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The Early History of Financial Economics, 1478-1776: From Commercial Arithmetic to Life Annuities and Joint Stocks

Author(s):Poitras, Geoffrey
Reviewer(s):Rashid, Salim

Published by EH.NET (February 2002)

Geoffrey Poitras, The Early History of Financial Economics, 1478-1776: From

Commercial Arithmetic to Life Annuities and Joint Stocks. Cheltenham:

Edward Elgar, 2000. x + 522 pp. $120 (cloth), ISBN: 1-84064-455-9.

Reviewed for EH.NET by Salim Rashid, Department of Economics, University of


This book aims at providing an introduction to the history of finance, more

properly financial mechanisms, from the fifteenth through the eighteenth

centuries. Poitras makes no claim to be presenting original research; rather he

is concerned with a synthesis of the historical literature on finance and

economics. Beginning with the nature of Scholastic and ‘Mercantilistic’

economic thought, the text takes us through the institutional changes and the

conceptual developments they fostered over the next four centuries. The

expository plan is easy to follow, since it follows the historical timeline and

stops to describe various institutional changes brought on by the growth of the

European economies.

This book should have a ready market. Many who begin with economics, gravitate

silently to finance and many others have no need of the transition. The easy

exposition and the portrayal of the historical developments make this useful

supplementary reading; with a text of original writings, it could serve as a

good introductory text in the history of finance. The reproductions of several

pages of original text provide the text with an authentic flavor. In most

places, the book has much ‘fun’ stuff to read.

Unfortunately, the author has not written with one audience consistently in

mind. Some aspects of the presentation will lose many potential readers. On

many occasions, the concepts are not introduced clearly. For example, while

there is much discussion of bills of exchange, there is no benchmark

definition. There are two major difficulties with the expository method chosen;

the reader will silently assume that bills of exchange were the same across

Europe at any point in time, and that they remained the same over time. (If

indeed there were no such locational differences or changes over the centuries,

this is a remarkable fact and needs prominence.) In keeping with the purpose of

the book, there should have been actual photographic reproductions of bills of

exchange through the ages. A short numerical example should precede the

definition. Thus: ‘Here is a problem faced by Merchant X in Bruges… In order

to solve this problem, the following piece of paper is drafted as a legally

enforceable document…. This is how the above document solves the problem….

The analytical concepts needed to understand this solution are….’ Students,

and readers like myself, would be much benefited by such pages. To make room

for them, items such as debates about the self-seeking behavior of the Church

could be made into footnotes or appendices. As it stands, the text gives the

impression of someone who began by wanting to write a text on finance, but

found the topic so closely related to the history of economics that he felt

compelled to give equal time to both subjects. This is not fair because finance

has a narrower scope and clearer analytical structure than economics. One does

not have to sacrifice historical detail to achieve analytical clarity. Take the

case of “fixed Income Valuation” on p 146. The first paragraph will not be

necessary for those who know what this involves, while the novice will find it

abrupt and unhelpful. In the middle of the next paragraph there is a clear

definition of the analytical essentials: “Valuation requires knowledge of: the

price, the size of the payment, the time period (term to maturity); and the

interest (discount).” If this sentence were followed by the points made in the

first paragraph on the need to use present values, we would have all the

essentials described. Next, the historical treatment could show us which of

these concepts were known and how they were utilized; finally, we could

appreciate which problems were fully solved and which needed to await further

theoretical development. Such a method would be helpful in many places

throughout the book as, say, the description of “dry exchange” (p. 245).

Models for the general reader do exist. Consider Poitras’ treatment of the

Triple or German contract (pp. 38-40) with that in The Abuse of

Casuistry (Albert Jonsen and Stephen Toulmin, Berkeley, University of

California Press, 1988) — a book whose intended audience is the general

reader. The first move toward a new paradigm was the introduction of a theory

of interest popularly referred to as the “triple contract,” the “German

contract,” or the “5% contract.” It marked a notable departure from the

medieval thesis and opened the way for a modern theory of profit from loans.

The name “triple contract” expressed the essence of the arrangement that Eck

popularized. Partners entered into three distinct contracts with each other.

First there was a contract of partnership, which was considered legitimate by

all commentators. Second, a contract of insurance was signed; under this the

investor was insured against a loss of his capital and, instead of paying a

premium, agreed to accept a lesser percentage of the total profits than would

otherwise come to him. Third, a contract was signed that guaranteed the

investor was a “sort of debenture holder without industry or danger of losing

capital.” This was an attractive form of investment, which provided the active

partner with considerable working capital. Commentators conceded that, if made

with different parties, each of these three contracts would be legitimate, but

most of them doubted the morality of the triple contract between two parties.

(pp. 188-89)

If the author plans a second edition, I hope he will look more at the financial

instruments devised by Islamic finance in the period 800-1400 AD. The growth of

world trade in this period is well covered in books such as those of Janet

Abu-Lughod. The fact that the Italians devised the earliest financial

instruments for Europe may not be unconnected with their close trading

relations with the world of Islam. In looking at financial history, Adam Smith

is less instructive than individuals like Lewes Roberts in the 1640’s and

Malachy Postlethwayt in the 1760’s.

The current “Conclusion” has interesting speculations on what leads to fame in

this area and why the contributions of “Anonymous” should figure largely in a

history of finance. The book should perhaps end with a list of potential topics

for future research. We know that the best mathematicians of this period were

limited to using polynomials, and low order polynomials at that. How accurate

were speculations with low order polynomials? If the speculations were more

successful than we can expect on the basis of the explicit mathematical

knowledge, does this then suggest that humans have much implicit or tacit

knowledge, which they can use but cannot necessarily articulate?

Salim Rashid is author of Economic Policy for Growth: Economic Development

Is Human Development (Kluwer 2000). His recent research asks “Can there be

theory of money?”

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):Medieval

Elites, Minorities, and Economic Growth

Author(s):Brezis, Elise S.
Temin, Peter
Reviewer(s):Szostak, Rick

Published by EH.NET (May 2001)


Elise S. Brezis and Peter Temin, editors, Elites, Minorities, and Economic Growth. Amsterdam: North Holland, 1999. x + 255 pp. $95 (cloth), ISBN: 0-444-82848-6.

Reviewed for EH.NET by Rick Szostak, Department of Economics, University of Alberta.

This book contains papers presented at a conference held at Bar-Ilan University in June of 1997. The conference, in turn, was inspired by a recognition that there has been very little research on the role of either elites or minorities in economic growth (though such a role often receives anecdotal treatment in general works). Moreover, the editors — Elise Brezis of Bar-Ilan University and Peter Temin of MIT — note that the literature which does exist is fragmented: not only do students of one society rarely draw parallels with elite or minority behavior elsewhere, but sociologists and economists approach these issues from different angles and thus rarely interact.

The editors/organizers are to be applauded for drawing together scholars from (at least) sociology, economics, and history departments. They could, though, have included information on the departmental affiliations of contributors. The reader is, instead, left to deduce which disciplinary perspective is at work in different chapters. The geographic range addressed is also fairly broad: Eastern and Western Europe and the Middle East are the subject of several papers, while North America and Southeast Asia are discussed one time each. Most of the papers deal with the twentieth century, but a handful investigate developments in the eighteenth or nineteenth centuries.

Sadly, the potential for comparative analysis is realized only in the introductory chapter. Rarely in later chapters do authors make even a passing reference to countries other than those they study, nor do they usually discuss how their analysis might benefit from the insights of other disciplines. Of course, this result largely reflects the limited scope and fragmentation of the pre-existing literature. One might have hoped, though, that interaction at the conference itself would have encouraged greater efforts at integration from contributors.

The editors’ introductory essay provides a good introduction not only to the book but also to the subject in general. After brief definitions of the relevant terms (a good strategy in an area ripe for semantic confusion), the editors discuss the key questions which motivate this collective inquiry. With respect to elites, we can ask how members are recruited into elites, how elite membership changes over time, how elite groups develop values, how powerful and united elites are, whether it is best to think in terms of one or diverse elites in particular societies, whether elites dominate democratic decisionmaking, and whether it is advantageous to have distinct economic and political elites.

With respect to minorities, the editors note that minority groups are often observed to play a disproportionate role in economic activity, but that we have not progressed beyond the broadest conjectures in attempting to understand why. While I agree with the editors, I wonder if a helpful first step in such a research agenda would be to attempt to quantify just how “surprising” this result is. There are, after all, lots of minority groups that either underperform or have no special success relative to their societies. Is the number of minority success stories (much) greater than we could expect tooccur randomly?

The editors review some of the possible explanations for minority success: that minorities have different values from the wider society; in particular that certain minorities which value Scripture may thus encourage literacy, education, and even rationality; that minorities may have strong kinship bonds — which will be especially important in societies where legal protections are weak and thus there are strong incentives to deal only with those one can “trust” [they could usefully have referenced here the work of Avner Greif on early modern ethnic trading groups in Europe and the Middle East]; and the possibility that minorities might be naturally rebellious and thus prone to economic and technological innovation. They note that countries which constrain minorities are usually close-minded in other ways [note that we might thus exaggerate the role of minorities in economic growth, by confusing correlation with causation]. They do not reprise the oft-heard argument that minorities might emphasize economic activity because they are barred from success in government, church, or military.

Beyond all of these questions of how elites and minorities function (and how minorities can become elites), there is the question of whether it matters. To what extent can the relative economic success or failure of countries be attributed to the nature of their elites and the behavior of their minorities? While I would urge scholars to appreciate the interrelated set of questions outlined by the editors, subscribers to this list will likely find the couple of papers which attack this last question of greatest interest.

As with any conference volume, there is considerable variety in quality and orientation in the sixteen papers. Some are largely speculative, and serve at best to raise questions for others to pursue. And some are concerned with the political influence of minorities and elites rather than their (related) economic influence. All naturally look at only a subset of the questions raised in the introduction. I will describe a handful of papers which might be of particular interest to list subscribers.

Peter Mathias asks how members of minorities can become members of elites. He notes that both religion and language can place powerful barriers between groups, and these in turn can create a strong sense of belonging among members of religious or linguistic minorities. He argues that business was much more risky at the time of the Industrial Revolution than today, and the incentives for dealing with members of one’s own (trusted) group much greater. Nevertheless, as members of minority groups succeeded economically, they faced incentives to assimilate into elite groups. Many descendants of Quaker industrialists did become Anglican, though Jewish families were much less likely to convert.

Eliezer B. Ayal studies the success of Chinese minorities in Southeast Asia. These groups arrived with little money, business experience, or education, but came to dominate large-scale business across the region. Ayal suggests that indigenous groups were “unsuited” to business, but does not at all explain why this might be. Ayal briefly reviews some of the possible explanations of minority success, adding one novel element: that colonial authorities actively sought to promote minorities to solidify their own power. Ayal argues that the Chinese business elite not only could not have been replaced by equally sagacious indigenous businesspeople, but that they encouraged political elites to pursue growth-enhancing policies; growth would thus have been much slower without these minorities. Critical of Malaysia’s attempts to favor Malay business since 1971, Ayal suggests that it would have experienced even more rapid growth otherwise. I would have liked Ayal to explore the relationship between economic and political elites in more detail. Are minority business elites more willing to cooperate with corrupt political elites (in return for protection)? Do the latter, like colonial governments, see some advantage in nourishing a minoritybusiness elite?

Peter Temin asks whether the recruitment of the American economic elite is as “democratic” as is commonly believed. He notes that Americans’ faith in democracy is rooted in a faith in economic mobility. Since Temin lacks evidence on the class of origin of Fortune 500 CEOs, he examines their education, gender, race, and religion. Here, too, the data are imperfect (Temin estimates an “upper bound” for Jews and Catholics by looking at surnames), but Temin’s results appear robust. He finds that the business elite is almost entirely male and white (there is one Asian and a handful of Hispanics; amazingly, given the prominence of multinationals on the list, there are almost no foreign-born CEOs), Protestant, and university-educated (with the Ivy League hugely overrepresented; Temin notes that entrance to such institutions decades ago depended more on family connections than SAT scores). [Temin does not, however, discuss the possibility that his results might reflect to some extent the tendency, noted by Mathias, for successful individuals to assimilate.] The American political elite — Temin looks at members of Congress — has become broadly representative of Blacks, Hispanics and Catholics, and women receive much better representation there than in the Fortune 500. However, the business elite is scarcely more representative of the population than it was a century ago. Temin takes the fact that CEOs are on average three inches taller than the rest of the population as further evidence that they came from a privileged background; a more powerful explanation may lie in the commonly observed (in psychological studies) fact that people tend to view the tall as more trustworthy and capable. Temin does not speculate on whether a wider appreciation of the narrow selection of the American business elite would decrease Americans’ faith in democracy. He does note that America is still a more mobile society than Europe. Americans might at least become more curious about the influence the business elite exerts on the political elite; recall Ayal’s discussion of how “minority” business elites can influence more representative political elites.

Joel Mokyr is one of the few authors to explicitly draw on the insights of a discipline other than his own: biology. Mokyr has long been advocating the application of evolutionary theory to economic history. In this paper he argues that technological innovation is effectively an act of rebellion against conventional wisdom and vested interests. He discusses the sorts of environments in which such rebelliousness is most likely to be approved. He argues that smaller societies, especially city-states, which are likely to be open to minorities, will be prone to encouraging this beneficial form of rebellion.

Finally, Francois Crouzet asks why a minority of family businesses are able to survive beyond the fabled third generation. He discusses several reasons why such dynastic survival is rare, including the economic and political challenges which any business will face over a period of a century or more, as well as the possibility of having too few or too many heirs. He notes that dynasties are more likely to survive in certain sectors: iron, brewing, pottery, chocolates, and banking (and textiles in France but not England). He conjectures that dynasties are most likely to survive in sectors that are viewed with respect by existing elites: the temptation to sell out and join the landowning class is thus reduced. I wondered also if continued family control might be especially beneficial in sectors where reputational effects loom large.

Rick Szostak is Professor of Economics at the University of Alberta. His research spans the areas of economic history, methodology, and interdisciplinary theory and practice. He has recently begun work on a manuscript that draws on each of these areas, tentatively titled “Exogenous Growth: Interdisciplinary and Historical Perspectives.” His books include The Role of Transportation in the Industrial Revolution (McGill-Queen’s, 1991), Technological Innovation and the Great Depression (Westview, 1995), Technology and American Society: A History (with Gary Cross; Prentice-Hall, 1995), Econ-Art: Divorcing Art From Science in Modern Economics (Pluto, 1999), and A Schema For Unifying Human Science: Interdisciplinary Perspectives on Culture (forthcoming, Susquehanna University Press).


Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Railroads and American Economic Growth: Essays in Econometric History

Author(s):Fogel, Robert W.
Reviewer(s):Davis, Lance

Robert W. Fogel, Railroads and American Economic Growth: Essays in Econometric History. Baltimore: Johns Hopkins Press, 1964. xv + 296 pp.

Review Essay by Lance Davis, Division of Humanities and Social Sciences, California Institute of Technology.

For those of us who lived through the exciting days of the “cliometric revolution,” the publication of Robert Fogel’s Railroads and American Economic Growth represented a very major milestone – it was as if we now had proof that we had left the bumpy and unpaved dirt road of the first few years and could see ahead a straight and well-paved highway into the future. (See note 1.) The roots of “clio” clearly lay in the 1956 publication of Cary Brown’s “Fiscal Policy in the Thirties: A Reappraisal” and, a few months later, in Alfred Conrad and John Meyer’s initial presentation of “The Economics of Slavery in the Ante-Bellum South.” Brown showed that, unlike the findings of the then-current historiography, government economic policy during the 1930’s was not an example of President Roosevelt’s imaginative application of the modern tools of Keynesian fiscal policy; and Conrad and Meyer demonstrated that, despite nearly a century of traditional historiography, ante-bellum slavery was profitable and, at least by implication, that, if the goal was to eliminate slavery before the 1940’s, the Civil War was not an extremely costly and totally unnecessary enterprise. However, these findings – findings that have been well substantiated by later research – while convincing to the small cadre of “converted,” were still not generally accepted by the historical profession. Thus, cliometrics did not really begin to flower until the publication of Robert Fogel’s study of the impact of railroads on American growth in the nineteenth century. Not only did it generate a spate of parallel studies (of Russia, Mexico, Brazil, England, and Scotland, to cite only five), but much more importantly, it provided a methodological foundation for the systematic study of economic history and long-term economic growth.

Despite the attention that had been paid to the construction of the Erie Canal, given the role of the national market in underwriting this country’s rise to become, economically at least, the richest nation in the world, and, given the speed with which rails came to dominate the transport network that provided the basis for that national market, it is not surprising that historians had concluded that railroads were the indispensable and driving force behind American growth in the nineteenth century. To the best of my knowledge, before the first annual Cliometric Conference (a conference held at Purdue University in 1960), few economic historians, neither those traditionally nor those cliometrically inclined doubted this fundamental tenant of American development. (See note 2.) Moreover, although some cliometricians may have been aware of the concept of social savings – a concept that was closely related to the economic literature on cost/benefit analysis – none had attempted to measure the savings attached to any specific legal or technical innovation. (Fogel had touched on a similar concept in The Union Pacific Railroad (1960), but his first published paper dealing specifically with social savings was still almost two years in the future – “A Quantitative Approach to the Study of Railroads in American Economic Growth” (1962).)

With its publication, Railroads proved once and for all that economic history, while still depending on the product of scholars “slugging it out in the archives,” could benefit mightily from the careful application of economic theory and econometrics. On the one hand, although the work immediately generated substantial controversy, and even today one might quibble about a few days or a few months, in the long run, there has been little question about the book’s major conclusion – that the level of per capita income achieved by January 1, 1890 would have been reached by March 31, 1890, if railroads had never been invented. Moreover, Fogel’s work also indicated that there was no other industry that was likely to have been more important than the railroads; and, thus, if not railroads, no other industry could have played the role that historiography attributed to the rails. On the other hand, the evidence is overwhelming that, since the publication and subsequent debate over Railroads, almost all economic history has been written by scholars who have either been trained in economics or who have found it necessary to acquire (either formally or informally) those basic economic and econometric skills. What, then, in addition to the central importance of the subject, made this such a path-breaking work? As the title suggests, the book is actually a collection of four interrelated, but really distinct, substantive essays: “The Interregional Distribution of Agricultural Products,” “The Intraregional Distribution of Agricultural Products,” “Railroads and the ‘Take-off’ Thesis: The American Case” and “The Position of Rails in the Market for American Iron, 1840-1860: A Reconstruction.” Any attempt at evaluating the contribution of the book rests on the evaluation of the methods and findings of the four.

If Fogel had limited his work to the last two essays – the two that in many ways were the most central to the then intense discussions of the “Axiom of Indispensability,” the work would have been important; but it would never have had anywhere near the impact that it actually did. In the third essay, “The Takeoff,” Fogel, although not addressing the question of whether or not there was in fact a “takeoff” between 1843 and 1860, in order to operationalize his argument, chooses the first of W.W. Rostow’s criteria for a “leading industry”: in this case, what impact did the railroads have on the “change in the percentage distribution of output among the various industries?” Then, drawing on the best available data – data reported by Robert Gallman in his seminal (1960) study of commodity output – Fogel finds that the impact of the railroads on that percentage distribution was minimal. In the case of iron, railroads, except at the end of the period, accounted for only a minor fraction of the output change (overall, including the later period, it was still only 17 percent); for coal, it was less than 5 percent; for lumber, barely 5 percent; in the case of transport equipment only 25 percent (only half of the change accounted for by vehicles drawn by animals); and for machinery it was less than 1 percent. Thus, for all manufacturing, the railroads accounted for less than 3 percent of the change – hardly a ringing endorsement for what was purported to be a “leading industry.”

In his more detailed examination of the impact of railroads on the development of the iron industry (an attempt to assess the importance of railroads to industrialization because of their alleged “backward linkages”), Fogel found it necessary to produce a new series on pig iron output between 1840 and 1860 and to revise the estimates of the consumption of railroads to account for imports and recycled rails as well as changes in the weight of rails. These new estimates represented a major contribution to our understanding of the industrial history of the period. Fogel’s primary interest, however, was not on the production of the new series, but on estimating the importance of the railroads in the development of the iron industry. His results, again, indicate that railroads did not dominate the development of the iron industry in the two decades before the Civil War. In fact, his conclusions strongly support Douglass North’s conclusion that, from the point of view of backward linkages, it would be as sensible to talk about an iron stove theory of the development of the iron industry as a railroad theory.

In these two essays Fogel demonstrates a command of what had heretofore been the best of traditional economic history, but in neither chapter are there any major methodological breakthroughs – merely a carefully constructed series of new estimates and the demonstration of an ability to bring those estimates to bear on important issues. In the first and second of the four substantive chapters – the estimate of the social savings from the interregional and from the intraregional distribution of agricultural products – Fogel’s methodological innovations do, however, play a central role. First, in both essays, he attempts to explicate and to provide estimates of the appropriate counterfactual – what the world would have been like had there been no railroads. Although historians have long employed counterfactual arguments – sometimes it seems without realizing it – to most historians the idea of an explicit counterfactual was still a very foreign notion in the early 1960s. Second, in both chapters Fogel employs the concept of social savings (the difference in social costs between the real and the counterfactual worlds) to provide a measure of the value of the introduction of the railroad. The concept of social savings is itself an important research tool; but, from a methodological point of view, it is equally important that the measure was defined operationally, so that Fogel’s calculations could be tested against alternative estimates and against possible alternative definitions. As an aside, however, it is interesting to note that, although the two studies are very very important from the view point of methodological innovation, from the point of view of traditional economic history, they are not as strong as the third and fourth substantive essays. In the second substantive essay – the social savings arising from the intraregional distribution of agricultural commodities – Fogel begins by noting that the substitution of rail for water was more rapid in the intraregional than in the interregional distribution of agricultural commodities, and, that, since the distances to be shipped in the intraregional case were only a third as great for rail as for water transport, one would expect that the social savings from the innovation would be greater. To estimate those savings he proposes two measures: alpha (a direct measure of the cost differences with and without the railroads) and beta (an indirect measure based on the difference in the value of the land that would have been economically productive with railroads and the lesser number of acres and, thus, the lesser value of land that would have been economically productive in the absence of those railroads).

Fogel then estimates alpha for a sample of counties in the North Atlantic region and concludes that the direct costs (alpha) would amount to a loss of 2.5% of GNP, and that adjustment for excluded indirect costs (alpha-2) would have increased that figure to 2.8% of GNP. Neither estimate, however, includes the potential savings that would have resulted from the construction of additional canals and better roads. He admits that the North Atlantic region may not provide an adequate representation of the entire country, but he argues that it would be too expensive and difficult to extend this direct measure of savings to the rest of the country.

As an alternative, Fogel suggests that, since water transport was available for about 76% of the land value in the U.S., since, in the absence of railroads, 75% of the loss of land value would be in the four states of Illinois, Iowa, Nebraska, and Kansas, and since all of the lost land could be brought into production with only a small extension of the canal network, a measure based on the difference in the value of arable land provides an equally good measure of social savings. He concludes that the cost of the direct loss of arable land from the absence of railroads (beta) would amount to 1.8% of GNP, and that the total loss – the sum of direct and indirect costs (beta-2) – would amount to 2.1% of GNP. Again, however, beta-2 does include the potential savings that would result from additional canals and better roads. Making further adjustments for the unbuilt canals and better roads, Fogel provides two estimates for the social savings from intraregional trade: alpha-3 equal to 1.2% of GNP and beta-3 equal to 1.0% It was, however, Fogel’s estimates of the social savings generated by railroads in interregional shipping (the first substantive essay), that really touched off the methodological revolution. As in the second essay, the use of explicit counterfactuals and the innovation of the concept (as well as his estimates) of the social savings broke new ground. In this case, however, there were also other very important methodological innovations.

Fogel begins with an operational definition of interregional distribution: “the process of shipping commodities from the primary markets of the Midwest to the secondary markets of the East and South.” While there were good estimates of agricultural production and agricultural exports, there were no data on the method and routes of shipment that were used to move agricultural commodities from producing areas to the points of domestic and foreign consumption; and it is here that Fogel introduces his single most significant innovation. He focuses of four commodities (wheat, corn, beef, and pork) – commodities that together represented 42 percent of agricultural income. He, first, estimates the export surplus at ten primary markets in the west and the consumption in the almost 200 deficit trading areas in the East and South (exports are attributed to the port from which they were shipped). The potential rail and water shipping routes from West to East were easily identified, and the costs of rail and water shipment were well known. To simplify the problem, Fogel focuses on a sample of 30 of the 825 potential routes between pairs of cities in the West and the East. Since the actual choice of routes is unknown, he very imaginatively suggests a linear programming model to estimate the routes – with and without railroads – that would have been selected had the shippers been guided by cost minimization. He then estimates the costs of the inferred shipments, costs estimated both with and without rails. Since there were also additional costs of water transport (lost cargoes, transshipment expenses, extra wagon haulage, time lost because of slower speed and because the canals and rivers froze, and the capital costs of the canals that were not included in the water rates), Fogel adjusts his original cost differentials to account for these additional expenses. His result is an estimate of the social savings in interregional shipment resulting from the innovation of railroads of six-tenths of one percent of GNP, a figure that would have increased to only 1.3%, had he assumed that rail rates were zero.

In this chapter Fogel made four important innovations that were to have a major impact of the nature of research in economic history: (1) the operational definition of social savings; (2) the use of an explicit counterfactual; (3) the use of a formal economic model to estimate what costs would have been had the decisions been made by economic man; and (4) his choice, when it was necessary to make assumptions about the actual world, of assumptions that were biased against his central findings. (See note 3.) Even more than his estimates of interregional social savings, the work in this essay completely changed the way economic historians would do business in the future. There is, however, one blemish in the story. Professor Fogel never actually solved the linear programming problem; his choice of routes was based on what he assumed the solution would have been.


1. To give you some feeling about that first decade, one might note that the term “cliometrics” was coined by my then colleague at Purdue, Stanley Reiter – he had been toying around with questions raised by a new discipline that he called “theometrics” (for example, “how many angels can dance on the head of a pin?); and, in his joking way, he suggested that the work in quantitative history seemed to be drawn from similar academic stream.

2. Bob Fogel and, perhaps, Douglass North and Al Fishlow, were the major exceptions. Fogel, himself, has said that he began his investigation fully believing that it would confirm the importance of the railroads. Fishlow (1965) reached conclusions for the antebellum period very similar to those Fogel reached about the latter part of the nineteenth century. Not long before this, North (1961, p. 164) wrote, “While the value added of rails was approximately $6.5 million in 1860 and roughly equals to the value added of bar iron, it was dwarfed by the value added of the polyglot classification of iron castings, which was $21 million in 1860. Indeed, the value added in stove making alone was equal to that of iron rails.”

3. For example, Fogel made no adjustment for changes in non-rail transport that might have been made had there been no railroads: he holds both origins and destinations fixed despite the fact that there would almost certainly have been some such adjustments in the absence of railroads; and he assumes that, in the absence of railroads, water rates would be constant rather than declining as might have been the case had canal builders exploited potential economies of scale.


E. Cary Brown. 1956. “Fiscal Policy in the Thirties: A Reappraisal,” American Economic Review, 46 (December).

Alfred Conrad and John Meyer. 1958. “The Economics of Slavery in the Ante-Bellum South” Journal of Political Economy, 66 (April). This paper was first presented at the meeting of the Economic History Association in 1956.

Albert Fishlow. 1965. American Railroads and the Transformation of the American Economy. Cambridge, MA: Harvard University Press.

Robert Fogel. 1960. The Union Pacific Railroad: A Case Study of Premature Enterprise. Baltimore: Johns Hopkins Press.

Robert Fogel. 1962. “A Quantitative Approach to the Study of Railroads in American Economic Growth: A Report of Some Preliminary Findings,” Journal of Economic History, 22 (June).

Robert E. Gallman. 1960. “Commodity Output in the United States,” in Conference on Income and Wealth, Trends in the American Economy in the Nineteenth Century, 24, Studies in Income and Wealth. Princeton: Princeton University Press.

Douglass North. 1961. The Economic Growth of the United States 1790 to 1860 Englewood Cliffs, NJ: Prentice-Hall.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century

Accounting for Growth: Information Systems and the Creation of the Large Corporation

Author(s):Levenstein, Margaret
Reviewer(s):Miranti, Paul

Published by EH.NET (September 1999)


Margaret Levenstein. Accounting for Growth: Information Systems and the Creation of the Large Corporation. Margaret Levenstein. Stanford, Ca., Stanford University Press, 1998. ix + 277p p. appendices, illustrations and index. Cloth, $49.50. ISBN 0-8047-3003-2

Review for H-Business and EH.NET by Paul Miranti, Rutgers University.

Margaret Levenstein has written an important book that should have a major im pact on the history of accounting and information systems and its connections to the theory of the growth of the firm. Dr. Levenstein argues that changes in corporate organization, strategy, market structure and technology serve as the drivers of modifications in the design and structure of accounting systems. This is a significant departure from the traditional approach followed by accounting historians who often focus more narrowly on the details of methodological evolution per se, placing little emphasis on other contextual factors. Central to her study is an asynchronous, three-stage categorization of accounting system development for the purposes of: (1) operational control; (2) short-term decision making; and (3) long-term capital allocations. These classifications enrich the analysis of firm practice by highlighting how changing priorities influenced information function, flows and content. They also help to avoid the rigidities inherent in such shop-worn constructs as the entity or proprietary theories that permeate many method studies in this field. The explanatory power of Margaret Levenstein’s propositions are tested by analyzing the experience of the Dow Chemical Company and its predecessor, the Midland Chemical Company during the period 1894- 1914. She persuasively argues that Dow’s accounting systems underwent an important transformation during this era as the firm made the transition from an adaptive strategy appropriate for an uncompetitive, cartelized market to an innovative strategy involving product diversification and competitive market settings. Midland Chemical, the precursor adaptive firm, only required a rudimentary accounting system to satisfy the limited information requirements necessary to operate successfully in the cartlelized market for its primary product, potassium bromide. The Dow Chemical Company, the innovative successor, on the other hand, needed a more elaborate accounting system to capture the wider array of information needed to exploit the market potential of electrochemical technology after it abandoned the bromide cartel in 1900.

Some of Margaret Levenstein’s findings are at a variance with earlier studies that dealt with the nature of the relationship between accounting information and corporate growth. She notes, for example, that capital allocation decisions at Dow were informed largely by marginal profit data rather than return on investment analysis which Alfred Chandler has identified as a major evaluative mechanism in modern corporations. This difference is probably more a function of the lack of sophistication in accounting and finance in an emergent enterprise whose management was dominated by chemists. Some AT&T subsidiaries were using return on investment as early as 1911. Moreover, it is not clear when Donaldson Brown actually developed the more elaborate Du Pont ROI calculation which included three components: profit margin, sales turnover and financial leverage. It may have been perfected after the 1914 cut-off date for the Dow study. And it did not become central to planning at General Motors until after 1921 when Brown joined the management team organized to resurrect that firm’s depleted finances. Second, Dr. Levenstein’s findings also do not support the conclusion of Johnson and Kaplan that corporate accounting practice was shaped strongly by professional accountants who were primarily concerned with the questions relating to financial reporting. At Dow professional accountants were consulted after the process of system evolution was well advanced (1900) and that their recommendations were only embraced selectively by management. Moreover, audits by independent public accountants were only performed occasionally (1900, 1905, 1910) with regular annual audits not beginning until 1911 which suggests that the linkage between the requirements of financial reporting and corporate accounting policy may have been weak. What is more surprising is that such a marginal enterprise actually engaged as advisors leading representatives of what then was a small and poorly understood profession. Professional accounting had only been licensed in New York since 1897 and was just beginning to be organized in Michigan and Ohio when Dow employed Haskins & Sells. The choice of a firm which had played a leading role in Progressive reform in Chicago and New York may imply that there is a question concerning the sociology of knowledge here that goes beyond the confines the current study. Perhaps, Dr. Levenstein’s next work on the Cleveland Trust, which provided important financial support to Dow, will shed more light on how professional accounting won acceptance among business and political elites as a means for strengthening social and economic ordering.

One dimension of Margaret Levenstein’s study which might have been expanded more is a generally excellent discussion of Dow’s haphazard capital costing policies. Initially, the firm only recorded repairs and betterment expenses. Later, seemingly arbitrary depreciation charges were recorded apparently in order to maintain surplus accounts at some desired level, perhaps conditioned by the amount of dividends management wished to pay out. The study, however, does not find any connections with contemporary developments in regulated public service enterprises where the de bate over depreciation raged because of its impact on rate bases. The accounting sections of the Hepburn Act of 1907, for example, were intended in part to require greater uniformity in depreciation practice among the nation’s railroads. More surprising was lack of discussion of the significance of the depreciation policies under the federal corporate income tax which became operative at the end of the period under survey.

Margaret Levenstein’s unique model which blends history and theory represents an important contribution to the accounting literature on a par, I believe, with the well known paradigms of such scholarly duos as Johnson and Kaplan, Meckling and Jensen and Watts and Zimmerman. Her ideas about the drivers of accounting evolution invites further confirmatory case studies to test her conclusions which were predicated on the experience of a single great firm in its formative stages of development. Dr. Levenstein’s study serves as an exemplar of the potential richness of case studies in accounting history-a genre that too often in the past has neither amplified theory nor major interpretative themes.


Subject(s):Business History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Determinants of Economic Growth: A Cross-Country Empirical Study

Author(s):Barro, Robert J.
Reviewer(s):Dawson, John W.


Published by EH.NET (July 1998)

Robert J. Barro, Determinants of Economic Growth: A Cross-Country Empirical Study. Cambridge, MA: MIT Press, 1997. xii + 145 pp. $22.50 (cloth), $12.50 (paper); ISBN: 0-262-02421-7 (cloth), 0-262-52254-3 (paper).

Reviewed for EH.NET by John W. Dawson, Department of Economics, Bellarmine College.

Robert Barro and his associates have been leaders in assembling a vast empirical growth literature during the past decade. This book summarizes many of Barro’s own findings in this area and provides a general overview of the empirical research on growth to date.

The text of the book is divided into three chapters which are based on Barro’s Lionel Robbins Memorial Lectures, delivered at the London School of Economics in February 1996. The first chapter briefly reviews the history of growth theory and, in particular, describes the convergence hypothesis associated with neoclassical growth theory. The discussion quickly turns to the regression framework to be used throughout the rest of the book, which is based on the neoclassical framework.

In Chapter 1, the regression framework is applied to a panel of data covering roughly a hundred countries over the years 1965-1990 in an effort to determine what factors are important in explaining long-run growth. In using panel data instead of a pure cross section, the approach differs from Barro’s early work in this area (e.g., see Barro (1991)), but is not unlike the analysis in his more recent studies (see Barro and Sala-i-Martin (1995)). The findings highlighted in this chapter are that the growth rate of real per capita GDP is enhanced by better maintenance of the rule of law, smaller government consumption, longer life expectancy, more male secondary and higher levels of schooling, lower fertility rates, and improvements in the terms of trade. The data also support the notion of conditional convergence; that is, for given values of these variables, countries with a lower initial level of real per capita GDP grow faster. The analysis also looks at democracy and inflation as potential factors determining growth rates, but their roles are the topics of Chapters 2 and 3. Finally, Chapter 1 concludes with projections of growth rates through the end of the century based on the empirical framework developed earlier in the chapter.

Chapter 2 looks at the role of political freedom in determining growth rates; that is, whether or not a more democratic form of government promotes long-run growth. The findings suggest that increases in political rights initially increase growth but tend to retard growth once a moderate level of democracy has been attained, but Barro states that “one cannot conclude from this evidence that more or less democracy is a critical element for economic growth” (p. 61). With this, the analysis turns to developing a framework for determining the level of democracy over time and across countries. While this has largely been a topic of interest to political scientists, the main finding is that levels of democracy are a function of economic factors. In particular, “the positive relation between democracy and prior measures of prosperity–the Lipset [1959] hypothesis–is well established as an empirical regularity” (p. 86). The chapter closes with long-run forecasts of the level of democracy across countries based on the empirical model developed in the chapter.

The third chapter considers the effects of inflation on long-run economic performance. Inflation has received relatively little attention as a potential determinant of long-run growth, but the issue is particularly timely given many central banks’ apparent preoccupation with price stability as a policy goal. The major result is that inflation is estimated to have a negative effect on growth, but “the clear evidence for adverse effects of inflation comes from the experiences of high inflation [annual rates in excess of 20%]” (p.117). Barro devotes a large part of this chapter to dealing with endogeneity issues; that is, ensuring that causation is running from inflation to growth and not in the other direction.

Barro’s approach to studying the determinants of growth is very much data-driven. However, economic historians will be interested in various aspects of the analysis that look at the role of institutions in the growth process. The analysis in Chapter 1 includes a “rule of law” index which is intended to “gauge the attractiveness of a country’s investment climate by considering the effectiveness of law enforcement, the sanctity of contracts, and the state of other influences on the security of property rights” (p. 27). The rule of law index is found to be statistically significant in explaining growth. Chapter 1 also introduces a democracy index into the empirical framework, but a detailed discussion of this relationship is postponed until Chapter 2. In that discussion, the role of other institutional and cultural issues such as ethnolinguistic fractionalization, colonial heritage, and religious affiliation are considered in the growth-democracy relationship.

There is no indication of the intended audience for this book, but it appears to be rather versatile. It provides a very general but useful overview of modern growth theory with particular emphasis on the convergence hypothesis, and provides a fairly complete statement of current methodology and conclusions in the empirical growth literature. All of this could be useful to students of growth at the graduate level and to economists who are not current in the growth literature. More importantly, in my opinion, is the book’s potential for use in the undergraduate classroom and among laymen. With very few exceptions, most of the terminology used in the text is accessible to undergraduates. Most of the exceptions fall in the area of econometrics, but the use of graphs throughout the book to illustrate key estimated relationships largely eliminates this potential problem. I have also found that a lecture or two on basic regression analysis makes even the large tables of regression results accessible to advanced undergraduates. The exposition keeps mathematical notational to an absolute minimum, and uses everyday terminology in many cases to describe the more difficult concepts. Only in the discussion of the debate over cross-section versus panel estimation in Chapter 1 and the choice of instruments in Chapter 3 does the text become sufficiently thick to hinder the interested undergraduate reader.

In several instances the author’s emphasis of the results may need to be qualified. For example, Chapter 2 states that “one cannot conclude from this evidence that more or less democracy is a critical element for economic growth” (p. 61). In the concluding observations following Chapter 3, however, the results concerning democracy are reported as a main result of the analysis: “Increases in political rights initially increase growth but tend to retard growth once a moderate level of democracy has been attained” (p. 119). In addition, the reader may well leave Chapter 2 questioning the direction of causation between democracy and growth, given that empirical models of both are considered in that chapter. Similarly, the results concerning inflation may not be appropriately portrayed, in the end, as being perhaps entirely driven by experiences of inflation in excess of 20% annually. Despite these minor shortcomings, I am confident in saying that the book succeeds in its overall goal of providing a useful summary of the empirical evidence on the determinants of recent economic growth.


Barro, R.J., 1991, “Economic Growth in a Cross Section of Countries.” Quarterly Journal of Economics 106, 2 (May): 407-433.

Barro, R.J. and X. Sala-i-Martin, 1995, Economic Growth (New York: McGraw-Hill).

Lipset, S.M., 1959, “Some Social requisites of Democracy: Economic Development and Political Legitimacy.” American Political Science Review 53: 69-105.

John W. Dawson Department of Economics Bellarmine College

John Dawson is author of “Institutions, Investment, and Growth: New Cross-Section and Panel Data Evidence,” forthcoming in Economic Inquiry.


Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Humans versus Nature: A Global Environmental History

Author(s):Headrick, Daniel R.
Reviewer(s):Jones, Eric L.

Published by EH.Net (January 2021)

Daniel R. Headrick, Humans versus Nature: A Global Environmental History. Oxford: Oxford University Press, 2020. ix + 604 pp. $40 (paperback), ISBN: 978-0-19-086472-9.

Reviewed for EH.Net by Eric L. Jones, University of Buckingham.


This is an encyclopedic volume, the more impressive because written by a single hand. Almost 500 pages are accompanied by one hundred pages of references. It is so voluminous and wide-ranging that the reviewer may feel ashamed to probe for limitations. For topic after topic, period after period, Daniel Headrick (Emeritus Professor at Roosevelt University) provides at least a page or two of thorough and judicious summary. Within every chronological segment, he characterizes the environmental condition of each of the world’s major regions, and often minor ones too. Proper weight is given to the immense stretches of prehistory, emphasizing not merely humanity’s ancient impress on the environment but its manipulation of habitats too, ever since the discovery was made that fire could be portable.

Headrick is certainly disposed to dwell on the losers among species, populations and societies but does not entirely neglect the winners. Of the latter, perhaps the least expected was the earthworm, which spread across North America from the east coast to which it had been inadvertently carried by European settlers. It is an example — and by improving soils by no means a trivial one — of the depth of the author’s reading in any number of specialist sources.

Throughout history and prehistory, human societies have administered and experienced every type of alteration in the environments housing them. Changes have been both stealthy and abrupt, signaled by the rise and fall of groupings as large as civilizations. Many developments have been responses to environmental opportunity, whenever the prevailing technology made fresh resources accessible. In the long run less benign factors have also been prominent, most of all climatic fluctuations and various diseases, endemic and epidemic, human, animal and plant. Apportioning the effects among these and a host of other influences, such as social conflict, deforestation (which comes to the surface in many of Headrick’s narratives), hunting and poaching, and geophysical shocks, is exceedingly difficult. Combinations of the forces are advanced as having marked most periods and most societies.

Drawing the episodes together over the whole earth and all of recorded time thus unfortunately clarifies less than might be hoped: the past is presented as a kaleidoscope. No hope, then, of isolating a prime mover unless it is the growth and migration of population — which is itself what one would like to have explained. No variable is independent of others. Societies were differently resilient, the author tells us, but that is description, not explanation. Headrick understandably plays up environmental reasons for major events, such as the Fall of Rome, and more generally leans towards the way fluctuating populations were calibrated by fluctuations in the climate. He notes cases where human action itself has probably affected the climate ever since the Neolithic. But he knows far too much to advance a monocausal thesis.

Insofar as any interpretive slant becomes apparent, the book reflects current alarm about environmental degradation and climate change. The latter may well prove a lasting game changer but there is comparatively little recognition of humanity’s satisfactory past accommodations to certain of its habitats. Historically, humanized landscapes in the temperate zones may have reached approximate equilibrium with nature; the recent excessive use of agricultural chemicals might be curbed by governmental regulation; and only global warming seems to toss an unavoidable spanner into the environmental machinery. Headrick’s view is that laissez faire will continue to rule and create an unstable mix between voluntary restraint, business as usual, and some barely understood technological fix for the planet’s problems.

Any conspectus on the gargantuan scale of this book is obliged to rely on the available literature and no one can withhold admiration for Headrick’s endless energy in that regard. An unavoidable weakness follows because the literature, at least work in English, is heavily skewed in favor of those major regions with highly organized polities. On the one hand tracing these examples constitutes a crushing work-load for the scholar; on the other they must minimize, relatively speaking, the experience of lesser regions, societies and periods. North America and Europe, and the western search for tropical products, necessarily figure large. China is increasingly claiming a share. Among early societies, archaeology has tended to concentrate on empires that had a big impact on their setting and left major monuments to be studied or excavated. Constructions of stone have obviously survived best and one can never escape the continual revaluations of Stonehenge, but the intermittently recorded achievements of societies that lacked stone give an inkling of parts of history’s jigsaw that may often be missing: in the south-west of what is now the United States, the Anasazi built their Great Houses with 200,000 logs of up to 320 kilograms apiece, dragging them from mountains 75 kilometers away because they had no draft animals!

Mentioning Stonehenge emphasizes the difficulties faced by any compiler of a general text. New techniques continue to make stunning discoveries at that site and at many others. No one can keep up with all the topics and sub-disciplines involved, which means that relying on the existing literature is slightly insecure. And interpretations can be overturned by the continual advance of knowledge. Ian Miller’s Fir and Empire: The Transformation of Forests in Early Modern China (Seattle: University of Washington Press, 2020) is persuasive that previous views of unrequited deforestation, that is without replanting, are misleading. It was published since the book under review was written and only serves to show how scholarship’s progress must chip away at any overview. Nevertheless for the foreseeable future Daniel Headrick’s Humans versus Nature will remain the ultimate reference work on global environmental history.


Eric Jones, Senior Fellow at the University of Buckingham, is the author of Revealed Biodiversity: An Economic History of the Human Impact (World Scientific, 2014), Barriers to Growth: English Economic Development from the Norman Conquest to Industrialisation (Palgrave Macmillan, 2020), and Landscape History and Rural Society in Southern England: An Economic and Environmental Perspective (in press).

Copyright (c) 2021 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (January 2021). All EH.Net reviews are archived at

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economic Development, Growth, and Aggregate Productivity
Historical Demography, including Migration
Historical Geography
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Islam, Authoritarianism, and Underdevelopment: A Global and Historical Comparison

Author(s):Kuru, Ahmet T.
Reviewer(s):Rubin, Jared

Published by EH.Net (May 2020)

Ahmet T. Kuru, Islam, Authoritarianism, and Underdevelopment: A Global and Historical Comparison. New York: Cambridge University Press, 2019. xvii + 303 pp. $35 (paperback), ISBN: 978-1-108-40947-6.

Reviewed for EH.Net by Jared Rubin, Department of Economics, Chapman University.


For centuries following the spread of Islam, the Islamic world was far ahead of Western Christendom by every conceivable metric of civilization: economy, science, philosophy, technology, urbanization, and empire. Yet, the Islamic world is not where the modern economy was born. At some point in the late medieval or early modern period, it fell behind the leading parts of Europe. It was in those places, particularly the Netherlands and Great Britain, where modern economic development began. Why was this the case? Why did the Islamic world lose its once sizable lead over Western Europe?

These are the questions tackled by Ahmet Kuru in Islam, Authoritarianism, and Underdevelopment: A Global and Historical Comparison. Kuru’s primary thesis is that the Middle East fell behind as a result of the “ulema (religious jurist)-state alliance” that took hold in many parts of the Muslim world beginning in the eleventh century. By this, Kuru means an alliance between the religious establishment on the one hand and the military state on the other. According to Kuru, this alliance marginalized intellectuals and bourgeoisie, and this persisted in most parts of the Islamic world until the twentieth century. Importantly, and correctly in my opinion, Kuru argues that this alliance is not a natural outgrowth of Islam, as was long argued by Orientalist scholars and more recently by Bernard Lewis. Kuru argues that this alliance emerged for the first time in the eleventh century and quickly became institutionalized via the madrasa system.

Much of the first half of the book is spent attempting to convince the reader that politics, science, and technology in the first few centuries after Islam were fundamentally different than what would follow after the eleventh century. This is uncontroversial, and Kuru does an excellent job summarizing the major developments from the period. On this front, Kuru is the best recent book I can think of in social science. He delves into the early history of Islamic science, mathematics, and philosophy, spanning most of the Islamic world from Spain to south Asia. Most readers knowledgeable in history will not come away convinced of something new — it is widely known that the Islamic world was well ahead of Western Europe (and perhaps the rest of the world) during Islam’s “Golden Age.” However, most readers will come away with much more insight into exactly what made the Islamic world so cutting-edge in this period.

Kuru proceeds to ask why the Islamic world fell behind. He posits that the “ulema-state” alliance that emerged in the eleventh century is to blame. This alliance emerged in the Seljuk Empire, which ruled large parts of the Middle East and Central Asia in the eleventh and twelfth centuries. It spread west from there, to the weakened Abbasid Empire and eventually toward Egypt and Syria under the Ayyubids and Mamluks. An important institution supporting the fiscal needs of these states was the iqta system (a militarized tax farming arrangement similar to the timar system used under the Ottomans), which gave the state financial independence and permitted the marginalization of the bourgeoisie. To make such a sea-change in the institutions of the state, the Seljuk model promoted the idea of religious legitimation of rule. And an institutional sea-change it was. Prior to the emergence of the ulema-state alliance, Islamic philosophy was vibrant and merchants had political power (mainly via their funding of ulema and philosophers). This changed with the movement towards the ulema-state alliance and the rise of madrasas. With a new source of legitimacy, rulers could afford to ignore the wealthy merchants who had previously been a central source of power. Philosophy also declined in favor of theology. Importantly, for Kuru, this meant that intellectuals were mostly sidelined, although Kuru goes to great lengths to show that intellectual activity merely slowed down; it did not stop altogether. This meant that there was little voice to counteract the ulema and Sufi mystics, neither of whom promoted rational thought. This arrangement was institutionalized through the madrasa system: “the ulema class had dozens, if not hundreds, of madrasas and thousands of members to disseminate its ideas, whereas the philosophers lacked institutional and financial bases except for arbitrary political patronage, particularly after the weakening of the merchant class, which had previously supported both philosophers and independent Islamic scholars” (p. 149). Even today, “the ulema have contributed to the weakening of [intellectuals and the bourgeoisie] by imposing certain religious restrictions that discourage conservative Muslim youth from pursuing careers in intellectual and financial sectors” (p. 60). These prohibitions required state support, which the ulema had as part of the ulema-state alliance. Kuru contrasts this with Europe, where the Renaissance and Enlightenment propelled philosophy, science, and ultimately economic development. He argues that this was where the economic divergence had its roots: the intellectual and mercantile classes of Europe gained greater power over time, while it was the religious clerics of Islam who maintained their grip on political (and, to a lesser extent, economic) power.

There are many things to like about Islam, Authoritarianism, and Underdevelopment. Perhaps above all, Kuru addresses head on the question “why did the Islamic world fall behind, despite being ahead for so long?” While such a question might not be controversial in some circles, particularly in the social sciences, much of Kuru’s audience does not consider this a correct question to ask. I certainly agree with Kuru that this is an important question, and understanding its answer helps us understand much about long-run economic development, both in the Islamic world and beyond. Kuru does an excellent job showing that a reversal of fortunes did indeed happen, and it was not just the result of colonization. Moreover, Kuru’s deep dive into early Islamic philosophy and science is admirable, and I believe most readers will learn a considerable amount from the first half of the book. Another one of the great strengths of Kuru’s tome is the documentation of the ulema-state alliance — both its origins and persistence. Such detailed documentation is largely missing in social science accounts of Islamic political history.

I believe that Kuru’s central thesis — the ultimate cause of the economic divergence was the emergence of an ulema-state alliance — is largely correct. Indeed, it strongly echoes the thesis I recently put forward in my 2017 book, Rulers, Religion, and Riches. This said, I believe there are three aspects to the book that could have been strengthened. Before I get to these, I would like to reiterate that there are indeed many good features to this book, and these positives well outweigh any drawbacks.

First, Kuru is a bit too quick to dismiss alternative explanations. He begins with the supposition that any explanation that cannot account for the initial economic lead of the Islamic world has limited explanatory power. This is undoubtedly true. He also correctly points out that while explanations focusing on colonialism make valid points regarding the detrimental effects of colonialism, they have a difficult time explaining the roots of the divergence, particularly because the timing is off. This said, Kuru is somewhat quick to dismiss works by Greif (2006), Kuran (2011), Blaydes and Chaney (2013), and Rubin (2017). These dismissals tend to take the tone of “there are counterexamples to one aspect of the argument” or “they cannot account for most of the observed phenomena” and thus should be dismissed (with the exception of Kuran, whose argument Kuru is not so negative on). But this is too high of a bar for arguments that attempt to explain major, macroeconomic movements over centuries. There will always be counterexamples (this is Kuru’s major argument against Greif; it is also used to counter Rubin). Arguments do not need to explain everything to provide deep insight (this is Kuru’s major argument against Blaydes and Chaney which, after all, is a nineteen-page article). In fact, if one were to hold Kuru’s argument to the standard he holds other arguments, it would also fail. But I do not believe this to be the case; I believe Kuru’s argument provides nice insight. Kuru’s argument would have been significantly strengthened had he focused on how these various arguments complement each other.

Perhaps this is a methodological issue. The works that Kuru dismisses are either empirical or support their theory via analytic narrative. Kuru’s work, meanwhile, is more of a narrative. The key distinction between narrative and analytic narrative is that the latter lays out the supporting evidence (in this case, historical evidence) within an analytical framework. Such a framework provides falsifiable predictions, and the analytic narrative provides evidence in support of these predictions. Kuru’s book does not do this. Its second shortcoming is that there is no real framework provided for understanding why the ulema-state alliance persisted for so long. In the words of economics, why was this an equilibrium? Kuru provides wonderful evidence that it existed and persisted, but why did it? Why did alternatives not arise? These are key questions to address for a book aiming to achieve a convincing causal explanation. On this front, the book is largely silent.

On this, I admit to being biased: understanding why this equilibrium occurred and why it persisted is central to my own book. On the one hand, Kuru is very good at showing this was not always an equilibrium in the Islamic world (my terminology, not his): for centuries following the spread of Islam, the alliance was weak at best, and merchants were not marginalized. Kuru and I agree on this point (although he does not believe so, as he incorrectly claims that I argue the alliance existed from the inception of Islam; we have some disagreement on details, but my views are largely aligned with his that this alliance emerged sometime around the tenth or eleventh century, after the religious establishment consolidated along with the four major schools of Sunni Islam). On the other hand, it is unclear from Kuru’s theory why this arrangement persisted for so long. A comparison to Europe makes this issue all the more apparent. As Kuru notes, such a cleric-state alliance also pervaded medieval Europe at certain times and places. What were the mechanisms that broke Europe out of this equilibrium? Kuru claims that the rise of the intellectuals, helped by universities and, eventually, the spread of printing facilitated the rise of Europe. But this is not enough. These events were not exogenous. They were part of a larger process through which religion became less important over time in European politics.

Finally, despite the fact that the book’s subtitle is “A Global and Historical Comparison,” this is not really a global theory. Almost nowhere outside of the Islamic world and Western Europe is mentioned in depth. And where Kuru attempts to explain the rise of Western Europe, there is much left wanting. As I read it, Kuru places significant weight on the rise of the European intellectual class (along with merchants) in the late medieval and early modern periods. While it is undoubtedly true that this class superseded its Islamic counterparts by the eve of industrialization, it is big leap to connect this to the rise of the modern economy, as well as why its locus was in northwestern Europe and not elsewhere. Kuru does (correctly) mention the importance of the printing revolution, Reformation, geographical discoveries, and the scientific revolution, but his emphasis remains on the role of intellectuals in making these events happen. This is not necessarily wrong — Joel Mokyr (2010, 2016) convincingly makes the case for an “Enlightened Economy” being central to England’s rise. But Mokyr’s argument is based on England in particular having numerous other, complementary factors such as a large base of highly-skilled workers. Nothing like this comes through in Kuru’s argument. In short, while Kuru’s argument regarding economic stagnation in the Islamic world is a deep one that is a real contribution to the literature, the arguments regarding the rise of Europe are less fleshed out.

If the latter half of this review seems negative, I urge you not to take that as indicative of my overall feelings towards Islam, Authoritarianism, and Underdevelopment. I believe it is the duty of any reviewer to highlight both their perceived positives and negatives in the book they are reviewing, and this is what I have attempted to do. In this case, I believe the positives well outweigh the negatives, and anyone interested in early Islamic history will get much from reading this book. The detailed history of early Islamic philosophy, science, and mathematics are a real treat to read, and are a great reminder that societies and economies ebb and flow.


Blaydes, Lisa and Eric Chaney. 2013. “The Feudal Revolution and Europe’s Rise: Political Divergence of the Christian West and the Muslim World before 1500 CE.” American Political Science Review 107(1): 16-34.

Greif, Avner. 2006. Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. New York: Cambridge University Press.

Kuran, Timur. 2011. The Long Divergence: How Islamic Law Held Back the Middle East. Princeton: Princeton University Press.

Mokyr, Joel. 2010. The Enlightened Economy an Economic History of Britain, 1700-1850. New Haven, CT: Yale University Press.

Mokyr, Joel. 2016. A Culture of Growth: The Origins of the Modern Economy. Princeton, NJ: Princeton University Press.

Rubin, Jared. 2017. Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not. New York: Cambridge University Press.

Jared Rubin is a professor of economics at Chapman University. His most recent book, Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not, was published by Cambridge University Press in 2017.


Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (May 2020). All EH.Net reviews are archived at

Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Geographic Area(s):Middle East
Time Period(s):Medieval

Stocks, Seasons and Sales: Food Supply, Storage and Markets in Europe and the New World

Editor(s):Ronsijn, Wouter
Mignemi, Niccolo
Herment, Laurent
Reviewer(s):Jones, Eric

Published by EH.Net (January 2020)

Wouter Ronsijn, Niccolo Mignemi and Laurent Herment, editors, Stocks, Seasons and Sales: Food Supply, Storage and Markets in Europe and the New World. Turnhout, Belgium: Brepols, 2019. x + 224 pp. 74 euros (paperback), ISBN: 978-2-503-58509-3.

Reviewed for EH.Net by Eric Jones, Senior Fellow, University of Buckingham.

One of my summer jobs as a student was working in an English grain silo on the accounts of the 1953 harvest, which had been nationalized. The losses resulting from this venture were simply written off by the government; hence, I remain suspicious of interventions in the market and expect corruption among farmers. The present volume is about a passably similar topic, arranged like a Festschrift and containing tenuously interrelated pieces. The themes are food supply, food storage and food markets during recent centuries in Europe, with an outlier in Mexico (which was in any case a European anatopism). The thrust runs from producer behavior to provisioning by city governments. But, it covers seven countries and is even more disparate because several periods are addressed. Methods vary too, from quantitative studies to conventional political history. As with Festschriften, corralling such diverse authors is like herding cats. Apart from recognizing that getting enough to eat was a central historical issue, it is hard to discern much commonality.

This leaves the reviewer little choice other than to pick and choose among the items, awarding bouquets according to personal interest. I can do no more than select those that seem promising for further research. Start, then, with the motives of farmers, most closely tackled in studies of English farm accounts by Richard Hoyle and by Liam Brunt and Edmund Cannon. The sins here are not of commission but of what might be called involuntary omission — unavoidable gaps in the available records and serious concerns about the representativeness of the farms investigated. The authors are well aware of these problems. What is unclear is how they can be addressed.

Gaps in the sources affect other pieces. Those that deal with the provisioning of cities sometimes have considerable quantitative data to hand but not necessarily everything required. Decisions about public storage were bedeviled by high costs, the complexities of management in the face of variable seasons, and infighting among political groups; a purely economic history seems scarcely possible. Another line of enquiry relates to a rather modern-sounding concern with urban self-sufficiency, where the finding is that towns with populations under 15,000 were more likely than larger cities to supply their own food from gardens. What might be missing is that incomes were lower in small towns, prompting supplementation by vegetable growing. This leads to the whole question of substitutions, which is sometimes discussed; the (obviously limited) trade-off between food and heating is however not mentioned.

A further intriguing line concerns the alternatives of expanding the “urban food frontier” versus the intensification of crop growing. The large city of Vienna drew in enough food to supply itself more or less satisfactorily by extending its reach even before the advent of rail and steamships. Changes in the quality of food were also significant and warn against over-simplified price series. Above all, interest attaches to the implication in more than one contribution that the motive of stabilizing grain supplies dominated the harsher market behavior an economist might expect.

A common sensation when an author finishes writing a book is that a somewhat different approach should have been taken. In the introduction, which is informative despite the disparate contributions, two of the editors, Wouter Ronsijn and Niccolo Mignemi, hint they could perhaps have reached beyond a focus on crops. They can see that the livestock sector has been largely left out. A chapter on fish is suggestive from the conservation point of view, but the fishing economy was not so immediately connected with grain production. The introduction also serves as conclusion, despite listing rather than summing up what is offered. It does point out a brace of distortions in the literature on storing food, meaning grain. First, scholars have striven to deduce the motives of farmers from pre-harvest movements of prices and fallen into wrangling over how far producers were rational maximizers. Although current opinion tends to emphasize motives other than profit, the results are indeterminate. I am sympathetic to the shift away from a priori assumptions but worry where it might take us. No one has yet set out a sharp alternative to the maximizing calculus — must economic history, then, deliquesce into special cases?

Secondly, the editors note that econometric historians tend to skirt technical aspects of producing and storing grain, just as they do in similar investigations. They can behave as though the world is fully represented by columns of prices. Perhaps it is, but the result is to gloss over aspects of the physical or biological world and be blind to features on the ground that may affect the series. As an example, the expense of barns is mentioned several times but less so that of the cheaper granaries. Nor did I find a single reference to staddle stones — which supported over 300 granaries in one English county alone — although without an index it is hard to be sure. At least the introduction to this collection does notice the methodological quirks of a fixation on price series and lack of concern about relevant technology. Furthermore, it presents what is in total a usefully wide-ranging non-Anglophone literature — although simultaneously demonstrating how nationalistic economic history can still be. Conflict between free-traders and regulators raged in the past and is not laid to rest today. Thus the chapter on Mexico is supported by few English language sources and those mostly of the Hobsbawm persuasion; unsurprisingly, but uninterestingly, it dismisses “liberal doctrine” tout court as naïve or disingenuous. Nevertheless, despite patchiness in this collection, the editors (being based in Ghent University, Bocconi University and CNRS Paris) are in as good a position as any to recruit an international team and I hope they will turn next to the pastoral economy.

Eric Jones, Senior Fellow, University of Buckingham, and Emeritus Professor, La Trobe University, is the author of Barriers to Growth: English Economic development from the Norman Conquest to Industrialisation (Palgrave Macmillan, in press) and Landed Estates and Rural Inequality in English History (Palgrave Macmillan, 2018)

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Markets and Institutions
Geographic Area(s):Europe
Latin America, incl. Mexico and the Caribbean
Time Period(s):17th Century
18th Century
19th Century
20th Century: Pre WWII

Agrarian Change and Imperfect Property: Emphyteusis in Europe (16th to 19th Centuries)

Editor(s):Congost, Rosa
Luna, Pablo F.
Reviewer(s):Dimitruk, Kara

Published by EH.Net (July 2019)

Rosa Congost and Pablo F. Luna, editors, Agrarian Change and Imperfect Property: Emphyteusis in Europe (16th to 19th Centuries). Turnhout, Belgium: Brepols, 2018. 311 pp. €71 (softcover), ISBN: 978-2-503-57923-8.

Reviewed for EH.Net by Kara Dimitruk, Department of Economics, Stellenbosch University.

The fourteen chapters in this edited volume detail the use of emphyteutic contracts, which were of ancient Greek origin and came under the purview of Roman law, across Europe. Emphyteutic contracts had two main features: (1) they divided property rights of land into an ownership right and a use right in return for an annual rent and (2) they were long-term, which, in most cases, was perpetual or indefinite.

This volume on the practice and evolution of emphyteutic contracts is a result of an international workshop by the authors. The introductory chapter by Gérard Béaur, Rosa Congost, and Pablo F. Luna offers several broad themes that, rather loosely, tie the chapters together. The characterization that these contracts were versatile and flexible — a result of decisions made by the parties to the contract and economic and social forces as much as formal legal changes — is intriguing. The authors of this chapter (and most of the chapters), unfortunately, do not connect the volume to other scholarship on property rights generally, for example by Douglass North (1990) or Naomi Lamoreaux (2011), or on Europe during the early modern era, for example by S.R. Epstein (2000).

The chapters are organized by region. Chapter 2, by Giorgio Chittolini, overviews emphyteutic contracts in central-northern Italy. The title reflects its non-specific content “Some points on emphyteusis in central-northern Italy.” Chapter 3, by Michela Barbot, assesses the use of emphyteutic contracts along the rural-urban dimension in Lombardy. In addition to connecting the study to more general work on property rights, the chapter assesses the evolution of emphyteutic contracts (enfiteusi and livello) into full property rights. It then compares their effectiveness relative to contracts giving full rights. On this question, it uses court cases and lawsuits to show that the divided property rights of emphyteutic contracts did not generate more lawsuits for land or water resources relative to contracts with full ownership.

Chapters 4 through 6 cover areas across France and Germany. Using contracts from tax collection registers responsible for recording property transfers, Gérard Béaur shows that emphyteutic contracts in their “pure form” were under-used across France relative to similar alternatives in Chapter 4. He then uses post-mortem records for the Meaux region to document that emphyteutic contracts were used by a variety of actors: religious communities, in rural communities for agricultural development, and in urban areas to let lands as towns were built. Jean-Michel Boehler, in Chapter 5, compares Germanic emphyteutic contracts (erblehn and hoflehn) in seventeenth- and eighteenth-century Alsace and connects the contracts’ evolution to changing economic and legal practices. The chapter largely, unfortunately, relies on bulleted lists for points of comparison. The author suggests emphyteutic lessees often had what amounted to full property rights in this context. Chapter 6, by Fabrice Boudjaaba, summarizes the fieffe, an emphyteutic contract in use in the region of Normandy in the second half of the eighteenth century. It compares the types of property in fieffes compared to property under sales and leases. In a different approach than the other chapters, Bodjaaba argues that these different contracts were used to solve problems throughout the life cycle of lessors and lessees using a demographic database (ages) of the parties to the contracts.

Chapters 7 through 12 take us to Spain and Portugal. Rosa Congost, Pere Gifre, and Enric Saguer, in Chapter 7, find that sub-emphyteutic contracts (subestabliments), which transferred small parcels of land, had come to dominate in Girona during the final stages of the Ancien Régime. Using a sample of contracts from notaries, they argue this evolution was a result of the disappearance of common rights and the loss of power of the lessor landowners relative to the lessees. Chapter 8 presents a complementary study. Llorenç Ferrer-Alòs and Belén Moreno Claverías document the origins and evolution of the rabassa morta contract, which gave the lessee rights specifically for growing grapevines, in Catalonia. They show the use of the contract expanded with the spread of viniculture in the region, and, interestingly, disappeared with the collapse of the phylloxera plague that killed grapevines and therefore terminated the contracts.

In Chapter 9, Antònia Morey Tous and Gabriel Jover Avellà trace the ideological defense of emphyteusis during the period of liberal reform in Majorca and examine its role in large-scale fragmentation of estates on the island using information from land registers. The case is particularly interesting, as the authors note, because the evolution of the economy with tourist-based urbanization to the present has created frictions with these property rights.

The foro, a type of land tenure that allowed lords to bring land under cultivation and was often emphyteutic in Galicia, is the subject of Chapter 10 by Pegerto Saavedra. The chapter overviews the extent of the use of the foro, how and why it was a source of conflict between lessors (landowners and monasteries) and lessees, and the evolution of rents and crops in the terms of contracts from the 1500s to the 1830s. In contrast to the broad picture of the preceding chapter, Pablo F. Luna in Chapter 11, reviews emphyteusis specifically for religious institutions in Galicia. It uses the monastery of San Pelayo of Oviedo as a case study to trace how contracting practices, such as the types of contracts used by the monastery, evolved from about 1660 to 1890.

Chapter 12, by Benedita Camara, argues that reform efforts to regulate or formalize the colonia, a semi-emphyteutic contract, were linked to changes in relative prices that necessitated the adaptation of the contract to land use and to place it in the framework of the Civil Code in nineteenth-century Madeira. It draws on qualitative evidence and broad comparisons with changes in English leasing practices during period to support this argument.

The book closes with two chapters on the Greek archipelago (the Cyclades and the Ionian Islands). Eleftheria Zei, in Chapter 13, briefly overviews the development of a new elite, who gained power through the development of wine production and viniculture, using information from emphyteutic contracts in the Cyclades during the seventeenth and eighteenth century. The final chapter, by Efi Argyrou and Sevasti Lazaari, uses emphyteutic contracts from the isle of Lefkada while it was under Venetian rule from 1684 to 1797 to provide a sketch of the types of landholders on the isle.

The main contribution of the book, in my perspective, is the encyclopedic nature of the work. The details of the contracts covered in each chapter in particular make it a useful reference. I imagine specialists of the different regions or scholars working on property rights will be interested in the arguments and particularly the types of evidence used, such as the types of property in and terms of the contracts.

The chapters generally touch on important themes, such as the development of private property rights or how contracts interacted with changes in land use, or interesting periods, such as liberal reform efforts in the mid-nineteenth century, that may be of interest for general readers. The ambitious scope, however, comes at the cost of a coherent narrative across the chapters that are also of varying quality. The legal details that comprise most of the work, I suspect, will go beyond most readers’ interest.


Epstein, S. 2000. Freedom and Growth: The Rise of States and Markets in Europe, 1300 1750. London: Routledge.

Lamoreaux, N.R. 2011. “The Mystery of Property Rights: A U.S. Perspective.” Journal of Economic History 71 (2): 275-306.

North, D.C. 1990. Institutions, Institutional Change, and Economic Performance. Cambridge: Cambridge University Press.

Kara Dimitruk is a Postdoctoral Fellow in the Department of Economics at Stellenbosch University in South Africa. She studies property rights and political change in early modern England and the British Cape Colony.

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

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century
19th Century

The Chinese Market Economy, 1000-1500

Author(s):Liu, William Guanglin
Reviewer(s):Pomeranz, Kenneth

Published by EH.Net (June 2017)

William Guanglin Liu, The Chinese Market Economy, 1000-1500. Albany, NY: State University of New York Press, 2015.  xviii + 374 pp., $30 (paperback), ISBN: 978-1-4384-5568-6.

Reviewed for EH.Net by Kenneth Pomeranz, Department of Economics, University of Chicago.

William Guanglin Liu has written a valuable book on a big, important, topic: the general trajectory of the Chinese economy from roughly 1000-1650.  (The title says 1500, but the argument goes beyond that date.) The research is excellent, and the author comes up with some original and inventive ways to use his data.  At times, however, it frames its arguments in overly stark forms, and makes claims that go beyond what it can prove.  But despite these concerns, this is a book well worth reading, which will stimulate very useful debate on fundamental questions of Chinese economic history.

As a first approximation, Liu’s theses are hard to argue with.  The author shows that China experienced very impressive growth during the Song dynasty (ca. 960-1279), a period in which there was also a striking expansion of the role of markets in Chinese society.  He also show that the policies of Zhu Yuanzhang (r. 1368-1398), founder of the Ming Dynasty (1368-1644) dealt a major blow to China’s economy by trying to resurrect an idealized world of largely autarkic and demonetized villages.  It took a long time for China to recover from this: in contrast to many scholars who think that by 1500 China had returned to a market economy generating at least a Song level of prosperity, Liu argues that this did not happen until at least 1600, and quite likely not even then.  Moving beyond China, Liu then suggests that this historical case shows the centrality of market institutions for stimulating economic growth, beginning at a very low level of development.

The first three of these points — the marketization and relative prosperity of Song times, and the damaging effects of early Ming policies — are broadly accepted.  The first controversy concerns matters of degree: how prosperous? How marketized?  How big and lasting a blow did the early Ming inflict?  A second set of controversies centers on causation, and thus on the role of other factors.  For instance, Liu says very little about the many technological innovations during the Song — including the invention of gunpowder, the magnetic compass, paper money, and the importation (from Southeast Asia) of early-ripening rice — except to note that some of the most important innovations did not diffuse rapidly.  Some others would assign those innovations (and some that began in the Tang, such as printing) a good deal of credit for the growth that occurred in the Song, and continued into the Yuan (1279-1368) in some parts of the empire. While we will never have the data necessary to arrive at a precise allocation of growth to different factors, there is still room for further productive discussion about relative weights. Likewise, it is possible to show that the Mongol conquests of the mid-thirteenth century had a devastating impact in some places (especially North China and Sichuan), and very little elsewhere (the Middle and Lower Yangzi Valley, and in the far south); the relative weight of those different regional stories is still unsettled, and matters greatly in whether Liu is justified in placing an overwhelming emphasis on early Ming anti-market policies in explaining an apparent stagnation or decline in living standards between the eleventh and sixteenth centuries.

One of the book’s contributions is to concentrate in one place the arguments for transformational change concentrated in the Song period, and followed by a later reversal: a once popular view (e.g. Elvin 1973) that has lately given way to a tale of more gradual progress across several centuries (Smith and Von Glahn 2003).  Making the best of flawed data, Liu estimates population growth of 0.92% per year between 980 and 1109, a remarkable rate for a pre-modern society.  And drawing on a large body of secondary scholarship, he points to considerable evidence for changes in agriculture — capital deepening, especially in the form of massive investments in irrigation, and increasing use of oxen – which should, logically, have raised agricultural yields significantly, allowing a population that had more than tripled to eat as well or better than its forebears.

Unfortunately, however, we lack much good data on actual yields in the Song.  Liu notes that Dwight Perkins’ well-known estimates are (like most others for this period) inferences from agricultural rents, and that much of the land in question was land used to support schools; he further argues that school land was often rented out at below-market rates, depressing these inferred yields, and that the land which families donated to schools was often their least fertile property, anyway.  Meanwhile several of Perkins’ later data points come from agricultural handbooks, and probably represent optimal results.  Thus Liu argues, the impression of slow but steady growth across centuries that emerges from Perkins’ highly influential work may well be a statistical illusion. He prefers the older idea of a Song boom followed by little progress in subsequent dynasties.   Building on work by Zhou Shengchan, Liu tries to work backwards from data on population and average food consumption to estimate thirteenth century yields in the Lower Yangzi region; the results vary considerably among prefectures, but are generally near the high end of our range of estimates for any period before the arrival of modern farm inputs.  They would therefore leave little room for continued growth in the Yuan, Ming, or even Qing.

If verified, this would be a very important finding, but I have my doubts.  In part, my doubts come from personal experience, as adopting a similar methodology for estimating eighteenth century output of various crops led to extremely high estimates.[1]  There are also technical problems with some of this data (particularly in Table 7.8), though probably not big enough to change the results dramatically.[2]   The most we can say with strong confidence, I think, is that some Song farmers achieved yields near the pre-modern maximum, and more and more of their neighbors caught up over time — though whether this happened over decades or centuries remains very uncertain.

For most non-food items, we simply lack the data to generate serious estimates of per capita consumption in Song times; and while anecdotal evidence of rising consumption exists, Liu prefers not to rely on it.  Instead, he relies on an estimate of real wages for unskilled workers to show that living standards in the Song were as high as they ever got in China prior to the twentieth century.  Because we have not found for China any very long series of wages for privately-hired workers in a relatively standardized occupation in a particular place — like the long runs of wages for construction workers on European cathedrals and colleges, for instance — Liu constructs a long-run series of military wages, for which data are comparatively rich; and because we lack data for enough commodities to construct a long-run price index, he uses grain prices as the denominator for his series.  The resulting series peaks at its very beginning (in 1004) and fluctuates wildly while declining overall for the next roughly 170 years. It is then relatively stable until another steep drop in the early Ming, and recovers slightly in the late Ming before declining again in the early Qing (Figure E-1).

Liu has done us a considerable service by piecing this data series together, but as a proxy for the living standards of ordinary people it must be taken with a very large grain of salt.  Governments did not engage soldiers through a true labor market, nor did the institutional setting of military recruitment or the conditions of being a soldier (aside from the wage) remain constant over time.  Moreover, even if we had a reliable private sector wage series, it would not necessarily follow that this was a reliable basis for estimating popular living standards, much less per capita GDP, as Liu argues (p. 133).  Wage earners were never more than 15 percent of the labor force in late imperial China, and most farmers either owned their own land or had a relatively secure tenancy (especially in Qing times).  Consequently, they earned far more than unskilled laborers did — perhaps three times as much on average, according to preliminary estimates I have made for the eighteenth century (and for the early twentieth, where the data are better). (Among other things, this is confirmed by the fact that tenants and smallholders could support families, while unskilled laborers could rarely afford to marry. And for GDP per capita, we would also have to average in the earnings of well-to-do families.  Last but not least, if the ratio between wages and average farm earnings changed over time — as it might well have, given a gradual strengthening of tenant usufruct rights over the course of the late empire — even a much better wage series might not tell us what we want to know about general living standards.

But if Liu does not prove his most ambitious claims, he does succeed in proving many of his smaller empirical claims.  In particular, the evidence for relative prosperity in the Song and a sharp decline in the early Ming seems too much to explain away, even if one can raise doubts about each individual measurement.  The money supply contracted very sharply in early Ming times, followed by the introduction of government notes (for state payments) that soon became almost worthless; customs receipts (and presumably long-distance trade declined; and the wage decline between ca. 1050 and ca. 1400 is too big to be explained entirely by data problems.  A separate estimate, later in the book, suggests that per capita income in North China might have fallen by as much as half between 1121 (on the eve of the Song loss of the North) and 1420, though output per capita seems to have remained stable in the Yangzi Delta.  Liu also makes a strong case that Song people were freer than their early Ming counterparts, and perhaps even less unequal economically (though Song writing shows so much worry about inequality that one is tempted to believe there was fire behind so much smoke).

This brings us to the problem of explaining these differences.  Liu provides a straightforward answer: Song reliance on the market worked while the early suppression of it backfired.  Moreover, this represents a timeless truth, most recently vindicated by the sharp contrast between the Maoist and post-Maoist periods.  Here. I think, Liu lets his argument outrun his evidence, focusing too exclusively on one broad-brush contrast.

It would be hard to deny that the increased influence of market principles in the Song stimulated growth: above all, probably, the agricultural growth of the south, which required significant investment (especially for water management) that would surely have been more modest had earlier dynasties’ restrictions of private landowning remained in force; and given the surpluses that southern agriculture soon generate, and the relatively easy transportation that its rivers offered, impressive commercial and urban growth soon followed.  Since the coastline south of the Yangzi also has far more good sites for ports than the coastline north of the Yangzi, the southward shift of China’s economic center of gravity was also propitious for foreign trade, which boomed under both the Song and the (Mongol) Yuan.

Even in the south, however, the state provided essential infrastructure (though its role declined over time), and often played a very active role in foreign trade. In the north, meanwhile, both the enormous system of canals built by the Song government and the huge concentration of demand in the capital region were crucial, both for consumer markets and the growth of a precocious iron industry stimulated by unprecedented levels of military spending.   A variety of inventions also must have contributed something to the robust growth of the Song period.

Nor, I think, would many people deny that the early Ming attempt to return to local autarky had serious and lasting negative consequences. But we should bear in mind that the North, where Liu’s decline in estimated output between 1121 and 1420 was concentrated, suffered a number of  major shocks in this period, all of which bypassed or fell much more lightly on the south (except for Sichuan). These included conquests by three sets of northern invaders (including, most devastatingly, the Mongols); the prolonged turmoil that toppled the Mongols and brought the Ming to power; a civil war between supporters of two Ming heirs; and repeated, enormous, Yellow River floods, including two that dramatically shifted the river’s course (out of six such incidents in the last 4,000 years) and made it impossible to rebuild the Song-era canal system.   Ming policies certainly did great damage, too, but the relative size of these setbacks needs more detailed analysis before we can accept Liu’s almost exclusive emphasis on the Ming founder’s anti-market policies.

I would also caution against lumping all the parts of Ming anti-commercialism under the heading “command economy,” and comparing it to an ideal type of “market economy,” as Liu often does (e.g. pp. 1, 4-12, 134-136, 197, 199).  No pre-modern state could maintain the vigorous intervention needed to run a true command economy for long.  The Ming may have been more effective than most, but their massive redistribution of property and forced migration was over by about 1425, with land and labor again being exchanged in private markets;[3] the system of artisan conscription unraveled during the fifteenth century; foreign trade outside the official tribute system gradually returned; and so on.  This did not mark the end of Ming anti-commercialism as an attitude, or of its effects: among other problems, the dynasty never tried to provide the money supply that the private economy needed, saddling its subjects with costs that lingered for centuries.[4]   But even if this failure was originally part of an aggressive state’s attempt at command economy, it soon evolved into something else: the failure of a relatively weak state to undertake even those interventions that could have benefited both itself and the private economy.  The succeeding Qing dynasty (1644-1912) certainly had no dream of a command economy, and often (though not always) sought to encourage markets;  and the state’s share of GDP may have slipped as low as 2 percent, compared to at least 10 percent and perhaps as much as 20 percent at the peak of Song military-fiscalism.[5]  Yet the Qing provided the most stable bronze currency — the money used for most everyday transactions — China had ever known, while uncoined silver provided a reasonably adequate currency for big transactions; and it mobilized impressive resources for various physiocratic projects, from water control to grain price stabilization to promotion of best practices in agriculture and handicrafts. (That it spent much less, proportionately, on its military than the Song or Ming had facilitated this combination of low extraction and significant services.[6])  And for about a century and a half, they presided over impressive demographic and economic growth, Interestingly,  three prominent economic historians — Loren Brandt, Debin Ma, and Thomas Rawski, none of them remotely anti-market — have argued that the principal reason why Qing economic development was not even better was that the government was too minimalist: that a small government spread across a vast area was unable to prevent all sorts of local actors — from bandits to local elites employing private enforcers to rogue government clerks — from interfering with local markets and property rights.[7]  Such interference was clearly a problem in the late Ming as well, though it is not precisely measurable in either period.  It does, however, remind us that a simple contrast between “market economy” and “command economy” does not give us enough tools to understand the different relationships between state and market in imperial China, or anywhere else.

Nonetheless, the book does an impressive job of demonstrating how much dynamism the marketizing economy of the Song generated, and how much of those gains had been lost by the mid-Ming, at least in certain regions.  The author’s efforts to quantify trends that many others have been content to describe qualitatively are impressive; this is a book where the appendices are often as thought-provoking as the text.  The results are not as revolutionary or dispositive as the book sometimes suggests, but they will stimulate productive debates for years to come.


1. Lacking data on the acreage devoted to non-grain crops in certain areas, I decided to estimate how much land must have been devoted to non-grain crops, relying on generally accepted numbers for population, grain consumption, and imports, and then multiply the acreage left over by conservative estimates of yields for the non-grain crops.  The results came out so high that I cut them in every way I could think of — including, in one case, arbitrarily reducing the estimate of non-grain acreage by half. The results I came up with were still at the high end of the existing range of estimates, or in some cases significantly beyond it.  I am not ready to toss out those estimates completely, and would be happy to see this approach vindicated; but I am inclined to be cautious here, especially since Liu has not made the same efforts to depress his results as I did.

2. The conversions from Zhou’s numbers, which mostly use Yuan dynasty measurements, is complicated. Trying to reproduce his results for one prefecture after an email exchange with me, Prof. Liu got a figure about 1 percent lower.

3. A rare set of household-level records, for instance, shows a family with modest landholdings in Huizhou engaged in no less than 18 land purchases or sales between 1391 (not long after the Ming came to power) and 1432.  See Von Glahn 2016: 291-293.

4. Von Glahn 1996 and Kuroda 2000 suggest that this was finally addressed with moderate success in the Qing.

5. Perkins 1967: 492; Wang 1973: 133 for the Qing; Golas 1988: 93-94 comes up with 24 percent for the Song, but admits that this seems unlikely.  Hartwell 1988: 79-80 suggests a bit over 10 percent.

6. On military spending compare Hartmann 2013: 29 with Zhou 2000: 36-38.

7. Brandt Ma and Rawski 2014: 60, 76, and 79.


Brandt, Loren, Debin Ma and Thomas Rawski. 2014.  “From Divergence to Convergence: Reevaluating the History behind China’s Long Economic Boom,” Journal of Economic Literature 52(1):45-123.

Elvin, Mark. 1973.  The Pattern of the Chinese Past.  Stanford: Stanford University Press.

Goals, Peter, 1988. “The Sung Economy: How Big?”  Bulletin of Sung-Yuan Studies 20: 89-94.

Hartmann, Charles. 2013.  “Sung Government and Politics,” in John Chafee and Dennis Twitchett, eds., The Cambridge History of China, Volume V Part 2: Sung China, 960-1279 (Cambridge: Cambridge University Press):19-133.

Hartwell, Robert. 1988. The Imperial Treasuries: Finance and Power in Song China,” Bulletin of Sung-Yuan Studies 20: 18-89

Kuroda Akinobu. 2000. “Another Monetary Economy: The Case of Traditional China,” in A.J. H. Latham and Heita Kawakatsu, eds, Asia-Pacific Dynamism, 1500-2000 (London: Routledge): 187-198.

Perkins, Dwight. 1967. “Government as an Obstacle to Industrialization: The Case of Nineteenth-Century China,” Journal of Economic History 27 (4): 478–92

Perkins, Dwight. 1969. Agricultural Development in China, 1368-1968.  Chicago: Aldine Publishing.

Smith, Paul, and Richard Von Glahn, eds., 2003. The Song-Yuan-Ming Transition in Chinese History.  Cambridge:  Harvard Asia Center.

Von Glahn, Richard. 1996.  Fountain of Fortune: Money and Monetary Policy in China, 1000-1700.  Berkeley: University of California Press.

Von Glahn, Richard. 2016.  The Economic History of China: From Antiquity to the Nineteenth Century.  Cambridge: Cambridge University Press.

Wang Yeh-chien. 1973. Land Taxation in Imperial China, 1750-1911.  Cambridge, MA: Harvard University Press.

Zhou Yumin. 2000.  Wan Qing caizheng yu shehui bianqian (Late Qing Fiscal Administration and Social Change).   Shanghai: Shanghai renmin chubanshe.

Kenneth Pomeranz is University Professor of History at the University of Chicago.  His best known book is The Great Divergence: China, Europe, and the Making of the Modern World Economy (Princeton, 2000).  His most recent publication is “The Data We Have vs. the Data We Want: A Comment on the State of the Divergence Debate,” Pt. I and Pt II New Economics Papers (June 8, 2017) Forthcoming publications include “Water, Energy, and Politics: Chinese Industrial Revolutions in Global Environmental Perspective,” in Gareth Austin, ed., Economic Development and Environmental History in the Anthropocene (forthcoming, 2017: Bloomsbury Academic).

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Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Geographic Area(s):Asia
Time Period(s):Medieval
16th Century
17th Century