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Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700-1850

Author(s):Pearson, Robin
Reviewer(s):Tebeau, Mark

Published by EH.NET (February 2006)

Robin Pearson, Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700-1850. Aldershot, UK: Ashgate, 2004. xiii + 434 pp. $100 (hardcover), ISBN: 0-7546-3363-2.

Reviewed by Mark Tebeau, Department of History, Cleveland State University.

Despite its rather obvious importance to modern economic development, the history of fire and property insurance has been largely neglected. Until now that is. Robin Pearson’s exhaustively researched and meticulously argued study, Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700-1850, offers the definitive history of the British fire insurance industry through the middle of the nineteenth century. Even more critically, Pearson establishes just how integral property insurance was to the industrial revolution. Although Pearson is careful to note that fire insurance did not determine the economic development (and, in fact, was often shaped by it), he shows how fire insurance developed in support of the broader economy, was often at the cutting edge of industrial business expansion, and fostered further economic growth.

At its broadest level, Pearson’s argument demonstrates how fire insurance was integral to an industrializing society. Widely available in London by the 1850s and easily acquired in the provinces, fire insurance reduced the uncertainty associated with the hazard of fire — at least in economic terms for businesses and the middle-class for whom insurance policies would have been most affordable. On mechanistic grounds, the availability of relatively cheap and stable forms of insurance offered security to property owners — residential, mercantile, or manufacturing. By indemnifying policy holders from significant property losses associated with fires, insurance provided an institutional incentive for accumulating wealth in the form of material items and investment. In short, it minimized the risks associated with aggressive economic development. At the same time, fire insurance was critical to the financing of the infrastructure, thus critical to industrial development. Firms provided capital for a variety of public improvement projects as well as for private economic ventures. Fire insurance firms also depended on and strengthened the institutional networks on which economic development depended. Thus, fire insurance became integral to industrial activity, “forming part of the feedback mechanism by which trust and confidence multiplied within business communities” (368).

Pearson’s research is exhaustive and his arguments are qualified with exceptional care — so much so, that it is difficult to offer a full accounting in a brief review. Insuring the Industrial Revolution begins with an initial chapter that outlines the overall development of the industry in a series of detailed and well-constructed tables. After that, the story is organized into two parts. The first section offers a chronological portrait of the industry. Pearson essentially divides his narrative into three periods of analysis, bounded by major political and economic developments, as well as shifting trends in the industry itself: the period from 1720 to 1782, the era from 1782 to 1815, and finally the years between 1815 and 1850. In these chapters, Pearson places the industry into the historiography of the British industrial revolution. Throughout, he takes an approach that explores the entirety of the market in insurance. He explores the vagaries of fire insurance firms in the provincial areas as well as in larger cities. He meticulously compiles and analyzes a mountain of data, synthesized into over fifty figures and tables — an impressive and (no-doubt) time-consuming contribution in their own right.

The second section of Insuring the Industrial Revolution examines the industry’s internal organization in a thematic explication of its central elements. It explores four broad topical areas: the process of company foundation and the social, political, and economic networks behind this process; the marketing of insurance and the development of networks of agents to manage the insurance transactions; the core practice of underwriting and its change over time, including the challenges of assessing risk; and the trends in how companies invested their capital and understood that capital in terms of their broader portfolio of risk, as well as how the insurance industry operated as an investment from the perspective of individual investors.

Although well written, it is easy to get lost in the details of this story. Pearson lovingly and painstakingly recounts an exhaustive list of similarities and differences in the industry, paying special attention to the geographic differences between Britain’s various provincial areas, and between the provinces and the major metropolitan centers. Sometimes frustrating from the perspective of a reader, this level of specificity nonetheless advances the larger purpose of the book, which is to recognize that subtle — and sometimes contradictory — manner in which the industry developed. Nor is this precisely a critique of Pearson’s skill as a writer. To the contrary, Pearson shows deft authorial voice in juggling such a complex story. For example, both the first and second sections of the narrative cover the same material, but there is little sense of redundancy here. In fact, Pearson’s examination of the various elements of the insurance industry is exceptionally well constructed. These chapters are a primer on the basics of insurance, introducing issues that did not disappear in 1850 but would continue to haunt insurers well into the twentieth century.

Insuring the Industrial Revolution will become a touchstone for future research on the history of fire and property insurance in part because of the connections that Pearson makes between industrialization and fire insurance. More importantly, though, this work also lays out an agenda for future research into the industry. Pearson provides a compelling argument as to why we should seek to better understand the connections between economic development and property insurance. He suggests, too, that we must look at the subject globally, developing rich cases studies that explore the history of insurance in Europe, the United States, and other places. And, through the example of what he has done with the British fire insurance industry, he demonstrates the benefits of weaving such case studies into the comparative history of property insurance. Not only will we get a better sense of the particulars of the industry, but we will also be able to better understand how the expansion of global economic connections may have fostered the stability of the insurance industry by creating a market in reinsurance and dispersing risk more widely. And, finally, we must keep in mind that the history of the fire insurance industry does not end in 1850 with the advent of more sophisticated tools for understanding risk. Rather, the industry’s continued evolution occurs in a direct relation to broader economic, political, and societal changes, not the least of which is that the danger of fire itself will continue to shift in modernizing societies.

Indeed, if Insuring the Industrial Revolution shows how the study of fire insurance contributes to broader debates in economic history, it also suggests implicitly that we place the study of fire insurance into a wider historical lens. Unfortunately, Pearson is a bit too guarded about such possibilities, arguing that “establishing an evidential link between the expansion of insurance and broad attitudinal changes in a society is extremely difficult” (368). However, I believe that we should nonetheless push the boundaries here and broaden the frame. We should identify ways in which the expansion of fire (and property) insurance was related to changes in the social, cultural, and political realms. I agree that such connections are difficult to prove, but as I suggest in my own work on urban fire risk, the work of insurers had tremendous implications for society. These include encouraging consumerism and the consumer safety movement; fire underwriters’ activities are clearly linked to shifting perceptions of societal danger; and, at the very least, insurers’ visions of the world frequently have been built into the material landscapes of ordinary life.

Insuring the Industrial Revolution is a singular achievement. Robin Pearson demonstrates that fire insurance played a consequential, if sometimes ambivalent, role in the industrial revolution. He also provides a roadmap that future scholars in this area will follow when constructing their own studies of the history of fire insurance. I hope that this fine study garners the wide audience it deserves.

Mark Tebeau is author of Eating Smoke: Fire in Urban America, 1800-1950 (Johns Hopkins University Press: 2003).

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):19th Century

The Effortless Economy of Science?

Author(s):Mirowski, Philip
Reviewer(s):Boland, Lawrence

Published by EH.NET (February 2006)

Philip Mirowski, The Effortless Economy of Science? Durham, NC: Duke University Press, 2004. v + 463 pp. $25 (paperback), ISBN: 0-8223-3322-8.

Reviewed for EH.NET by Lawrence Boland, Department of Economics, Simon Fraser University.

This book is a collection of sixteen essays of which six were published in readily available journals and eight in collections. In addition to the Introduction, there is one original essay at the beginning. All of them will provide new evidence for Mirowski’s critics, particularly those who complain about his over-the-top style.

The common thread for the essays is that all are about heretics — starting with Mirowski himself. Readers with first-hand familiarity with the academic life of a heretic will easily appreciate these essays. The sub-theme for all of the essays is a challenge for the common view that in science there is a market place for ideas. The sub-theme is common place in so-called Science Studies and apparently even in some Philosophy of Science literature.

Much of this book will be familiar to readers of Mirowski’s previous books. But the focus throughout is what he calls the science-economics nexus. In his Machine Dreams that nexus concerns how modern economics is financially promoted by outside agencies such as the U.S. Air Force and Naval Research, etc. One could say that even though the economics of research matters, it is not a “market place of ideas” as some would claim, but (I would say) a competition for “shelf space.” As is well known in the grocery store business with the Pepsi-Coke wars, this is not really a case of perfect competition. Machine Dreams explains why the competition was not market-based and to a great extent rigged. The heretics discussed here were the ones unable to get shelf space and the question addressed is why.

The book is divided into five parts. In Part One, after an introduction that explains everything one needs to know about the essays, Mirowski begins by confessing to being an aging enfant terrible. In Part Two, he begins his critical examination of those who try to see science as a “market place of ideas” and other attempts to characterize science by using characterizations of society. The chief heretic to be examined is Michael Polanyi who is of primary interest because he explicitly tried to create an economics of science. Thomas Kuhn comes in for critical examination for his attempt to create a sociology of science, as does the philosopher of science Philip Kitcher who goes so far as to use neoclassical and game theory as a basis for characterizing social structure of science. Of particular concern is the apparent privatization of science which seems to be rendering ordinary academic science journals to be useless.

Part Three raises many questions concerning the na?ve presumptions of economists and social scientists about numbers and constants that they think can be found in natural sciences. One issue raised is that too often social scientists think that measurements involve a natural process when in fact even in physics the constants needed to establish measurements depend on the stability other alleged constants and thus can often be open to question. Part Four takes this into the common quantitative territory of econometrics. In particular, Mirowski takes on the proponents of Cliometrics and the na?ve presumptions of proponents of rational expectations, as well as others who equate neoclassical rationality with economic success. He provides evidence of a convincing counter-example to such presumptions. The more general questions involve when economists adopt the latest mathematical fad to model neoclassical economics without thinking things through. This discussion involves another heretic, Benoit Mandelbrot, a mathematician who understood the limits of mathematical model building.

Part Five strikes at the heart of neoclassical economics, the so-called Laws of Supply and Demand. The chief heretic here is William Thomas Thornton who was a friend of John Stuart Mill and yet was critical of the Laws of Supply and Demand and in particular the basic notion of such a thing as a demand or supply curve that is taken for granted in textbooks today. Armed with Thornton’s perspective, Mirowski turns to the obvious culprit, Alfred Marshall, whose presentation of demand and supply curves is the fountainhead of almost every neoclassical textbook. This part closes out with a consideration of historiographical questions that might be asked by a wise historian of science. The heretic here is Henry Ludwell Moore, who Mirowski argues began an empirical approach to economics that was intended to be a critique of Marshallian demand and supply analysis contrary to conventional wisdom. And in the last and most difficult chapter, the challenge for historians of economic thought is how they go about reconciling ordinary demand and supply analysis or market exchange analysis as a view of science with an alternate view that might see sciences as a “gift economy”.

An obvious audience for this book is all of the aspiring heretics out there who will find Chapter 1 to be particularly interesting. Obviously, it is a book that should be read by all true-believers in neoclassical economics. But since economics today is being taught as if it is a matter of catechism rather than critical thinking, there is probably not much hope. Surely, historians of thought can find a lot here to cause them to reconsider some sacred cows.

Lawrence Boland’s recent publications include Foundations of Economic Methodology: A Popperian Perspective, free PDF copies of his previous five books and many other publications can be found at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

The Political Economy of Protection: Theory and the Chilean Experience

Author(s):Lederman, Daniel
Reviewer(s):Irwin, Douglas A.

Published by EH.NET (January 2006)

Daniel Lederman, The Political Economy of Protection: Theory and the Chilean Experience. Stanford: Stanford University Press, 2005. ix + 191 pp. $55 (cloth), ISBN: 0-8047-4917-5.

Reviewed for EH.NET by Douglas A. Irwin, Department of Economics, Dartmouth College.

This slim volume provides an overview of the political economy of trade policy in the case of Chile over two centuries. This is efficiently done in four chapters. The first chapter reviews the economics and political science literatures on the political economy of protection as a way of setting the stage for the analysis of Chilean policy. The second chapter consists of a historical overview of Chile’s trade policy from the early nineteenth century to the present. Chapter three undertakes an econometric analysis of Chile’s trade to GDP ratio since 1810, and chapter four addresses the forces behind Chile’s open trade policies since 1974.

The literature on the political economy of trade policy is such a large and sprawling one that it is difficult to provide a synthesis of the whole. Still, Lederman provides a good overview of the literature in both economics and political science. Economists tend to focus on economic interests and income distribution, while political scientists tend to focus on ideological and institutional considerations. These approaches can be complementary, but Lederman tends to treat them separately rather than propose an integrated framework that he will use throughout the book in analyzing Chile.

The book then moves on to examine Chile’s openness (trade to GDP ratio), terms of trade, and real exchange rate for as long a period as data exist. These indicators are then related to discrete changes in Chile’s trade policy in terms of legislation and other policy actions. Of particular note is how liberalism was discredited as a policy approach in the economic chaos between 1911 and 1927. As a result of changed economic circumstances, in particular, a severe and negative terms-of-trade shock in 1918, interest groups and ideas about the economy led to an institutionalization of protection.

The next chapter uses unit root tests to determine when there were structural breaks in Chile’s openness ratio and explores how various independent variables (openness, fiscal balance, terms of trade, economic growth, etc.) affect the probability of liberalization. This is a rather heavy-handed use of time series econometrics that is informative only in a limited way. One of the major problems with the political economy literature, reviewed in chapter one of the book, is the relatively low quality of empirical work. The standard approach has been to throw a bunch of independent variables on the right hand side of the equation and predict tariffs, openness, probability of trade policy change, etc. It is easy to raise questions about whether the independent variables are truly independent, or how one should interpret the results. The degree of measured openness of an economy depends not only (or even primarily) on government policy, but also on economic structure at home and abroad, making it difficult to fully capture in a parsimonious econometric equation. (The estimation of more structural models of the political economy of protection has many problems as well.) Lederman’s contribution is to look specifically at Chilean data rather than provide any methodological breakthroughs in this area.

Chapter four is an interesting and enlightening case study of how Chile changed its trade policy toward a more liberal stance in the early 1970s and thereafter. Lederman describes what happened, the interest group participation in the change, the various compensation mechanisms that were employed to ensure political support for the change, and how the change persisted. This chapter would be excellent reading for anyone interested in a succinct and informative analysis of Chile’s policy change.

In sum, economic historians will benefit from the availability of this succinct overview of Chilean trade policy. While the economic history of Argentina’s trade policy is known from the work of Carlos Diaz Alejandro in the past and Alan Taylor more recently, and Mexico’s policy has been illuminated by the work of Stephen Haber, more work is needed on other important Latin American countries. Lederman’s book is a good contribution that provides some diversity in historical experience beyond the standard studies of European or North American trade policy.

Douglas A. Irwin is the author of Free Trade under Fire.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: WWII and post-WWII

Americanization of the European Economy: A Compact Survey of American Economic Influence in Europe since the 1880s

Author(s):Schröter, Harm G. S
Reviewer(s):Brownlow, Graham

Published by EH.NET (January 2006)

Harm G. Schr?ter, Americanization of the European Economy: A Compact Survey of American Economic Influence in Europe since the 1880s. Dordrecht: Springer, 2005. xii + 268 pp. $99 (hardcover), ISBN: 1-4020-2884-9.

Reviewed for EH.NET by Graham Brownlow, Faculty of Business, Auckland University of Technology.

The development of what could be termed the “American way of economic culture” in Europe since the 1880s is the stated focus of Harm Schr?ter’s book. Schr?ter is Professor of History at the University of Bergen. The long-run focus of the economic history and the promise to consider the nexus between European cultural and economic development intrigued and excited this reviewer; unfortunately my expectations and hopes were far from met. Indeed after ploughing through this book, Schr?ter’s claim made in the preface (p. ix) that it was the product of ‘a number of years’ labors came as a great surprise to this reviewer. The standard of general presentation is extremely careless for an academic work, especially for one with such a high hardcover price. The inadequate standard of presentation leaves the distinct impression of a manuscript having been rushed to publication without adequate proofreading. There are far too many typos, spelling and grammatical errors to mention. Entire passages are put in italics for no good reason (p. 118) and at one point instead of the location of an AFL-CIO conference the reader is met in the text with a cryptic ‘[where?]’ (p. 196).

The basic thesis of the book is that three successive historical waves of Americanization have shaped Europe’s economic and cultural life. These waves are identified and each is assigned a part in the book. Part 1, which is only a single chapter, covers the first wave of Americanization that is claimed to have emerged between 1870 and 1945. Part 2, covered by chapters 2 through 4, discusses the ‘Golden Age’ as a process of Americanization and the next three chapters cover Americanization since the 1980s. In part 1, Americanization is viewed as involving a transfer of ‘economic institutions and culture’ across the Atlantic. In the period from 1870 to 1945 the process is equated with a Europe-wide phenomenon; in later chapters the diversity of different national experiences is recognized. In part 2, the implications of the Marshall Plan for Americanization are considered along with the cultural effects of the growth of mass consumption and production. In part 3, the focus is on the transfer of free market policies to Europe since the 1980s. The role of financial and labor markets in determining the pace of Americanization is also considered.

The book covers a wide range of issues, but its coverage is found wanting in a number of respects. Firstly, there are a wide range of topics where Schr?ter makes elementary errors regarding historical fact. To note just a few of the more glaring errors, F.A. Hayek was not a Friedmanite monetarist of the Chicago School variety (pp. 127-28) and his Road to Serfdom was first published in 1944 and not 1946 (p. 128). EQUIS is not an American business school standard (p. 149). EQUIS is in fact European in origin and is run by the European Foundation for Management Development (EFMD). The emergence of professional baseball began with the formation of the National league in 1876 and not at the start of the twentieth century (p. 186). As with the typographical errors, these errors of fact should have been spotted prior to publication.

Secondly, a number of major weaknesses in the historical and economic interpretation exist independently of Schr?ter’s many errors of historical fact. To start with, especially as Schr?ter uses it, the central concept of Americanization is imprecise. In addition to defining it as a transfer of culture and institutions, Schr?ter also defines it as variously a synonym for convergence of growth rates (p. 96), the pursuit of deregulation and privatization (p. 205) and national differences in per capita advertising expenditure (p. 120). While these uses are not necessarily inconsistent with one another, this reviewer would have preferred a single definition that could better lend itself to measurement. Schr?ter’s suggestion that such a more quantitative approach would be ‘misleading’ (p. 7) again does not convince this reviewer.

Thirdly, there are a number of extremely peculiar omissions in the discussion of Americanization. These omissions further reduce the credibility of the book. Strangely, despite in chapter 4 discussing the alleged role of marketing and advertising as academic disciplines in promoting Americanization, Schr?ter makes no reference to the growing literature on the causes and consequences of the post-1945 Americanization of the global economics profession (Coats, 1995). Schr?ter, moreover, despite claiming that small states are more susceptible to Americanization (p. 205), ignores mentioning the role of American investment in creating Ireland’s economic transformation in the last decade. Most economists would agree that the attraction of American inward investment has been central to the Celtic Tiger. For Schr?ter to omit even mentioning the paradigm case of American economic influence in recent European economic history, when he repeatedly discusses the very ‘unAmerican’ practices that exist within German retailing, strikes this reviewer as odd to say the least.

Perhaps this last omission arose because all too often Schr?ter is rather too fond of equating German and/or French with ‘European’ conditions. Different European countries get very different levels of discussion devoted to them; indeed some countries barely get a mention. The contents of the index illustrate this point. There are no references to Spain, Portugal or Poland in the index and few mentions to these countries in the text. This skewed geographical focus is all the more unfortunate as the book’s introduction promised the analysis would not just consider the major countries (p. 8). Moreover, those interested in UK economic history will be similarly disappointed, — while in certain parts of book British cultural and economic ‘exceptionalism’ is recognized (pp. 6, 205), it is never adequately explained. Nor is the relevant literature on the uniqueness of British economic performance even mentioned (Hutton, 1996). The UK’s status as a cultural and economic ‘middle way’ between continental Europe and America is an important topic that Schr?ter makes far too little of in this book.

This ambitious but ultimately unsatisfying book will struggle to find a target readership because of its weaknesses of style and substance. Overall this is not a book that can be satisfactorily recommended to undergraduate students of European economic history as they will inescapably repeat its errors of fact and economic understanding. Overall then, I’m sorry to report that Schr?ter’s book fails by a wide margin to deliver on its promised focus on European cultural and economic development. Economic historians seeking to consider the interplay between economy and culture are still better served by the works of authors such as Eric Jones and Peter Temin.


Coats, A.W. (ed.), 1995. The Development of Economics in Western Europe since 1945. London, Routledge.

Hutton, Will, 1996. The State We’re In. London, Vintage.

Graham Brownlow is Senior Lecturer in Economics at Auckland University of Technology. His published research is mainly in the area of institutional economic history and Irish economic history. His most recent journal article (co-authored with Frank Geary) is entitled: “Puzzles in the Economic Institutions of Capitalism: Production Coordination, Contracting and Work Organisation in the Irish Linen Trade, 1750-1850,” Cambridge Journal of Economics, Vol. 29, No. 4 (2005), pp. 559-77.

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Permeable Border: The Great Lakes Basin as Transnational Region, 1650-1990

Author(s):Bukowczyk, John J.
Faires, Nora
Smith, David R.
, David

Published by EH.NET (January 2006)

John J. Bukowczyk, Nora Faires, David R. Smith and Randy William Widdis, Permeable Border: The Great Lakes Basin as Transnational Region, 1650-1990. Pittsburgh: University of Pittsburgh Press and Calgary: University of Calgary Press, 2005. xii + 298 pp. $35 (cloth), ISBN: 0-8229-4261-5.

Reviewed for EH.NET by Jerome K. Laurent, Department of Economics, University of Wisconsin-Whitewater.

This volume was the result of a conference held at Wayne State University in Detroit with sponsorship by the Michigan Council for the Humanities. The four authors consist of two Americans, one Canadian and an American of Canadian descent; three are historians and one a geographer. The resulting seven chapters provide various perspectives on the development of the Great Lakes region from 1650 to the present, both as a borderland and as a transnational region of Canada and the United States.

John Bukowczyk of Wayne State University begins by writing about “the production of history, the becoming of place” and suggests that in many ways the Great Lakes region has been “difficult to define” as changes in the economic, social and political scene occurred over time. He surveys the thoughts of many scholars who have written on the subject in the past. The Great Lakes area was affected by nation building, capital formation, and migration of labor during the period.

Bukowczyk continues the discussion in Chapter 2 entitled “Trade, War, Migration and Empire in the Great Lakes Basin, 1650-1815.” He focuses on the movement of peoples in and through the Great Lakes region, ties to the St. Lawrence River Valley, especially in early times by the French, the prominence of the fur trade, the impact of the French and Indian War, the significance of British involvement in the area, the movement of several Indian tribes, the importance of the Treaty of Paris (1763) and the setting of international boundaries in the area. Moreover, he discusses the role of the “Long War” — the period from 1763 to 1815 in the development of the Great Lakes as a region. There was a westward movement of land seekers from both western New York and Ontario into the area, which now had a formal boundary between British Canada and the United States. Yet in many ways the region was “an economic whole” (p. 28), according to Bukowczyk.

In the third chapter, also by Bukowczyk, the emphasis is on the roles played by emigration, transportation, capital, and the government in the Great Lakes region during the 1815 to 1890 years. He covers the canal building era, especially the Erie Canal, and the role of the state in providing for this transportation route to Lake Erie. This project and others had the effect of encouraging the development of urban areas and their agricultural hinterlands. The British, meanwhile, wanted to develop the St. Lawrence Valley “based no longer upon fur but now upon a new set of staples: timber, flour, and wheat” (p. 35). The result was the Rideau Canal, which provided water connections from Montreal to Kingston, Ontario for geopolitical reasons, as well as for commercial traffic, but it was a “boondoggle,” according to the author. The canalization of the St. Lawrence River and building of the Welland Canal was to improve connections with the Great Lakes region, but with “mixed results” for the Canadians. Beyond transportation ventures, the Canadians, French and British, had other crises to solve; they “had to renegotiate their relationship both to the British Empire and to the expansionist American agrarian republic” (p. 46). As time went on there was a flow of population from Canada to the United States in the Great Lakes region. To many Canadians, this “was a symptom of … dependency and underdevelopment” (p. 49). The beginning of the railroad age added another dimension to economic relationships in the region. The integration of Canada as a nation separate from the British Empire and the United States had economic and political ramifications: it included railroad building into Western Canada, tariffs mainly protective in nature, and the development of a Canadian industrial heartland in Ontario and Quebec.

Chapter 4 by Nora Faires of Western Michigan University deals with the “migration from Ontario to the Upper Midwest in the nineteenth and early twentieth centuries (p. 78). This reader-friendly chapter covers in detail the patterns of Anglo-Canadian migration into new areas affording cheap land, especially in the United States. A number of examples of the experiences of actual migrants are included showing the variety of work and business opportunities available to enterprising persons. The movement of population back and forth over the border areas was fairly common although the net change over time favored population gains for the American Upper Midwest. Of special interest is the short discussion of African American emigration to Canada during the pre-Civil War period.

David R. Smith of the University of Michigan covers the topic of “channeling and regulating cross-border traffic in labor, capital and goods” in the Great Lakes region (p. 120). He suggests that by the late nineteenth century the “national policies of both Canada and the United States established the essential patterns of Canadian emigration and the reciprocal movement of American capital throughout the region” (p. 121). According to Smith, an open transnational labor market developed between Canada and the United States along with protective tariff policies, which benefited U.S. manufacturers and extractive industries. Border points, such as Point Edward-Port Huron and Detroit-Windsor, were important crossing locations. He examines in detail the Census records showing the percentage of Canadian-born migrants in the population of the Upper Midwest of the United States. He suggests that this pattern of migration must be understood within the broader context of the effort of the United States (government and private capital) “to exert power and influence over the economic development of the continent’s economy” (p. 148).

In Chapter 6, Randy William Widdis of the University of Regina discusses directions for future research on the topic of “migration, borderlands, and national identity.” Various ideas from a number of scholars are included. Of special interest is his discussion of migration patterns using Canadian border-crossing records for the early twentieth century years showing a high percentage of Canadian migrants settling mainly in ten American cities. He emphasizes that “borderlands are organic; they evolve over time to become different places” (p. 174).

In the final chapter John Bukowczyk concentrates on “region, border and nation” as to where research efforts should move in the future. He points out that the authors of this work generally define a region “regionally and historically, not culturally, spatially, or teleologically” (p. 177). They also see the Great Lakes area as “historically transnational” given “the economic (and other) relationships that have spanned the border” (p. 177). He concludes by emphasizing that the Canada-U.S. border “never was a fixed structure, but rather a bundle of contingencies presenting both opportunities and constraints” (p. 180). This reviewer would agree with his assessment.

Overall, the book is a well-researched effort on the part of the four authors. It is a needed addition to the professional literature on this subject. They are able to weave together a discussion of the economic, political and social aspects of developments in the Great Lakes region for a long period of time. Moreover, they are able to fit the situation existing in the Great Lakes area into a broader historical context for both Canada and United States. This reviewer would have desired more discussion of the important role of Great Lakes water transportation in the movement of people and products, on both sides of the border, during the period. Of special note is the Appendix, which details primary sources available for use in migration studies, the extensive Notes (totaling 46 pages) and excellent suggestions for further reading provided on a chapter-by-chapter basis by the authors. Scattered throughout the text are numerous illustrations, maps and tables containing useful information for the reader.

Jerome Laurent is the author of articles on Great Lakes transportation history, which have appeared in Explorations in Economic History, the Journal of Transport History and the International Journal of Maritime History. His most recent article is “‘And Cut Throat Competition Prevented:’ Concentration and Control in Great Lakes Transportation, 1915-1940,” International Journal of Maritime History (December 2002): 43-84. Currently, he is researching the economic organization of Great Lakes transportation during the pre-World War I period.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The History of Foreign Exchange

Author(s):Einzig, Paul
Reviewer(s):Officer, Lawrence H.

Published by EH.NET (January 2006)

Classic Reviews in Economic History

Paul Einzig, The History of Foreign Exchange. London: Macmillan, 1962. xvi + 319 pp. (second edition, 1970, xxi + 362 pp.)

Review Essay by Lawrence H. Officer, Department of Economics, University of Illinois at Chicago.

The History of Foreign Exchange: A Provocative Classic

Paul Einzig (1897-1973) was both a financial journalist and an author of scholarly works. (A brief, excellent biography of Einzig is Tether, 1986.) Einzig was a prolific writer in both the popular press and academic realms. For two decades, he contributed a regular, ?Lombard Street,? column for the Financial News (London). Later, he provided a weekly column in the Commercial and Financial Chronicle (New York). Because of his popular writings, academic economists have a tendency to discount Einzig?s contributions to economics as a discipline. This reviewer feels compelled to refute that tendency.

Using a strict definition of ?book? — excluding pamphlets, revised editions, works with similar titles, translations from English into other languages, volumes written solely in a non-English language, reports to governments or commissions, working papers, works that are in only a handful of libraries, and unpublished manuscripts — this reviewer counted carefully (from the WorldCat database) that Einzig was the author of fifty-seven different books — a phenomenal number. Of this total, one is Einzig?s autobiography and at most a half-dozen could be construed as political treatises (judging by title). This leaves fifty volumes as primarily economic in content. No doubt, some of these volumes were written in haste and some are not particularly technical. On the other side, Einzig?s books contain only his own writings; not one is an edited volume.

It is instructive to count also the number of books produced by the seven other authors of 2006 Classic Reviews series. Allowing for edited as well as authored volumes (but excluding works edited by others, and to which the author of interest merely contributed one or more chapters), the number of books attributed to each of the eight authors is listed below.

Number of Books Attributed to Author


Source: WorldCat. See text.

Certainly, Einzig?s total number of books is phenomenal in comparison to any of the other authors. In fact, incredibly, Einzig?s number of books exceeds even the total number of the other seven authors. True, the table is purely quantitative, not qualitative, in nature. And, true, unlike the other authors Einzig was strictly a writer by profession. Nevertheless, by any standard, Einzig was a prolific book author indeed.

Further, Einzig published articles in professional economics journals, even though he was not an academic economist. The JSTOR database lists nineteen articles authored by Einzig — eighteen in the Economic Journal and one in the Journal of Finance. These numbers are exclusive of book reviews; JSTOR lists twelve by Einzig, of which six are in the Economic Journal and one in the Economic History Review.

The point of the above discussion is that, although Einzig was neither an academic professor nor a government economist, he should be taken seriously as an astute observer of contemporary economic events, as an applied-economic theoretician, and as an economic historian. One of his best books in the first category is International Gold Movements (1929, 1931) — invaluable to historians of the interwar gold standard. His best work in the second category is The Theory of Forward Exchange (1937), still useful to researchers of interest-rate parity. Among other virtues, that book contains an excellent discussion of selection of variables to test the theory, as well as data still used in scholarly studies. In the third category, paramount is The History of Foreign Exchange, the anatomy (including publication history) of which is shown in Table 2.

Anatomy of The History of Foreign Exchange

St. Martin?s Press

St. Martin?s Press


Listing edition in catalogue. Source: WorldCat.

a Reprint, with alterations.

b Japanese translation, by Asao Ono and Shunzo Muraoka.

Einzig states, in the preface to the first edition of the History, that his purpose is to produce ?a single book … that would cover the entire history of Foreign Exchange in all its main aspects from its origins to our days? (p. xi in the second edition — all references in this review are to that edition). He remarks that nobody before had produced such a treatise. It is fair to say that neither has anybody since done so. There have been many books on the entire history of money as such, rather than of foreign exchange, and a variety of books on foreign exchange for particular currencies over a lengthy period of time or for a variety of currencies over a particular era — but no one other than Einzig has produced a history of the foreign-exchange characteristic of currencies for purportedly all currencies (of interest) and for all eras. From probable international bills of exchange in Babylonia (twenty-first century B.C.), to U.S. borrowing in the Eurodollar market (late 1960s), Einzig succeeds admirably in conveying the flavor of foreign exchange.

To cover systematically experience of such breadth, Einzig divides his book into chronologically based sections, as shown in Table 2. Part I deals with the Ancient Period (primarily Greece and Rome, though also earlier civilizations), Part II the Medieval Period, Part III the Early Modern Period (sixteenth to eighteenth centuries), Part IV the Nineteenth Century (to World War I), Part V 1914-1960, and Part VI (added in the second edition) the 1960s. To provide breadth systematically for each of these six eras, Einzig instills discipline on his research and writing by dividing each Part into four chapters: (1) foreign-exchange markets and practices, (2) exchange rates, including crises and trends, (3) foreign-exchange theory, and (4) exchange-rate policy. This schema greatly enhances the value of the volume as a reference work. Part I includes an introductory chapter, on the origins of foreign exchange; and the book includes a general introduction and a general conclusion (the latter largely rewritten in the second edition).

Each chapter in Parts I-V (but not Part VI) contains endnotes, which are purely bibliographical. There is also an excellent bibliographical essay, termed ?a selected bibliography? — and, in the second edition, this bibliography is extended to incorporate the 1960s. Again the book is presented excellently as a reference volume. This characteristic is helped by a good ?index of names,? but the subject index could have been more extensive.

The author?s ambitious and unique goal, the tremendous research effort (aided by the author?s proficiency in several languages), and the systematic presentation of the research results all make The History of Foreign Exchange a classic in economic history. The caliber of the journals that reviewed the History is indicative of that judgment. Of the five top general journals in economics 1960s vintage (American Economic Review, Economic Journal, Journal of Political Economy, Quarterly Journal of Economics, and Review of Economics and Statistics), the three that reviewed books (the first three stated) did in fact review the History. Two of the top three journals in economic history at the time (Journal of Economic History, and Economic History Review) reviewed the book. It is not surprising that the third, Explorations in Entrepreneurial History (the predecessor of Explorations in Economic History), did not review the History, because of the then-narrow orientation of the journal. (As for the Journal of European Economic History, it did not commence publication until 1972.) Among major economics journals that engaged in book reviews, only Kyklos elected not to review the History. On the other side, American Historical Review, perhaps the top general-history journal, did conduct a review.

These reviews, together with several others in outlets not specializing in history, are listed and summarized in Table 3. The caliber of some reviewers is unusually high: the economic historians J. R. T. Hughes, L. S. Pressnell, and Raymond de Roover; and the international-economics specialist Arthur I. Bloomfield. Most reviewers had very positive things to say about the History; but they did not withhold criticism.

Reviews of The History of Foreign Exchange

Note: All reviews are of the first edition, except the 1971 Choice review.

The most negative evaluation is that of L. S. Pressnell, whose positive assessments are few, and even these are negative assessments in disguise. Einzig did not hesitate to respond to reviewers? criticisms that he viewed as unfair or based on incorrect facts. He had written a rejoinder to a review of his Primitive Money (1949), this review appearing in the anthropological journal Man. The editor of the journal published Einzig?s (1949) rejoinder in condensed form, and, incredibly, wrote a reply to Einzig?s rejoinder (rather than having the reviewer reply)!

Einzig responded to Pressnell?s criticisms, in the preface to the second edition of the History, stating, quite correctly, that Pressnell?s review ?amounted to little more than a list of attacks, wasting very little time or space on trying to justify, explain or illustrate his criticisms? (p. viii). Einzig gleefully, and again correctly, castigates Pressnell for associating paper credit with inflation/deflation in Ancient Rome, whereas in fact there was no paper money and inflation took the form of coinage debasement. Einzig then writes:

Long-suffering authors have seldom the opportunity to answer their critics, which is a pity because, by drawing attention to flagrant instances of ill-informed criticisms such as the one denounced above, they might be able to raise the standard of criticism. Being a hard-hitting critic myself it is not for me to object to being hit hard — provided my critic knows what he is talking about.

In fairness to Einzig, he did meet the criticism of some reviewers that ?the chapters dealing with modern developments were ?too sketchy?? (p. vii), by producing a second edition with the addition of Part VI. However, Einzig disagreed with the criticism that ?the chapters dealing with earlier periods were unnecessarily long,? and therefore did not condense these chapters (or otherwise alter them substantively) in the second edition. The present reviewer agrees with this decision; for the existing literature on foreign exchange is heavily oriented to recent periods. Einzig?s work on earlier periods fills a definite void.

Turning to this reviewer?s impressions of the History, consider each Part in order. For the Ancient Period, there is lack of everything: data, writings on theory, definitive information about markets and about rationales for policy. Einzig acknowledges that he has ?to make bricks with very little straw? (p. 7). There is much conjecture on Einzig?s part, albeit his presentation generally makes sense. He shows knowledge of both the classical literature and modern treatises on these times, and does as much as he can with snippets of information.

Einzig?s definition of a true foreign-exchange transaction (involving coins of both domestic and foreign parties) is acceptance by tale rather than by weight. He suggests that this first occurred in the fifth or sixth century B.C. As for the use of bills of exchange in foreign-exchange transactions, Einzig speculates that this could have arisen even earlier. There is discussion of depreciation and debasement of coinage, including the observation that the debasement of Roman coins had the effect of India ceasing to accept them. Einzig emphasizes that foreign trade was inflexible and, in particular, inelastic with respect to the exchange rate. He notes that exchange-rate information for this era is not only scarce but also complicated, due to the existence of trimetallism (three monetary metals: copper, silver, gold) and symmetallism (electrum: gold/silver alloyed coins).

Einzig is careful not to overstate the role of foreign exchange in theory and policy. Debasement of coinage in Rome was generally done to finance budget deficits rather than to correct balance-of-payments deficits. The same is true for Greek devaluations and debasements. The purchasing-power-parity (PPP) theory of exchange rates cannot be discerned in Ancient writing. The reason given again is the inelasticity of foreign trade, with tremendous differences in prices of goods across countries (due to both high transport costs and high profit margins). On the other side, exchange control was the policy of Sparta and of Egypt (under Ptolemaic and Roman rule), with Plato the intellectual champion of such a policy. Exchange control existed in the Roman Empire in connection with the accumulation of exchange as tribute to be transferred to Rome.

Considering the Medieval Period, Einzig observes that ?manual exchange? (exchange of domestic for foreign coin) began to give way to bills of exchange in an evolutionary process. He makes much of the fact that international bills (because they involved exchange risk) were a means of circumventing the anti-usury laws of the Church. He is impressed with medieval foreign-exchange theorizing, which arose in the context of whether exchange rates concealed interest, and discerns a variety of theories (or harbingers of theories) of exchange-rate determination in the Scholastic writings: demand and supply, exchange risk, cost-of-production, money-supply, balance-of-payments, and PPP. Exchange control over bills was less strict and less pervasive than over coins, because the Church required freedom of transferring funds emanating from Papal collections.

For the Early Modern Period (sixteenth-eighteenth centuries), Einzig provides a good discussion of the gradual transition from medieval to modern practices. He notes that Thomas Gresham (of ?Gresham?s Law? fame) made the first known computation of a specie point (the English gold-import point from Flanders) in 1558. Einzig outlines the history of the British, French, Dutch, German, Spanish, Swedish and Russian exchange rates (each relative to other currencies) during this period. The Early Modern Period witnessed the first true exchange-rate theorizing, meaning ?a deliberate analysis of cause and effects of Foreign Exchange movements and the role of Foreign Exchange in the economic system? (p. 138). Salamancan (Spanish) writers of the sixteenth and seventeenth centuries are credited with the money-supply theory and the purchasing-power theory of the exchange rate; but (as Einzig states) it is unclear whether they meant the entire money supply (coinage) in circulation or the supply merely in the foreign-exchange market for the purchase of foreign bills. The Salamancans did not develop the balance-of-payments (or trade-balance) theory of the exchange rate; this was done by English writers, such as Gresham and Mun.

The Malynes-Misselden-Mun controversy is judged to be ?one of the most important controversies in the history of Foreign Exchange theory? (p. 142); but only one page is devoted to this controversy. Malynes, who here had a speculation theory of the exchange rate, lost the debate; Mun?s view that the exchange rate and specie flows depended on the trade balance became preeminent. Yet elsewhere Malynes theorized the price specie-flow mechanism, but Einzig does not acknowledge this accomplishment. Nor does Einzig mention that ?Malynes has all the ingredients for the PPP theory and comes ever so close to exhibiting the theory for both fixed and floating rates? (Officer, 1982, p. 258). Schumpeter (1954, p. 737) also judges that ?Purchasing-Power Parity theory, or some rudimentary form of it … can … certainly be attributed to Malynes.?

Regarding policy in the Early Modern Period, Einzig mentions various alternatives to exchange control:

1. A uniform tax on exchange transactions — temporarily imposed in England in 1586, after exchange control was abandoned. Not noted by Einzig, the idea was resurrected (but not implemented) during the period of ?dollar surplus? in the 1960s.

2. Official pegging of exchange rates. This was done by fixing the price of foreign coins in domestic coins. The pegging was adjustable, that is, the price was changed periodically.

3. Official intervention in the foreign-exchange market, for example, by requiring exporters to sell their foreign exchange to the government at unfavorable rates. This is actually a form of exchange control. Creation of an exchange equalization account, that would have enabled intervention similar to the Bretton Woods system and the managed float that followed it, was advocated by Gresham and others, but did not occur.

4. Altering mint parities. This was often done to induce a net inflow of specie, rather than to affect exchange rates as such.

5. Changing or suspending seigniorage on coinage. This affected specie points and therefore the exchange-rate spread. Once seigniorage was abolished (as in England in 1666), this policy lost its mechanism.

Regarding the Nineteenth Century, Einzig writes that ?the advanced paper currency inflation in France during the Revolution and the fluctuation of the inconvertible pound during the period of suspension may be regarded as the first meaningful experience in Foreign Exchange movements under inconvertible paper currency systems? (p. 171). This statement is incorrect on two counts:

First, nothing is said about the experience of China, where paper was invented and paper money first issued. At times, paper money circulated together with coined money, and at times the paper money was inconvertible. It is known that Chinese coins circulated in foreign countries in the fifteenth century and probably earlier (see, for example, Bernholz, 2003, p. 56). There must have been implications for exchange rates, if only for ?manual exchange? (domestic for foreign coin). True, little if any information on such foreign exchange exists. Yet that deficiency did not stop Einzig from making conjectures about foreign exchange in the Ancient Period!

Second, several pages are devoted to the Bank Restriction Period (the inconvertible pound in 1797-1821, also called ?the bullionist period?), in both empirical (exchange value of the pound) and theoretical (bullionist-controversy) aspects. Indeed, Einzig writes: ?the so-called ?bullionist? controversy … was probably the most important Foreign Exchange controversy for all time? (p., 202). However, he makes no reference at all to an earlier ?bullionist period,? the Swedish inconvertible paper currency and floating exchange rate of 1745-1776. China was the first country to introduce paper money; but Sweden was the first to issue banknotes. In fairness to Einzig, the Swedish experience was not generally known until ?rediscovered? by Eagly (1963, 1968, 1971). Nevertheless, Einzig could have incorporated this important experience in the second edition of the History, but he chose not to do so.

This reviewer also takes exception to Einzig?s view that ?technical devices? to discourage the outflow or encourage the inflow of gold were undertaken predominantly by countries (such as France and Germany) other than the three (Britain, the United States, Holland) that ?with really narrow gold points were … on a really effective gold standard? (p. 173). Regarding the latter three countries, Einzig states only that the Bank of England adopted such devices during the Boer War, and mentions nothing about U.S. use of these policies. In fact, both the Bank of England and U.S. Treasury engaged in extensive ?direct manipulation? of gold points for much of the classical gold-standard period (see Clark 1984; Officer 1986, 1996, chapter 9).

For the period 1914-1960, Einzig reports the great change in foreign-exchange policy: from minimal government interference with free foreign-exchange markets over the century since the end of the Napoleonic Wars, to official intervention the rule rather than the exception. Exchange control, which had lapsed into disuse, was resurrected. Correspondingly, PPP theory had been almost entirely forgotten during the century of relative stability of the major exchange rates. Now the theory was restated, with great vigor and dogmatism, by Gustav Cassel. Supported by major economists, such as John Maynard Keynes (who later withdrew his support) and A. C. Pigou, the theory would never again be ignored.

Discussion of the 1960s, reluctantly included by Einzig as an additional part in the second edition of the History, is not particularly impressive, in part because a single decade does not warrant the space given to it in a study stretching over several millennia. Einzig compares the only occasional and isolated foreign-exchange crises of the 1815-1914 century to the multitude of crises decade after decade since. The prevalence of foreign-exchange crises continues to this day!

In his concluding chapter, Einzig predicts that an abandonment of the fixed-rate system of Bretton Woods (which was often discussed in the literature, but had not yet happened at the time of his writing) would only be temporary. ?It would not take very long for most Governments to realise the grave disadvantages of the currency chaos resulting from their ill-advised decisions to de-stabilise their exchanges. Sooner or later they would return to the system of stability, as their forerunners did each time they were forced to abandon it in the past? (p. 348). Einzig expresses that view from the perspective of four thousand years of exchange rates! The creation of the euro — fixed exchange rates par excellence, which replaced multiple national currencies with one supranational currency — provides partial validation of Einzig’s prediction. Time will tell whether the present float, or rather managed float, between the various currencies of the developed world (euro, dollar, yen, pound, etc.) will also be succeeded by a renewed fixity of exchange rates. That event would make Einzig’s prediction impressive indeed. Einzig was well-known as a proponent of fixed as distinct from floating exchange rates; but his prediction that any lapse from fixed rates would only be temporary is a positive statement, not a normative one.

Einzig was well-known as a proponent of fixed as distinct from floating exchange rates; but his prediction that any lapse from fixed rates would only be temporary is a positive statement, not a normative one.

Einzig observes, with disdain, the ?obscurantist presentation? of modern foreign-exchange theory and the widening gap of this theory from foreign-exchange policy. He writes: ?No contribution to Foreign Exchange Theory expressed in terms of mathematical economics has added anything of substance to the subject that could not have been added to it without the use of mathematics? (p. 322). This statement is not quite the same as the more-common view that ?any legitimate theory that is expressed mathematically can also be exposited verbally.? Einzig is consistent, for there is not one mathematical symbol in the History!

If there is any general weakness of the History, it is the absence of tables and charts of exchange rates, mint parities, and specie points. Einzig is aware of this limitation; he writes:

There is everything to be said for compiling continuous series of exchange rates for all the important exchanges in the principal Foreign Exchange markets, at least from the 16th century, but preferably also for the late Medieval Period. The material is there, in public records and business archives. But to make it accessible is a task that only some well-endowed research department could undertake. (p. xii)

It is fair to say that economic historians have performed much work of this nature since the publication of the History.

The History of Foreign Exchange has great limitations as well as great strengths. It is an impressive, but also a controversial and provocative, work. Undoubtedly, though, it deserves to be called a classic.


Bernholz, Peter. Monetary Regimes and Inflation: History, Economic, and Political Relationships. Cheltenham: Edward Elgar, 2003.

Clark, Truman A. ?Violations of the Gold Points, 1890-1908.? Journal of Political Economy 92 (October 1984): 791-823.

Eagly, Robert V. ?Money, Employment and Prices: A Swedish View, 1761.? Quarterly Journal of Economics 77 (November 1963): 626-36.

Eagly, Robert V. ?The Swedish and English Bullionist Controversies.? In Robert V. Eagly, ed., Events, Ideology and Economic Theory. Detroit: Wayne State University Press, 1968: 13-31.

Eagly, Robert V., editor, The Swedish Bullionist Controversy. Philadelphia: American Philosophical Society, 1971.

Einzig, Paul. International Gold Movements. London: Macmillan, first edition, 1929, second edition, 1931.

Einzig, Paul. Primitive Money in Its Ethnological, Historical and Economic Aspects. London: Eyre and Spottiswoode, 1949.

Einzig, Paul. ?Primitive Money: A Rejoinder? (with Editor?s Reply). Man 49 (November 1949): 132.

Einzig, Paul. The Theory of Forward Exchange. London: Macmillan, 1937.

Officer, Lawrence H. ?The Purchasing-Power-Parity Theory of Gerrard de Malynes.? History of Political Economy 14 (Summer 1982): 256-59.

Officer, Lawrence H. ?The Efficiency of the Dollar-Sterling Gold Standard, 1890-1908.? Journal of Political Economy 94 (October 1986): 1038-73.

Officer, Lawrence H. Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press, 1996.

Schumpeter, Joseph A. A History of Economic Analysis. New York: Oxford University Press, 1954.

Tether, C. Gordon. ?Einzig, Paul.? In Lord Blake and C. S. Nicholls, eds., The Dictionary of National Biography. Oxford: Oxford University Press, 1986.

Lawrence H. Officer is Professor of Economics at the University of Illinois at Chicago and Editor, Special Projects, EH.Net. He is a specialist in international economics and monetary history. His recent journal publications include ?The U.S. Specie Standard, 1792-1932: Some Monetarist Arithmetic,? Explorations in Economic History (2002) and ?The Quantity Theory in New England, 1703-1749: New Data to Analyze an Old

Question,? Explorations in Economic History (2005). Officer is a recurrent contributor to the ?How Much Is That?? section of EH.Net.

Copyright (c) 2006 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 (; Telephone: 513-529-2229). Published by EH.Net (January 2006). All EH.Net reviews are archived at

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

Essays on the History of Economics

Author(s):Samuels, Warren J.
Henderson, Willie
Johnson, Kirk D.
Johnson, Marianne
Reviewer(s):Paganelli, Maria Pia

Published by EH.NET (January 2006)


Warren J. Samuels, Willie Henderson, Kirk D. Johnson and Marianne Johnson, editors, Essays on the History of Economics. New York: Routledge, 2004. xiii + 340 pp. $165 (cloth), ISBN: 0-415-70006-X.

Reviewed for EH.NET by Maria Pia Paganelli, Department of Economics, Yeshiva University.

The unifying theme of Essays on the History of Economics may not be obvious from simply looking at its table of contents. The volume has four essays. Willie Henderson and Warren Samuels write on “The Etiology of Adam Smith’s Division of Labor: Alternative Accounts and Smith’s Methodology Applied to Them” with an appendix by Henderson on “How Does Smith Achieve a Synthesis in Writing? Evidence from His Propensity to Truck, Barter and Exchange.” Warren Samuels, Kirk D. Johnson and Marianne Johnson write the second essay, titled “Should History-of-Economic-Thought Textbooks Cover ‘Recent’ Economic Thought?” as well as the third essay, “What the Authors of History-of-Economic-Thought Textbooks Say about the History of Economics.” The last essay is a solo by Samuels on “Thorstein Veblen as Economic Theorist.”

What connects these four essays is summarized by Samuels in the introduction: “If John R. Hicks is correct that no one theory can answer all our questions, then perhaps there is room for multiple theories of capital, of cost, and so on, each devoted to inquiring into different questions. As it stands, most economists seem compelled to believe that only one correct theory of capital or of cost, etc. can exist and then adopt their favorite one — all the while using it as a tool or element of design strategy. Historians of economic thought can enrich economic theory by educating future economists along the lines of theoretical pluralism” (p. 6).

If a goal of history of economic thought is to show that economics and its history is not a monolith, but rather a discipline with a plurality of socially constructed theories and concepts, this is a successful work of history of economic thought.

The first essay deals with the plurality of interpretations of Adam Smith’s sources of the division of labor. Through a meticulous textual analysis, the authors show that in addition to the oft-mentioned propensity to truck, barter and exchange and reason and speech, four additional sources for the division of labor can be argued for. Division of labor may emerge because individuals take advantage of opportunities, because of the presence of a commercial society, because of the “nature of human nature” or because of human desire for approbation. The interpretative conflicts and paradoxes associated with the language are numerous.

The second essay is explicitly meant to challenge Joseph Dorfman’s answer to the question: Where does history of economic thought end? In The Economic Mind in American Civilization (1959) Dorfman claims that time must pass for us to gain knowledge and perspective. The authors show that history of economic thought is able to handle recency in a more variegated way than Dorfman is willing to admit. The authors go though 73 textbooks in their various editions (a total of 124 textbooks) to see how recency is handled. They report for each whether the problem of recency is explicitly discussed, how the design changed over the years to account for recent materials, the extent of coverage of recent materials, and the frequency of citations and references to prominent post-war economists. The results are mixed: there is no clear end of history of economic thought, which contradicts Dorfman’s rule, and supports the idea of pluralism in the history of economic thought. Dealing with recency may reduce the risks of a history written by the survivors or by the winners. Also, the multitude of histories of economic thought seems to dispute Dorfman’s assertion that the one correct story will be revealed with the full knowledge generated by the passage of time. Another conclusion from this chapter seems a challenge to trained historians of economic thought: “most of recent history-of-economic-thought work is undertaken by economists (and others) who are not historians of economic thought” (p. 179) through survey articles, literature reviews, specialized encyclopedias, biographies and the like. Pluralism in the discipline comes also from the diversity of writers of the history of the discipline.

The third essay reports the historiographic position of 63 textbooks. It successfully shows that “the history of economic thought does not write itself” (p. 264) but is filtered through the interpretive eyes of the textbook writer. By analyzing the design strategies of the textbooks, this chapter is a testimony to the pluralism of the discipline. The diversity of interpretations is visible in the choice of starting and ending time, in the individuals and schools covered, and especially in the focus on theories or on ideas. The work presented seems immense, as for each historiographic question there is a list of authors who provide an answer and the answer itself. Given the amount of information presented, it seems like an electronic version of this chapter, with the option of electronically searching it, would be useful as a working tool for a scholar interested in this kind of research.

The last essay challenges the hegemony of neoclassical economics in defining theory. The interpretation of the work of Thorstein Veblen is used to demonstrate the limits of such supremacy. The same author (Veblen) can be interpreted as an anti-theorist as well as a theorist, depending on how theory is defined. If by theory we understand only neoclassical theory, a la Blaug, then Veblen is an anti-theorist and offers no theory. By expanding the definition of theory to include non-neoclassical theories, Veblen is a theorist (a non-neoclassical one) and is not anti-theory (while he is anti-neoclassical).

The volume is an immense work of scholarship, as shown by the rich twenty-five pages of bibliography. It is a dense picture of the state of the discipline today, a picture that shows a dynamic cacophony of different voices, rather than a unified but maybe more monotonous tune.

Maria Pia Paganelli is an Assistant Professor of Economics at Yeshiva University. She works on eighteenth-century money theories and on Adam Smith.


Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Business History around the World

Author(s):Amatori, Franco
Jones, Geoffrey
Reviewer(s):Becker, William H.

Published by EH.NET (January 2006)


Franco Amatori and Geoffrey Jones, editors, Business History around the World. Cambridge, UK; Cambridge University Press, 2003. xv + 425 pp. $55.90 (cloth), ISBN: 0-521- 82107-x.

Reviewed for EH.NET by William H. Becker, Department of History and Department of Strategic Management and Public Policy, George Washington University.

Together, the essays in this book produce a mosaic picture of the study of business history at the end of the twentieth and the beginning of the twenty-first centuries. It is an essential reference work for students in any number of disciplines — history, economics, management, finance, sociology — interested in the history of business. The essays are drawn from papers presented at a colloquium on the future of business history at Bocconi University in Milan in October 1998. Many of the papers were substantially rewritten for this volume. The editors divide the work into three parts, and they introduce the book with a perceptive essay of their own. The essay goes further than providing an overview of the contents of the volume by highlighting the historic and recurrent tensions over what in fact constitutes the study of business history.

Part I of the book is devoted to essays focused on methodological and theoretical issues. These essays demonstrate the towering influence of Alfred D. Chandler, Jr. on the field. Critics of his work have not succeeded in producing a powerful alternative synthesis. But the ongoing critique of Chandler’s analysis has stimulated work on business history, especially in the United States, as scholars continue to debate subjects such as the field’s orientation to economic theory and how to accommodate business history to new directions in historical studies. Louis Galambos leads off the first section with a piece on the field’s identity and boundaries. He provides a trenchant overview of the development of the field and examines Chandler’s influence as business historians — and others — continue to come to terms with his legacy. Galambos also examines the interplay between economics and business history by a discussion of Oliver Williamson’s use of Chandler in his own work on the neoclassical theory of the firm. He discusses the important efforts of Peter Temin, Daniel M.G. Raff, and Naomi R. Lamoreaux, under the auspices of the NBER, to increase the collaboration between economics and business history in the building of a neoclassical paradigm of firm behavior. Galambos also addresses the work of evolutionary economists, such as Richard Nelson and Sidney G. Winter. In the next essay William Lazonick, writing on “understanding innovative enterprise,” reviews his well-known criticisms of neoclassical economics for ignoring the dynamics of firm development and for slighting the issue of innovation. Lazonick’s critique of Chandler is that he did not conceptualize the large industrial firm fully enough as a social institution. This point is taken up and broadened considerably in the essay by Jonathan Zeitlin on what has been called the “historical alternative” approach to business history. In this wide-ranging essay, Zeitlin argues that focusing on the firm too much narrows the field and that business historians must situate economic activity more broadly to account for ideology, individual personality, social structure, geographical location, resource endowments, and politics and government. These essays point up the broad methodological bases of business history, none of which dominates the field at the beginning of a new century.

The second part of the book is devoted to essays on “area patterns” in the study of business history. It starts off with a useful overview of the field in the United States by William J. Hausman. The following essays consider the scholarship on business history in a number of countries and/or regions. Britain, the Netherlands, the German-speaking areas, Japan, France, Italy, Spain, Greece, and Scandinavia are all covered. While Canada and Australia do not receive treatment, countries such as China and regions like Latin America are discussed. These essays range widely, as might be expected. While Chandler’s influence has been felt in the work on business history in many of these places, it looms less large overall than in the United States. In many of these countries, family business has played a much larger role than in the United States, and the professionally managed hierarchically organized firm is less common. Government has also played a larger role in business and economic development in many of the countries discussed in the second part of the book than in the United States, although one can argue that the influence of government has not received the attention it deserves among U.S. business historians. Ultimately, the essays in Part II of the book provide a useful perspective on the role that different national histories and systems of higher education play in framing the issues to which scholars devote themselves. In Scandinavia, Spain, and Greece business is firmly tied to the study of economic history. Business historians in Britain, Japan, France, and Italy often find themselves teaching in departments or schools of management and business studies. Commissioned corporate histories are an important source of work in business history in Britain, the Netherlands, Scandinavia, and Japan. Outside of the United States, the influence of postmodern theorizing has been less pronounced in the history profession although Galambos sees its influence growing as, for example, studies of consumer culture appear for countries other than the United States.

The final part of the book provides essays on comparative business history. This is a particularly promising area of work, although not entirely new to the field, since some of the earliest work in comparative business history appeared decades ago. Nevertheless, increasing globalization makes comparative perspectives more attractive than ever. The essays in this section cover family firms in comparative perspective, the history of multinational corporations, and business-government relations over time. Each essay discusses the relevant literature, but also suggests new subjects for study. The third part of the book ends the entire volume with an essay by Alfred D. Chandler, Jr. on current opportunities for research in the field. Chandler briefly reviews the development of the fields of business and economic history, and then turns to a plea for business historians to study more intensively the electronic-based industries: consumer electronics, computers, and information technology. Like the industries of the second industrial revolution that transformed the world economy in the late nineteenth and early twentieth centuries, these are the industries that profoundly altered life at the end of the twentieth and the beginning of the twenty-first centuries. Chandler, who did so much to focus business history on the large-scale firm, emphasizes here the importance of the study of firms in the context of the development of their industries. This latter point adds another dimension to the rich panoply of material about empirical studies and methodological and theoretical issues that the editors have put together in this wide-ranging, indispensable book.

William Becker’s recent publications include Voice of the Marketplace: A History of the National Petroleum Council (with Joseph A. Pratt and William M. McClenahan) and The Market, the State, and the Export-Import Bank of the United States, 1934-2001 (with William M. McClenahan). He is currently writing Shaping Corporate America: Big Business and the Twentieth Century Experience.


Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Beer in the Middle Ages and the Renaissance

Author(s):Unger, Richard W.
Reviewer(s):Aerts, Erik

Published by EH.NET (January 2006)

Richard W. Unger, Beer in the Middle Ages and the Renaissance. Philadelphia: University of Pennsylvania Press, 2004. xviii + 319 pp. $45/?29.50 (cloth), ISBN: 0-8122-3795-1.

Reviewed for EH.NET by Erik Aerts, Department of History, University of Leuven.

According to the French historian Fernand Braudel, Europe in the medieval and early modern period was divided into a beer area and a wine area, the north being “the land of beer and drinks made from fermented grain.” This beer area started in Scandinavia and European Russia, continued over large parts of Germany and Eastern Europe, covered the British Isles and expanded into the central European plains and the territory of the Low Countries. But, as Richard Unger, Professor of History at the University of British Columbia, shows in his latest book, this beer area was by no means static. In the late Middle Ages and the sixteenth century it spread southwards, reaching the Alps, southern Germany and northern France. This fascinating process, made possible by beer producers and beer consumers, is described and explained in a book that spans a much wider period than its title suggests. Unger starts his history in Mesopotamia where archaeologists have found that beer was already the favorite beverage of the Sumerians as early as 3500 BC. The book ends somewhere in the middle of the seventeenth century when, for Unger, the golden age for European brewers had ended.

The origins of this long period of growth and prosperity for brewers are to be found in technological and organizational changes during the Middle Ages. The introduction and spread of hopped beers gradually transformed female-dominated household production first into workshops with some commercial activity and then into bigger “nucleated” workshops producing for export markets. The driving force behind the process of expansion and development was technological change. Unger in an earlier article (Journal of European Economic History, 21, 1992, pp. 281-313) distinguished six phases of change. In a preparatory phase a market and a production base were created; in the second phase product innovation — the use of hops in the brewing process — occurred while the success of this superior product acted as an “external shock” to promote the diffusion of the innovation by stimulating producers to adopt the innovation in the third phase. The fourth phase was a long period of acclimatization of the new product to local conditions resulting in a fifth phase in which the new technology was fully mastered. In a final phase process innovation optimized the product innovation and also saw the consolidation of the earlier developments.

This phase model is more or less the framework of the book, which is nicely divided into fourteen chapters that combine a chronological with a geographic and thematic approach. In an introductory chapter the making of beer is described, while chapter 2 discusses the character of the early medieval beer before the introduction of hopped beer. This beer was the gruitbeer, named after its most popular additive, a combination of dried herbs. While the first large-scale production of beer took place on the large estates of Benedictine monasteries in the eight and ninth centuries, professional and commercial brewing started in the new urban centers between 1000 and 1300 (chapter 3). By 1300 a market had been created, though at that time “in Dutch and English towns there was no sign of innovation in the production of beer” (p. 52). That innovation would come when thirteenth-century brewers in northern Germany, in Bremen, Hamburg, Wismar, Rostock and other Hanseatic towns, started brewing hopped beers for export by sea. The use of hops considerably enhanced the durability of beer so that large quantities could now be exported to the densely-populated and prosperous markets of the Low Countries (chapter 4). Competition from abroad stimulated or even forced public authorities and brewers in the southern and northern Low Countries, England and Scandinavia to imitate the imported beers. With some considerable time lags brewers in these countries also began to produce hopped beers for the market and managed to realize a remarkable import substitution (chapters 5 and 6).

By this point in the book Unger has given a detailed description of four distinct, though not always subsequent, phases and has nearly finished his chronological story. Chapters 7 to 10 are devoted to the analysis of the new brewing technology as it developed into a mature industry. Such mastery probably was achieved from around 1300 in north Germany, one century later in Holland, in the last quarter of the fifteenth century in Flanders and Brabant, and around 1550 in England. Unger defines maturity through levels of production and consumption, capital investment and technological development, bringing together interesting figures on beer output and grain input, the number of breweries, consumption per person, size of brews and brew kettles, frequency of brews, etc. He discusses the conflicts between brewers and bakers, the relationship between beer prices and cereal prices, the high ratio of capital to labor, and pays a lot of attention to the increasing size of the industry. After three additional chapters on types of beer and their international exchange (chapter 11), beer taxation (chapter 12) and guilds and brewery workers (chapter 13), Unger concludes that by 1650 and because of the increasing competition from brandy, spirits and colonial drinks (coffee, tea and cocoa), the days of prosperity for European brewers were over. But he prefers to end on an optimistic note: “beginning in the late nineteenth century there was to be a second brewing boom” (p. 246).

Unger’s bibliography is impressive and based on extensive reading of the specialized literature in Dutch, English, German and Scandinavian historiography. Some of his ideas could be further developed or some of his figures supplemented from a couple references in French that escaped him: R. Van Uytven, “Le combat des boissons en Europe du moyen ?ge au XVIIIe si?cle,” in S. Cavaciocchi (ed.), Alimentazione e nutrizione secc. XIII-XVIII (Istituto Internazionale di Storia Economica “F. Datini”. Serie II – Atti delle “Settimane di Studi” e altri convegni, 28), Prato, 1997 or E. Aerts, “La teneur en alcool de la bi?re dans les Pays-Bas, 1400-1800,” in Th. Riis (ed.), A Special Brew … Essays in Honour of Kristof Glamann (Odense University Studies in History and Social Sciences, 165), Odense: Odense University Press, 1993. It is very difficult to detect errors or misinterpretations in Unger’s nuanced and careful reasoning, but one might quibble with his statement that bottom yeast in the Middle Ages was only known in Bohemia (pp. 6 and 153) or that “everyone” in the court of Holland and Hainault drank beer in the first half of the fourteenth century (p. 76). Beer consumption certainly did not decline everywhere in Europe after the sixteenth century, as suggested on p. 2. My own data for the southern Low Countries and some older evidence for southern Germany show a more complex pattern. And if it is true that eighteenth-century brewers were crippled by rising grain prices after 1750, why did these rising prices not affect the brewer’s sharpest competitors, the gin distillers, even more since they were using an even larger grain input?

Though all chapters will be a mine for future beer historians, it is clear that chapters 3 to 6 are the most innovative. For Unger the use of hops was by far the major innovation in the pre-industrial history of beer, making possible the rise and long-term growth of a new industry, the success of a new beverage, and the gradual decline of the market for wine. Few will contest the logic of his argument. But some questions remain, even when all available evidence is presented so elegantly as in this book. A few examples: Hopped beers were known in the Low Countries in the Carolingian period (pp. 53-54). Then why did it take so long ?– almost 500 years — before every brewer in this highly industrialized and progressive region started making them? Why did it require an “external shock” from foreign hopped beer being imported in the fourteenth century if brewers were already familiar with the new beer in the ninth century? Of course, public authorities — lords and urban magistrates — who raised taxes on the old beer types without hops had to give their permission, but they usually did so very quickly. Brewers had to adopt the new technology, but why should it have taken centuries? And what about consumers, did they have to be convinced as well? Was hopped beer not better than the old gruitbeer? Here even Unger hesitates, calling beer made with gruit “more than acceptable” and serving “the purpose of an alcoholic beverage of some purity and good taste” (p. 56), but also qualifying it as “a drink for the poor and the sick” (p. 64) “to satisfy poorer consumers who could not pay for the better quality” (p. 82), although the new hopped beer and the old gruitbeer were “not so dramatically different” (p. 78). Still, the popularity of the hopped beer already in 1323 forced the count of Holland to lift the ban on its import (p. 77). Taking into account the popularity of the hopped beer and a series of brutal “external shocks” in the fourteenth and fifteenth centuries it becomes even more difficult to explain why several breweries in the southern Low Countries and the prince-bishopric of Liege continued producing the gruitbeer throughout the seventeenth and eighteenth centuries. Unger refers to an old technology remaining in place “for some time [italics are mine] perhaps to satisfy conservative demand or to satisfy poorer consumers” (pp. 82 and 151). It could be a good argument, except that consumers with less purchasing power had other beers at their disposal after 1500 and that we simply do not know whether gruitbeer was cheaper than hopped beer or not. So perhaps all beer historians (myself included) have been focusing too much on the introduction of hopped beer and by overestimating the importance of this invention have neglected another historical reality? By this I mean the sharp decline in the grain prices in the fourteenth century. Since grain accounted for at least 70 percent of the production cost of a brew, beer became much cheaper in the late Middle Ages and perhaps this change in prices — together with other phenomena such as the expansion of seaborne trade — was more important for the promotion of the beverage, the growth of the industry and the erosion of the wine market than the “new kind” of beer, already known centuries before?

Richard Unger has produced a well-documented and highly readable synthesis of a major industry, replacing as such the older work by W. Hoffmann, L. Sillner, E. Urion and F. Eyer, and others. He brings together a wealth of quantitative data and qualitative evidence and gives a new, often thought-provoking interpretation of the origin and diffusion of a medieval technology. While admitting himself that this is not the definitive history of European brewing, his ideas on late medieval and early modern European brewing will serve as a very useful framework for future research and certainly stimulate new hypotheses.

Erik Aerts has been Director of the Antwerp State Archives and is now Professor at the History Department of the University of Leuven where he teaches medieval and early modern economic history. His main interests are the history of brewing, the history of money, credit and financial institutions, and the development of archival science in nineteenth-century Belgium.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Europe
Time Period(s):Medieval

The Economics of World War I

Author(s):Broadberry, Stephen
Harrison, Mark
Reviewer(s):Engerman, Stanley L.

Published by EH.NET (January 2006)


Stephen Broadberry and Mark Harrison, editors, The Economics of World War I. Cambridge: Cambridge University Press, 2005. xvi + 345 pp. $80 (cloth), ISBN: 0-521-85212-9.

Reviewed for EH.NET by Stanley L. Engerman, Departments of Economics and History, University of Rochester.

Intended as a companion volume to The Economics of World War II: Six Great Powers in International Comparison, edited by Mark Harrison (1998), The Economics of World War I succeeds admirably in describing behavior during World War I and its immediate aftermath in nine different nations involved in the war. The nations covered include five Allies — France (Pierre-Cyrille Hautcoeur), the United Kingdom (Stephen Broadberry and Peter Howlett), Russia (Peter Gatrell), Italy (Francesco Galassi and Mark Harrison), and the U.S. (Hugh Rockoff); three Central Powers — Germany (Albrecht Ritschl), Austria-Hungary (Max-Stephan Schulze), and the Ottoman Empire (Sevket Pamuk); and one neutral — the Netherlands (Herman de Jong).

The essays, each by first-rate scholars, draw heavily upon recent quantitative data — there are 143 tables and 13 figures — and each also has an extended bibliography, including many recent books and articles, as well as references to official sources. The editors appear to have imposed a heavy hand in having these studies deal with similar issues in a similar manner, making cross-country comparisons easy. In addition to the country studies there is an essay-length “Overview” that places the war and the nations in perspective. The volume would be a quite useful reference work, in addition to its importance as a description and analytical interpretation of the impact of warfare.

The basic presentation for each country draws heavily upon standard economic measures — GDP, agricultural and industrial production, labor supply, labor productivity, the trade balance, real wages, government expenditures, debt, money and prices, and various others — and the “Overview” provides comparisons for several of these. In wartime GDP increased in the UK, Italy, and the U.S., but declined in Germany, the Netherlands, Austria, Russia, France, and the Ottoman Empire, with the declines of the latter four being in the order of 30 to 40 percent. Not surprising, all nations had increases in the share of government spending in national income after 1913, ranging from doubling to between five- and eight-fold, with the wartime share being in excess of fifty percent in both Germany and France. In terms of population, territory, and output the Allies, including their colonies, were considerably larger than the Central Powers, 4.5 times larger for gross output. Several essays include a measure of the “costs of the war,” following the 1920 procedures of E.L. Bogart, including material destruction as well as human losses. The largest costs were borne by France and Germany. In addition there are some concluding discussions of the legacy of the war, which include analysis of ideological and economic factors, often noting the major enduring changes in government taxation and expenditure policy. Many other issues are covered, some general, some specific to particular countries, including the effect of blockades on neutral nations, reparations, and the impact of the decline of the Ottoman Empire after the war.

The general conclusions of the editors are not surprising — “that the outcome of global war was primarily a matter of the levels of economic development of each side,” that “war is, in general, a negative-sum activity,” and, as shown also in World War II, “peace is better than war.” Since war clearly utilizes resources and kills people, the negatives are obvious, while presumably the benefits, including the political effects, could be achieved by other means. Even if one may raise questions about these conclusions of the editors, all of the essays are written clearly, present considerable data, and are analytically sophisticated. This is a superb collection on a very important topic, and will repay reading by all economic historians.

Stanley L. Engerman is John Munro Professor of Economics and Professor of History at the University of Rochester.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII