Conversations on Growth, Stability, and Trade: An Historical Perspective

Published by EH.NET (April 2003)

Brian Snowdon, Conversations on Growth, Stability, and Trade: An Historical

Perspective. Cheltenham, UK: Edward Elgar, 2002. xvi + 483 pp. $120

(hardcover), ISBN: 1-84064-995-X.

Reviewed for EH.NET by Christopher Hanes, Department of Economics, State

University of New York at Binghamton (beginning fall 2003).

The first part of this book is a survey of theories of long-run economic

growth, business cycles, monetary policy and international trade and capital

flows, based on the author’s lectures at the Newcastle Business School,

Northumbria University (England). The second part is transcripts of the

author’s interviews with Ben Bernanke, Jagdish Bhagwati, Alan Blinder, Nick

Crafts, J. Bradford DeLong, Barry Eichengreen, Kevin Hoover, Charles Jones,

Christina Romer and Joseph Stiglitz. Together, the survey and interviews give a

clear view of current work in macroeconomics and its intellectual background,

guided by a knowledgeable man who appears to have remarkably few axes to grind.

Oddly missing is any discussion, beyond a bare mention, of “New Keynesian”

theory — that is, attempts to understand the microfoundations of wage and

price rigidity and unemployment, and test implications of the new theories. But

there is a lot on growth theory and monetary policy, two fields that have

changed a lot in recent years. A particular virtue of the book is its emphasis

on the interplay between economic thought, public policy, and economic

outcomes.

The book’s title isn’t accurate, as the book actually doesn’t give a

historical perspective apart from its thorough discussion of the Great

Depression and some of the interviews. History comes up hardly at all in the

interviews with Bhagwati, Blinder, Hoover, and Stiglitz, for the excellent

reason that those men have little to say about it (though they have a lot to

say about other things). Mostly, the book guides the reader expertly through

macroeconomics right up to the borders of economic history, and stops there.

With respect to economic growth, for example, the textbook section explains the

Harrod-Domar model, the Solow model, AK models, etc., and the role of free

trade and capital flows, leading right into fascinating interviews with Jones

and Stiglitz. The reader gets the idea that the important variable is

institutions. Jones observes that “it’s not at all clear why some countries are

able to adopt institutions which encourage people to work hard to produce goods

and services rather than to steal from their neighbours, either directly

through theft or indirectly through rent seeking and corruption. The important

question is how do you change those institutions?” (p. 355). “When we start to

ask important questions like why are some countries better at setting up good

institutions, certainly it seems that one needs to have a good understanding of

the system of incentives that is in place at the start. Maybe it’s important to

understand where that system came from, in order to understand where it’s

likely to go” (p. 366). From this point, the author could lead us into the

economic history literature and describe a few concrete examples of important

or illustrative institutional developments in this or that time and place. But

he doesn’t.

My other complaint about the book is that it appears to have come into print

untouched by the hands of editors. There are frequent misspellings and

grammatical errors of the kind that result from a careful author revising a

manuscript himself, with no one else to read over the drafts. It was an

editor’s job, left undone, to restrain the author’s use of quotes to make

statements that do not require specific cites, like this: “As Easterly writes,

‘When machines are scarce, the additional output from one more machine will be

high. When machines are abundant, additional output from one more machine will

be low'” (p. 74). Some sections of the book give the impression that the author

made, and just barely lost, a bet that he could write whole paragraphs without

using his own words. The staff at Elgar ought to be ashamed of themselves.

None of this detracts from the usefulness of the book or Snowdon’s achievement

in producing it. The first part of the book is meant to set up the issues that

will be discussed in the interviews, but it also constitutes an extraordinarily

good textbook, explaining important ideas and pointing out connections between

them. The interviews reveal the intelligence and humor of their subjects, and

hold a few surprises. One might recall a recent flap when Stiglitz seemed to

say that some fellow economists in public service were intellectually dishonest

shills for Wall Street — well, he says it again here (p. 396)! Romer’s

comments on current monetary policy issues go against conventional wisdom in

important respects, but are strongly based on practical experience — the

vicarious experience one gains from studying history. This interview, and the

ones with Bernanke, Crafts, DeLong and Eichengreen show how much historical

knowledge can add to the work of a great economist.

While the book won’t tell a macroeconomist what he needs to know about economic

history, it will tell an economic historian much of what he needs to know about

current literature in macroeconomics. I recommend it to graduate students

training in either area. It should be in every library. A hundred years from

now, it will be an important guide to what leading economists thought they

knew, and what they knew they didn’t know, as of A.D. 2002.

Christopher Hanes is the author of “Nominal Wage Rigidity and Industry

Characteristics in the Downturns of 1893, 1929, and 1981,” American Economic

Review, December 2000, and (with John James) “Wage Adjustment under Low

Inflation: Evidence from U.S. History,” American Economic Review,

forthcoming.