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Published by EH.NET (July 2006)

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Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright, editors, Historical Statistics of the United States, Volume Three: Economic Structure and Performance. New York: Cambridge University Press, 2006. xiv + 831 pp. $825 (for the five-volume set), ISBN: 0-521-81790-0.

Reviewed for EH.NET by Joseph H. Davis, The Vanguard Group.

This volume of Historical Statistics is comprised of nine chapters and, in most cases, focuses on annual data and their sources. The objective is a straightforward if not ambitious one: provide reliable and relevant data that characterize the evolution of the economic structure and performance of the United States. Of course, “reliable and relevant” are open to interpretation. In my judgment, this Millennial volume does a better job than its Bicentennial predecessor, a noteworthy achievement.

The first two chapters of the volume focus on the prominent macroeconomic data on the trend in national output (first chapter) and business cycles (second chapter). I wish that I had had Richard Sutch’s introduction to these two chapters while in graduate school. Sutch provides an excellent summary on the history of national income accounting and the official NIPA estimates. Along with Paul Rhode, Sutch also provides a much-needed summary on the state of affairs regarding conjectural real GDP estimates before 1929.

The first chapter also introduces a new annual series on real GDP beginning in 1790. Referred to as the Millennial Edition Series, Sutch characterizes his real GDP estimates in the footnotes as “a pastiche reflecting the work of many contributors,” which is no exaggeration given the copious series documentation. In effect, the real GDP Millennial Edition Series is the result of splicing the best available annual interpolators through the best available output benchmarks for the pre-Civil War period. However, one criticism of this series is that it should be accompanied by more disclaimers, and its construction should have been detailed in the introduction (rather than delegated to endnotes). Indeed, given the overview of the unresolved “excess volatility” debate in the introduction, how should this series be viewed? What statistical inferences can (and cannot) be drawn? Given the fact that the volume provides two long-running annual real GDP per capita series dating back to 1790 (the Millennial Edition Series, and an alternative estimated by Louis Johnston and Samuel Williamson for EH.NET using different source data), which one is preferred? While I believe that the Millennial Edition utilizes more appropriate data in its interpretation (disclaimer: some of the data used are my own), I believe that more discussion should have been dedicated to its limitations. In my opinion, these real GDP data may be used to control for long-term trends, but should not be used in testing for structural breaks in macroeconomic volatility over time.

As a minor quibble, some of the tables in the first two chapters do not include the latest revisions, such as the version of the Davis industrial production index used to interpolate the real GDP Millennial Edition Series. In addition, the business cycle dates presented in the second chapter focus solely on the NBER dates, and thus ignore subsequent revisions to the monthly NBER business cycle dates for the late 1800s and early 1900s (by Christina Romer), and revisions to the annual NBER cycles for the 1800s (by myself more recently).

The volume’s fourth chapter focuses on popular wholesale and consumer price indexes. Christopher Hanes, the chapter’s editor, provides a fantastic introduction on how price indexes are constructed, the general trend in aggregate U.S. price indexes since 1800, and a brief history of the most popular aggregate price indexes. Hanes even provides tables with examples of how the rate of change in a price level can be computed under different techniques, a valuable exercise for students. Also noteworthy are Hanes’s comments on (and caveats about) various index construction methods. Hanes also cautions on the usage of the longest historical aggregate price series, particularly the annual CPI for all items, which has been linked from various sources back to 1774. While available for some time among economic historians (and third-party providers such as Global Financial Data), Hanes suggests that researchers may wish to use the PPI (as opposed to the CPI) when controlling for the price level back through the 1800s on account of the scarcity of rent data prior to 1913.

Richard Sutch’s chapter on savings, capital and wealth should serve as must-reading for students of economics and public policy. Of particular note is his expert treatment of the oft-confusing definitions of various savings measures, and the distinction between national and personal savings. The annual data in the chapter include updates of many data series derived from the National Income and Product Accounts and the Flow of Fund Accounts.

I found the volume’s sixth section, entitled “Geography and the Environment,” one of the most interesting, perhaps because I have the least familiarity with this topic. The section discusses and presents data on a host of environmental and climate indicators. Certainly, the section should introduce an interesting array of time series to a broader audience, including annual data on the number of oil spills, North American geese population estimates, and the number of forest acres damaged by insects. The section also updates important weather data, including the annual mean temperature and precipitation from various city and climatological stations as early as 1780.

The volume’s seventh section is dedicated to science, technological change, and productivity. The section’s editors, Gavin Wright and Stanley Engerman, provide excellent and concise overviews of these phenomena, including the U.S. patent system, the rise of organized industrial research, productivity measures, and the rise of computer technology. The section updates various Bicentennial series, including annual patent data, R&D expenditures, and productivity indexes. Gavin Wright also assembles valuable statistics on computers, including performance indicators of computers and transistors beginning in 1946 with the ENIAC.

Naomi Lamoreaux’s introduction to the volume’s eighth section on the dynamics of U.S. business organization is simply excellent, and should serve as necessary reading for students of finance and history alike.

The volume’s final chapter on U.S. financial markets assembles various statistics on monetary aggregates, banking, insurance, and interest rates. In the end, this chapter will be heavily consulted by practitioners and researchers in empirical finance. Michael Bordo, the editor of the section, has assembled a solid chapter with the assistance of other leading minds in the history and evolution of the U.S. financial system. Contributors include Howard Bodenhorn and Eugene White on financial institutions and their regulation, Peter Rousseau on securities markets, and John James and Richard Sylla on debt, the flow of funds, and interest rates. Key financial series have been updated, including those for U.S. equity prices (as early as 1802), long-term bond yields (as early as 1798), and money market rates (as early as 1831).

Like its 1975 predecessor, this reference volume set stands to be among the most widely cited works in economic history. The third volume updates the most popular macroeconomic and financial data, and in most cases does so with the careful assistance of leading scholars. Beyond the data, this volume also provides critical information as to the data sources, their limitations, and their potential implications. Arguably, this context is as important as the data series themselves, since this volume will certainly play a role in educating the next generation of economists, analysts, and historians.

Joe Davis is a Principal within both the Investment Counseling & Research Department and the Fixed Income Group of The Vanguard Group, a mutual fund company based in Valley Forge, Pennsylvania with over $1 trillion assets under management. While not currently in academia, Davis is a Faculty Research Fellow of the National Bureau of Economic Research (NBER).