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The Panic of 1819: The First Great Depression

Author(s):Browning, Andrew H.
Reviewer(s):Haulman, Clyde A.

Published by EH.Net (January 2020)

Andrew H. Browning, The Panic of 1819: The First Great Depression. Columbia, MO: University of Missouri Press, 2019. x + 439 pp. $45 (hardcover), ISBN: 978-0-8262-2183-4.

Reviewed for EH.Net by Clyde A. Haulman, Department of Economics, College of William and Mary.

Andrew H. Browning chronicles the events and unfolds the complexities of the U.S. economy at the end of the second decade of the nineteenth century in his excellently researched and insightful book, The Panic of 1819. Most often, historians and economists have looked at this period as a typical post-war boom and bust while focusing attention on the political and social changes that were driving the young nation. Browning digs deeper and in doing so makes a strong case that the Panic of 1819 was more than the usual post-war cycle.

Beginning with an overview of the years leading up to the crisis, Browning looks at Napoleon’s decision to sell the Louisiana Territory, Mr. Jefferson’s embargo, and Mr. Madison’s war as critical elements in setting the stage for the westward expansion that would dominate the American economy for decades. Although much has been written about the Market and Transportation Revolutions that began during this period and helped shape the nature of economic relationships in the new nation, Browning adds insights about the Corporate Revolution, “a distinctly American surge in limited-liability joint-stock companies” (p. 66). It is this innovation that ensured capital for the interdependent growth in markets and transportation. He concludes setting the stage for the panic with a discussion of the impact of unusually cold temperatures in the middle of the decade (exacerbated by the explosion of the Tambora volcano in 1815). The resulting summer snow and drought in the Northern Hemisphere drove up grain prices and encouraged many Americans to move westward.

Even when grain prices leveled off (although cotton prices continued rising), demand for western land, particularly in Alabama, Ohio, Indiana, and Illinois, continued to accelerate. The sale of land in Alabama increased over twenty times between 1816 and 1818. Encouraged by easy loan terms and funded by the new Second Bank of the United States and the numerous state banks that had sprung up in the years following the demise of the First Bank, a full-blown speculative bubble erupted. Browning covers in detail the well-known role of the Second Bank in the expansion and ensuing contraction. He emphasizes the importance Treasury officials and the Second Bank’s management attached to the 1818-1819 maturation of Louisiana bonds requiring payment in specie, mostly to foreign holders.

With the collapse in full swing, Browning deftly uses a wide range of contemporary sources, especially newspapers and periodicals representing all parts of the country as well as government documents and records, to chronicle the progress of the downturn. Reporting on falling prices, declines in output, and high levels of unemployment, Browning first looks at the eastern part of the nation and then the west. Details provided by the stories of particular individuals enhance the description of the hard times with its rapid increase in bankruptcies and legal actions for debt.

Browning concludes his study with three chapters considering the impact of the Panic. The first discusses the range of relief efforts enacted in many states including restructuring of poor assistance, the use of minimum appraisal and stay laws, and restrictions on bank charters. Increased cost of poor relief in the wake of the Panic along with the Second Great Awakening’s moral views led to changes in public attitudes toward the poor and to reductions in funding that set the tone for much of the next century. The next chapter highlights increased democratic participation stemming from relief efforts and a focus on political corruption that stimulated growth in organized political factions. Browning’s final chapter links the effects of the Panic and the role of the Second Bank in heightening sectionalism to the growing factional politics and the focus on states’ rights of the Jacksonian era.

A question for economists left unanswered by Browning’s work is the disconnect between contemporary reports of significant declines in output and severe unemployment and the findings of empirical work by Joseph H. Davis (Quarterly Journal of Economics, 119:4 (2004), pp. 1177-215.) and Vadim Khramov and John Ridings Lee (IMF Working Paper, 13/214, 2013). Davis uses 43 output series to develop an index of industrial production for the period 1790-1915. For the Panic years (1819-1821), 27 series are available and show an increase of 9.6 percent in industrial output derived from increasing demand in the broader economy. Similarly, creating an index using inflation, unemployment, the budget deficit, and changes in real GDP, Khramov and Lee find the Panic of 1819 to be the second mildest downturn of the nineteenth century.

Now that Browning has catalogued the extensive contemporary reports on output and unemployment during the Panic of 1819, what might those who study the period do to improve empirical measures of the early nineteenth century economy and to reconcile those data with contemporary perceptions about the Panic and its economic impact?

Until that work is completed, Andrew Browning has given us a masterful study of an often overlooked economic crisis and has rightfully subtitled his work “The First Great Depression.”

Clyde Haulman is the author of Virginia and the Panic of 1819: The First Great Depression and the Commonwealth (2008).

Copyright (c) 2020 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 2020). All EH.Net reviews are archived at

Subject(s):Macroeconomics and Fluctuations
Markets and Institutions
Geographic Area(s):North America
Time Period(s):19th Century

Virginia and the Panic of 1819: The First Great Depression and the Commonwealth

Author(s):Haulman, Clyde A.
Reviewer(s):Karmel, James

Published by EH.NET (June 2009)

Clyde A. Haulman, Virginia and the Panic of 1819: The First Great Depression and the Commonwealth. London: Pickering & Chatto, 2008. xi + 197 pp. $99 (hardcover), ISBN: 978-1-85196-939-5.

Reviewed for EH.NET by James Karmel, Department of History, Harford Community College.

Clyde Haulman?s new book on the Panic of 1819 and Virginia is a thorough treatment of the Panic?s economic impact on the state. It is chockfull of tables, charts, and statistics that describe the state?s economy from approximately 1816 through 1823. Indeed, the book is very heavy on numbers, though the qualitative story is not neglected entirely. It is an important contribution to early American economic history and provides an interesting and far-reaching perspective on the significance of the first major financial crisis and recession of early Republic. Moreover, the financial crisis and ?Great Recession? of 2007-09 necessitate a greater understanding of historical declines and recoveries, making Haulman?s book timely.

The book?s first two chapters provide a summary of the post-War of 1812 American economy and a broad overview of the Panic. Haulman explains that the American and Virginia economies boomed from 1815 to 1819, with increases in land sales, strong commercial exchange, and efforts to stabilize the money supply via the Second Bank of the Unites States (SBUS). Yet, the boom turned into a big bust by mid-1819: a phenomenon explained in various ways by specialists in the context of other similar economic crises in American history. Mainly, they have characterized the Panic of 1819 by noting 1) a sharp decline in demand for American exports to Europe, 2) an extensive financial contraction, and 3) the ?debt-deflation? theory favored by current Federal Reserve Chairman Ben Bernanke (among others), in which bad debt-asset ratios lead to a deflationary, downward spiral. Haulman applies each of these theories in his narrative on Virginia. Yet, he clearly favors the ?debt-deflation? theory to explain the severity of the Panic of 1819 and his assessment that it ?ranks with the depression of 1839-1843 as the worst of the contractions experienced by the United States in that century? (p. 33). The Bernanke and Haulman-favored explanation has particular resonance for its parallel to the recent global recession.

Haulman?s narrative addresses the role of the SBUS in the third chapter, where he argues that the national bank was pivotal in both the post-war boom (1816-18), panic and recession (1818-23). In Virginia?s case, the SBUS?s decision to cal in loans precipitated a state-wide dearth of specie by 1819. Significantly, this hampered the ability of the otherwise sound lending policies of the Old Dominion?s state banks to make loans. However, they drew the wrath of the public and politicians who shifted towards a hard money position by 1820 and ratcheted up anti-banking rhetoric. A very similar pattern occurred in Pennsylvania, which had increased its state-chartered banks ten-fold in the years following the war, only to see many crash and burn via the SBUS contraction and extreme specie policy beginning in mid-1818. Haulman?s analysis continues in chapters four and five by comprehensively reviewing the Panic?s impact on Virginia?s agriculture and business sector. Haulman?s analysis here relies upon an examination of factors such as agricultural prices and wages, land values, business licenses issued, and fluctuations in the number of retail and wholesale merchant partnerships.

An important component to the book is a long analysis of Virginia?s poor relief efforts that took place in the years of the Panic and ensuing depression (chapter six). Indeed, Virginia developed an extensive relief network in these years, and rose above states such as New York and Rhode Island in its legal framework for support to both ?poorhouses? and ?outdoor relief? (for paupers not residing in poorhouses). Where other states decreased financial resources for the poor in the Panic years, most areas of Virginia increased support for paupers and poorhouses. The analysis of the downtrodden and efforts to help them is one of the more interesting parts of the book. Haulman effectively uses data to show the regional breakdown of the Panic?s impact across the state. The hardest hit area was the older, developed and export-dependent Tidewater region as measured by poor relief data. By contrast, the western Trans-Allegheny region suffered less ? probably owing to its relative economic self-sufficiency and regional independence. This regional analysis provides an interesting juxtaposition to other financial analyses of the Panic, in which speculative western banks are often placed at the center of the crisis. The Virginia pauper and relief data also showed that there was an urban-rural dichotomy to the Panic?s impact, with urban Virginians more severely affected by the downturn than rural Virginians. Consequently, counties with substantial towns and cities provided much greater poor relief than rural counties.

Finally, the book concludes (chapter 7) with a sweeping essay that utilizes the Virginia experience to demonstrate the Panic?s powerful legacy for the early American republic. The concluding chapter ties the Panic to the ultimate demise of the SBUS in the 1830s, and emphasizes how it sharpened both hard money and soft money ideologies that persisted through the first half of the nineteenth century. Virginia?s devotion to poor relief also set a precedent that other states eventually followed as the boom-and-bust cycle took its periodic toll on Americans in these years. They enacted legislation to provide more direct relief beyond poorhouses, curtailed debtors? prisons and increased public safety expenditures. In addition, the Panic intensified the protectionist wave of the 1820s, culminating in the 1828 ?Tariff of Abominations.? Finally, it directly fed the economic and democratic populism of the Jacksonian years (and Andrew Jackson himself) by bringing into question the financial policies of the Republican establishment represented by the presidencies of Virginians James Madison and James Monroe. In Haulman?s view, the Panic?s popular impact helped create the political conditions that energized the states? rights approach to slavery issues and criticism of government finance beholden to private interests.

In summary, Virginia and the Panic of 1819 is a valuable, well-documented case study of this significant phase of American economic history. It should have particular appeal to historians comfortable with statistical analysis and quantitative determinism. At times, the narrative could really use a personal perspective: who are some of the actual persons behind the voluminous data presented? Otherwise, there?s not much to criticize: this is a very good study and an important addition to the literature.

James Karmel is an Associate Professor of History at Harford Community College in Bel Air, Maryland. He is the author of Gambling on the American Dream: Atlantic City and the Casino Era (2008). He can be reached via e-mail at

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):19th Century

Classical Economic Theory and the Modern Economy

Author(s):Kates, Steven
Reviewer(s):Numa, Guy

Published by EH.Net (November 2020)

Steven Kates, Classical Economic Theory and the Modern Economy. Cheltenham: Edward Elgar, 2020. vi + 264 pp. $125 (hardcover), ISBN: 978-1-78643-356-5.

Reviewed for EH.Net by Guy Numa, Department of Economics, Colorado State University.


This book is about how little Steven Kates thinks of the “modern economy,” an umbrella term for all variants of Keynesian economics. Bold and pretentious statements abound. “Just about the whole of modern economic theory is perniciously wrong … there is virtually nothing useful one can learn from a modern economics text in how to manage an economy” (p. 1). “Economists know nothing whatsoever about the analytical depth of the classical economists” (p. 16). Kates aims “to explain why classical economics is vastly superior” (p. 17). Kates wants to convince us that he is “almost uniquely placed” to do so, though he acknowledges “how obscure [he is] within the world of economics” and notes that “virtually no one sees things as [he does]” (p. 17). This does not prevent him from boasting about how, as chief economist of Australia’s national employers’ association, he “never made a single wrong call on the economy or the effects of public policy” (p. 20). Unfortunately, the book is filled with errors. Relevant quotes and texts are omitted or distorted for the sole purpose of justifying his anti-Keynesian narrative.

Throughout the book, Kates acts more like a pamphleteer than a convincing analyst. In almost all of the twelve chapters that comprise the book, he rants about Keynesian macro, his long-standing target. He even scolds Austrian economists for being too cozy with Keynes (p. 215). Kates asserts that “the number of jobs is unrelated to the level of demand for goods and services … It is a proposition that is … absolutely correct both in theory and also from the evidence of every attempt to use a stimulus to increase the level of employment” (p. 4). He insinuates that a legal mandate on employers to pay higher wages is tantamount to theft (p. 18)! Kates is more persuasive when he reminds the reader that classical economists considered recessions and government intervention, though the topic is superficially discussed. Overall, Kates’s arguments are quite repetitive.

The centerpiece of Kates’s anti-Keynesian manifesto is his own definition of Say’s Law. His mantra is that “Say’s Law is different in meaning and implications from the nineteenth century’s loi des débouchés … properly attributed to Say” (p. 13). Kates makes three claims: i) Say’s arguments was that “demand is constituted by supply” (pp. 13, 69); ii) “Fred Taylor noted that the principle denying the possibility of overproduction and demand deficiency did not have a name … He supplied that name, calling it ‘Say’s Law’ after J.-B. Say. ‘Say’s Law’ is, however, not Say’s loi des débouchés” (p. 14; see also pp. 67-69). Ironically, the claim contradicts a previous statement, where Kates (1998, p. 151) argued correctly that “Taylor was the first to use the term ‘Say’s Law’ to describe what had previously been referred to as ‘the law of markets’ or the ‘théorie des débouchés’;” iii) “Keynes was not trying to deny that demand is constituted by supply. He was denying that economies never enter recession because of a deficiency of demand” (p. 15).

In fact, all three propositions are erroneous. Kates’s faulty definition of Say’s Law has previously been demonstrated (Jonsson 1999). The problem is that Kates conveniently avoids quoting relevant passages which disprove his manufactured arguments. In some instances, these passages follow immediately Kates’s quotes, but they are conspicuously omitted.

First, apparently Kates is not familiar with Say’s writings. It is no wonder that he never quotes Say. Contrary to Kates’s claims, Say’s loi des débouchés (law of outlets) cannot be reduced to the argument that goods buy goods (pp. 67, 91). Indeed, in the first edition of Say’s Traité the discussion of the law is not limited to the chapter on outlets (Book I, chapter XXII). In Book IV, chapter V, Say ([1803] 2006, p. 688) wrote: “the scope of the total demand for means of production, does not depend upon the scope of consumption. Consumption is not a cause: it is an effect. One must buy in order to consume; yet one can buy only what has been produced. The quantity of products demanded is therefore determined by the quantity of products created? Undoubtedly so” (original emphasis). Thus, Say never declared that “demand is constituted by supply.” Say’s focus was production not supply, an important distinction. For him, products consisted of goods or services produced or traded at cost-covering prices. Kates recognizes that this element “was the core of classical thought” (p. 12), but he fails to apply this crucial reasoning to Say’s thinking. Moreover, Kates maintains that “following the publication of Malthus’s Principles, Say agreed completely with Malthus’s critics and denied the possibility of demand deficiency” (p. 68). This statement, too, is incorrect. Recent studies have demonstrated, with ample evidence, that in several instances Say admitted that a general demand shortfall was possible and could cause economic crises (Béraud and Numa 2018, 2019). Following Say, most classical economists believed that production was the source of demand. That is the essence of what later became known as Say’s Law. However, for Say the law need not imply that supply was necessarily equal to demand, nor that demand deficiency could not cause crises. Because Say and other classical economists carefully distinguished supply from production, Say’s law of outlets differed from Keynes’s interpretation.

Second, it is true that Taylor invented the term “Say’s Law.” However, it is incorrect to claim that Taylor created the term “to describe … the impossibility of demand deficiency as a cause of recession.” Page 73 of the book is the perfect illustration of Kates’s selective quoting and blatant distortions of the historical record and the textual evidence. Kates quotes Taylor twice. The first quote does not contain any reference to the term “Say’s Law.” In reality, Taylor (1925, p. 196) discussed “general demand fallacies;” nowhere in this passage is “Say’s Law” defined as “the impossibility of demand deficiency as a cause of recession,” which is nothing but Kates’s own version of the law. The second quote ends with Taylor’s explicit reference to Say (1803), but Kates omits what follows immediately after, that is, the actual statement of the principle which begins on the same page by the following words. “This principle may be stated as follows: Principle — Say’s Law. The Ultimate Identity of Demand and Product. In the last analysis, the demand for goods produced for the market consists of goods produced for the market, i. e., the same goods are at once the demand for goods and the supply of goods; so that, if we can assume that producers have directed production in true accord with one another’s wants, total demand must in the long run coincide with the total product or output of goods produced for the market (Taylor 1925, pp. 201-202; original emphasis). This passage, Taylor’s actual definition of Say’s Law, is never quoted or mentioned in Kates’s book. The irony is that in the past, Kates (1998, p. 150) correctly quoted it. It should be noted that, like Say, Taylor (1925, p. 203) acknowledged that general demand deficiency could cause economic crises. He also admitted that public expenditures could have expansionary effects, a position that Say also supported. Taylor rightly credited Say with the earliest and clearest formulation of the law of outlets; hence the term “Say’s Law.”

Third, the question is whether Keynes’s definition of Say’s Law is the same as Kates’s. Keynes was very clear. He ([1939] 1973, pp. xxxiv-xxxv) criticized “the doctrines associated with the name of J.-B. Say” and explicitly interpreted Say’s Law as the principle “that demand is created by supply.” For Keynes ([1936] 1973, p. 18), the expression means that “in some significant but not clearly defined sense that the whole of the costs of production must necessarily be spent in the aggregate … on purchasing the product” (see also Keynes [1936] 1973, p. 26). He deduced from this principle the idea that, for classical economists, a lack of demand was not the cause of recessions, but Keynes never defined Say’s Law as “recessions are never caused by demand deficiency.” Kates’s “definition” of Say’s Law is just a straw man to justify his anti-Keynesian propaganda.

The book suffers from other flaws. Kates reduces classical economic theory to John Stuart Mill’s Principles. Even though Mill was a prominent classical economist, this is incredibly simplistic. Kates even admits that much, conceding that “Mill’s economics is very different from the economics of Smith and Ricardo” (p. 32). Kates’s reading of Mill is also incomplete. There is no discussion of Mill’s radicalism (Persky 2016), other than the fact that he was a self-proclaimed “socialist” (pp. 5, 32, 73). Furthermore, the secondary literature is rarely considered. On topics such as Say’s Law, classical political economy, and the Keynesian revolution, one would expect a comprehensive discussion of recent and older studies. Instead, Kates’s volume is a true preacher’s monologue .

There may be legitimate reasons to criticize modern economic theories and policies. However, protesting against Keynesian economics should not be done at the expense of the historical record and the textual evidence.


Béraud, Alain, and Guy Numa. 2018. “Beyond Say’s Law. The Significance of J.-B. Say’s Monetary Views.” Journal of the History of Economic Thought 40 (2): 217–241.

Béraud, Alain, and Guy Numa. 2019. “Retrospectives: Lord Keynes and Mr. Say: A Proximity of Ideas.” Journal of Economic Perspectives 33 (3): 228-242.

Jonsson, Petur. 1999. “‘Say’s Law and the Keynesian Revolution: How Macroeconomics Lost Its Way’ by Steven Kates.” Southern Economic Journal 65 (4): 967–970.

Kates, Steven. 1998. Say’s Law and the Keynesian Revolution: How Macroeconomic Theory Lost its Way. Cheltenham: Edward Elgar.

Keynes, John Maynard. (1936) 1973. The General Theory of Employment, Interest and Money. London: Macmillan. Reprinted in Vol. 7 of The Collected Writings of John Maynard Keynes. London: Macmillan.

Keynes, John Maynard. (1939) 1973. “Preface to the French Edition.” Reprinted in The General Theory, pp. xxxi–xxxv. Vol. 7 of The Collected Writings of John Maynard Keynes. London: Macmillan.

Persky, Joseph. 2016. The Political Economy of Progress: John Stuart Mill and Modern Radicalism. New York: Oxford University Press.

Say, Jean-Baptiste. [1803, 1814, 1817, 1819, 1826, 1841] 2006. Traité d’économie politique ou simple exposition de la manière dont se forment, se distribuent et se consomment les richesses. Édition variorum in Œuvres Complètes de Jean-Baptiste Say. Paris: Economica.

Taylor, Fred Manville. 1925. Principles of Economics. Ninth edition. New York: Ronald Press.

Guy Numa is an Assistant Professor of Economics at Colorado State University. Recent publications include “Retrospectives. Lord Keynes and Mr. Say: A Proximity of Ideas” (with Alain Béraud), Journal of Economic Perspectives (2019); “Jean-Baptiste Say on Free Trade” History of Political Economy (2019); “Money as a Store of Value: Jean-Baptiste Say on Hoarding and Idle Balances” History of Political Economy (2020).

Copyright (c) 2020 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 2020). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

How Innovation Works: And Why It Flourishes in Freedom

Author(s):Ridley, Matt
Reviewer(s):Coelho, Philip

Published by EH.Net (August 2020)

Matt Ridley, How Innovation Works: And Why It Flourishes in Freedom. New York: Harper Collins, 2020. 406 pp. $30 (cloth), ISBN: 978-0-06-291659-4.

Reviewed for EH.Net by Philip Coelho, Department of Economics, Ball State University.



Matt Ridley, the author of The Rational Optimist, has written another excellent book; he is an imaginative thinker and a writer of clarity. This book is very worthwhile reading; still (like any project) it is not perfect. In this review, I will try to convey what he has done and point out where I have difficulties. The book’s 12 chapters explain the histories of innovation in various economic sectors. Chapter one is devoted to energy, Two to public health, et cetera. In the Introduction, Ridley explains why and what he is doing, and what he expects to accomplish; he defines innovation as: “like evolution … a process of … discovering ways of rearranging the world … that happen to be useful. The resulting entities are the opposite of entropy: they are more ordered, less random, than their ingredients were before” (p. 2). This is a very useful, non-didactic definition; it avoids semantic arguments (whether a person was or was not an entrepreneur, and what do entrepreneurs do) that bedevil business histories. The author is borrowing from his training as an evolutionary biologist by incorporating its analytics into a history of innovation. Ridley forthrightly states that he is not attempting to explain why, when or where innovation occurred, but “telling stories” about people turning inventions into “useful innovations [that] teach us, by the examples of their successes and failures, how it happened” (p. 7).

Chapter 1, “Energy” is illustrative of his methodology. Starting in the eighteenth century Ridley examines innovations in the production of energy from non-animal sources. The basic theme, reiterated throughout the book, is that innovation is an evolutionary process; it is accretive, not the product of lonely geniuses huddled and isolated in workshops. He puts forth three candidates (Denis Papin, Thomas Savery and Thomas Newcomen) as putative innovators (“Notice I do not call him an inventor; the difference is crucial” (p.15)) of the first successful steam engine. Ridley’s distinction is crucial; it identifies an inventor as a person who first conceptualizes a process and defines innovators as the people who make the invention economically useful. In the case of steam power, Hero of Alexandria employed rudimentary steam powered devices in the first century AD; still there were people using steam power centuries before Hero, so the case for identifying the person who first conceptualized steam power is, at best, quixotic. Still steam power was not economically useful before the developments that occurred in the eighteenth century. Then a series of innovators made steam power economic; it could be employed to produce goods and services in less costly ways than had been available previously. In 1698 Thomas Savery was granted a patent for an invention for the “raising of water by the impellent force of fire” (p. 18). This introduces another theme that Ridley returns to throughout his book: that patents are more than somewhat arbitrarily rewarded and they, more often than not, impede innovation. People who used the Newcomen engine had to pay royalties to the holders of the Savery patent no matter how much they had modified it. Similarly, Ridley argues that the Watt patents were obstacles in the way of improving the efficiency of the Watt steam engine.

There is a tension between the effects that patent protection laws have in stimulating innovation and the rent-seeking obstacles to innovations that patents provide. Ridley is firmly in the camp that argues that current patent laws discourage more innovations than they promote. If you throw in copyright laws — which in theory and in practice, (e.g. the film Bambi) can be almost perpetually protected — then I am in complete agreement with Ridley. This is an economic issue: as they are currently structured, do patent protection and copyright laws promote or impede innovation? The economic basis for granting “intellectual property” a favored place in the law and in public debate should be reconsidered.

In the “Energy” chapter, Ridley reprints a plea from an 1819 edition of the magazine The Chemist asking for funds to build a monument to Watt: “He is distinguished from other public benefactors, by never having made, or pretended to make it his object to benefit the public . . . This unpretending man in reality conferred more benefit on the world than all those who for centuries have made it their especial business to look after the public welfare” (p. 26). This is a great quote and it echoes the famous “invisible hand” passage from Adam Smith’s The Wealth of Nations, yet I have not been able to track down Ridley’s source. This is typical; he is rather cavalier about sourcing. There are no footnotes, nor page citations. Each chapter has its own section in “Sources and further reading section” (pp. 375-388). But if you are trying to find a particular reference be prepared to spend some time and be frustrated. After spending 40 minutes with various search engines, I failed to find either Ridley’s source for the quotation from The Chemist or the original. In another great passage in chapter 3 (“Transport”) — where he questions the wisdom of the (self-anointed?) scientific establishment — Ridley quotes an article in the Scientific American from 1906 doubting the veracity of the Wright brothers’ claim to heavier than air flight: “If such sensational and tremendously important experiments are being conducted … is it possible to believe that the enterprising American reporter … would not have ascertained all about them … long ago?” (pp. 100-01). Well the answer to that question is yes, it is possible to believe the high Pooh-bahs of the American scientific establishment were ignorant of what the Wright brothers were doing in 1906, let alone in 1903 at Kitty Hawk. I was successful in tracking down that quotation (Scientific American 1906, vol. 94: 40), it only took 20 minutes and access to a major university’s library and search engines.

Yet Ridley does not fare so well in chapter 6 (“Communication and Computing”) where he quotes Thomas Watson of IBM in 1943 as saying that “there is a world market for maybe five computers” (p. 203). It is a nice story, but it is either totally or heavily fabricated. The only quote from Watson in the public record (appropriately from Geek History: that mentions five computers is from an IBM’s stockholders meeting, which says: “We believe the statement that you attribute to Thomas Watson is a misunderstanding of remarks made at IBM’s annual stockholders meeting on April 28, 1953. In referring specifically and only to the IBM 701 Electronic Data Processing Machine — which had been introduced the year before as the company’s first production computer designed for scientific calculations — Thomas Watson, Jr., told stockholders that ‘IBM had developed a paper plan for such a machine and took this paper plan across the country to some 20 concerns that we thought could use such a machine. I would like to tell you that the machine rents for between $12,000 and $18,000 a month, so it was not the type of thing that could be sold from place to place. But, as a result of our trip, on which we expected to get orders for five machines, we came home with orders for 18.’” The problem is that Ridley’s work is replete with wonderful anecdotes. I have no doubt that the vast majority are accurate, but detailed citations are valuable in both verifying and falsifying historical interpretations.

Another deficiency is that Ridley’s knowledge of the literature in economic history is incomplete; he attributes the growth of the American automobile industry to Henry Ford who “revolutionized the industry after 1908” (p. 92). This statement is both incorrect and contradictory to his hypothesis that innovations and economic changes are evolutionary, not revolutionary. Robert Thomas (1969) explains just what Ford did in the era of the Model T Ford. In 1908 both: “Buick and Ford introduced into the $1,000 price class for the first time automobiles of standard design [engines in the front, French type body work, steering wheel, etc.]. These designs, the Buick Model 10 and the Ford Model T, were similar to cars being sold in the $1,500-$2,000 price class” (Thomas p. 150). What Henry Ford did that made him different from competing producers is to make virtually identical cars year after year while simultaneously lowering prices. The automobile was changing rapidly during those years (selective transmissions replacing planetary transmissions, self-starters, increased horsepower, etc.) yet the Model T remained unchanged. By 1914 the Model T was selling approximately 45% of new cars sold in the U.S., yet it was receiving only 25% of the revenue from new car sales (Thomas, p. 153). What Ford did was to produce outdated cars whose primary competitors were used cars, not new cars. Essentially Henry Ford made a fortune by producing technologically obsolete vehicles at attractive prices. As the technology of the automobile advanced, Ford could not maintain his price/marketing strategy because many (most?) of the used cars for sale in 1920 had more desirable features than the 1920 Model T. At prices that Ford could profitably sell cars, consumers preferred the typical used vehicle to the 1920 Model T. The growth of the used car market forced Ford to change strategies; subsequently the Ford company followed the industry practice of annual model changes and improvements with constant or increasing prices.

Ridley’s deficiencies aside, the insights he provides in the various chapters ((2) Public Health, (3) Transport, (4) Food, (5) Low-Technology Innovation, (6) Communications and Computing, (7) Prehistoric Innovation, (8) Innovation’s Essentials, (9) The Economics of Innovation, (10) Fakes, Frauds, Fads, and Failures, (11) Resistance to Innovation, and (12) An Innovation Famine) are very perceptive and an educational delight. Ridley frustrates any who wish to replicate his analysis without undo effort, still every chapter has multiple non-obvious insights. Focusing on a few insights does not do justice to the book, yet it must be done otherwise the review would be too burdensome to read.

A theme that Ridley repeatedly emphasizes is the conservatism of government and the establishment in reaction to innovation. Patent and copyright law as obstacles to innovation have already been mentioned, but we should not forget our own sacred cows, the intelligentsia and academia. As a graduate student in the 1960s, I remember the future Nobel Prize winner, Douglass C. North, echoing the received wisdom of the time that no more aid or development projects should be directed towards countries (particularly India and Pakistan) because they were “basket cases,” that were too overpopulated and whose only fate was starvation and death for the many. Ridley (p. 134) suggests that this opinion had its genesis in the foreign services and development agencies. If that is the case, Paul Ehrlich’s Population Bomb (1968) is not entirely his responsibility. Nevertheless, it is risible that so many academics could have been so wrong about the near-term future of food production in the late 1960s through the mid-70s. In the same vein, government agencies in India tried to suppress the introduction of the hybrid wheats that were among the first products of the Green Revolution: “Indian bureaucrats were adamant that Mexican wheats should not even be allowed in the country, let alone encouraged. The biologists warned of devastation and disease if the wheats failed. The social scientists warned of ‘irreversible social tensions’ and riots if the wheats succeeded — and caused some farmers to make more money than others” (p. 133)

Ridley devotes an entire chapter to a history of the suppression of novelty. Things that were suppressed include coffee, margarine, genetically modified organisms, herbicides, and cellular telephony. Methods of suppression include diktats, regulations, patents, copyrights, legislation, commissions, and litigation. Every change affects someone negatively; if a change can be halted or delayed the costs of the change can be eliminated or reduced. Ridley relates how “land-use” (zoning) planning has reduced the population of San Jose during the Silicon Valley boom. Another, more completely examined example is that of the European Commission, which in 2014 mandated that energy efficiency (a “good” thing to the Commissioners, not so good for energy producers) of vacuum cleaners be tested in the absence of dust or debris. It so happens that the Dyson Cyclone vacuum cleaner is much more energy efficient than vacuum cleaners with bags because the bag cleaners operated less efficiently as the bags got filled with dust and debris. The (German) manufacturers of bagged cleaners had lobbied the Commission effectively. Dyson appealed the regulations through the courts and in November of 2018 he was vindicated. Still the delay cost Dyson sales and increased those of the makers of bagged cleaners. We may not have much reason to lament a billionaire’s decreased sales, but we should deplore the erroneous information produced by public agencies that deluded consumers.

There are many cases of innovations that Ridley examines that are worthy of full-scale economic analyses. Two that particularly intrigue me are the examples of corrugated roofing and bed-nets with insecticide embedded in them. We see corrugated roofing throughout in poor, tropical countries; I typically had given them no thought other than this is how the poor live in the tropics until this book. Corrugated roofs were a substantial improvement over other types of roofing for warehouses and industrial spaces in nineteenth century Britain. In poor countries today in the tropics they are symptomatic of improved living conditions; the alternatives to tin roofs are organic (straw, mud, and wood) that are more costly (including upkeep), less effective, a haven for insects and rodents, and not very useful for channeling rain for storage or irrigation. It would be nice to know the cost/benefit analysis comparing corrugated roofing to the alternatives and what something as innocuous as roofing does.

Bed-netting infused with insecticide is an interesting story. The bed nets were treated with insecticides to see how prophylactic they were in preventing malaria carrying mosquitoes from infecting people. Since the bed nets rarely escaped holes and tears, the people conducting the study kept it going even when the bed-nets were severely damaged. The researchers found that torn bed-nets retain a substantial amount of efficacy and are still effective in reducing the mosquito-borne transmission of malaria with bed-nets accounting for approximately “70 per cent of the six million lives saved worldwide [from death by malaria]” (p. 75).

There are other examples galore; if you have an interest in innovation, how it evolves, and how and why it is obstructed, then you should read this book. I recommend it highly. True it has difficulties — the lack of adequate citations and an index that is somewhat haphazard. Still I urge you to read it; I would recommend buying the e-copy for two reasons: 1) on most e-books you can do a word search and that reduces the importance of an index; and 2) the hard-bound (cloth) copy that I purchased is nearly falling apart after one (close) reading. The binding of this book does no credit to its publisher.


Robert Paul Thomas, “The Automobile Industry and Its Tycoon,” Explorations in Entrepreneurial History, ser.2:6:2 (1969: Winter).


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Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Hawai’i: Eight Hundred Years of Political and Economic Change

Author(s):La Croix, Sumner
Reviewer(s):Alston, Lee J.

Published by EH.Net (October 2019)

Sumner La Croix, Hawai’i: Eight Hundred Years of Political and Economic Change. Chicago: University of Chicago Press, 2019. ix + 309 pp. $60 (hardcover), ISBN: 978-0-226-59212-1.

Reviewed for EH.Net by Lee J. Alston, Department of Economics, Indiana University.

Economic and political development is a longitudinal process. Sumner La Croix (emeritus University of Hawaii) gives us 800 years of the development of Hawaii from its settlement by immigrants from the Society Islands in the mid-thirteenth century to the present. The settlement of Hawaii was unique because it was uninhabited when the Polynesians arrived, which means they did not face resistance. This does not mean that the settlers started with a tabula rasa. They brought with them the culture and institutions that they left in the Society Island. In Chapter 1, La Croix gives us a short history of Hawaii, a Cliff’s Notes to the book. I encourage the reader not to stop there because the book is too rich in the details of institutional change. Indeed, it is the best case study that I have read on long run development.

In Chapter 2, La Croix takes up the issue of voyaging and settling Hawaii. He relies on recent work by archeologists who have established that Polynesians traveled to Hawaii sometime in the mid-thirteenth century. The Polynesians migrated strategically, i.e., they did not discover Hawaii by chance but rather by taking longer and longer voyages until they discovered Hawaii. They found an uninhabited fertile land and they thrived economically and demographically. The population growth rate in the first century was perhaps the highest recorded anywhere. It slowed from the mid-fourteenth century to the mid-fifteenth century and slowed further to reach an estimated population of 400,000 by 1778, at the arrival of Captain James Cook. To support such a high population growth, land must have been fertile and initially abundant. La Croix maintains that the social structure was relatively egalitarian. The crop of choice was taro.

From Chapter 3 on La Croix adopts the framework of North, Wallis and Weingast (NWW) in Violence and Social Orders. The Polynesians brought their home institutions of chiefdoms to the Hawaiian Islands. They competed with one another and violence erupted frequently. In the language of NWW, the chiefdoms were fragile states. Over time, archaic states emerged that were more stable and became natural states with systems of taxation and a hierarchy. Relying on work of archaeologists, La Croix documents that the agricultural surplus allowed for recreation as well as a more hierarchical structure with the elite taxing those below to allow for investments in stone monuments. Taxation consisted of labor dues, and consumption by chiefs and their retinue as they moved across their states. Ritualistic human sacrifices helped established legitimacy. The archaic states encompassed entire smaller islands with the larger islands splitting into several states generally delineated by volcanic slopes. Despite rebellion and wars, the population continue to grow. Over time, agriculture expanded from ponded taro production to include large rain fed fields on volcanic slopes.

The arrival of Captain Cook in 1778 upset the relatively stable natural order in the Hawaiian states (Chapter 4). The interactions with the whites from the west meant a dramatic decline in population from disease, as much as an 80% drop in population between 1778 and 1831. This exceeds by far the decline in Europe from the Black Death. Amid the population decline, Hawaii experienced a resource boom in the extraction of sandalwood, mostly for the Chinese market. The decline in population and the rush for sandalwood meant a decline in agricultural production, yet somewhat perversely, wages did not increase because of consolidation of political power. In 1795, Kamehameha, one of the ruling chiefs on the island of Hawaii conquered all of the islands except for two minor islands. He did so by amassing an arsenal of weapons before other chiefs. Kamehameha established himself as King and cleverly solidified his power by cutting in the other chiefs on the rents from land and sandalwood. The new dominant network was powerful enough to extract more labor at lower wages in agriculture and sandalwood extraction. Kamehameha died in 1819 and was succeeded by his son, who, though he managed to stay in power, was less successful in managing the overharvest of sandalwood that was more or less depleted by 1830.

Two other booms followed the sandalwood boom (Chapter 5): supplying whaling ships and sugar cane cultivation by British, German and U.S. corporations. Both sugar and supplying whaling ships were labor intensive so wages rose considerably. Population continued to decline from new epidemics. La Croix maintains that in the face of increased power of foreign corporations, the King privatized most of the land including his own holdings. The rationale was that land held in private would be harder to usurp should a foreign power take over Hawaii. The King also adopted other western institutions, including more rule of law in general along with a written Constitution. In the language of NWW, Hawaii by mid-nineteenth century had become a mature natural state.

The monarchy by the mid-nineteenth century seemed relatively stable and accommodated the nascent sugar industry. What upturned the apple cart such that Hawaii became a U.S. territory in 1898? In Chapter 6 La Croix argues convincingly that two factors led to the increased power of the sugar industry, which in turn led to the U.S. toppling the monarchy: population growth in the U.S. West where Hawaii sold most of its sugar; and a reciprocal trade agreement with the U.S. in 1876 that eliminated any tariff on Hawaiian sugar.

After territorial status, native Hawaiians lost power and three forces dominated Hawaii: the sugar industry, the territorial government and the U.S. military. Native Hawaiians increasingly lost power. There was a positive side in that increasingly U.S. institutions became implanted but with fewer checks and balances because power resided in the territorial governor and not the legislature (Chapter 7). For most native Hawaiians, territorial rule was extractive and arbitrary. Chapter 9 “Statehood and the Transition to an Open-Access Order” follows more cleanly after Chapter 7. The details are fascinating on the forces that led to statehood, which Hawaiians overwhelmingly supported. Hawaiians viewed statehood as clearly superior to the colonial style rule of territorial status. With statehood came representation in the U.S. Congress and less arbitrary policies. Importantly, neither the territorial nor the state government ever properly redressed the former confiscation of crown lands and lack of secure property rights to land for the majority of Native Hawaiians. In Chapters 8, 10 and 11, La Croix chronicles the failed policies of territorial and state policies concerning homes, leases and land reform intended to benefit those left behind. The policies consistently never met their stated goals. Despite the failures, Hawaii boomed from the 1960s to today, largely through tourism from the U.S. In his concluding chapter, La Croix discusses the broad sweep of Hawaiian history including the importance of self-rule for 600 years that set the stage for the successful transition to statehood. Problems still exist concerning the recognition of the rich cultural Native heritage but there is strong advocacy for recognition. Overall, La Croix pulls together an amazing amount of interdisciplinary scholarship to shed light not just on Hawaiian economic and political development but on the larger process of institutional change.

I highly recommend this book.


North, Douglass C., John Joseph Wallis and Barry Weingast. 2009. Violence and Social Orders: A Conceptual Framework for Recorded Human History. Cambridge: Cambridge University Press.

Lee J. Alston (Professor of Economics, Indiana University and Research Associate, NBER) is co-author of Institutional and Organizational Analysis: Concepts and Applications, Cambridge University Press (2018) and Brazil in Transition: Beliefs, Leadership, and Institutional Change, Princeton University Press, (2016).

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Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):Australia/New Zealand, incl. Pacific Islands
Time Period(s):General or Comparative

Manufacturing Advantage: War, the State, and the Origins of American Industry, 1776–1848

Author(s):Schakenbach Regele, Lindsay
Reviewer(s):Khan, B. Zorina

Published by EH.Net (September 2019)

Lindsay Schakenbach Regele, Manufacturing Advantage: War, the State, and the Origins of American Industry, 1776–1848. Baltimore: Johns Hopkins University Press, 2019. xi + 263 pp. $60 (hardcover). ISBN: 978-1-4214-2525-2.

Reviewed for EH.Net by B. Zorina Khan, Department of Economics, Bowdoin College.
Lindsay Schakenbach Regele, Assistant Professor of History at Miami University, has employed her well-honed research skills to produce an original and fascinating book that rewards the reader with discerning insights into the genesis of American industry. Economists who examine manufacturing in the nineteenth century address such specialized issues as factor inputs, productivity growth, commercial policy, comparative advantage, and incentives for technological innovation. This book offers a valuable complementary — and often provocative — perspective on these questions.

The central argument of Manufacturing Advantage is that U.S. industrial policy was derived from a model of “national security capitalism,” designed to foil internal and external threats. The primary objective of the federal government was to ensure national security in the early republic, and the manifest military need to protect the new nation dictated the commercial need for import substitution and industrial protectionism. This was especially true in the area of two products, guns and textiles, that were both deemed essential for national security. The author’s thesis is reflected in a contemporary quote (cited on p. 3) that “The best mode of warfare for our country [is] the artillery of carding and spinning machinery and the musketry of shuttle and sledge.” As a result, the military-industrial complex and close linkages between the state, business, and warfare are not a phenomenon of the twentieth century, but have continuously characterized the American system of manufactures since the Revolutionary era.

This geopolitical perspective motivates the conclusion that the federal government’s management of business was central to the development of manufacturing in the United States. Market competition and private enterprise were ultimately subsidiary and subservient to the macropolitical requirements of the emerging nation. The overarching political initiatives were enabled by the deft machinations of government officials, whose “policies lurk behind the rise and fall of American factories” (p. 4). As such, the most significant actors in this historical drama were not the great inventors or founders of grand enterprises whose names survive to the present day. Rather, the stars on the national and global stage were members of the executive branch such as the President and Secretaries of State and War, consular employees, pettifogging diplomats, trade and treaty negotiators, and other political representatives. The degree of government intervention varied somewhat over time, but the creation of a “perpetual warring machine” necessitated a certain and continuing role for federal oversight and financing of industry.

The six chapters of the book elaborate on these arguments, spanning 167 pages of text and some 80 pages of endnotes, along with several illustrative maps. The first chapter focuses on the immediate post-Revolutionary era. George Washington notably decreed that the survival of the new nation depended on military self-sufficiency, which required both adequate weaponry and materials to outfit the troops through “civilian and martial manufacturing” (p. 17). The Constitution undoubtedly provided the prerequisites for a free market economy, including provisions for interstate commerce, and secure property rights in real and intangible assets. However, for the author, the most important clauses of this document were its directions regarding the staffing of departments within the executive branch, granting them the authority to enforce unilateral directives that affected industrialization.

The implications of such authorization for manufacturing are spelled out in subsequent chapters. The firearms industry, in particular, was subsidized and supported by a War Department that was determined to be in perpetual readiness for military conflict. Even though formal wars were intermittent, “the United States was never truly at peace,” so the War Department and its military policies had a continued influence on the course of industrialization. The objectives of the State were achieved indirectly in the case of the textile industry, which was decentralized, with large networks of loosely-connected suppliers and producers. In contrast, the success of the centralized weapons manufacturers was directly related to actions of the federal government. For instance, the 1808 Congressional Act for Arming the Militia approved $200,000 per annum for guns, which provided an impetus for the expansion of key establishments in the firearms industry. Federal government officials required interchangeable parts, which significantly influenced production processes for weaponry and beyond. Territorial expansion in the nation served the dual purpose of benefiting military industry and adding to the markets for other types of manufactured output.

In an intriguing turn, the narrative pivots in Chapter 4, to propose that “the road to economic development in fact traveled through Florida” (p. 87). The acquisition of Florida territory provided valuable venture capital to underwrite nascent industrialization in New England in the 1820s at just the time when funding was scarce. The 1819 treaty with Spain allowed for the federal government to assume outstanding claims of American business, and this subsidy provided a large stimulus for Northern manufacturing enterprises. Influential investors such as the Boston Associates were able to shape political decisions and divert federal financial resources to benefit their own interests. Flush with government reimbursements and payouts, these privileged firms engaged in widespread predatory behavior that ranged from “patent trolling” to aggressive “vulture capitalist” strategies to acquire competitors. According to the author, for both textile and arms manufacturers, infusions of cash from the federal government provided more effective stimuli for growth and innovation than the private market.

Moreover, “if we are to understand the early success of the Waltham-Lowell System we must do so in the context of diplomacy” (p. 126). The U.S. diplomatic corps and allied federal officials ensured that American manufacturing interests were effectively represented overseas. Their commercial diplomacy was especially evident in Latin America, which soon provided an expanding and profitable market for guns and textiles from the U.S. Rather than economic comparative advantage, exports from New England to these foreign markets were being leveraged by canny deals brokered by political agents. Consular agents of the United States did not just obtain favorable terms in bilateral treaties, they also adeptly funneled inside business information, negotiated preferential tariffs and regulation, and even intermediated and executed contracts in Latin America, all on behalf of private American firms. Polities that depended on American arms were especially susceptible to further maneuvering on behalf of American textile producers. These displays of “soft power” and “economic coercion” enabled the United States to achieve a rapid transition from undistinguished colony to a country with international influence.

The final chapter elaborates on this “industrial manifest destiny.” By the middle of the nineteenth century, the United States had extended its reach through Oregon and California to the Pacific Ocean. This political expansionism opened for northeastern industrialists the gateway to markets in Asia and Latin America; and even the once-dominant imperial power of Britain was forced to acknowledge the industrial supremacy of its former colony. The relationship between the federal government and private enterprise that was vested in national security capitalism would further ensure the success of the Union Army over the South during the Civil War. The conclusions drawn from textiles and arms in the antebellum period would later apply to such key enterprises as the railroad industry, where government demand compensated for the absence of private demand (p. 166). In short, a strong State and its agenda of national security capitalism was responsible in large part for observed industrial outcomes, from the founding of the republic through the era of big business and modern economic growth.

An economic analysis of such issues would, of course, be somewhat different. One would hesitate to attribute industrialization in the United States so definitively to any one specific factor, especially given the sparse attention to conflicting interests, tradeoffs, opportunity costs and the potential for crowding out. The American economy was characterized by balanced growth, with productivity gains in all industries, not just in textiles and guns, and it is not clear how well this thesis can be extended to other areas such as the production of beer or boots. And, even while acknowledging the presence of diplomacy and government intervention, one might wonder about the extent to which these factors are significant for explaining American competitiveness, especially relative to its British and European rivals who indulged in such policies on a far more pervasive scale.

Nevertheless, it is a compliment to note that the monograph under review could not have been written by an economist. The author writes with verve and a captivating command of nuance, insight, breadth and in-depth analysis. She has read the secondary literature extensively, and draws on an impressive array of primary sources, including consular letters, diplomatic papers, and other previously-unexploited sources. This archival research is especially compelling when it documents the exertions of U.S. political representatives to shift negotiations and outcomes to privilege New England manufacturing interests. The discussion is extremely informative regarding the complexities and impact on far-away New England of complex treaties and initiatives and military conflicts. On every page one encounters thoughtful and persuasive claims, such as the argument that foreign demand for access to innovative American-made firearms was a potent bargaining lever in diplomatic negotiations, which created a symbiosis between the interests of military enterprises and textile producers who wished to penetrate overseas markets. In sum, both historians and economists would benefit from closely engaging with the arguments in this fine addition to the bookshelf on the early sources of American industrial supremacy.
B. Zorina Khan is Professor of Economics, Bowdoin College and Research Associate, National Bureau of Economic Research. Her new book is Inventing Ideas: Patents and Innovation Prizes in the Knowledge Economy (Oxford University Press, forthcoming 2020).

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Subject(s):Economic Planning and Policy
Military and War
Industry: Manufacturing and Construction
Geographic Area(s):North America
Time Period(s):18th Century
19th Century

Reconstructing the National Bank Controversy: Politics and Law in the Early American Republic

Author(s):Lomazoff, Eric
Reviewer(s):Cowen, David

Published by EH.Net (July 2019)

Eric Lomazoff, Reconstructing the National Bank Controversy: Politics and Law in the Early American Republic. Chicago: University of Chicago Press, 2018. x + 253 pp. $90 (cloth), ISBN: 978-0-226-57945-0.

Reviewed for EH.Net by David Cowen, Museum of American Finance.

“… [Of] all acts of government none perhaps was more delicate, none required greater discretion and caution to guard it against improper speculations than the granting of a bank charter,” wrote Secretary of the Treasury Albert Gallatin to Thomas Jefferson in 1804. He continued that “… It is an act of the highest legislative nature.”[1] Eric Lomazoff understands this as well, and his book, Reconstructing the National Bank Controversy: Politics and Law in the Early American Republic, brings back to the fore the constitutional banking debate that raged throughout much of the early history of our country. This playing field constitutes well-tread ground with established paradigms by previous generations of scholars. Given that there are well-established narratives, it is not easy to shed new light. Lomazoff does so by taking an incredibly deep dive into the bank debates, starting with the 1791 creation of the First Bank of the United States, and continuing with the 1811 death of the institution, the 1816 subsequent re-charter, the 1819 McCulloch v. Maryland challenge in front of the John Marshall-led Supreme Court, and Andrew Jackson’s attack leading to the death of the Second Bank of the United States in 1836. For good measure, in the concluding chapter Lomazoff brings the discussion forward to look at the implications for the founding of the Federal Reserve and other monetary debates.

Lomazoff — to his credit — has pored over the debates and legislative records with a fine-tooth comb. The extensive research extends to his secondary sources as well. The work is carefully footnoted throughout, and the footnotes themselves provide a wealth of knowledge and demonstrate the depth of scholarship. For instance, he took care to self-catalogue the 3,150 letters of Nicholas Biddle on microfilm held at the Library of Congress (p. 216, note 21). The structure of the book includes vignettes at the beginning of several chapters that recount the traditional viewpoints on the subject. Given that the title of the book is Reconstructing the National Bank Controversy and “reconstruct” means to rebuild after something has been destroyed or damaged, the author needed to set the stage by first constructing the accepted dogma via the vignettes.

Lomazoff has gone back and read the primary source materials in depth and has effectively placed them side-by-side for the debates of 1791, 1811, 1816, 1819 and 1836. What makes this thought provoking is that so many others have done so as well, and they have drawn different conclusions. A first step is to understand the standard and accepted line of logic that is central to the original narrative: Article I Section 8 of the U.S. Constitution. This section empowers the government to perform many duties, including raising an Army and Navy and declaring war, and its final paragraph constitutes the famous Sweeping Clause, “to make all Laws which shall be necessary and proper.” The Sweeping Clause allows for a broad interpretation of the Constitution. It has been the linchpin to the bank debates for years, as it authorized the government to create two national banks and own part of them. In Lomazoff’s journey through the research, he found that another part of Article 1 Section 8 has received scant attention, but it may hold the key to much of the debate. That portion is the Coinage Clause, which authorizes Congress to coin and regulate money. While that argument is known to scholars, it has taken a backseat to the Sweeping Clause. Lomazoff is out to correct the historical record and give the Coinage Clause equal due. Interestingly, buried in a footnote the author admits that, “in an early pass I too adopted a version of the strict/broad dichotomy” (p. 176). A second recurring theme is that the constitutional debates were often shaped by self-interest or messy party politics.

As part of his case, Lomazoff introduces the three F’s that anti-bank advocates rally their objections around: federal, functional and frequency standards. In short, federal questions whether there are other institutions, i.e. state banks, which can provide a similar service. Functional gets to the core of the Necessary and Proper Clause, i.e. as it relates to Article I and the Sweeping Clause, and asks whether a national bank would fill that role directly or indirectly. Frequency is exogenous to Article I and debates what power a government should have as it relates to coinage, borrowing money, and banking. The three F’s are used throughout the book to assist in defining the debates.

The book begins with the 1791 creation of the First Bank of the United States, when the opponents threw, “everything but the kitchen sink at it” (p. 15). But the anti-bankers needed a legal issue, and in 1791 that was a strict interpretation of the Constitution. Therefore, Lomazoff agrees that, “the traditional 1791 narrative certainly does not err,” but he wants to ensure that constitutional scholars realize it was not one size fits all with other factors at play (p. 30).

A pivotal chapter titled “The Compromise of 1816” takes a very deep dive into the charter debate of the Second Bank of the United States. Here the book highlights how a Republican-controlled Congress and the White House cloned a national bank that many of them had killed just a few years prior. Given the stress of financing the War of 1812, these politicians realized the need for a national bank, and they needed to “swallow their long-standing objections” (p. 105). But how? Their answer was the Coinage Clause of Article 1 Section 8.

A few years hence was the landmark McCulloch v. Maryland case, where the Supreme Court reaffirmed the national bank. Using the Compromise of 1816 as a lens on this case is interesting, although the author admits, “it may be too much, however, to claim that the Compromise of 1816 ultimately helps make better sense of what occurred in McCulloch” (p.139). When we fast forward to the 1830s and Andrew Jackson’s attack on the Second Bank, Lomazoff explains that traditional historical fare has excluded that his veto message also included the Coinage Clause. That portion has been lost to scholars over time.

Revisionist history is not an easy hill to climb, especially when the traditional paradigms are so well entrenched. This book is geared toward constitutional scholars and members of the academic community who can handle the in-depth analysis. This is not light summertime reading. In one section, Lomazoff points out that, “American economic historians are familiar with these facts” (p. 98). However, economic historians who grew up on traditional narratives will find this a detailed refresher course with a Coinage Clause twist. Lomazoff has opened our eyes that the Coinage Clause needs some due. Some months after the difficult fight over chartering the First Bank, Alexander Hamilton stated that, “a mighty stand was made on the affair of the Bank. There was much commitment in that case. I prevailed.”[2] Eric Lomazoff also prevails, as he brings much commitment to the role of the Coinage Clause in shaping early national bank debates.


1. Albert Gallatin to Thomas Jefferson. April 12, 1804. The Writings of Albert Gallatin. Vol II, pp. 184-85. The italics are Gallatin’s.


David Cowen is President/CEO of the Museum of American Finance. He is the co-author (with Richard Sylla) of Alexander Hamilton on Finance, Credit, and Debt (Columbia University Press, 2018) and (with Robert Wright) of Financial Founding Fathers: The Men Who Made America Rich (University of Chicago Press, 2006).

Copyright (c) 2019 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 2019). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):18th Century
19th Century

From Wall Street to Bay Street: The Origins and Evolution of American and Canadian Finance

Author(s):Kobrak, Christopher
Martin, Joe
Reviewer(s):Rockoff, Hugh

Published by EH.Net (February 2019)

Christopher Kobrak and Joe Martin, From Wall Street to Bay Street: The Origins and Evolution of American and Canadian Finance. Toronto: University of Toronto Press, 2018. xii + 401 pp. $35 (paperback), ISBN: 978-1-4426-1625-7.

Reviewed for EH.Net by Hugh Rockoff, Department of Economics, Rutgers University.

Why did the Canadian financial system escape the devastation that the American system experienced in the Great Depression (although Canada did not escape the decline in economic activity) and in 2008? Indeed, why has the financial system of Canada been so much more stable throughout its history than the American system? It’s a question that many economic historians have thought about. Calomiris and Haber (2014) is a recent attempt to come to grips with this and other comparisons which highlight the instability of the American financial system. And I have done some work on this with Michael Bordo and Angela Redish (1994, 2015).

From Wall Street to Bay Street sheds light on these questions. The book, I should note, is written for the layperson and not for the typical reader of EH.Net. One imagines (hopes?) that the intended audience might include a journalist, a politician, or a business executive looking for an explanation of a puzzling fact that might in turn affect what they write or do. Although Kobrak and Martin include some comparative charts at the end of the book, the text itself includes no charts, tables, or equations. As an explanation for lay readers, it works well. But, as I will explain below, I think it is also a book that professional economic historians will profit from reading.

Joe Martin is the Director of Canadian Business History at the Rotman School of Management of the University of Toronto. Christopher Kobrak (an undergraduate philosophy major at Rutgers, a clear marker of excellence, and a Columbia Ph.D.) was at the Rotman School at his untimely death in 2017. They chose to tell the whole story of American and Canadian finance — insurance, investment banks, and so on, as well as commercial banking — chronologically. There are introductory and concluding chapters, and five chapters in which they take their story from the colonial period to today.

Although the American systems were and very likely are still more crisis-prone than the Canadian system, there have been some bad moments in Canada that they duly note. There was a “near panic” in Western Canada in 1907 that the government addressed by allowing banks to issue notes in excess of those permitted under existing reserve requirements (p. 146). The Home Bank failed in 1923 and the government provided compensation for 35 percent of small deposits. And an emergency loan was made to the Dominion Bank. The Office of the Inspector of Banks was then created in the wake of the Home Bank failure. During the 1930s the Sun Life Insurance Company received special treatment from regulators probably because it was considered “too big to fail” (p. 184). The less-developed countries debt crisis of the early 1980s hit the Canadian financial system hard. And there were other difficulties including failures of trust companies and banks. The Office of Superintendent of Financial Institutions was created in the wake of these difficulties. But all of this pales in comparison with the American record of financial crises – 1819, 1837, 1857, 1873, 1893, 1907, 1930, and 2008, just to name some of the big ones.

What explains the relative stability of the Canadian system? Kobrak and Martin rely on two explanatory factors. One, that will be familiar to most American and Canadian financial historians, is Canada’s system of nationwide branch banking; a stark contrast with the United States which for much of its history had a fragmented banking system in which banks were always prevented from branching across state lines and in some cases were prevented from establishing any branches at all by unit banking laws. Most financial historians, I believe, agree that the absence of branching made American banks far more vulnerable to economic shocks than their Canadian cousins. The problem of state-centric regulation, however, was not confined, Kobrak and Martin show, to banking, but also troubled the American Insurance industry. This comparison illustrates one of the strengths of From Wall Street to Bay Street: its broad sectoral coverage creates opportunities for comparisons that test their conclusions about the origins of the difference in stability between the systems.

The other explanation that Kobrak and Martin rely on is culture. There is a tradeoff, they argue, between innovation and stability. “American finance,” in their estimation, “has been associated with an abundance of the former and not enough of the latter, with Canada assuming the opposite approach” (p. 14). In their concluding chapter they say that “Americans have always exhibited a tolerance for recklessness in commercial innovation, which appears curious to much of the rest of the world, including Canadians.” A reference to Tocqueville, who said much the same, helps to establish the venerable lineage of their observation about different attitudes toward stability (p. 262). Their reliance on cultural differences inevitably raises the question of whether it is “Kosher to Talk about Culture” to quote the title of one of Peter Temin’s (1997) well-known papers. A reliance on cultural explanations is always problematic. It is far easier to suggest cultural explanations for economic phenomena than to test them rigorously. For that reason, many economic historians shy away from them. Kobrak and Martin, however, are not afraid. I was skeptical at first, but I found myself coming away persuaded that part of the difference in institutional arrangements (including regulatory structures) and records of stability in the two financial systems ultimately derives from different attitudes toward innovation and stability.

Some parts of the book will be familiar to professional economic historians, such as summaries of work by economic historians on slavery and the Great Depression, and can be skipped by someone already familiar with these literatures. But professional economic historians are likely to encounter ideas that are worth pondering. The repeated emphasis on cultural differences is one example. Their conviction that to understand financial systems one has to look at the systems in their entirety and not focus solely on banking is another.

My bottom line is that this is a fine book. It delivers the explanation that they promised to the lay reader, but professional economic historians, such as those of us that read the posts on EH.Net, will also find that the book is worth their time.


Bordo, Michael D., Angela Redish, and Hugh Rockoff. “The U.S. Banking System from a Northern Exposure: Stability versus Efficiency.” Journal of Economic History 54, no. 2 (1994): 325-41.

Bordo, Michael D., Angela Redish, and Hugh Rockoff. “Why Didn’t Canada Have a Banking Crisis in 2008 (or in 1930, or 1907, or …)?” Economic History Review 68, no.1, (2015): 218-43.

Calomiris, Charles and Stephen Haber. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Princeton: Princeton University Press, 2014.

Temin, Peter. “Is It Kosher to Talk about Culture?” Journal of Economic History 57, no. 2 (1997): 267-87.


Hugh Rockoff is a distinguished professor of economics at Rutgers University and a Research Associate of the National Bureau of Economic Research. His current research focuses on the origins of America’s national income accounts and in joint work with Michael Leeds at Temple University on the coming of Jim Crow to American horse racing.

Copyright (c) 2019 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (February 2019). All EH.Net reviews are archived at

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Prelude to the Dust Bowl: Drought in the Nineteenth-Century Southern Plains

Author(s):Sweeney, Kevin Z.
Reviewer(s):Arthi, Vellore

Published by EH.Net (January 2017)

Kevin Z. Sweeney, Prelude to the Dust Bowl: Drought in the Nineteenth-Century Southern Plains. Norman, OK: University of Oklahoma Press, 2016. xv + 283 pp. $35 (cloth), ISBN: 978-0-8061-5340-7.

Reviewed for EH.Net by Vellore Arthi, Department of Economics, University of Essex.

In Prelude to the Dust Bowl, an engaging new narrative history of the U.S.’s Southern Plains, Kevin Z. Sweeney adds to a growing literature that confronts the popular view that the Dust Bowl of the 1930s represented a moment unique in its devastation and unprecedented in the environmental history of the United States. Sweeney sets about overturning this persistent myth by casting his focus backward to a series of oft-overlooked nineteenth-century droughts. Having established a pattern of disaster and response that predates the 1930s, he then uses these events as lenses by which to examine the interaction between human populations, the environment, and politics more broadly.

The book is at its most compelling when it explores how the region’s popular image — which alternated between that of the “Great American Desert” and the land of milk and honey — came to be. Sweeney shows that which version of the Plains captured the public’s imagination at a given moment largely came down to chance timing and politics.

To start, notions about the environmental character of the Great Plains were formed in the midst of a drought more severe than that experienced during the Dust Bowl of the 1930s. Indeed, following the first official expedition to the recently-purchased territory in 1819-20, Major Stephen H. Long’s team famously pronounced the region a Great American Desert “uninhabitable by a people depending upon agriculture for their subsistence” (Long and James, 1823, p. 361). The expedition’s key mistake was to assume that their brief experience of the region’s climate represented its permanent state. This pessimistic assessment was intensified by happenstance: a series of delays and budget shortfalls led to privations which, Sweeney suggests, unduly exaggerated the expedition’s perceptions of the region’s inhospitability. These perceptions in turn became enshrined in the popular understanding of the region, one which has persisted even to this day — particularly as the usage of the word “desert” has evolved from that in Long’s time (a grassy region absent trees and humans; see, e.g. Sweeney, p. 17) to mean an arid or sandy region.

Although it would soon become verdant again, the cyclicality of the Plains’ climate was largely lost on early observers: amateur geographer Josiah Gregg, who traveled the Santa Fe Trail in the much wetter 1830s, described a Plains so lush, welcoming, and thoroughly at odds with that of the Long expedition “that it is hard to imagine that they [were] describing the same region” (p. 33). As with Long, Gregg appears not to have questioned the representativeness of his experience. Comparing these and other contemporary reports to systematic, long-run paleoclimatological evidence, however, Sweeney finds both views of the Southern Plains to be dangerously incomplete. Here, he rightly emphasizes the danger of extrapolation, particularly in a region so characterized by extreme weather cycles.

Nineteenth-century discussions of the region’s climate and natural resources were politicized, further biasing assessments of the environmental conditions there. Accordingly, and whatever their accuracy, each of these conflicting strains of contemporary assessment would prove politically convenient at one time or another in the century that followed — for instance, when justifying the forcible relocation of eastern Native American tribes to Plains lands deemed too treacherous for white settlers, or when eventually trying to entice these same settlers to the region, where they could act as human bulwarks to the spread of slavery while simultaneously raising the return to railway construction. Indeed, America’s short and selective memory is a theme Sweeney returns to throughout the book, although some readers may leave hungry for more in-depth explanations of related issues — such as why the government’s knowledge of the region’s environment remained poor despite extensive contact with the Plains’ long-standing native residents, or why prospective Boomers failed to incorporate new information into their assessments of the feasibility and economic returns to settlement.

Sweeney goes on to offer several chapters which detail the negotiations between the U.S. government, the newly relocated Native American tribes of the Eastern United States, and the long-standing Native American tribes of the Southern Plains. In this section, which may be of greater interest to political historians of the American West than to environmental and economic historians, climate plays only an incidental role: severe periodic droughts intensify the conflict, deprivation, and environmental degradation brought about by the constraints Federal Indian Policy placed on the traditionally sustainable and land-intensive lifestyles of the Great Plains.

Sweeney ends his story of the Southern Plains on the eve of the Dust Bowl. Along the way, he draws occasional comparisons and contrasts between the droughts of the nineteenth century and their more famous 1930s counterpart. Sweeney notes, for instance, that although the droughts of the mid-to-late 1800s shared many of the same features as the Dust Bowl (e.g., dust storms, insect infestations, livestock wasting, conflict over property rights and down-river externalities), these droughts were far more severe than that during the 1930s. What’s more, they prompted even larger migratory responses — perhaps because earlier Plains residents may not have owned or sentimentalized farms in quite the way subsequent Homesteaders would go on to do. Despite causing widespread suffering, however, the nineteenth-century droughts failed to inspire massive relief efforts of the like documented by Fishback (2016) in the 1930s. Instead, nineteenth-century policymakers largely declined to respond (in part because of Civil War-era resource constraints, in part because of fears that relief given to slave-holding Plains tribes would fall into Confederate hands, and in part to downplay the sort of destitution that would dissuade Plains settlement). This left any piecemeal attempts at relief efforts largely in private hands.

Although there is some discussion of these historical parallels, it should be noted that the book offers perhaps less systematic and substantive engagement with the literature on the environmental history of the 1930s than one might expect from its title. Themes of continuity and change could be made more explicit, and a more prominent link to the 1930s as a point of comparison would be a welcome addition, thus more firmly linking this work to ongoing debates on the degree to which human actions over the preceding century of intensive settlement and cultivation may have contributed to the Dust Bowl. At many points, Sweeney makes tantalizing allusions to the ongoing process of adaptation between humans and the environment, but there is less in-depth treatment of this rather central issue here than in other recent works of economic history (see, e.g., Cunfer (2005); Hornbeck and Keskin (2014); and Hansen and Libecap (2004)). To this end, Geoff Cunfer’s On the Great Plains (2005), which centers on precisely this man-nature arms race, would make an excellent technical, quantitative companion to this qualitative work of history — one in which Sweeney’s talents at coaxing nuance and historical richness from a wealth of disparate contemporary sources are on full display.

The droughts of the nineteenth-century Plains — and the lessons learned from them — have long been overshadowed by the environmental events of the 1930s. Prelude to the Dust Bowl should be commended for helping to raise these events from relative obscurity, and in so doing, enriching our understanding of even later processes of conservation, land management, and technological adaptation.


Geoff Cunfer (2005). On the Great Plains: Agriculture and Environment. College Station: Texas A&M University Press.

Price V. Fishback (2016). “How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s,” NBER Working Paper 21925.

Zeynep Hansen and Gary Libecap (2004). “Small Farms, Externalities, and the Dust Bowl of the 1930s.” Journal of Political Economy, 112 (3), 665–694.

Richard Hornbeck and Pinar Keskin (2014). “The Historically Evolving Impact of the Ogallala Aquifer: Agricultural Adaptation to Groundwater and Drought.” American Economic Journal: Applied Economics, 6 (1), 190-219.

Stephen H. Long and Edwin James (1823). An Expedition from Pittsburgh to the Rocky Mountains Performed in the Years 1819 and ’20, Volume II. Philadelphia: H.C. Carey and L. Lea.

Vellore Arthi is a Lecturer (Assistant Professor) in Economics at the University of Essex. Her work focuses on human capital formation, public health, and intra-household allocation in developing-country and historical settings, with particular attention to the impact of climate and environmental shocks on a range of outcomes including health and early-childhood development.

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

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

The Reception of David Ricardo in Continental Europe and Japan

Editor(s):Faccarello, Gilbert
Izumo, Masashi
Reviewer(s):Peach, Terry

Published by EH.Net (October 2014)

Gilbert Faccarello and Masashi Izumo, editors, The Reception of David Ricardo in Continental Europe and Japan.  Abingdon, UK: Routledge, 2014.  vi + 249 pp. $160 (hardcover), ISBN: 978-0-415-82771-3.

Reviewed for EH.Net by Terry Peach, Department of Economics, University of Manchester.

This book is described as “a coherent and unique collection of chapters exploring the reception and diffusion of David Ricardo’s writings in different languages.” As there exists no other study of this kind, the claim to uniqueness is unobjectionable; but the alleged coherence of the volume is not so obvious: the seven chapters of which it comprises are of widely differing length, focus and quality.

The first essay by Alain Béraud and Gilbert Faccarello on the reception of Ricardo in French (1800-1875) is the longest and most comprehensive chapter. While it may seem odd that a single contribution should take up one quarter of the book, in this instance the length seems justified: Ricardo’s work attracted more attention in France (and Switzerland) than in other parts of continental Europe, and French translations and critical interpretations were singularly important in influencing Ricardo’s reception elsewhere. Unfortunately for the understanding of Ricardo, however, the translations were dismal. The 1819 version of the first edition of Ricardo’s Principles by Constâncio is described as “defective, with many errors and approximations that obscured [Ricardo’s] meaning,” while the 1847 effort by Fonteyraud was “almost appalling.” Here it could have been useful to be informed in greater detail about the precise nature of the “defects” and how they may have influenced Ricardo’s (mis-) interpretation. However, it was not only inaccurate translations that were a potential stumbling block. By the time of his literary transmission across the channel, French political economists had developed theories that “all confer a fundamental role on utility and demand” and were viewed as antithetical to, and inimical of, Ricardo’s ideas. Furthermore, readers of the 1819 translation would have been subjected to J.B. Say’s critical notes on the text, indisposing them to a favorable reception (or to an accurate understanding of the book, in Ricardo’s own opinion).  The upshot of these and other influences was that there was “a suspicious and even hostile reception of Ricardo’s writings,” which were criticized, inter alia, for being too abstract and unrealistic, too concerned with material interests, culpably neglectful of demand influences on value, and in some cases, as with the (misunderstood) theory of rent, downright fallacious.

Similar criticisms of Ricardo were articulated by German writers, as we find mentioned in Christian Gehrke’s review of a narrow selection of literature from the period from 1817 to 1914. Running to 61 pages, in this case the length, and certainly the focus, seem more difficult to justify. The author admits that his discussion is “restricted in several respects,” including an exclusive concern with the theory of value and distribution and a limitation on the authors discussed (strikingly, Marx’s reception of Ricardo is dealt with only “indirectly”). The restriction is excused on grounds of “time and space,” which may explain the startlingly abrupt ending of a chapter bereft of concluding remarks. The deeper problem is that the author is pursuing two disparate objectives, one the investigation of the reception of Ricardo’s works, the other an account of “some of the more important German contributions to the development of the classical approach to value and distribution.” The significance of the self-serving fiction of “the” classical approach is that it allows some contemporary followers of Piero Sraffa, including Gehrke, to present themselves as proud standard-bearers of a venerable historical tradition. This chapter is more concerned with the “tradition” than it is with Ricardo’s reception.

The two following and relatively brief chapters cover the reception of Ricardo’s ideas in Portugal up to 1848 (José Luís Cardoso) and Spain from 1818 to 1869 (Salvador Almenar). As it turns out, it was more a case of lack of reception, with Ricardo criticized, when not being ignored, for many of the same perceived foibles that irked those French critics who were themselves influential in shaping Portuguese and Spanish opinion.

Similar considerations apply to Ricardo’s (non-) reception in Italy as recounted by Anna La Bruna and Annalisa Rosselli, especially with the theory of value and distribution. With arresting modestly, the authors confess that there is nothing further for them to add in that area, and instead devote their contribution to inquiring whether Ricardo’s monetary ideas fared any better. They did not. While their conclusion may at this point in the book seem familiar, the authors are to be congratulated for their clear exposition and, uniquely, for providing an informed account of Ricardo’s own position on the issues discussed.

With a French influence also operating in Russia, “their Russian counterparts adopted a respectfully critical attitude towards Ricardian economics,” reports Denis Melnik. By the 1870s, when the Principles was first translated into Russian, Ricardo was typically treated as of only antiquarian interest, later to be enlisted (by Rubin) in a Marxian reconstruction of economic thought. Melnik proclaims joyously, presumably to the applause of Gehrke et al, that the translation into Russian of Sraffa’s work has opened a “new chapter in the long theory of the diffusion of Ricardo’s theory [sic] in Russia.”

The final contribution, on Ricardo’s reception in Japan by Masashi Izumo and Shigemasa Sato, has something in common with Melnik’s in that both extend their discussion of Ricardo’s influence to the present day, no doubt because there is little to say about the earlier period. Izumo and Sato do refer to Ricardo’s “widespread acceptance in Japan” during the late nineteenth and early twentieth centuries, but this “acceptance” was second or third hand via the likes of Fawcett and J.S. Mill, with the Principles only translated into Japanese in 1921. In more recent times Ricardo has increasingly captured the attention of historians of economic thought. Some indication is given of their directions of research, albeit a very sketchy one.

A general theme in this volume is that Ricardo’s works were poorly received in one country after another. This would be in marked contrast to the position in the UK if, as claimed in the Introduction and the first chapter, Ricardo’s domestic reception had been one of general acclaim. But that was not the case. Granted, Ricardo did have his devoted supporters — they numbered precisely two according to James Mill, who identified himself and McCulloch — but his ideas received a barrage of criticism that continued well into the 1830s: there was nothing approaching a victory for Ricardo’s “New School” (as it came to be called) either during his lifetime or in the decades immediately following it. Other countries may have lacked the supporters, but in terms of criticism they were merely following the UK example, both in tone and detail.

Terry Peach, University of Manchester (, is the author of Interpreting Ricardo (Cambridge University Press, 1993) and editor of David Ricardo: Critical Responses, Volumes I to IV (Routledge 2003) which documents the UK reception of Ricardo over the period 1817-1848. With Cheng Lin and Wang Fang he recently co-edited The History of Ancient Chinese Economic Thought (Routledge 2014)

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 (October 2014). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Asia
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII