Human Capital and Institutions: A Long Run View

Published by EH.NET (February 2010)

David Eltis, Frank D. Lewis, and Kenneth L. Sokoloff, editors, Human Capital and Institutions: A Long Run View. New York: Cambridge University Press, 2009. ix + 342 pp. $85 (hardcover), ISBN: 978-0-521-76958-7.

Reviewed for EH.NET by David Mitch, Department of Economics, University of Maryland ? Baltimore County.

The Cliometric movement is now a half century old and throughout its existence Stanley Engerman has been one of its leading lights. Thus it is no surprise that this volume based on papers from a festschrift conference in honor of Engerman offers some exceptionally strong scholarship. However, it also bears some of the characteristics peculiar to festschrift volumes. The human capital and institutions theme suggested by the title has been applied quite broadly and loosely in order to incorporate all the contributions in this volume. Only three of its ten contributions deal with this theme directly; of the rest, two are anthropometric, one deals with employment and income stability, two with human talent, one with legal standing of labor contracts and one with usury laws. And while about half of the contributions are based ? as best I can tell ? on fresh research, the other half are largely reprises in varying degrees of work published elsewhere. Moreover, the book?s status as a festschrift in honor of Engerman is obscured by two aspects. The same editors, David Eltis (Emory University), Frank Lewis (Queens University), and Kenneth Sokoloff (late of UCLA), put together Slavery in the Development of the Americas published in 2004 which also honors Engerman and it is that earlier volume which has the usual introductory tributes and concluding bibliography of published work of the honoree. And in addition, one of the editors, Kenneth Sokoloff, died before the volume under review was completed and this current volume begins with a two page memoriam to Sokoloff while the editor?s introduction gives as much mention to Sokoloff as to Engerman. All the same, given his contributions to economic history, one can hardly begrudge Engerman at least a second festschrift volume and I suspect that at least one memorialschrift to Sokoloff is in the works. Having now actually read the chapters of this volume, I found that their cumulative quality more than offset any lack of cohesiveness, freshness or clarity on festschrift status. In fact, the diversity of topics was a plus in at least one respect; I found a definite merit of this book as an edited volume to be the opportunity it provided to sample the range of approaches currently undertaken by some of the senior practitioners of economic history.

The essays in the volume are grouped into four parts. The first part deals with ?health and living standards.? Two of the essays in this section are anthropometric: Robert Fogel?s survey of his work on biotechnology and what he calls the technophysio evolution and its implications for current health care policy along with Richard Steckel?s overview of his project on using skeletal remains to examine very long run trends in health and nutrition. It is these two essays which truly offer long run perspectives spanning in the case of Fogel?s project several centuries and in the case of Steckel some millennia. Although both these essays stem from much larger research projects, I found each informative as overviews of the authors? work. The third essay in the section is by George Boyer on income and employment instability in Victorian and Edwardian England. Boyer extends previous work with Timothy Hatton on unemployment estimates in substantial new ways with careful marshalling of evidence from diverse sources to argue that important but not fully appreciated changes occurred between the late eighteenth and early twentieth centuries in how British society coped with income and employment insecurity. Boyer argues that provision for poverty ?was not a ?unilinear progression in collective benevolence? from poor relief to national insurance? (p. 83). Instead, compared to what came before or after, the Victorian era was dominated by the role of self-help, friendly societies and other forms of mutual assistance rather than government-funded poor relief.

The second part of the volume is the one that directly addresses the topic of human capital and institutions. While two of the chapters in this part are based on work published elsewhere, they are both fundamental contributions and thus worth bringing together in one volume. One of these chapters is Stanley Engerman, Elisa Mariscal, and Kenneth Sokoloff?s piece on the evolution of schooling in the Americas. It is a slightly revised version of Mariscal and Sokoloff (2000). In this chapter, the authors build on the now influential Engerman/Sokoloff thesis on the importance of resource endowments in shaping long run institutional change. They attribute the much more advanced state of schooling North America over Central and Southern America to the more equal distributions of land and wealth in the former area. This chapter is a model of careful comparative argument and is also valuable for its collection of schooling data for various dates for a wide range of North and South American countries. In their contribution, Claudia Goldin and Lawrence Katz, like the Engerman et al chapter, consider the comparative question of why the U.S. led in education over other countries of the world. However, they address this question by looking at variation across U.S. states throughout the early twentieth century and they focus on secondary education. Like Engerman et al, they attribute much of the advance to social homogeneity in U.S. communities but in contrast to the previous study they give less consideration to the franchise. To their credit, the authors are quite clear in opening notes on how their chapter builds on previous working papers and also on material taken up in greater depth in their recent book The Race between Schooling and Technology. And they provide a sense of the care taken in compiling their data. They thus nicely offer readers ?Goldin and Katz Concise? rather than ?Goldin and Katz Lite.? The remaining chapter in this part reports Michael Edelstein?s new time series estimates of engineering graduates in the State of New York over the nineteenth and twentieth centuries. Edelstein does a thorough job of explaining his choices in compiling his numbers and the significance of his findings on trends in a profession that he argues convincingly has been central to modern economic growth.

The third part is titled ?human capital outliers? and consists of chapters on artists and very rich Jews. In their chapter, David Galenson and Robert Jensen revisit work Galenson has been doing for about a decade on the life cycle of artists based on a distinction between incremental, experimental innovators and conceptual innovators. They provide examples of artists in each category and then some empirical support by showing fitted profiles of prices of artworks on age in each case. Edward Tufte (2006, pp. 148-50) has objected to this modus operandi of displaying fitted curves without displaying the underlying auction price data ? and that the dichotomy in creative types may over-simplify. Still the exposition is lucid and the price-age profiles are intriguing. The other chapter in this part is Peter Temin?s study of why there have been a disproportionate number of very wealthy Jews. After providing a quite cogent formulation of the problem, Temin argues that Jews attaining great wealth were able to do so not as is sometimes suggested because discrimination in large business corporations spurred their entrepreneurial endeavors but rather because of the social networks they could draw on due to their clearly defined religious and ethnic identity. He supports his argument with simulations showing contagion effects. Despite this volume?s title, neither Galenson and Jensen nor Temin give much attention to the role of institutions in shaping and influencing the factors they consider although Galenson has done so elsewhere (see for example Galenson (2001)). I was surprised that Temin did not reference Andrew Godley?s (2001) comparison of Russian immigrant Jews in London versus New York City as a way of ascertaining the role of institutional environment in influencing the promotion of entrepreneurship for groups with a common Jewish heritage.

The final part of the volume takes up the theme of constraints. Robert Steinfeld?s chapter takes up constraints in the labor market. His point of departure is the Fogel and Engerman finding in Time on the Cross that slave labor was not necessarily less efficient than free labor. He then argues that the emergence of free labor contracting and in particular the reform of the Masters and Servants Act in Victorian England was not due to market forces or the perception by employers that free labor was more efficient than coerced or constrained labor but rather to the extension of the franchise with the Reform Bill of 1867 and related political factors. Steinfeld?s is the only non-cliometric chapter in the volume making minimal use of quantification and with no tables or figures.

Hugh Rockoff?s concluding chapter deals with the non-human resource issue of usury laws in the North American British colonies and U.S. He has compiled evidence on the evolution of usury laws in the North American colonies and the U.S. He argues for the importance of both intellectual attitudes as well as competitive market forces in influencing imposition and relaxation of usury laws. Until I read his chapter, I am not sure I fully appreciated that Adam Smith had actually advocated usury restrictions in The Wealth of Nations, albeit with moderation. Rockoff gives careful attention to the usury provision of the National Currency Act of 1863, arguing that concern for promoting the flow of capital to Western states implied provisions allowing national banks in a given state to charge the highest allowed interest in that state rather than some lower uniform national level. Rockoff?s weighing of the evidence leads him to conclude that on balance usury laws in the U.S. did have an impact on capital markets, though he leaves it as an issue for future research to assess its magnitude. Interestingly, Rockoff admits (p. 313, note 36) that compared with Bodenhorn and Rockoff (1992), his current work on usury laws implies somewhat less regionally integrated capital markets in the nineteenth century U.S.

To use David Galenson?s distinction, the cliometric movement was initially perceived by many as making a conceptual breakthrough in the practice of economic history; however, this volume raises the issue of whether many of the founding cliometricians should in retrospect be classified as experimental innovators. Comparing the second section of this volume with the human capital section of the manifesto of the cliometric movement, The Reinterpretation of American Economic History (Fogel and Engerman 1972), one is certainly struck by the variety of incremental advances both conceptually and in data collection that have occurred in the interim. The current volume also highlights at least some of the interdisciplinary directions in which cliometrics has proceeded over the last 40 years. This is particularly evident in the anthropometric work of Fogel and Steckel. As Galenson (2009, p. 2) has recently acknowledged, efforts to extend quantification to art history have met with definite resistance by art historians. All the same, the use of quantification in this volume while certainly abundant is generally worn lightly and in a nuanced manner as would seem fitting for the honoree?s intellectual style. While Steinfeld?s is the only non-quantitative chapter, only three of the remaining nine chapters by my reckoning explicitly report econometric results.

It is certainly a tribute to the breadth of both Engerman?s and Sokoloff?s work as well as the reach of cliometrics that this volume features just one aspect of their endeavors. One can turn to Slavery in the Development of the Americas for an entirely different dimension of Engerman?s contributions and I would anticipate at least one Sokoloff memorialschrift dealing extensively with his work on technological innovation and other topics barely touched on in this volume.

References:

Howard Bodenhorn and Hugh Rockoff (1992), ?Regional Interest Rates in Antebellum America? in Claudia Goldin and Hugh Rockoff eds. Strategic Factors in Nineteenth Century American Economic History, A Volume to Honor Robert W. Fogel (Chicago: University of Chicago Press).

David Eltis, Frank D. Lewis, and Kenneth L. Sokoloff, editors (2004), Slavery in the Development of the Americas (Cambridge University Press).

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

David Galenson (2001), Painting Outside the Lines (Cambridge, MA: Harvard University Press).

David Galenson (2009), Conceptual Revolutions in Twentieth-Century Art (Cambridge University Press).

Andrew Godley (2001), Jewish Immigrant Entrepreneurs in New York and London, 1880-1914 (New York: Palgrave).

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

Elisa Mariscal and Kenneth L. Sokoloff (2000), ?Schooling, Suffrage, and the Persistence of Inequality in the Americas, 1800-1945? in Stephen Haber ed. Political Institutions and Economic Growth in Latin America (Stanford: Hoover Institution Press).

Edward Tufte (2006), Beautiful Evidence (Cheshire, CT: Graphics Press LLC).

David Mitch is Professor of Economics at the University of Maryland, Baltimore County. His chapter ?Chicago and Economic History? is forthcoming (2010) in Ross Emmett ed., The Elgar Companion to the Chicago School of Economics. Email: mitch@umbc.edu.