Technology and American Growth, p.51). But when the solution is arrived at, it often solves far
more than it was intended for and overshoots its target, and thus it creates a new bottleneck. This
leapfrogging or “compulsive sequences” phenomenon was used to describe the eighteenth century
cotton manufacturing, but in fact it applies to much of the rest of the technological revolutions of the eighteenth century. At the start of the century, British society knew well that it faced a number of hard but well-defined problems: finding longitude at sea, pumping water out of deep-shaft coal
mines, ridding society of smallpox, and turning pig iron into wrought iron cheaply and rapidly. By
1800 these problems had all been solved. Rosenberg’s essay deals with firms and their recognition
of an opportunity for profit, but one can easily add other motives, from the altruism of Jonas Salk,
the driving ambition of James Watson to the political ideology of the men and women working on
Project Manhattan.
Academic work was the center of Rosenberg’s life. After his retirement, he continued to write and
publish. Together with Bronwyn Hall, he edited the massive two-volume Handbook of the
Economics of Innovation (Elsevier, 2010), which contains wonderful survey essays by every serious
scholar working in the area. He also published a sparklingly original and creative paper (jointly with Manuel Trajtenberg) in the Journal of Economic History (2004) on the economic significance of the Corliss steam engine and its effect on American industrialization. The brand new Handbook of Cliometrics (2015) contains an essay by Rosenberg jointly with Stanley Engerman on “Innovation in Historical Perspective.”  There was much more to Rosenberg’s intellectual persona than his interest in innovation and technical knowledge. He was fascinated by the “greats” of economics — especially Smith and Marx, on whom he wrote perceptive essays, as well as lesser but equally fascinating figures such as Charles Babbage. He published a collection of his essays on the History of Economics as he saw it (often from the point of view of technology), entitled The  emergence of Economic Ideas: Essays in the History of Economics — idiosyncratic, perhaps, but never dull. In the editors’ introduction to the first volume of the Economics of Innovation compilation, Rosenberg and Hall cite a long passage from Schumpeter’s preface to the Japanese edition of his 1937 book The Theory of Economic Development. Schumpeter recounted a debate he had with Walras on whether economics should concern itself only with statics or should also be concerned with the rapid changes in the economy. These kinds of historical issues held endless fascination for Rosenberg. The first essay in his published Graz Lectures, Schumpeter and the Endogeneity of Technology: Some American Perspectives (Routledge, 2000), was entitled “Joseph Schumpeter and the Economic Interpretation of History.” He cited at length and with almost palpable delight Schumpeter’s statement that economic history was absolutely required for the scientific study of economics. Rosenberg was also interested in modern medical research and its place in the modern American research university. He surely was the only economic historian to have published a paper both in The New England Journal of Medicine and The Energy Journal (and probably the only one to have published in either).
Rosenberg was one of the broadest and most intellectually curious minds I ever met. He was, as Ken Arrow remarked in his eulogy, an enormous lover of books and owned many thousands of them — yet ironically his own preferred format was the short pointed essay or at most a short and summary book such as his brief Technology and American Economic Growth. Having read papers on science and technology his entire life, he may have adopted the scientist’s preferred mode of communication over the long and heavily-detailed books written by the typical economic historian. He never wrote a single-authored magnum opus on economic history. The closest he ever came to a big-think ambitious “explanation of everything” was the set of Rosenberg’s lecture notes that L.E. Birdzell collected and then together published as a book How the West Grew Rich. It is a lovely and often insightful book, but it lacks the grandeur and sweep of a David Landes, Douglass North, or Eric Jones, who have written books with similar themes. Rosenberg’s comparative advantage was the brief essay, and the books he published were mostly collections of these essays. These essays were, without exception, beautifully written: he had the gift of expressing a complex and nuanced
economic relation in a short and elegant phrase. They are still read by students and scholars all over the world.
As a person, Rosenberg was deeply loved and admired by those who knew him well. He was urbane
and erudite even by the high standards of the great economic historians of his generation. He was
witty to the point of being hilarious, and could be sarcastic and cutting when he wanted. He was also a deeply caring husband, father and grandfather, the emblematic Jewish father who knew that
investment in human capital and family cohesion were the essence of Jewish culture. He was a great colleague and a warm and wonderful friend. Of all the many senior economic historians of that generation whom I knew and admired over the years, he was the only one whom I regarded as much as a relative as a colleague. I will never forget you, Uncle Nate.

British Economic Growth, 1270-1870

Author(s):Broadberry, Stephen
Campbell, Bruce M. S.
Klein, Alexander
Overton, Mark
van Leeuwen, Bas
Reviewer(s):Persson, Karl Gunnar

Published by EH.Net (August 2015)

Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen, British Economic Growth, 1270-1870. Cambridge: Cambridge University Press, 2015. xxxix + 461 pp. $40 (paperback), ISBN: 978-1-107-67649-7.

Reviewed for EH.Net by Karl Gunnar Persson,  Department of Economics, University of Copenhagen.

This collective work is an ambitious and careful attempt to reconstruct historical national income accounts for England/Britain over six centuries — from 1270 to 1870. GDP is estimated from the output side unlike the study by Gregory Clark (2010), which covers approximately the same period and reconstructs national accounts from the income side. The major results from these two studies differ profoundly: Clark is an advocate of “Malthusian stagnation,” while British Economic Growth presents a more dynamic view of the pre-industrial economy. The contrasting results are a reminder that historical national accounting is marred by the fragility of the underlying data and is sensitive to approximations and assumptions needed to reach an end result.
British Economic Growth, 1270-1870 begins by establishing population levels (chapter 1) and by implication population growth rates. It acknowledges that population level estimates differ by a wide margin for the medieval period and the authors opt for estimates in the middle of the existing range.

In chapters 2 and 3 agricultural volumes are reconstructed by first establishing the area of agricultural land in use, the share of different crops, the number of cattle, etc. Output for the different components can then be estimated using yields and conversion ratios for various crops and animals. The final step is to aggregate these outputs into an agricultural sector output. All this is done in a transparent way, largely based on primary sources.  The incremental nature of agricultural progress is visible in increasing yields and reduced fallows. However, for the medieval period the documentation stems from the estate sector which is a relatively small part of the agrarian sector, less than a quarter. Was the non-estate sector, run by tenants, sharecroppers and free-holders, more efficient? The authors indicate that there is some evidence that this was the case, but they nevertheless assume that conditions in the estate sector prevailed in agriculture at large. For the post medieval period, paradoxically perhaps, the documentation is thinner and farm accounts do not appear until the end of the eighteenth century

Chapters 4 and 5, which are devoted to industry and services, rely more on the secondary literature. Output volumes in the various subsectors are established in chapter 4, and then aggregated to GDP and GDP per head in chapter 5. The resultant pre-1700 GDP series are, of course, a major accomplishment of synthesis, while the post-1700 figures differ only marginally from those established by Nicholas Crafts and Knick Harley and they all rely heavily on Walther G.  Hoffmann’s (1955) pioneering work.

Part 2 of British Economic Growth, 1270-1870 has a more analytical approach, discussing how the new results compare to those of other studies. The central claim in the book is to stress the resilience of the growth process even when faced with continued population growth and resource constraints. When GDP per head increased after the Black Death, because of a softening of resource constraints, the Malthusian expectation would be that income would fall when population stated to grow again in the sixteenth century. The authors take an explicit non-Malthusian position showing that the expected reversal did not happen. In fact the authors argue that income per head doubled from the pre-Black Death period to the mid eighteenth century. Their target here is the argument of Clark (2010) and Michael Postan before him, that pre-industrial income per head was stationary in the long run. That is, income increases were transitory and the only permanent effect of technological change would be an increase in population. Chapter 6 is devoted to comparing real wages series with GDP per head. Clark’s reconstruction of GDP is driven by his real wage series which tend to support the Malthusian thesis. However, wage data are constructed from day wages and British Economic Growth argues that you can reconcile a stationary day wages series with increasing GDP per head by adjusting for known increases in days worked in the sixteenth to eighteenth centuries. The authors do not seriously challenge the validity of the day wage series as such, even if there is a discussion in the literature. One major problem is that the salaried working class was a quite small proportion of the labor force. Most people were tenants, free-holders and self-employed, and very little is known about their income and whether it tracked day wages.

How do you assess the accomplishment of this study in the face of alternative interpretations? One way is to look at the general consistency of the many claims made. One surprising result in chapter 7 is that kilocalorie use per head implied by the agrarian output and population series is more or less stable over the entire period. The implication is that the increase in income per head did not spill over into increased demand for calories, but only into more expensive calories, say, beer instead of porridge.  The calorie intake throughout is not far off the minimum requirement for an active life, and at the same level as in France in the eighteenth century, although French workers were known as being less productive in physically demanding work in that period. There are in fact a number of recent assessments of calorie supplies, reviewed by Morgan Kelly and Cormac Ó Gráda (2013), and while all studies apply the same methodology results differ too much for comfort. The most optimistic ones by Robert A. Allen and Craig Muldrew end up at calorie intake about 70 percent higher in the eighteenth century. Kelly and Ó Gráda suggest that agricultural output might in fact be underestimated in British Economic Growth.

Another puzzle refers to the sharp increase of the relative share of the non-agricultural labor force in the sixteenth and seventeenth centuries (chapter 9). Such a change would presumably have generated changes in consumption patterns in favor of industrial goods and services. However, changes in the consumption pattern of that magnitude are not entirely plausible given the reported slow growth of income. Is income growth underestimated for this period? Other indicators point in that direction. For example per capita consumption of metals had tripled by 1700 compared to its peak medieval level, which you would suspect to be associated with more vigorous growth of income.

British Economic Growth, 1270-1870 will be a work of reference, inspiration and controversy for decades to come. Some results will undoubtedly be challenged and revised. Others will stand the test of time. The claim that England/Britain was on a trajectory of slow income growth from medieval times is one of the results which probably will last.


Gregory Clark (2010). “The Macroeconomic Aggregates for England, 1209-1869.”  Research in Economic History, 27: 51-140.

Walther G. Hoffmann (1955). British Industry, 1700-1950. Oxford: Basil Blackwell.

Morgan Kelly and Cormac Ó Gráda (2013). “Numerare est Errare: Agricultural Output and Food Supply in England before and during the Industrial Revolution.” Journal of Economic History, 73: 1132-63.

Karl Gunnar Persson is Professor Emeritus of Economics at University of Copenhagen.  A revised and enlarged edition of his book An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present (in collaboration with Paul Sharp) was published in 2015 by Cambridge University Press.

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

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century

Jacob Myron Price

Jacob Myron Price passed away, after a long illness, on Wednesday, May 6th, at Glacier Hills retirement and nursing facility in Ann Arbor, Michigan.         

Born November 8th, 1925, the son of Oscar and Agnes (Pike) Price in Worcester, Massachusetts, Jack, as he was known to family and friends, became a distinguished historian of the early modern Atlantic economy.  His father’s employer, the Kelvinator Corporation, moved the family to Boston, Baltimore, and Pittsburgh where Jack attended public schools.  He entered Harvard College in 1942 just before his 17th birthday, and was drafted into the Army after completing his sophomore year.  He served in the U.S. Army Air Force as a cryptographic technician, mostly in India servicing the famous “Hump” flights over the Himalaya Mountains to supply Chinese forces fighting the Japanese invasion.  He rose from the rank of Private to Staff Sergeant before his honorable discharge in 1946.  He completed his Harvard bachelor’s degree in 1947, with High Honors and as a member of Phi Beta Kappa; earned a master’s degree in 1948; and completed his Ph.D. in 1954.

He taught at Harvard and Smith College, in 1956 joining the History Department at the University of Michigan, where he spent the rest of his career, retiring in 1991.  He won numerous honors and awards, among them Fulbright scholarships for graduate study in England, and Guggenheim Fellowships (twice).  He was a Fellow of the Royal Historical Society and of the British Academy, served as president of the Economic History Association 1987-88, and was a Visiting Fellow at All Soul’s College, Oxford.

His research began with a study of the Anglo-American development of the market for tobacco in Russia, 1676-1722.  His work throughout his career was characterized by a fusion of microscopic analysis of individual merchants and their firms with a broad contextual sweep, encompassing social, political, and diplomatic history.  His study of  the global tobacco trade culminated in 1973 with the magisterial two-volume France and the Chesapeake, in which he used his micro-macro approach to focus on the effects of the French royal monopoly of tobacco purchases and sales on American producers and British distributors, ending with the destruction of the monopoly by the French Revolution.

Jack Price had a remarkable command of the archival sources for economic history, and an equally remarkable ability to find and follow the many threads of the complex story of early modern entrepreneurship.  Along the way, he published numerous articles and reviews that illuminate aspects of the 18th century far beyond his early studies of the tobacco trade.  Most of the best of this work has been collected and published in three volumes of his essays 1995-6.  It is worth noting that Jack Price himself was not a user of tobacco.

Beyond his own research, Jack took time to support younger scholars, through his active involvement with the Institute for Historical Research of London University, and his generous support of the Price Fellowships for young researchers working in the Clements Library at the University of Michigan.  Michigan undergraduates who experienced his lectures in British history found them to be models of both clarity and seriousness.  Twice (1971-72 and 1979-84) he chaired the Michigan History Department.

Personally, Jack might impress those who did not know him well as dour, even brusque.  Basically he was a shy person without family who was wedded to his work.  He depended on a small circle of close friends in Ann Arbor, and a wider circle in the American and English academic world.  These friends knew that he was a passionate, deeply knowledgeable lover of classical music, especially opera, and that he could be exceptionally kind and generous to any of them who needed his help.  They also saw the evident pleasure he took in being with their families, and especially watching the children grow.

Those who would sample the mature best of his scholarship may turn to his short book, Capital and Credit in British Overseas Trade (1980), which touches in important ways on the controversial issue of the origin of the Industrial Revolution, and the even shorter Perry of London (1992), in which he traces the all-too human rise and fall of an important trading family and its firm, both books published by Harvard University Press.

Before age and illness overtook and slowly incapacitated him, Jack had begun work on the origins of modern British banking.  He never married.  His parents and a younger brother, Malcolm, predeceased him.  His only survivors are his devoted friends.

Sustainability: A History

Author(s):Caradonna, Jeremy
Reviewer(s):Hill, Joshua P.

Published by EH.Net (December 2014)

Jeremy Caradonna, Sustainability: A History. New York: Oxford University Press, 2014. vii + 331 pp. $28 (cloth), ISBN: 978-0-19-937240-9.

Reviewed for EH.Net by Joshua P. Hill, Department of Economics, Montana State University-Billings.

Jeremy Caradonna’s stated purpose for his book is “to demonstrate that the fundamental idea of creating a sustainable society has a long genealogy that stretches back at least to 1700” (p. 254). He also seeks to summarize the major themes of, and the occasional tensions in, “sustainist” thought and to draw lessons from the last three-hundred years for members of this movement.

Caradonna (Associate Professor of History at the University of Alberta) begins his history with pre-industrial societies, recognizing that ecological problems pre-date the industrial revolution. He contends that there was recognition in these societies that certain behaviors were unsustainable but that it was from the industrial revolution that a school of thought emerged that is recognizably “sustainist.”

Caradonna rapidly traces a thread through centuries of thinkers and political movements. Along the way he ably documents the fact that interest in environmental quality has grown over the last three centuries and that government has as often been used to undermine environmental quality as to support it. He examines some of the literature on the link between wealth and happiness, questions whether GDP is a useful measure of well-being, discusses alternative measures, and lambasts government-led growth. He documents the success of private efforts (including an extensive summary of those by entrepreneurs and businesses) to improve environmental quality and the repeated failure of centrally-led efforts to do so.

A central theme through the book is that we may not have the optimal mix of material prosperity and environmental quality. There is little attention paid, however, to how we should figure out what balance we should have. Instead, it is assumed that this mix is already known and that what is necessary is to marshal grassroots, commercial, and governmental forces to pursue it. The words “overpopulation” and “overconsumption” recur incessantly with no examination as to how we know that people are over-consuming or over-populating. This is unfortunate since this is the core of the issue.

Caradonna spends a great deal of his book on economics. He has clearly read enough to identify shortcomings within the discipline (such as an over reliance on GDP and upon mathematic formulation) and to use economic vocabulary like “externality.” He concludes from his foray into economics, however, that omitting externalities from mathematical models was the goal for practitioners rather than an oversight. In a telling quote, he states that “Instead of calling pollution what it was, it became euphemized as ‘spillovers’ or the ‘spillover effect.’ (p. 127).

He lambasts neoclassical economics “with its ‘growthmania,’ general indifference towards pollution and ecosystem destruction, and dogmatic belief that ‘tastes and preferences’ are innate in humans rather than culturally shaped” (p. 112) as being the root of much ecological evil in the last two hundred years and lauds the emergence of sustainability economics as a separate field which contends “that society needed a stable, just, and ecologically sound economy” (p. 116).

There is certainly a kernel of truth in his criticisms of economics. Institutions were neglected for a period, some economists have become overly reliant upon GDP as a measure of well-being, government economic planning certainly caused environmental degradation (not to mention human suffering), and ethics and morality do not have a large place in most academic articles. However, these issues have been recognized by economists. Nearly all introductory economics textbooks provide extensive examination of the shortcomings of GDP. The Nobel prizes of Ronald Coase and Douglass North were recognition of the importance of property rights and institutions. Those of James Buchanan and Friedrich Hayek highlighted the difficulties of using government for social policy.

Caradonna’s misinterpretation of economic thought is unfortunate precisely because of how crucial tradeoffs are. He highlights the difficulty of placing a value on spillovers but misses the fact that this is precisely the strength of a system of private property rights coupled with the common law doctrine of trespass and nuisance. These generate prices which reveal individuals’ preferences and facilitate cooperation and coordination. Such a system is, in truth, the only way that anyone can answer the question of what the ideal mix is.

In the end, this book is two intertwined but distinct pieces. The first highlights increasing interest in environmental issues, that material wealth does not necessarily translate into happiness, that government and centralized solutions to social problems often go awry, that mathematical formulation can be deceptive, that how we quantify the world around us matters, and that entrepreneurs and social groups can ably solve spillovers if given an arena in which to do so. The second piece is a polemic. It largely ignores what is documented in the first and argues for greater government control, for heavier reliance upon alternative quantitative measures of well-being, and for a smaller role for individuals to express their preferences in the realm of voluntary exchange.

Taken as a whole, this book will be of less use to those seeking to understand the rise of the “sustainist” movement or practical solutions to environmental issues than it will be to confirmed members of the movement who are looking for an encouraging story of how they are destined to overcome.

Those looking for deeper treatments of the issues raised in this book should look to, among others, Terry Anderson and Donald Leal (2001), Diane Coyle (2014), and Paul Heyne (2008).


Terry Anderson and Donald Leal (2001), Free Market Environmentalism, New York: Palgrave.

Diane Coyle (2014), GDP: A Short but Affectionate History, Princeton, NJ: Princeton University Press.

Paul Heyne (2008), “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion [edited by Geoffrey Brennan and A.M.C. Waterman], Indianapolis: Liberty Fund.

Joshua P. Hill is Assistant Professor of Economics in the College of Business at Montana State University-Billings. His research focuses on the interface between firm structure, political economy, and economic growth.

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):Agriculture, Natural Resources, and Extractive Industries
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII