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Stefano Fenoaltea

Deirdre McCloskey, Richard Sylla and Gianni Toniolo contributed information and personal recollections to this In Memoriam. Christopher Hanes wrote it and bears responsibility for errors. McCloskey’s own obituary of Fenoaltea has been published in the PSL Quarterly Review (2020). Journal articles and books by Stefano Fenoaltea are listed at the end and referred to in the text by number in the list. References to publications by other people are given in the ordinary way.

            Stefano Fenoaltea died unexpectedly in Rome on September 14, 2020 of a previously undiagnosed cardiac condition, at the age of 77. He stood out for his brilliance and cheerful pugnacity in a generation of economic historians who did great work and were not averse to scholarly dispute.

            Fenoaltea was born in Italy and educated in European schools. He was graduated at Georgetown University (first in his class) in 1963 and received a PhD in Economics from Harvard in 1968. In the first two decades of his career he wrote several papers on the related topics of medieval manors and servile labor. In 1975 he published “The Rise and Fall of a Theoretical Model: The Manorial System” (4), a response to a paper by North and Thomas (1971) titled “The Rise and Fall of the Manorial System: A Theoretical Model.” North and Thomas had argued that serfs provided their labor to lords in an implicit contractual exchange for “the public good of protection and justice” (North and Thomas 1971, p. 778). Fenoaltea examined their argument and concluded that it was “empirically untenable…Their account of later developments is equally unsatisfactory, since it draws on a dubious interpretation of demographic and political history, and appeals to institutional constraints to an extent that is both empirically unjustified and analytically alarming” (pp 408-409). A few months later Fenoaltea published “Authority, Efficiency, and Agricultural Organization in Medieval England and Beyond: A Hypothesis” (5), which presented his own argument about the manorial system: “the advantages of demesne agriculture were attached specifically to the exercise of authority over the labor force” to “increase output by imposing the use of a superior technique” and reenforce “social roles and hierarchy” (p. 695). In 1976 came “Risk, Transaction Costs, and the Organization of Medieval Agriculture” (7). Here Fenoaltea attacked the argument of McCloskey (1975) that medieval peasants farmed scattered small plots in open fields in order to diversify plot-specific risk. McCloskey published a reply (1977); Fenoaltea replied to the reply (10). Both scholars appeared to enjoy themselves, and McCloskey “was driven to write” (in McCloskey’s words) an article that provided further evidence for his original proposition (McCloskey 1984). In “The Slavery Debate: A Note from the Sidelines,” published in 1981, Fenoaltea ran through the no-man’s land in the battle between Fogel and Engerman (1974) and their critics (David et. al., 1976), taking well-aimed shots at both sides. 

            In 1984 Fenoaltea published “Slavery and Supervision in Comparative Perspective: A Model” (15), perhaps his best-known work among English-speaking economic historians, which won the Cole Prize for the best article in the Journal of Economic History that year, and also the Economic History Association’s Fritz Redlich Prize for the best article in economic history worldwide in the past two years. In it, Fenoaltea hypothesizes that the “pain incentives” applied to slaves by the master’s threats of physical punishment could elicit great effort but not carefulness, giving slave labor a competitive advantage in “extremely land- and effort-intensive activities (for example, moving stones from here to there)” (p. 639). He shows how his hypothesis and related ideas can account for many otherwise-puzzling features of slavery from ancient times through the nineteenth century.

            Even better, in my opinion, is “Europe in the African Mirror: The Slave Trade and the Rise of Feudalism” (24) written in 1988 but not published until 1999.[1] Fenoaltea begins by developing a model to explain a puzzle about the transatlantic trade in African slaves. The puzzle is that the trade transported, at great cost, labor to a region with a high land-labor ratio and concomitantly high physical product of labor (the Americas) from another region with a high, perhaps higher land-labor ratio and physical product of labor (Africa). “The challenge is thus to develop a model capable of producing an efficient trade even though the population density is lower and the physical marginal product of labor higher at the source” (p. 124). The explanation proposed by Fenoaltea is that African elites had a demand for European-produced goods, while extremely high transportation costs within Africa prevented African elites from buying European goods with raw materials produced by slaves exploited at home in Africa. Thus, “Even if the backward area is relatively underpopulated,…it may export people to pay for the advanced products its elite wishes to consume but cannot obtain from domestic sources.” Meanwhile, “the profitability of slave exports means that the source area will tend to lapse into endemic petty warfare and lose the benefits of comparatively peaceful exploitation through taxes or tribute” (p. 124). After developing the model for Africa, Fenoaltea applies it to slave trades in Europe from classical times through the medieval era, and speculates that in “the early Middle Ages, when Christian Europe was itself backward relative to the Byzantine and Islamic worlds…. Europeans may thus have tended to export human beings to pay for advanced manufactures: the anarchy that plagued the West may have been due in primis to raids undertaken for the sake of obtaining captives” (p. 125).

            Fenoaltea’s papers in these areas are exemplars of a style once common, now rare in economic history, in which the author takes generally-accepted historical facts, presenting little if any further empirical evidence, and presents a model to explain the facts in words – no math – as the result of transactions costs and other fundamental economic forces along the lines of University of Chicago “Price Theory.” A paper in this style lives or dies on the author’s rhetorical skill and the originality and strength of his argument. If the paper succeeds, it is fun for the reader as well as the author.

            But these papers made up the smaller portion of Fenoaltea’s scholarship. Most of his career was devoted to a different kind of work. Starting with his PhD dissertation (1), Fenoaltea studied Italy’s economic development in the era between the formation of the Italian state in the 1860s and the First World War. For this he needed historical statistics on Italian output. At the time Fenoaltea started out reliable statistics of this type had already been constructed for the United States (Frickey [1947], Gallman [1960, 1966]). But the ones available for Italy were not as good, due partly to a dearth of the historical source material for Italy that was available for the U.S.[2] In order to study Italy’s economy, therefore, Fenoaltea constructed his own series on Italian output: first, indexes of industrial production; eventually, measures of GDP components. Fenoaltea continued this work through the rest of his life in cooperation with excellent scholars in the Bank of Italy as well as Italian academic institutions. He was still constructing new series and improving old ones when he died.

            The reader may wonder how well this work suited the author of “Slavery and Supervision in Comparative Perspective.” For most economic historians the construction of statistical series is not fun – perhaps not as bad as moving stones from here to there, but requiring an unpleasant combination of effort and care. Why did Fenoaltea keep at it?

            Certainly, it gave him opportunities for satisfying, not to say epic scraps, with some of the other scholars working on Italian statistics. It provided foundations for papers challenging existing views of Italian development which Fenoaltea published in prominent English- and Italian-language economic history journals (see list below) and several books (71, 72, 73, 74, 75). In “International Resource Flows and Construction Movements in the Atlantic Economy: The Kuznets Cycle in Italy, 1861-1913” (20, 1988), Fenoaltea used series he had constructed on construction in Italy to test an important hypothesis about the nineteenth-century development of America, Argentina and other new countries. It had been observed that construction, immigration and international capital inflows  in new countries were correlated with each other, and negatively correlated with construction in Britain, in “long swings” or “Kuznets cycles.” It had been hypothesized that the ultimate causal factor in these patterns was the migration flows: capital followed labor across the Atlantic. Italy was a natural experiment to test this. It was a capital-importer like the new countries but a country of emigration. It lost more population at times when new-country immigration was high. Fenoaltea showed that in Italy emigration was positively correlated with construction; construction was “tied to changes in the supply of foreign capital, and thus to British foreign investment – themselves attributable, it would appear, less to variations in domestic British investment opportunities than to changes in investors’ perception of the relative safety of investment in Britain and abroad” (20, p.607). “The Italian experience is thus not merely an exception to, and therefore destructive of, the unified interpretation of the Atlantic economy which attributes construction to migration and capital flows to construction. It suggests an alternative and equally unified interpretation, in which capital flows caused construction, and construction..caused migration” (p. 634). This paper has frequently been cited by economic historians interested in American development and international flows of labor and capital.[3]

            It is clear, however, that for Fenoaltea the construction of statistical series was not a dull task. It was an intellectual exercise that drew on all his knowledge of economic theory and of history – economic, political and technological. According to Gianni Toniolo, Fenoaltea believed:

quantitative reconstruction of the past is practically an unbounded task, even when limited in time and space. To him, the task was particularly challenging given the relative paucity of the original statistics. As a result of his work, Italy’s historical statistics for the years 1861-1913 are undoubtedly the most refined and complete of those for any country I know something about. The level of disaggregation by sector and area is extremely fine, the information about production technologies impressive.

Fenoaltea’s last book begins with a disquisition on the construction of historical economic statistics which “should be compulsory reading for all graduate students in economic history (even more so in economics!)” (Toniolo).[4] In it Fenoaltea lays out his method:

Invent the series you seek to construct, your initial best guess; but don’t stop there, the starting point matters little only if you move beyond it. Draw out the implications of your series as an applied economist would, recognizing technical relationships, the impact of trade, the substitution effects that can be inferred from the typically abundant evidence on relative prices, the income effects, where appropriate, that influence consumption; and set those implications next to the corpus of surviving “data,”  as best you can master it, as an historian would. You will soon enough find that your initial estimates violate “data” constraints, constraints that may be distant but are effective constraints all the same. Revise, rinse, and repeat; at the end of the process you will have a production series, for the “undocumented” industry at hand, that is reasonably tightly constrained by (the application of economic logic to) the historical evidence.

            So much for Fenoaltea’s work. What was the man like?

            Stefano was admirably slender and always appropriately dressed, una bella figura, often in a somewhat country-gentleman mode. It is impossible to imagine him fat and sloppy.[5] He was mischievous. He could not resist needling officious, smug or easy-to-offend people. He did not like to follow rules. He did not respect authority. In fact, he could barely tolerate it. He was entertaining in conversation, an excellent companion for dinner or a walk. He relished wit: like most academics he liked to hear himself talk; unlike many academics he liked to hear other people talk too. He was given to epigrams and prepared jokes, which could be forgiven because they were almost always good, and to amateur sociology (what economic historian isn’t?). A favorite topic was national characteristics, especially differences between Italians on the one hand and Americans, Canadians or Britons on the other.[6] A hint of his conversational style can be found in his articles and books:

Italy’s provinces are the rough equivalent of France’s departements; but where the latter are named after natural features, more barbarico, the former bear the proud names of their principal cities (59, p. 58).

The heirs of the Ancona group continue however to this day to analyse the cyclical fluctuations of the original Vitali series, either out of filial piety  or – in the absence of comprehensive alternative estimates – a Nelsonian talent for exploiting a blind eye; see most recently Delli Gatti et al. (2005) (36, fn. 6).

 In estimating times series, as in love and war, the most important thing is luck (29, p. 726).

Another [problem] is that the sources are opaque…that their hidden defects surface, rather like those of our former spouses, only with extended cohabitation” (75, p. 13)

            Amateur sociologists will want to trace Stefano’s character to his family background and upbringing. He was the son of Sergio Fenoaltea, an opponent of Italian fascism who spent time in Mussolini’s prisons and, after Mussolini’s fall, was a member of an important committee (Italy’s National Liberation Committee) that coordinated resistance to the Germans and cooperation with the allies. After the war Sergio Fenoaltea entered the Italian diplomatic service and eventually served in its top job, ambassador to the United States, from 1961 to 1967, during which Stefano was in college at Georgetown and graduate school at Harvard.[7] Stefano always spoke of his father with great respect and affection.[8] Sergio Fenoaltea remained resolutely pro-American even in the late 1960s when the Vietnam War was raging.[9] Stefano was just as pro-American. You could get him to criticize our clothing, manners and food but not our morals or institutions.

            While his father moved through the diplomatic service, Stefano was educated in French-language schools on the French national curriculum, which is strictly standardized, allowing easy transfers from school to school, and is highly regarded outside English-speaking countries. McCloskey says that Stefano “told me once that his high culture – novels, poetry, and so forth – was French.” Certainly, Stefano shared the French attitude that culture and education were virtues to be displayed rather than (as they are to Americans) sources of embarrassment. He was as fluent in Latin, French and of course Italian as he was in English, which may account for the frequency in his English-language publications of phrases in the other languages. However baffling, even annoying to the monoglot American reader, to Stefano these were simply le mot juste.

            Stefano’s lack of respect for authority was perhaps a form of instinctive anti-fascism, hence an act of filial piety, but his friends agree that whatever its source it was a hindrance to his career. At Harvard, his PhD advisor was not the famous Alexander Gerschenkron though Stefano’s dissertation was directly related to Gerschenkron’s research. According to Fenoaltea’s fellow graduate student Richard Sylla this was because “Stefano had a falling out with Gerschenkron. I never quite understood it, but apparently it had something to do with Stefano challenging some of Gerschenkron’s interpretations of Italian industrialization in the late 19th century, which led Gerschenkron to suggest/demand that he find another dissertation advisor.” According to Deirdre McCloskey, another Harvard student at the time, Gerschenkron “refused to work with him when Stefano questioned The Master’s views on the rate and sources of Italian industrialization. Doubtless Stefano was less than diplomatic about the disagreement.” This incident is a worse reflection on Gerschenkron than on Stefano, of course. Stefano appeared to hold no grudge.[10] When Stefano had himself become a senior scholar he was (in my experience) interested and helpful, rather than defensive, when challenged by a youngster.[11]

            However, it is an unfortunate fact that in academic life it is sometimes necessary to suck up. Stefano could not do that any more than he could turn his head around 360 degrees. Getting tenure was a problem. Stefano’s scholarship won him try-outs in many excellent American economics departments (including among others Penn and Duke) and a stint at the Institute for Advanced Study in Princeton. But as of the mid-1990s “Stefano was the greatest economic historian of our cohort who had never gotten tenure” (Sylla).

            Then things took a happy turn. “In 1996, Stefano moved permanently to Italy, to chairs first at the University of Cassino, then at Brescia and finally, in 2003, at the University of Roma Tor Vergata…. He retired in 2013 and took up a visiting professorship at the prestigious Collegio Carlo Alberto (University of Torino)” (Toniolo). About the time Stefano moved to Italy he inherited a house his father had built on a hill outside Marino above the Alban Lake. He lived there for many years with his wife Maria Angela Pieche and their three children. His last book was dedicated to his recently-born grand-daughter.

Journal articles published by Stefano Fenoaltea

1. “Public Policy and Italian Industrial Development, 1861-1913,” Journal of Economic History XXIX, no. 1 (March 1969), pp. 176-179.

2. “Railroads and Italian Industrial Growth, 1861-1913,” Explorations in Economic History IX, no. 4 (Summer 1972), pp. 325-352.

3. “The Discipline and They: Notes on Counterfactual Methodology and the ‘New Economic History’,” Journal of European Economic History II, no. 3 (Winter 1973), pp. 724-746.

4. “The Rise and Fall of a Theoretical Model: The Manorial System,” Journal of Economic History XXXV, no. 2 (June 1975), pp. 386-409.

5. “Authority, Efficiency, and Agricultural Organization in Medieval England and Beyond: A Hypothesis,” Journal of Economic History XXXV, no. 4 (December 1975), pp. 693-718.

6. “Real Value Added and the Measurement of Industrial Production,” Annals of Economic and Social Measurement V, no. 1 (Winter 1976), pp. 111-137.

7. “Risk, Transaction Costs, and the Organization of Medieval Agriculture,” Explorations in Economic History XIII, no. 2 (April 1976), pp. 129-151

8. “On a Marxian Model of Enclosures,” Journal of Development Economics III, no. 2 (June 1976), pp. 195-198.

9. “Real Value Added Once Again,” Annals of Economic and Social Measurement VI, no. 1 (Winter 1977), pp. 133-134.

10. “Fenoaltea on Open Fields: A Reply,” Explorations in Economic History XIV, no. 4 (October 1977), pp. 405-410.

11. “The Slavery Debate: A Note from the Sidelines,” Explorations in Economic History XVIII, no. 3 (July 1981), pp. 304-308.

12. “The Growth of the Utilities Industries in Italy, 1861-1913,” Journal of Economic History XLII, no. 3 (September 1982), pp. 601-627.

13. “The Organization of Serfdom in Eastern Europe: A Comment,” Journal of Economic History XLIII, no. 3 (September 1983), pp. 705-708.

14. “Railway Construction in Italy, 1861-1913,” Rivista di storia economica I, International issue (1984), pp. 27-58, and “Le costruzioni ferroviarie in Italia, 1861-1913,” Rivista di storia economica I, no. 1 (giugno 1984), pp. 61-94.

15. “Slavery and Supervision in Comparative Perspective: A Model,” Journal of Economic History XLIV, no. 3 (September 1984), pp. 635-668.

16. “Public Works Construction in Italy, 1861-1913,” Rivista di storia economica III, International issue (1986), pp. 1-33, and “Le opere pubbliche in Italia, 1861-1913,” Rivista di storia economica II, no. 3 (ottobre 1985), pp. 335-369.

17. “Construction in Italy, 1861-1913,” Rivista di storia economica IV, International issue (1987), pp. 21-53, and “Le costruzioni in Italia, 1861-1913,” Rivista di storia economica IV, no. 1 (febbraio 1987), pp. 1-34.

18. “The Extractive Industries in Italy, 1861-1913: General Methods and Specific Estimates,” Journal of European Economic History XVII, no. 1 (Spring 1988), pp. 117-125.

19. “Transaction Costs, Whig History, and the Common Fields,” Politics & Society XVI, no. 2-3 (June-September 1988), pp. 171-240.

20. “International Resource Flows and Construction Movements in the Atlantic Economy: The Kuznets Cycle in Italy, 1861-1913,” Journal of Economic History XLVIII, no. 3 (September 1988), pp. 605-638.

21. “The Growth of Italy’s Silk Industry, 1861-1913: A Statistical Reconstruction,” Rivista di storia economica V, no. 3 (ottobre 1988), pp. 275-318.

22. “Servi e schiavi,” Rivista di storia economica IX, no. 1-2 (giugno 1992), pp. 45-48.

23. “Politica doganale, sviluppo industriale, emigrazione: verso una riconsiderazione del dazio sul grano,” Rivista di storia economica X, no. 1 (febbraio 1993), pp. 65-77.

24. “Europe in the African Mirror: The Slave Trade and the Rise of Feudalism,” Rivista di storia economica XV, no. 2 (agosto 1999), pp. 123-165.

25. “The Growth of Italy’s Wool Industry, 1861-1913: A Statistical Reconstruction,” Rivista di storia economica XVI, no. 2 (agosto 2000), pp. 119-145.

26. “The Growth of Italy’s Cotton Industry, 1861-1913: A Statistical Reconstruction,” Rivista di storia economica XVII, no. 2 (agosto 2001), pp. 139-171.

27. “Textile Production in Italy, 1861-1913,” Rivista di storia economica XVIII, no. 1 (aprile 2002), pp. 3-40.

28. “Production and Consumption in Post-Unification Italy: New Evidence, New Conjectures,” Rivista di storia economica XVIII, no. 3 (dicembre 2002), pp. 251-298.

29. “Notes on the Rate of Industrial Growth in Italy, 1861-1913,” Journal of Economic History LXIII, no. 3 (September 2003), pp. 695-735.

30. “Peeking Backward: Regional Aspects of Industrial Growth in Post-Unification Italy,” Journal of Economic History LXIII, no. 4 (December 2003), pp. 1059-1102.

31. “La formazione dell’Italia industriale: consensi, dissensi, ipotesi,” Rivista di storia economica XIX, no. 3 (dicembre 2003), pp. 341-356.

32. “Contro tre pregiudizi,” Rivista di storia economica XX, no. 1 (aprile 2004), pp. 87-106.

33. “Textile Production in Italy’s Regions, 1861-1913,” Rivista di storia economica XX, no. 2 (agosto 2004), pp. 145-174.

34. “Einaudi commentatore e protagonista della politica economica: aspetti dell’età giolittiana,” Rivista di storia economica XX, no. 3 (dicembre 2004), pp. 301-308.

35. “La crescita economica dell’Italia postunitaria: le nuove serie storiche,” Rivista di storia economica XXI, no. 2 (agosto 2005), pp. 91-121.

36. “The Growth of the Italian Economy, 1861-1913: Preliminary Second-Generation Estimates,” European Review of Economic History IX, no. 3 (December 2005), pp. 273-312.

37. “Economic Decline in Historical Perspective: Some Theoretical Considerations,” Rivista di storia economica XXII, no. 1 (aprile 2006), pp. 3-39.

38. “Mining Production in Italy, 1861-1913: National and Regional Time Series” (with Carlo Ciccarelli), Rivista di storia economica XXII, no. 2 (agosto 2006), pp. 141-208.

39. “The Chemical, Coal and Petroleum Products, and Rubber Industries in Italy, 1861-1913: A Statistical Reconstruction,” Rivista di storia economica XXIII, no. 1 (aprile 2007), pp. 33-80.

40. “Business Fluctuations in Italy, 1861-1913: The New Evidence” (with Carlo Ciccarelli), Explorations in Economic History XLIV, no. 3 (July 2007), pp. 432-451.

41. “I due fallimenti della storia economica: il periodo post-unitario,” Rivista di politica economica XCVII, no. 3-4 (marzo-aprile 2007), pp. 341-358.

42. “The Chemical, Coal and Petroleum Products, and Rubber Industries in Italy’s Regions, 1861-1913: Time Series Estimates” (with Carlo Ciccarelli), Rivista di storia economica XXIV, no. 1 (aprile 2008), pp. 3-59.

.

43. “A proposito del PIL, “ Italianieuropei, 2008, no. 1, pp. 165-169.

44. “The Growth of the Utilities Industries in Italy’s Regions, 1861-1913” (with Carlo Ciccarelli), Rivista di storia economica XXIV, no. 2 (agosto 2008), pp. 175-205.

45. “Social-Overhead Construction in Italy’s Regions, 1861-1913” (with Carlo Ciccarelli), Research in Economic History XXVI (2008), pp. 1-80.

46. “Construction in Italy’s Regions, 1861-1913” (with Carlo Ciccarelli), Rivista di storia economica XXIV, no. 3 (dicembre 2008), pp. 303-340.

47. “Shipbuilding in Italy, 1861-1913: The Burden of the Evidence” (with Carlo Ciccarelli), Historical Social Research XXXIV (2009), no. 2, pp. 333-373.

48. “Luigi Einaudi storico economico dell’età liberale,” Rivista di storia economica XXV, no. 3 (dicembre 2009), pp. 321-330

49. “Metalmaking in Italy, 1861-1913: National and Regional Time Series” (with Carlo Ciccarelli), Rivista di storia economica XXVI (2010), no. 1, pp. 121-153.

50. “The Reconstruction of Historical National Accounts: The Case of Italy,” PSL Quarterly Review LXIII (2010), no. 252, pp. 77-96.

51. “The Effects of Unification: Markets, Policy, and Cyclical Convergence in Italy, 1861-1913” (with Carlo Ciccarelli and Tommaso Proietti), Cliometrica IV (2010), no. 3, pp. 269-292.

52. “On the Structure of the Italian Economy, 1861-1913,” Rivista di storia economica XXVII (2011), no. 1, pp. 61-72.

53. “L’industria e l’economia nelle province dell’Italia liberale: tra storia e geografia” (with Carlo Ciccarelli), Semestrale di Studi e Ricerche di Geografia XXIII (2011), no. 2, pp. 31-46.

54 “Lo sviluppo economico italiano dal Risorgimento alla Grande Guerra,” Annali della Fondazione Giuseppe di Vittorio, 2011, pp. 213-227.

55. “The Rail-guided Vehicles Industry in Italy, 1861-1913: The Burden of the Evidence” (with Carlo Ciccarelli), Research in Economic History XXVIII (2012), pp. 43-115.

56. “The Growth of the Italian Economy, 1861-1913: The Expenditure Side Re- (and De-) constructed,” Rivista di storia economica XXVIII (2012), no. 2, pp. 285-318.

57 “La cliometria e l’unificazione italiana: bollettino dal fronte” (with Carlo Ciccarelli), Meridiana. Rivista di storia e scienze sociali, no. 73-74 (2012), pp. 258-266.

58 “La cantieristica in Italia, 1861-1913: una ricostruzione quantitativa” (with Carlo Ciccarelli), Bollettino dell’Associazione Italiana Documentazione Marittima e Navale, no. 26 (2012), pp. 129-154.

59. “Through the Magnifying Glass: Provincial Aspects of Industrial Growth in Post- Unification Italy” (with Carlo Ciccarelli), Economic History Review LXVI (2013), no. 1, pp. 57-85.

60. “The Non-metallic Mineral Products Industries in Italy, 1861-1913: National and Regional Time Series” (with Carlo Ciccarelli), Rivista di storia economica XXIX (2013), no. 3, pp. 267-317.

61. “The Measurement of Production Movements: Lessons from the General Engineering Industry in Italy, 1861-1913,” Explorations in Economic History 57 (2015), pp. 19-37.

62. “Industrial Employment in Italy, 1911: The Burden of the Census Data,” Rivista di storia economica XXXI (2015), no. 2, pp. 225-246.

63. “The Measurement of Production: Lessons from the Engineering Industry in Italy, 1911,” Research in Economic History XXXII (2016), pp. 73-145.

64. “Fenoaltea on Industrial Employment in 1911: A Rejoinder,” Rivista di storia economica XXXI I (2016), no. 1, pp. 113-117.

65. “Understanding the Ancient Near Eastern Economy: A Note from the Sidelines,” Rivista di storia economica XXXII (2016), no. 3, pp. 403-415.

66. “The Engineering Industry in Italy’s Regions, 1861-1913: A Statistical Reconstruction”, Rivista di storia economica XXXIII (2017), no. 2, pp. 159-246.

67. “The Growth of Italy’s Apparel Industry, 1861-1913: A Statistical Reconstruction,” Rivista di storia economica XXXIII (2017), no. 3, pp. 315-350.

68. “The Backlash to Globalization: Some Further Thoughts,” Annals of the Fondazione Luigi Einaudi LII (2018), no. 1, pp. 15-20.

69. “Italy in the Market for Seagoing Vessels, 1861-1913: Domestic production, Imports, and Exports,” Rivista di storia economica (in press).

70. “Spleen: The Failures of the Cliometric School,” Annals of the Fondazione Luigi Einaudi (forthcoming).

Books published by Stefano Fenoaltea

71. L’economia italiana dall’Unità alla Grande Guerra, pp. viii, 339 (Rome-Bari: Laterza, 2006; ISBN: 88-420-7925-1).

72. La produzione industriale delle regioni d’Italia, 1861-1913: una ricostruzione quantitativa. 1. Le industrie non manifatturiere (with Carlo Ciccarelli), pp. xlviii, 499 (Rome: Banca d’Italia, 2009).

73. The Reinterpretation of Italian Economic History: from Unification to the Great War, pp. xxi, 296 (New York: Cambridge University Press, 2011; ISBN: 978-0-521-19238-5).

74. La produzione industriale delle regioni d’Italia, 1861-1913: una ricostruzione quantitativa. 2. Le industrie estrattivo-manifatturiere (with Carlo Ciccarelli), pp. vi, 677 (Rome: Banca d’Italia, 2014).

75. Reconstructing the Past: Revised Estimates of Italy’s Product, 1861-1913. (Turin: Fondazione Luigi Einaudi, 2020.

Other references

David, Paul A. , Herbert G. Gutman, Richard Sutch, Peter Temin and Gavin Wright. Reckoning with Slavery. New York: Oxford University Press, 1976.

Fogel, Robert William and Engerman, Stanley L. Time on the Cross: the Economics of American Negro Slavery. Boston: Little, Brown 1974.

Frickey, Edwin. Production in the United States, 1860-1914. Cambridge, MA: Harvard University Press, 1947.

Gallman, Robert E. “Commodity Output, 1839-1899.” In William N. Parker, ed. Trends in the American Economy in the Nineteenth century. Studies in Income and Wealth, Volume 24. Princeton: Princeton Univesity Press for NBER, 1960.

— “Gross National Product in the United States, 1834-1909.” In Conference on Research in Income and Wealth, Output, Employment and Productivity in the United States after 1800. New York: Columbia University Press for NBER, 1966.

Gerschenkron, Alexander. ‘Notes on the Rate of Industrial Growth in Italy, 1881-1913.” Journal of Economic History, December 1955, 15 (4): 360-375.

McCloskey, D.N. “The Persistence of English Common Fields.” In William N. Parker and E.L. Jones, Eds., European Peasants and Their Markets. Princeton: Princeton University Press, 1975.

— “Fenoaltea on Open Fields: A Comment.” Explorations in Economic History, 1977, 14 (4): 402-404.

— and John Nash.”Corn at Interest: The Extent and Cost of Grain Storage in Medieval England.”

American Economic Review, March 1984, 74(1): 174-187

— “Stefano Fenoaltea (1943-2020).” PSL Quarterly Review, December 2020, 73(5).

Morgenstern, Oskar. On the Accuracy of Economic Observations. Princeton: Princeton University Press, 1963.

North, Douglass and Robert Thomas. “The Rise and Fall of the Manorial System: A Theoretical Model.” Journal of Economic History, December 1971, 31 (4): 777-803.


[1] In a footnote to the 1999 publication Fenoaltea explains that the article is the same as the 1988 paper and “unforeseen commitments have delayed both the publication of the volume developing the analysis of the African slave trade and, perhaps sine die, the intended further research on early medieval Europe” (p. 123). According to Gianni Toniolo, editor of the journal in which the paper was eventually published (Rivista di Storia Economica), Stefano had signed a contract for the book with Cambridge University Press but “had hardly even begun to write” it.

[2] Fenoaltea describes the development of Italian historical production and GDP statistics in 73 (chapter 1) and  75 (chapter 3). Late-nineteenth century America was full of institutions that gathered economic information, such as active state and local governments, trade associations and business-oriented newspapers, not to mention the U.S. Bureau of the Census. Britain resembled the U.S. to some degree in this respect. Italy, along with most other continental countries, did not.  

[3]It was required reading in graduate economic history classes taught by Peter Lindert and Jeffrey Williamson, at least.

[4]I agree with Toniolo. In my fantasies, it and Morgenstern (1963) are readings in a half-semester graduate economics core course called “Data.” 

[5]Think of a cheetah.  Try to imagine a fat, sloppy cheetah. You can’t. That is what I mean.

[6] A rough quote on the subject of litter in parks: “In America, public property is everyone’s property; in Italy, public property is no one’s property.”  Claiming to speak from personal experience, Stefano said that Italian high-school soccer players took showy shots whether or not they had a realistic chance of scoring, while British/American/ Canadian kids passed the ball to guys in good positions.

[7] Here is the place for an excellent story about Stefano told by Richard Sylla, who was in graduate school with Stefano. “I invited him to have dinner one weekend with my wife and me at our apartment….He said “I’m not sure about my plans for the weekend. I haven’t decided yet whether I should stay in Cambridge and socialize with my intellectual equals, or go to Washington and intellectualize with my social equals.”

[8] Soon after I first met Stefano he showed me, with pride, his library of classic economics books from the 1880s-1930s (think Edgeworth, Marshall, Pigou, Keynes). Stefano said it had been collected by his father “who had a degree in economics.” That was all he told me about his father at the time but I got the impression that from Stefano’s point of view  the connection between his father and economics conferred dignity on economics.  

[9] According to Sergio Fenoaltea’s New York Times obituary, he resigned as ambassador to America in 1967 at a time when he “seemed to disagree with his Government, particularly with what he felt was Foreign Minister Amintore Fanfani’s lukewar commitment to the North American  Treaty Organization.”

[10]Presumably, one of the reasons Gerschenkron refused to oversee Fenoaltea’s dissertation was that Fenoaltea was constructing an index of Italian industrial production for 1861-1913. Gerschenkron had already constructed such an index. Fenoaltea’s index pointed to different conclusions about Italian development. According to Toniolo, “Gerschenkron did not take it lightly and Stefano had to find himself new dissertation supervisors.” Gerschenkron’s index had been published it in 1955 in an article titled “Notes on the Rate of Industrial Growth in Italy,1881-1913′ (Gerschenkron 1955). In 2005 Stefano published an article with exactly the same title in the same journal (29). In it he wrote “The title of this piece is of course a recent copy of an Old Master…. Alexander Gerschenkron’s classic article,” and counted the years that “have passed since the present writer began unwarily to tread in his teacher’s footsteps…. As my contemporaries will recall, the footsteps I stepped in had not quite been vacated by Gerschenkron’s own feet.”

[11] When I was an assistant professor, about 1990, one of the first papers I wrote presented a hypothesis to explain the distribution of slave labor across occupations and economic sectors. It was different from, and could have been seen as opposed to, Stefano’s argument in “Slavery and Supervision in Comparative Perspective” (15).  Despite my appalling ignorance on the subject Stefano talked to me about it for many days, apparently with pleasure. Without him the paper would have been much worse.

The European Guilds: An Economic Analysis

Author(s):Ogilvie, Sheilagh
Reviewer(s):de Vries, Jan

Published by EH.Net (March 2019)

Sheilagh Ogilvie, The European Guilds: An Economic Analysis. Princeton, NJ: Princeton University Press, 2019. xvi + 645 pp. $40 (hardcover), ISBN: 978-0-691-13754-4.

Reviewed for EH.Net by Jan de Vries, Department of History, University of California at Berkeley.

 
Europe’s craft guilds have been a topic of interest to scholars for a very long time. When the Classical economists condemned them and the French revolutionaries set about abolishing them everywhere they seized power, Europe’s craft guilds, which had then functioned in nearly all of urban Europe for some eight hundred years, came into bad odor: they became the poster child for ancien régime economic privilege and oppression. Later, institutional economists of the “German Historical School” and many historians came to the defense of the old guild regime. Something that had helped organize economic life for so long, that gave manual workers — some of them — a political voice, and that embodied the “spirit” of an economic epoch deserves to be understood on its own terms.

Over the past century or so economists have become less interested in the “spirit” of economic epochs and most social historians became disabused of any romantic notions they may have nurtured about guild members, who were, after all, petty commodity producers, if not actual capitalists. But the beginning of a new millennium brought with it a renewed appreciative interest in guilds. The new institutionalism cast the guilds’ seemingly self-serving actions in a new light, a light that revealed clever solutions to various forms of market failure, particularly in the realm of technical innovation and human capital formation. The guilds were back: instead of being a disreputable relic of the old regime, they now looked like pathfinders for the great divergence.

Sheilagh Ogilvie, Professor of Economic History at the University of Cambridge, has now written a book that intends to bring this most recent flirtation to an end. The European Guilds is a comprehensive study of craft guilds in Europe as a whole. Its foundation is a database of guild actions drawn primarily from the vast secondary literature on guilds, which mostly focus on individual trades or single towns. Ogilvie’s database is primarily qualitative in character: describing guild policy on a particular issue, such as ordinances defining formal guild power in a town, the observations of an outsider concerning guild behavior, etc. But the database also includes quantitative elements: the number of guilds and their members, the price of guild membership, litigation expenses, license payments, etc. Altogether, her database includes 12,051 quantitative and 5,333 qualitative observations drawn from twenty-three modern European countries beginning with the eleventh century and continuing until the last European guilds were abolished in the late nineteenth century.

The database is the foundation of this study. Every aspect of guild behavior Ogilvie addressed is analyzed on the basis of the relevant database elements. Thus, she has 706 discrete observations concerning guilds and innovation, 4919 observations that address barriers to entry to guild membership, etc. The observations as a whole are fairly well distributed across space and time, although nearly half come from the Low Countries and German-speaking Europe. Ogilvie is attentive to possible over- and under-representation problems, but there remains the problem of the nature of the observations themselves. Some record historical events, others are prescriptive statements (rules, pronouncements), yet others are claims of interested parties. Is there a secure way of converting such a mixture of observations into a conclusive statement of guild behavior? Ogilvie’s approach is to rely on the sheer number of observations available to her and, in most cases, on what she sees as the unambiguous answers her database gives to the questions she puts to it.

For, make no mistake, guilds were, first and last, institutions designed to redistribute resources to their members at the expense of society at large (p. 80). They were employer associations, “steely and implacable” in their seeking after rents (p. 210) that endured for so long because guilds succeeded in sharing enough of their rents with those who held political power to buy their protection (p. 581). That is, guilds were not primarily “private order” institutions that generalized trust, built social capital and enriched civil society. They were what Adam Smith said they were: conspiracies against the public, abetted in their pursuit of private gain by public power.

Ogilvie makes this case systematically. Chapter by chapter, she reviews the collusive ties of guilds to governmental authorities, the barriers to entry erected by guilds, their manipulation of markets, their discriminatory policies regarding women and an array of religious and ethnic groups. With few exceptions, guilds acted to restrict membership, monopolize production, exploit suppliers and hired labor, and exclude women.

Scholars who speak well of guilds usually concede their monopolistic, corporatist character, but point to redeeming virtues: they uphold quality standards, enable investments in human capital via apprenticeship, and even stimulate innovation by providing a non-patent based incentive structure. Certainly the most interesting chapters of the book tackle these themes. Ogilvie’s database arms her with example after example to show that guilds were, after all, irredeemable. Their quality controls served themselves, not consumers; apprenticeship had little to do with guilds (and was hardly necessary to the acquisition of skill in most trades); and innovation was only tolerated by guilds when it served the members’ interests. This last claim may seem like a significant concession, but Ogilvie sees it as one more confirmation of the myopic focus of guild activity.

The many thousands of guilds that existed from about 1100 to at least the 1790s imposed a deadweight loss on the European economies, a loss that continued unabated throughout this long period. But, was this loss large or small? After all, no economic era is without its rent-seeking institutions, corrupt governments and feckless regulators. Is there a profession or industry in the United States that does not seek to maintain entry barriers, define self-serving quality standards, and buy the favor of politicians? Did the rent seeking of the craft guilds exceed the endemic background rent seeking that is, arguably, part of the human condition?

The organization of Ogilvie’s study does not lend itself to providing an answer to this question since she pools her data to generate a group portrait of “The European Guild.” Only in the final chapter of this exhaustive study does she turn to a comparative approach. Were guilds less noxious in some places, or in some branches of industry, than in others? Did the severity of rent seeking correlate with overall economic performance? While Ogilvie does not consider industry differences, she does seek to distinguish broad European zones of strong, average, and weak guilds. Her database reveals the German, Nordic, and Iberian lands to have had the strongest, most objectionable, guilds, while the Low Countries and Britain had the weakest. There, either the state or the town magistrates limited guild power more consistently than elsewhere in Europe.

Ogilvie then compares the GDP estimates available for these European countries and finds that Britain and the Low Countries performed better, overall, than the other regions of Europe. This, she suggests, is the measure of the difference that guild power could make.

This analysis is brief, highly aggregated, dependent on weak data, and, unfortunately, not terribly convincing. Northwestern Europe in the early modern era differed from the rest of Europe in so many dimensions that an assertion that the line of causation should run from weak guilds to faster GDP growth is, at the very least, premature.

The European Guilds is a learned and comprehensive study of an institution that stood at the heart of the European non-agricultural economy for over seven centuries. Its strength is, however, also a weakness. The guild is analyzed at a high level of abstraction, the wealth of detailed examples notwithstanding. This aids in drawing generalizations about guild intentions and behavior; but it limits the examination of the guilds within the larger economies in which they functioned. The final chapter hints at these issues, but it is far less fully developed than the rest of this volume. Instead of closing a debate, Ogilvie has, I believe, reinvigorated one. Her new book will be the necessary starting point for anyone wishing to pursue the matter further.

 
Jan de Vries is the Sidney Hellman Ehrman Professor of History and Economics, Emeritus, at the University of California at Berkeley. He is the author, among other works, of The Industrious Revolution (Cambridge, 2008) and The Price of Bread: Regulating the Market in the Dutch Republic (Cambridge, 2019).

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 (administrator@eh.net). Published by EH.Net (March 2019). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Business History
Industry: Manufacturing and Construction
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century

The Contradictions of Capital in the Twenty-First Century: The Piketty Opportunity

Editor(s):Hudson, Pat
Tribe, Keith
Reviewer(s):Geloso, Vincent

Published by EH.Net (July 2017)

Pat Hudson and Keith Tribe, editors, The Contradictions of Capital in the Twenty-First Century: The Piketty Opportunity. Newcastle upon Tyne: Agenda Publishing, 2016. xii + 300 pp. $30 (paperback), ISBN: 978-1-911-116-11-0.

Reviewed for EH.Net by Vincent Geloso, Texas Tech University.

By the turn of the millennium, the study of inequality was more or less the poor child of the discipline of economics. The financial crisis brought this subfield back into prominence. It was hauled back onto the stage thanks in large part to the efforts of Thomas Piketty alongside research partners such as Emmanuel Saez and Gabriel Zucman, and kindred spirits like the late Tony Atkinson. Piketty’s three-pound tome Capital in the Twenty-First Century, which aggregated a series of prior works, will likely keep scholars abuzz for many years. This is because it attempts the dual task of considering the theoretical linkages between inequality and growth while also providing detailed methodological approaches to measuring inequality. Given the breadth of the concepts underlying those contributions, an entire book (or three or four) discussing and expounding on the finer details, limitations and promises contained in Piketty’s work is well justified.

The Contradictions of Capital, edited by Pat Hudson and Keith Tribe, is therefore a welcome contribution, with a few reservations. On the empirical front, there is very little to quibble about. The chapters produced by Patrick Manning, Matt Drwenski, Tetsuji Okazaki and Prasannan Parthasarathi are particularly valuable as they consider regions often ignored and about which little is known. Each on their own present relevant empirical contributions linking certain key regions to what we can refer to as the “Piketty narrative.” For these chapters alone, the book should be considered a valuable addition to one’s library.

More importantly, the book not only attempts to measure inequality (and capital), but it tries to expand theoretically on how to measure it. To do so, some chapters (notably the introduction by the editors, as well as Mary O’Sullivan’s chapter) pound the need to import more features of the Cambridge capital controversy. Simply explained, this debate centered on the ability to measure capital accumulation as an aggregate (K) which could be introduced into the commonly-used Cobb-Douglas production function. Joan Robinson and Piero Sraffa at the University of Cambridge contended that capital was not some fungible fund of homogeneous composition. In addition, capital could not possibly be measured independent of price levels without the risk of tautology. Since the role of capital features prominently in Piketty’s claim that the returns to capital (r) are greater than economic growth (g), this discussion should be welcomed as an interesting theoretical refinement of his work. To be fair, this reviewer is skeptical of the role that the Robinson-Sraffa brand of capital theory can play in terms of theorizing about capital, and even more of its value in terms of providing empirical progress. Indeed, while the other side of the Two Cambridges capital debate (Paul Samuelson and Robert Solow of MIT) conceded the logical validity of the argument, the absence of valid empirical alternatives to supplant the simplistic (but often sufficient) Cobb-Douglas function (or even more sophisticated functions such as those seen in the debates over the economics of slavery in antebellum America) limits the value of reintroducing the capital controversies of the 1960s. Nonetheless, it is important to be reminded of these theoretical points.

While it is correct to question the measure of capital and the theory of capital behind it, the book more or less elides the deeper question about inequality. The book simply assumes that inequality tends to be detrimental to society and that there is a case for reducing it by state action. This is not necessarily true. There is income inequality between a hedge fund banker and a Benedictine monk. That gap in income does not map to a gap in utility as the two individuals are maximizing their well-being on different planes of existence. While this is a reductio ad absurdum, it does speak to reality as there exist threshold earners and/or individuals who are on the backward-sloping portion of their labor supply curve where the substitution effect is greater than the income effect. There are also individuals who would refuse to swap places with others simply for greater income. A university economist, for example, might earn less than his partner who happens to be a lawyer and yet he would still be reluctant to swap places even though the income be significantly greater. That university economist is simply maximizing his well-being under the constraint that he does not want to practice law for the proposed income. In what way is that inequality a detrimental one? Such discordance between income and well-being is bound to emerge in rich societies where heterogeneous preferences imply that different channels of well-being maximization exist — many of which cannot be captured by income measures. In fact, the most problematic fact for those who want to tackle the topic of inequality is that while income inequality is rising within Western societies, inequalities of happiness and life satisfaction are falling (Dutta and Foster 2013; Stevenson and Wolfers 2008). Recognizing this fact forces one to accept the need for a further step in research: the decomposition of inequalities by source in order to identify which ones are actually detrimental (Welch 1999). The ones described above, as well as those that would emerge mechanically from population aging causing compositional change (Schirle 2008; Almas and Mogstad 2012, 2014; Goldstein and Lee 2014) or differences in labor hours households decide to provide (Pistolesi 2009) can hardly be considered detrimental. Those inherited at birth — the stickiness of present inequality as represented in the popular Great Gatsby Curve (Corak 2013) — can more easily be categorized as harmful. The same can be said of inequality that results from government action: regressive taxation, subsidies favoring richer households, regulations preventing entry and raising prices that feature disproportionately in lower income household budgets. In fact, the case can easily be made that a substantial proportion of inequalities actually result from state actions that distort markets (Geloso and Horwitz 2017). Thus, it is surprising that in Contradictions of Capital, this issue is not taken up with more vigor, as it was one of the arguments (albeit a peripheral one) made by Joan Robinson (1953).

When one accepts the possibility that some inequalities are not detrimental, one must logically accept the need to decompose inequality and consider the possibility that the proposed firefighter (the state) is often the pyromaniac who started the blaze in the first place. Although the present book is informative about the existing interpretations (and their shortcomings) of inequality, while also being empirically inquisitive about the Piketty legacy (which in itself makes the book a worthy read), it falls one step shy of considering this salient prospect which is still unaddressed. As such, it does not fully live up to the promise made in its early pages, even if it does achieve some pretty good mileage.

References:

Almås, Ingvild, and Magne Mogstad. “Older or Wealthier? The Impact of Age Adjustment on Wealth Inequality.” Scandinavian Journal of Economics 114, no. 1 (2012): 24-54.

Almås, Ingvild, Tarjei Havnes, and Magne Mogstad. “Baby Booming Inequality? Demographic Change and Earnings Inequality in Norway, 1967–2000.” Journal of Economic Inequality 9, no. 4 (2011): 629-650.

Corak, Miles. “Income Inequality, Equality of Opportunity, and Intergenerational Mobility.” Journal of Economic Perspectives 27, no. 3 (2013): 79-102.

Dutta, Indranil, and James Foster. “Inequality of Happiness in the U.S.: 1972–2010.” Review of Income and Wealth 59, no. 3 (2013): 393-415.

Geloso, Vincent, and Steven Horwitz. “Inequality: First, Do No Harm.” The Independent Review 22, no. 1 (2017): 121.

Goldstein, Joshua R., and Ronald D. Lee. “How Large Are the Effects of Population Aging on Economic Inequality?” Vienna Yearbook of Population Research (2014): 193-209.

Pistolesi, Nicolas. “Inequality of Opportunity in the Land of Opportunities, 1968–2001.” Journal of Economic Inequality 7, no. 4 (2009): 411-433.

Robinson, Joan. “The Production Function and the Theory of Capital.” Review of Economic Studies 21, no. 2 (1953): 81-106.

Schirle, Tammy. “Age-adjusted Measures of Earnings Inequality in the United States, 1980-2010.” Economics Bulletin 32, no. 3 (2012): 2662-2669.

Stevenson, Betsey, and Justin Wolfers. “Happiness Inequality in the United States.” Journal of Legal Studies 37, no. S2 (2008): S33-S79.

Welch, Finis. “In Defense of Inequality.” American Economic Review 89, no. 2 (1999): 1-17.

Vincent Geloso is the author of Rethinking Canadian Economic Growth and Development since 1900: The Quebec Case (Palgrave Macmillan, 2017).

Copyright (c) 2017 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 (administrator@eh.net). Published by EH.Net (July 2017). All EH.Net reviews are archived at http://www.eh.net/BookReview.

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

History by Numbers: An Introduction to Quantitative Approaches

Author(s):Hudson, Pat
Ishizu, Mina
Reviewer(s):Roberts, Evan

Published by EH.Net (May 2017)

Pat Hudson and Mina Ishizu, History by Numbers: An Introduction to Quantitative Approaches (second edition).  London: Bloomsbury, 2017. xx + 339 pp. $35 (paperback), ISBN: 978-1-84966-537-7.

Reviewed for EH.Net by Evan Roberts, Department of Sociology, University of Minnesota.

For a field on the wane (see the discussion in Historically Speaking in 2010) quantitative history has a good stock of textbooks, but the flow of new entrants is slow. The revised edition of History by Numbers — originally solo-authored by Pat Hudson in 2000 and now co-authored with Mina Ishizu in its 2017 second edition — would make an excellent textbook for an upper division undergraduate history class. Anyone wishing to extend their students and themselves could add Charles Feinstein and Mark Thomas’s Making History Count for a more advanced undergraduate or graduate-level class in quantitative history. Of course, this supposes there is sufficient demand among history students to enroll in such a class, a critical question I return to later in the review.

The presumed audience for History by Numbers is history rather than economics students. Chapter 1 situates quantitative history within the discipline of history, while Chapter 2 discusses the nineteenth-century statistical movements in Britain and the epistemology of quantitative reasoning. Economics students would benefit from reading these chapters, yet they fit more squarely within the design of a history course and curriculum. The remainder of the book takes students and their instructors through a standard sequence of data management, exploration and analysis, written with the presumption that students begin with only a memory of high school mathematics. The exploratory data analysis chapters focus on graphical methods, and how to characterize the distribution of a single variable. Examples in all the chapters come from the published literature, but with a hand on the scale for modern British economic and social history. British universities have been more successful than their North American peers in maintaining quantitative work within history departments, so the choice of examples reflects the state of the field.

The chapter on time series and indices is particularly strong, with clear worked explanations of how to construct indices and the art of choosing the right base period. There is a very good explanation of cyclical fluctuations and seasonality, and how to work with this form of data correctly. The graphics and the text complement each other especially well here. Regression and correlation is then covered in one chapter, integrating both time series and cross-sectional data. For an introductory course this is appropriate, and the separation of cross section and time series approaches can await students in a subsequent course, where Feinstein and Thomas’s more advanced text separates these issues. Sampling and significance testing in Chapter 7 wrap up the purely statistical chapters, with more worked examples from published research. Chapter 8 outlines how economic historians put statistical methods to work in building models and testing theories, putting cliometrics in perspective for history students. It is not until Chapter 9 that we get to the foundational work of doing History by Numbers: getting numbers from manuscripts into the computer. Again, the authors do well in putting recent developments in creating quantitative data into historical perspective for a generation of students who have grown up in an era where important tools of quantitative history: digital cameras, laptops, databases, geographic information systems, and fuzzy matching of text are ubiquitous in their daily lives.

History by Numbers would make an excellent textbook for a course introducing students to quantitative methods in the context of historical examples, particularly for instructors who would integrate that introduction with a history of the British industrial revolution. A more general and topically eclectic course on quantitative history could also use this book as a core text with very little modification, as it discusses research on topics ranging from violence in nineteenth-century New Zealand to the wolfram market in World War II Spain. Two sections of discussion questions integrate the worked statistical examples in the text with substantive historical and economic questions, and could be used as the basis for labs or tutorials.

Alternatively, instructors might use History by Numbers as their secret guide to teaching statistics to history students without assigning it as a text (I apologize to the authors for the significant reduction in their royalties this implies). Indeed, this was how I used the previous edition of the book; as a script for teaching statistics to history students in a social history class using entirely American data. With IPUMS, EH.Net, and Historical Statistics of the United States it is not hard to find data that can be used to teach all the statistical concepts introduced in History by Numbers. Bearing in mind that book authors face harder constraints on length than online book reviewers whose words come cheap, there are some omissions in an otherwise quite comprehensive survey of modern quantitative history. There could be greater discussion of longitudinal data from cohort studies which are mentioned just briefly at the end of the text. Moreover, in an otherwise diverse set of articles for discussion I was surprised to see none from the strong Scandinavian quantitative history tradition (largely written in English these days).

Overall then there is much to recommend in History by Numbers for instructors whose goal is to teach statistics using relatively clean data from already digitized sources. Working with small clean datasets allows students to focus on learning statistics, statistical software, and gaining confidence in making statistical inferences. The next step in students’ development, directly suggested by Chapter 9, is writing an Honors or senior thesis using methods from the book, and available sources tailored to student and instructor interest.  This supposes that students have been motivated to first take a course guided by History by Numbers. Yet, as the authors note quantitative history has not grown since the first edition was published.

Perhaps we are doing it wrong, and need to rethink how we introduce students to quantitative history. The same arguments apply mutatis mutandis to introducing students to quantification in other undergraduate social science programs such as sociology, political science, and anthropology. In all of these disciplines a meaningful fraction of students approach quantitative methods with some anxiety. In the same spirit as Joshua Angrist and Jörn-Steffen Pischke (2017) recommend changing the traditional sequence of introductory econometrics courses to reflect changes in empirical econometric practice, quantitative historians should also introduce students to their practices “by example rather than abstraction.”

For historians and their kin in economics and sociology departments, teaching by example means beginning with primary sources. It is now straightforward to lead with the sources, to begin where students are found, a little shy of quantification but probably willing to enroll in a class that offers an introduction to research methods and an immersion in primary sources. Leading with immersion in primary sources meets the modal student closer to their interests, and can be a powerful recruitment tool for a class, compared to others built around textbooks and reading. Tools for transcribing data can now be easily built using Google tools, or the Zooniverse Project Builder (https://www.zooniverse.org/lab).  Such a course could also be pitched to students as “digital history.” The fashion for attracting students with “digital” may wane in the future, but the pedagogical underpinnings of beginning with collaborative digitization of sources (quantifiable sources!) are sound.

When students get their hands metaphorically dirty with the sources, see that their small sample of sources differs internally, and differs from their classmates’ sample of sources, the motivation to investigate questions statistically comes more organically.  They can then learn statistics with data they have created. Fitting data collection and analysis into one semester requires compressing analysis somewhat, the omission depending on the manuscripts and data at hand. If the data are cross sectional surveys, for example, index numbers may be omitted. My experience has been that beginning with the manuscript sources, creating a small dataset, and then analyzing it, leads to the greatest engagement from students who initially lack confidence in quantitative methods. Such an approach punts some of the statistics taught in History by Numbers to later semesters, but with the benefit of having engaged more students in quantification than a course framed explicitly as quantitative history.

Thus, the conclusion that History by Numbers is an excellent text for an upper division class is premised on the existence of a sophomore course that introduces students to quantitative methods quietly, and maybe just a little surreptitiously. Call it digital history, call it social history or historical sociology, whatever topic you think will attract students at your institution, and ideally the students will be so far into the course that they won’t realize they’re learning statistics until you’ve shown them they can do it. As Hudson and Ishizu emphasize many students have more of an aptitude for the common-sense tools of statistics than they realize. In short, while I can recommend History by Numbers to social and economic historians, I also recommend that we think carefully and creatively about how our curricular sequences can bring more students into quantitative history courses.

References:

Joshua D. Angrist and Jörn-Steffen Pischke. 2017. “Undergraduate Econometrics Instruction: Through Our Classes, Darkly,” Journal of Economic Perspectives 31(2): 125-44.

Charles H. Feinstein and Mark Thomas. 2002. Making History Count: A Primer in Quantitative Methods for Historians. New York: Cambridge University Press.

Robert Whaples. 2010. “Is Economic History a Neglected Field of Study?” Historically Speaking 11(2): 17-20.

Evan Roberts is Assistant Professor of Sociology and Population Studies at the University of Minnesota. His best enrolling quantitative methods class went by the title “Living, Working and Dying in Chicago.” Recent publications include “Family Structure and Childhood Anthropometry in Saint Paul, Minnesota in 1918” (with John Robert Warren), History of the Family.

Copyright (c) 2017 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 (administrator@eh.net). Published by EH.Net (May 2017). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods

Reform or Repression: Organizing America’s Anti-Union Movement

Author(s):Pearson, Chad
Reviewer(s):Friedman, Gerald

Published by EH.Net (June 2016)

Chad Pearson, Reform or Repression: Organizing America’s Anti-Union Movement.  Philadelphia, University of Pennsylvania Press, 2016. viii + 303 pp. $55 (cloth), ISBN: 978-0-8122-4776-3.

Reviewed for EH.Net by Gerald Friedman, Department of Economics, University of Massachusetts.

Even while the Labor Movement is dying, its history thrives.  For a long time, Labor History was a narrow often sterile discipline focused on the glorious rise of unions and socialist political formations, the formal Labor Movement.  Labor History was populated by advocates whose works often read like sermons, histories of good and honest workers struggling against evil capitalists and their political toadies.  Strikes and unions were good, except where the earnest rank-and-file were betrayed by self-serving union leaders.  Sometimes, these betrayals cost the workers.  But the experience of collective action and struggle always contained good lessons, and task of the labor historian was seen as interpreting these lessons and passing them along to build the labor movement.

While labor historians imagined placing workers and their struggles at the center of historical analysis, by reducing capital, the state, and labor to simplistic Marxist elements, their work was consigned to a leftist ghetto.  Labor History as medieval morality play can contribute little to the broader study of history because it treats all actors as parodies. Ironically, by shrinking all social actors to a simplistic category, this work brought nothing to the understanding of the labor movement or the proper strategy for labor struggles.  In the face of the decline, even the collapse, of the Labor Movement, the old Labor History has had nothing to say except the old mantra of “evil capitalists” and “self-serving union leaders.”

Perhaps it is the crisis of the Labor Movement that has invigorated the field of Labor History.  A new generation of historians has emerged conscious that the old categories are inadequate to understand the current crisis.  They are ready for a much more nuanced approach, one that recognizes the varieties of capital. The experience of the Labor Movement’s rise and decline has forced them to recognize the often-contentious relationship between capital and democratic states, and the role of ideology in shaping not only the Labor Movement, but the response to labor militancy by states and by capitalists.  In short: the new generation recognizes that the making of the capitalist class and any capitalist state is just as challenging as the making of the working class.  By conceiving labor history as a history of contending collective movements, labor historians have enriched our understanding of American employers and their organizations (Ernst 1995; Harris 2006), their bargaining strategies and campaigns against unions (Richards 2008; Sidorick 2009; Cowie 1999), their often-tangled relationship with state officials (Howell 1992; Howell 2005; Friedman 1998; Friedman 2007), and the ideology they developed to sustain their collective action (Phillips-Fein 2009; Harris 1982; Leon 2015).  At its best, this new labor history is contributing, as labor historians have long wanted, to a broader emerging field of the history of capitalism (Beckert 2014).

Chad Pearson’s new book should be seen in the context of this transformation of Labor History into a piece of the larger history of American capitalism. His book uses brief biographies and case studies of local associations to examine the development of the Open Shop movement in American industry before the First World War.  (“Open Shops” are establishments that hire workers without regard for their union membership; in practice, they do not hire union members because they do not sign union contracts.)  In particular, Pearson addresses a question that has often appeared as a paradox to liberal historians eager to portray the American story as a march of progress: the coincidence, both in time and often in personnel, between the Progressive Era “Age of Reform” and the rise of militant anti-unionism and the repression of labor organization.  How to reconcile the seemingly antagonistic positions of progressive reformers like George Creel, who advocated of women’s suffrage, public ownership of utilities, and opposed child labor, while also campaigning for the Open Shop and serving on Citizen’s Industrial Association of America (CIAA) press committee (Pearson 2016, 70)?  What to say of Theodore Roosevelt, bitter critic of both the repressive labor policies of the Anthracite Coal companies and of the closed (union) shop?  Or the liberal hero, Louis Brandeis, who argued that the open shop protected the liberties of both employers and the rights of meritorious unionists and nonunionists alike (Pearson 2016, 83)?

It is the great strength of Pearson’s study that regardless of any personal sympathy with unions and labor militancy, he avoids any cant but evaluates seriously the positions of open-shop employers.  He shows that they, too, were often reformers and their employers’ movement was as much a part of the Progressive Era as was the Labor Movement. In rejecting labor militancy and the closed shop as incompatible with his vision of America’s political traditions, Brandeis, for example, expressed a view of labor relations and the economy that was championed by Progressive Era employers’ organizations, has remained popular in America, and has come to motivate much of our political right.  In this view, free Labor has no social dimension.  It means simply the right of individuals to conduct their businesses and to buy and sell commodities, including their own labor power, untrammeled by the interference of others, either state regulators or other workers or businesses.  An attribute of individuals, freedom is negated by collective action.  Not only does free competition among individuals best promote efficiency, it is fair because it rewards work and merit; and it is just because it represents liberty. Labor unions are a threat to efficiency because they place the lazy and incompetent on equal standing with the hard-working and meritorious.  Worse, through their political action, by promoting regulation and monopoly, they are a fundamental threat to freedom, “the greatest menace” (Pearson 2016, 182).  Far from a selfish battle to increase profits, the campaign for the open shop and the employer in the management of his property, was a noble and generous struggle to protect fundamental principles of justice and fairness.

If the open-shop activists had a general political orientation, Pearson shows that, paradoxically for many historians, it was liberal and progressive rather than reactionary.  Open shop proponents did not see themselves as part of a counter reformist movement; instead, they were part of a tradition of social reform that stretched back to the abolitionists and early Republicans, to Abraham Lincoln rather than Jefferson Davis.  They saw themselves as heirs to the abolitionists, reformers, patriotic and class-neutral proponents of industrial fairness and guardians of ambitious, hard-working individuals. It was natural then for them to oppose monopoly, to favor honest government, municipal efficiency, industrial progress and professionalization. Far from fighting against labor or higher wages, they often condemned abusive managers (like the Anthracite Coal companies), and favored welfare capitalist initiatives and what labor economists today call efficiency wages.

It would be a cheap shot at the open-shop activists to observe that their campaign in defense of individual liberty against collective regulation required collective action, “employer solidarity” and individual sacrifices to benefit the group.  Indeed, their campaigns were often undermined by the actions of self-interested individuals, employers who displayed an inclination not to “give their time to anything that will further the interests of the group. (Pearson 2016, 160, 162).  Like their union opponents, employers’ organizations face a collective action problem, the need to mobilize individual resources to produce public goods. Pearson’s greatest contribution is to show how these organizations addressed this problem, and how they used ideas — the ideology of individual liberty — to mobilize their constituents.  What socialism was for the working-class movement, progressivism became for America’s employers.

Pearson’s work should be read and read carefully by all interested in the history of the Progressive Era, the history of employer organizations, and American political thought.  His work is Labor History in the broadest and finest sense, the history of the development of American capitalist society.

References:

Beckert, Sven. 2014. Empire of Cotton: A Global History. New York: Knopf.

Cowie, Jefferson. 1999. Capital Moves: RCA’s Seventy-Year Quest for Cheap Labor. Ithaca: Cornell University Press.

Ernst, Daniel R. 1995. Lawyers against Labor: From Individual Rights to Corporate Liberalism. The Working Class in American History. Urbana: University of Illinois Press.

Friedman, Gerald. 1998. State-Making and Labor Movements: France and the United States, 1876-1914. Ithaca: Cornell University Press.

Friedman, Gerald. 2007. Reigniting the Labor Movement: Restoring Means to Ends in a Democratic Labor Movement. Abingdon, UK: Routledge.

Harris, Howell John. 1982. The Right to Manage: Industrial Relations Policies of American Business in the 1940s. Madison University of Wisconsin Press.

Harris, Howell John. 2006. Bloodless Victories: The Rise and Fall of the Open Shop in the Philadelphia Metal Trades, 1890-1940. New York: Cambridge University Press.

Howell, Chris. 1992. Regulating Labor: The State and Industrial Relations Reform in Postwar France. Princeton: Princeton University Press.

Howell, Chris. 2005. Trade Unions and the State: The Construction of Industrial Relations Institutions in Britain, 1890-2000. Princeton: Princeton University Press.

Leon, Cedric de. 2015. The Origins of Right to Work: Antilabor Democracy in Nineteenth-Century Chicago. Ithaca: ILR Press/Cornell University Press.

Pearson, Chad. 2016. Reform or Repression: Organizing America’s Anti-Union Movement. American Business, Politics, and Society. Philadelphia: University of Pennsylvania Press.

Phillips-Fein, Kim. 2009. Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan. New York: W. W. Norton.

Richards, Lawrence. 2008. Union-Free America: Workers and Antiunion Culture. The Working Class in American History. Urbana: University of Illinois Press.

Sidorick, Daniel. 2009. Condensed Capitalism: Campbell Soup and the Pursuit of Cheap Production in the Twentieth Century. Ithaca: ILR Press/Cornell University Press.

Jerry Friedman has served as the U.S. editor of Labor History since 2003.

Copyright (c) 2016 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 (administrator@eh.net). Published by EH.Net (June 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

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

Douglass C. North

written by John Wallis

Douglass C. North passed away at the age of 95 at his home in Benzonia, Michigan.  He was among the most important and influential economic historians and economists of the late 20th century.  He will be deeply missed by his family, friends, colleagues, and students.

Douglass Cecil North was born on Nov. 5, 1920, in Cambridge, Massachusetts, the youngest of three children. He attended the University of California-Berkeley, graduating in 1942.  He received his PhD from Berkeley in 1952.  He began teaching at the University of Washington Seattle in 1950, and in 1983 moved to Washington University in St. Louis, where he remained a professor for the rest of his career.  He was co-recipient of the 1993 Nobel Memorial Prize in Economic Sciences with Robert Fogel.

He is survived by his wife Elisabeth Case and his three sons Douglass, Christopher, and Malcom.

The following description of his intellectual accomplishments are taken from John Wallis “Persistence and Change: The Evolution of Douglass C. North,” in Institutions, Property Rights, and Economic Growth: The Legacy of Douglass North.” Edited by Sebastian Galiani and Itai Sened. Cambridge University Press, 2014.

North long emphasized the importance of history and of neo-classical economics.  He criticizes both disciplines for their complacency about the adequacy of the current conceptual and methodological consensus on how history or economics should be done.  He always operated within a framework of individuals who act intentionally (neo-classical economics matters) and who perceive the world through cognitive lenses that are part inherited from their culture and part derived from their own experience (history matters).  Individual actions are governed by interests shaped by relative prices, endowments, and constraints (institutions) as well as by perceptions of how the world around us works (cognition and beliefs).   Social outcomes are the sum of individual actions, but the summation process is not a simple adding up, since interactions between individual decisions and beliefs critically influence the behavior of everyone.

The evolution of North’s thinking continuously shaped his willingness to pursue the interesting questions he was unable to address in his last book or paper, not by the what was currently hot in the profession.  Testimony to the power of his insight is that the profession has followed him, for he certainly didn’t followed the profession. Nowhere is it easier to see this process than in his first book, The Economic Growth of the United States, 1790-1860.  The introduction, page vii, states his conceptual approach:

This study is based on the proposition that U. S. growth was the evolution of a market economy where the behavior or prices of goods, services, and productive factors was the major element in any explanation of economic change. Institutions and political policies have certainly been influential.  They have acted to accelerate or retard growth on many occasions in our past, primarily by affecting the behavior of the prices of goods, services, or productive factors either directly or indirectly.  But they have modified rather than replaced the underlying forces of a market economy.

It is hard to imagine a conceptual statement that more inaccurately predicts the path that North’s research eventually followed.

Economic Growth was one of the first examples of quantitative economic history, or cliometrics, North’s first major contribution to economics and economic history.  The book presented a very neo-classical theory of economic development that emphasized the importance of geographic specialization and division of labor, which led him to investigate the sources of falling transportation costs over the nineteenth century.  His 1958 paper in the Journal of Economic History laid out a technology based neo-classical framework for thinking about declining freight rates, but ten years later, in his 1968 Journal of Political Economy paper, North concluded that: “The conclusion one draws is that the decline of piracy and privateering and the development of markets and international trade shared honors as primary factors in the growth of shipping efficiency over this two-and-a- half-century period.” (p. 967).  Essentially, the costs of shipping were falling because costs other than the costs of operating ships were falling.  Those cost reductions were the result of institutional change.  The paper marks North’s turn toward both transaction costs and institutions as important elements of economic change over time.

The turn towards transaction costs and institutions did not mean a turn away from neo-classical economics, however.  The assumption of zero transaction costs and unchanging institutions could be relaxed within the context of neo-classical theory, as North argued in 1971: “What we need is a body of theory which encompasses the traditional models of the economist and both widens its scope and allows us to include an explanation of the formation, mutation and decay of organizational forms within which man cooperates or competes.”  North was moving toward a neo-classical theory of institutions in which the form of institutions, or organizations, was itself determined by traditional neo-classical rationality and constraints:

Let us begin on a positive note. Briefly stated, the model specifies the process by which an action group (an individual or group) perceive that some new form of organization (institutional arrangement) will yield a stream of benefits which makes it profitable to undergo the costs of innovating this new organizational form. These new arrangements have typically been profitable to realize potential economies of scale, reduce information costs, spread risk, and internalize externalities. These institutional arrangements account for a vast array of the “economic institutions” with which economic historians have traditionally been concerned. However, the formation (and mutation and decay) of these organizational forms can now be an integral part of the economic analysis rather than a descriptive addition to the analysis. Moreover, since a great many were realizable without substantial redistribution of income, their formation is at least in principle predictable from the model. Perhaps even more significant than the ability to integrate economic analyses and institutional formation is the implication of this theoretical model for the study of productivity increase. Economic historians have focused on technological change as the source of growth but the development of institutional arrangements from the above mentioned sources are a major historical source of the improvement in the efficiency of product and factor markets. The development of more efficient economic organization is surely as important a part of the growth of the Western World as is the development of technology, and it is time it received equal attention. The few cases of which I am aware that have attempted to measure productivity change attributable to improving economic organization certainly support this contention. (1971, pp. 119-120)

The idea that neo-classical theory could be used to explain why institutions functioned as they did was a fundamental breakthrough and North’s second major conceptual contribution.  The idea was implemented in a series of papers with Lance Davis and with Robert Paul Thomas, that led to two more books: Institutional Change and American Economic Growth, published in 1971 with Davis and The Rise of the Western World published in 1973 with Thomas.  The heart of the argument in both books is that we can explain changes in the organization of human interaction (institutions) on the basis of the rational interests of individuals attempting to structure the world around them in ways that maximize net benefits.  The classic application of the technique is North and Thomas’s explanation of how the rising price of labor in 14th century Europe as a result of the Black Death, led to the institution of wage labor in western Europe and a return to the institution of serfdom and slavery in eastern Europe.  The same relative price shock led to two different, but both rational, institutional changes.

Two lines of thinking emerged from the idea of neo-classical institutions, and they were not entirely consistent with one another.  In one line, institutional change occurs because of short-run variations in relative prices that create, at some point in time, the incentives to restructure human organizations.  For some reason these changes persist.  This led North to investigate both path dependence and transaction costs.  Transaction costs play a key role, because they are both a reason to change institutions to reduce (or increase) transaction costs and because transaction costs subsequently can make it difficult to change institutions and so contribute to institutional persistence.

The other line of thinking was a growing dissatisfaction with neo-classical economics altogether as a way to understand the process of economic growth specifically, and more broadly to understand the process of economic change over time.   His third significant breakthrough was the realization that neo-classical theory was not just inadequate, but unable to explain long term economic and institutional change in any society, growing or not.

He directed his first clear criticism at economic historians. While acknowledging the important contribution that economic theory and quantitative techniques made to advancing our understanding of historical processes, nonetheless:

From my quite subjective perspective, the new economic history has made a significant contribution to revitalizing the field and advancing the frontiers of knowledge. Yet I think it stops short — far short – of what we should be accomplishing in the field. Our objective surely remains that of shedding light on man’s economic past, conceived in the broadest sense of those words; and I submit to you that the new economic history as it has developed has imposed strictures on enquiry that narrowly limit its horizons-and that some of my former revolutionary compatriots show distressing signs of complacency with the new orthodoxy.  (1974, p. 1)

His criticism of neo-classical theory in economic history, development, and growth would culminate in Structure and Change in Economic History, 1981, what many (including myself) believe is North’s best book.  The introduction and a second chapter extend the argument that we must have more than a history of markets to understand economic change.  The third chapter titled “A Neoclassical Theory of the State,” lays out a logical neo-classical argument for why, in the presence of transactions costs, political systems do not inevitably evolve institutions that promote economic growth.  Indeed, as long-term economic history suggests, the tendency is for political systems to evolve that do not support growth. Chapters four and five argue that we need a theory of organizations as well as a theory of beliefs and ideology if we are to understand long run change, particularly long run change that does not inevitably produce growth and development.

The contradiction is clear in Structure and Change.  On the one hand, there is a strong argument that neo-classical economics is incapable of delivering the full range of explanations necessary to understand economic change, particularly ideologies and beliefs.  On the other hand, there is a strong argument that rational individual behavior is consistent with institutional choices that retard, rather than promote, economic growth.  Is the question to be neo-classical or not be neo-classical?

The real question the book is trying to grapple with is: persistence or change?  Going back to Rise of the Western World, institutions change when there are gains from doing so, but then  persist because of the high transaction cost of changing them.  In Structure and Change, beliefs and ideologies persist.  Because beliefs (and norms and culture) are based on the cumulative experience of society passed down through culture and formed through repeated interaction of many people through norms of behavior, beliefs do not change quickly and it is extremely difficult to for social actors to manipulate beliefs in current time.  As a result, beliefs are always a function of what happened in the past and can impede change in the present for good or ill.  It is the persistence of beliefs and institutions from the past (culture) that explain why changes in the present often produce results that impede rather than promoting growth and development.  The importance of beliefs in North’s framework plays a major role in Institutions, Institutional Change, and Economic Performance (1990) and is the central focus ofUnderstanding the Process of Economic Change (2005).

The Structure and Change framework includes two different time patterns of institutional change.  One is episodic and discontinuous, like the move toward wage payments after the Black Death in western Europe.  The other is continuous and marginal. Changes in beliefs and ideologies, in norms, and in informal and formal rules occur constantly and, while changes sometimes persist, they need not.  Neither continuous or episodic institutional change is necessarily persistent.

Fleshing out these ideas in the 1990s produced a classic example of change during a crisis that persists: “Constitutions and Commitment” with Barry Weingast (1989).  The paper’s emphasis on institutional mechanisms explains why particular institutions are self-enforcing and persist over time.  At the same time North was writing Institutions, Institutional Change, and Economic Performance.  Persistence plays a large role in Institutions, which regularly emphasizes that the function of an institution is to provide stability and predictability to human behavior.  The big contribution of the book, however, is the definition of institutions that North calls the sports analogy.  Institutions are the rules of the game and the means of enforcement, and organizations are the teams that play the game.  The definition motivates three behavioral choices that organizations can make.  1) maximize under the rules; 2) devote resources to changing the rules; and/or 3) cheat.  The alternatives are not mutually exclusive, and they comprise a framework for understanding the dynamics of institutional change.

North’s fourth major contribution was to separate institutions and organizations.  Since his earliest books, North always included a discussion of organizations as important, but organizations were treated as manifestations of institutions.  Organizations usually disappeared from the conceptual framework, which was always neo-classical in its focus on individuals.  By defining institutions as the rules of the game and means of enforcement and then separating the rules from the organizations that actually play the game, the possibility of a dynamic relationship between the interests and incentives facing the organizations and the structure of the rules became possible.  The descriptive concept that comes out of the dynamics is ‘adaptive efficiency.’  In some societies, the interaction of institutions and organizations produces a series of institutional changes that get incrementally better, rather than a sequence that is sometimes good and sometimes bad for economic performance.  This is North’s fourth fundamental contribution.

Rather than resolving (or integrating) the tension between the long and short term forces  leading to institutional change, Institutions exacerbated it.  The rules of the game included formal rules, informal rules, and norms of behavior.  By stressing the function of institutions as providing stability and predictability, and emphasizing the importance of beliefs and norms, the book effectively claimed that the persistence of institutions was not a matter of real-time economic and political forces, but an outcome of the natural limits to human capacities for cognition and culture.  North pressed farther down this road with his 2005 book, Understanding the Process of Economic Change.  The interaction between organizations and institutions was a central point in his last book with John Wallis and Barry Weingast, Violence and Social Orders in 2009.

 

Partial Bibliography

North, Douglass C. 1958. “Ocean Freight Rates and Economic Development 1750–1913.” Journal of Economic History, 18(4): 537–555.

North, Douglass C. 1961. The Economic Growth of the United States 1790–1860. Englewood Cliffs, N.J.: Prentice-Hall, Inc.

North, Douglass C. 1966. Growth and Welfare in the American Past. A New Economic History. Englewood Cliffs, N.J.: Prentice-Hall, Inc.

North, Douglass C. 1968. “Sources of Productivity Change in Ocean Shipping, 1600–1850.” The Journal of Political Economy. 76(5): 953–970.

North, Douglass C. 1971. “Institutional Change and Economic Growth.” Journal of Economic History, 31(1): 118–125.

Davis, Lance E., and Douglass C. North. 1971. Institutional Change and American Economic Growth. Cambridge, UK: Cambridge University Press.

North, Douglass C. 1974. “Beyond the New Economic History.” Journal of Economic History, 34(1): 1–7.

North, Douglass C. 1978. “Structure and Performance: The Task of Economic History.” Journal of Economic Literature, 16: 963–978.

North, Douglass C., and Barry R. Weingast. 1989. “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England.” The Journal of Economic History, 49:4.

North, Douglass C. 1981. Structure and Change in Economic History. Cambridge: Cambridge University Press.

North, Douglass C. 1986. “The New Institutional Economics.” Journal of Institutional and Theoretical Economics, 142(1): 230–237.

North, Douglass. C. 1990a. Institutions, Institutional Change, and Economic Performance. New York: Cambridge University Press.

North, Douglass C. 1990b. “A Transaction Cost Theory of Politics.” Journal of Theoretical Politics, 2(4): 355–367.

North, Douglass C. 1991. “Institutions.” In The Journal of Economic Perspectives, 5(1): 97–112.

North, Douglass C. 1993. “Douglass C. North, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1993: Autobiography.” Vol. 2010. The Nobel Foundation.

North, Douglass C. 1994. “Economic Performance through Time.” American Economic Review, 84: 359–368.

North, Douglass C. 1995. “The New Institutional Economics and Third World Development,” in John Harriss, Janet Hunter, and Colin M. Lewis, eds., The New Institutional Economics and Third World Development, New York: Routledge.

North, Douglass C. 2005. Understanding the Process of Economic Change. Princeton: Princeton University Press.

North, Douglass C., and Robert Thomas. 1973. The Rise of the Western World: A New Economic History. New York: Cambridge University Press.

North, Douglass C., John Joseph Wallis, and Barry Weingast. 2009. Violence and Social Orders: A Conceptual Framework for Interpreting Human History. New York: Cambridge University Press.

North, Douglass C., John Joseph Wallis, Steven B. Webb, and Barry R. Weingast, ed.  2013. In the Shadow of Violence: Politics, Economics, and the Problem of Development.  Cambridge University Press.

Human Capital in History: The American Record

Editor(s):Boustan, Leah Platt
Frydman, Carola
Margo, Robert A.
Reviewer(s):Rosenbloom, Joshua L.

Published by EH.Net (October 2015)

Leah Platt Boustan, Carola Frydman, and Robert A. Margo, editors, Human Capital in History: The American Record. Chicago: University of Chicago Press, 2014. xi + 406 pp. $110 (cloth), ISBN: 978-0-226-16389-5.

Reviewed for EH.Net by Joshua L. Rosenbloom, Department of Economics, Iowa State University.

Through her own scholarship, the many doctoral students she has supervised, and her leadership of the National Bureau of Economic Research’s (NBER) Development of the American Economy Program, Claudia Goldin has played an outsized role in shaping the practice, standards, and approaches of the economic history profession today.  Having been honored as President of both the Economic History Association and the American Economic Association, Goldin has also done a great deal to integrate historical approaches into economics, while promoting careful attention to economics in historical work.  The essays collected in this volume, which were first presented at an NBER conference in 2012, represent a fitting tribute to Goldin’s contributions to scholarship in historical economics.

The book contains ten substantive chapters sandwiched between an introduction by the editors and a touching and very personal appreciation of Goldin by Stanley Engerman.  The introduction by the editors elaborates the unifying theme of the volume — the centrality of human capital to understanding American economic development — and highlights some of the many ways that Goldin’s scholarship, alone and with various collaborators, has contributed to our understanding of this historical record.

Given the scope of topics encompassed within the themes of this volume it is not possible to do justice to the many insights they yield.  Rather, this review will seek to touch on some of the highlights of the volume as I see them.  Broadly speaking the contributions in the book fall into two groups: the first four chapters address topics related to the supply of and demand for skilled labor, while the remaining six chapters focus on aspects of women’s labor force participation and related issues, such as fertility and family formation.

Among the first four chapters, the first, written by Lawrence F. Katz and Robert A. Margo, is likely to have the greatest impact on our understanding of American economic development.  In this chapter, the authors revisit the topic of capital-skill complementarities, which was the theme of Goldin and Katz’s influential 2008 book, The Race between Education and Technology.  Drawing on a vast array of data sources, encompassing IPUMS samples from the population census, establishment-level data from the manuscripts of the census of manufactures, and newly collected archival wage data, they argue that the widely held view of nineteenth-century technological advance as de-skilling is incorrect.  Rather, Katz and Margo argue, the nineteenth-century experience more nearly resembles that of recent decades, when technological change caused a hollowing out of the workforce, reducing the demand for artisanal skills while increasing demand for both white-collar workers and less skilled operatives.

It is hardly a criticism to say that the next three chapters take a narrower focus.  These chapters offer valuable empirical insights and illustrate the creative use of a variety of different data sets, but the insights they yield are more limited, helping to fill in details rather than recast our understanding of events. In chapter 2, Nora Gordon investigates the effects of income inequality on high school graduation rates. This chapter offers considerable insight into the data challenges involved in addressing this question, but these challenges make it hard to draw firm conclusions in the end.  Ilyana Kuziemko and Joseph Ferrie (chapter 3) employ IPUMS data to explore the determinants of immigrant assimilation, in the twentieth-century. They show that while immigrant families with young children in the period 1900-1930 assimilated more quickly than those without young children, the opposite was true in the period 1970-2010.  They conjecture that in the earlier period, children contributed to parental learning about the surrounding culture, but that in the latter period, parents “leaned on” their children to navigate a foreign culture for them. In chapter 4, Dora Costa, Hoyt Bleakly and Adriana Lleras-Muney investigate the relationship between child health and investments in schooling.  Using a variety of micro-data sets they show that the relationship between child health and schooling was weaker in the nineteenth century than it became in the twentieth century, a result they attribute to the shifting value of physical strength and education in the labor market.

Among the chapters focusing on female labor force participation and family issues two chapters stand out for posing important questions and yielding new insights.  The first, written by Shelly Lundberg and Robert A. Pollak (chapter 7) explores the breakdown of the relationship between marriage and childbearing that has characterized the period since 1950.  Relying on charts and a few selected tables to illustrate key trends, Lundberg and Pollak advance a compelling reinterpretation of the economics of marriage that allows for cohabitation and offers an explanation for the divergence of patterns of marriage and childbearing associated with differences in education and income classes.  The second, by Claudia Goldin (chapter 9), develops a new account of male-female occupational segregation premised on the notion that female entry into an occupation may signal a reduction in occupational prestige.  After developing this “pollution” model, Goldin takes it “into the real world,” using a novel data set derived from two 1940 U.S. Department of Labor, Women’s Bureau Studies that link information on employers’ policies and the characteristics of office workers.

The other chapters in this section of the book again make valuable contributions, but their scope and implications are more limited.  Claudia Ollivetti (chapter 5) uses international data to show that the U-shaped pattern of female labor force participation in the United States documented in Goldin’s Understanding the Gender Gap (1990) appears to be a much more general phenomenon.  Leah Platt Boustan and William Collins (chapter 6) offer a number of fresh insights about racial differences in female labor force participation in the twentieth century.  Drawing on data from the IPUMS and the NLS they argue that the persistence of racial differences reflects in part cultural differences that are transmitted by childhood experience, so that daughters of working mothers are more likely to combine work and childrearing themselves.  Martha Bailey, Melanie Guldi and Brad Hershbein (chapter 8) offer new details of the evolution of fertility in the United States, but their effort to motivate these measurements as an answer to the question whether there has been a second demographic transition seems somewhat forced.  Edward Glaeser and Yueran Ma’s effort to account for the emergence of gender stereotypes and their role in creating discriminatory beliefs (chapter 10) is intriguing, but to this reader appeared to be something of an outlier in this volume.  In comparison to the other contributions, the Glaeser-Ma chapter is largely theory driven and does not make much effort to integrate this theory with historical reality.

Overall, the quality of the scholarship in this volume is impressive.  Many of the chapters deploy new data or use more familiar sources in new and novel ways.  The care with which the data are handled is exemplary and the linkage between economic reasoning and historical investigation is strong and mutually reinforcing.  While the novelty and historical insight offered by the different contributions is uneven, a number of chapters merit wide readership and almost all will be important references for future research.

Joshua L. Rosenbloom is Professor of Economics and Department Chair at Iowa State University.  He is also a Research Associate of the National Bureau of Economic Research, Cambridge, MA. His recent publications include “Labor-Market Regimes in U.S. Economic History,” (co-authored with William A. Sundstrom) in Paul W. Rhode, Joshua L. Rosenbloom and David F. Weiman, eds. Economic Evolution and Revolutions in Historical Time (Stanford, CA: Stanford University Press, 2011).

Copyright (c) 2015 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 (administrator@eh.net). Published by EH.Net (October 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Education and Human Resource Development
Historical Demography, including Migration
Labor and Employment History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Institutions, Innovation, and Industrialization: Essays in Economic History and Development

Editor(s):Greif, Avner
Kiesling, Lynne
Nye, John V. C.
Reviewer(s):Margo, Robert A.

Published by EH.Net (May 2015)

Avner Greif, Lynne Kiesling, and John V. C. Nye, editors, Institutions, Innovation, and Industrialization: Essays in Economic History and Development.  Princeton, NJ: Princeton University Press, 2015. v + 430 pp.  $49.50 (cloth), ISBN: 978-0-691-15734-4.

Reviewed for EH.Net by Robert A. Margo, Department of Economics, Boston University.

Although it would be difficult to prove conclusively I believe the level of social capital in the economic history profession is very high, absolutely and relative to other fields in economics.  Because the field is small, new entrants are quickly integrated into the fold.   Senior scholars take their mentoring responsibilities seriously, and not just to their own students.  On the back end, there is a very strong tradition of Festschriften, the formal honoring of distinguished individuals by research conferences and requisite commemorative volumes.   For economic historians who have produced many more successful PhDs in their career than the average number of chapters in an edited volume, the decision of whom to include in the published Festschrift (as opposed to the conference) is a delicate challenge.   As the co-editors note in their introductory remarks, this certainly was the case with the volume under review, honoring as it does Joel Mokyr, one of our most prodigious scholars and certainly one of the most prolific in replenishing the profession with new PhDs over the past several decades.  The co-editors are all well-known Mokyr students.  Avner Grief is the Bowman Family Endowed Professor in Humanities and Sciences at Stanford University; Lynne Kiesling is Associate Professor of Instruction in the Department of Economics at Northwestern University; and John V. C. Nye is the Frederic Bastiat Chair in Political Economy and Professor of Economics at George Mason University.

The book is divided into four sections.  The first without title or number presents the co-editors’ introductory remarks; and two chapters, one by Cormac Ó Gráda (“Neither Feast nor Famine: England before the Industrial Revolution”) and a second by Joel Mokyr (“Progress, Useful Knowledge, and the Origins of the Industrial Revolution”).  The second section (“Institutions”) contains four chapters by Grief (“Coercion and Exchange: How did Markets Evolve?”); Gergely Baics (“Meat Consumption in Nineteenth Century New York:  Quantity, Distribution, and Quality, or Notes on the ‘Antebellum Puzzle’”; Mauricio Drelichman and Hans-Joachim Voth (“Funding Empire: Risk, Diversification, and the Underwriting of Early Modern Sovereign Loans”); and Noel D. Johnson, Mark Koyama, and Nye (“Establishing a New Order: The Growth of the State and the Decline of Witch Trials in France”).   The third, (“Innovation”) has four chapters by Fabbio Braggion, Narly R.D. Dwarkasing, and Lyndon Moore (“Increasing Market Concentration in British Banking, 1885 to 1925”); Peter B. Meyer (“The Catapult of Riches: The Airplane as a Creative Macroinvention”); Karine van der Beck (“England’s Eighteenth Century Demand for High-Quality Worksmanship: Evidence from Apprentice, 1710-1770”); and Rick Szostak (“A Growth Agenda for Economic History”).  The fourth and final section (“Industrial Revolution”) is the longest with five chapters by Hoyt Bleakley, Louis Cain, and Joseph Ferrie (“Amidst Poverty and Prejudice: Black and Irish Civil War Veterans”); Ralf R. Meisenzahl (“How Britain Lost its Competitive Edge: Competence in the Second Industrial Revolution”); Carolyn Tuttle and Simone A. Wegge (“Regulating Child Labor: The European Experience”); Joyce Burnette (“Decomposing the Wage Gap: Within- and Between-Occupation Gender Wage Gaps at a Nineteenth Century Textile Firm”); and Eric Jones (“The Context of English Industrialization.”   Most of the authors are former doctoral students of Mokyr; others are long-time colleagues or professional associates (Cain, Jones, Ferrie).

Due to the eclectic nature of the book and space constraints being what they are, I shall hit the highlights as I see them and make some general observations.  Joel Mokyr’s chapter is a very effective summary of a forthcoming Princeton University Press book on the question near and dear to his heart: Why England? The Baics chapter provides an abundance of fresh quantitative data on the “antebellum puzzle,” showing that meat consumption appears to have declined in New York City in the late 1830s and early 1840s.  Karine van der Beek creatively uses archival records of apprentices subject to the stamp tax to study how the demand for certain types of skilled labor changed during the Industrial Revolution.   The Bleakley, Cain and Ferrie chapter uses unique data from the Early Indicators project collected by Mokyr’s cross-town colleague, the late Robert Fogel, to provide new insights into economic mobility experienced by Civil War veterans, by race and ethnicity.

The blurbs on the back cover of the book tout the “cutting-edge” (Harold James) and “pioneering and provocative” (Stephen Haber) nature of the chapters, but that is not how I see them for the most part.  As practiced today in the United States economic history is mostly indistinguishable in style and technique from other branches of applied economics.   Absent a few passing references to game theory here and there, and some simple algebra in Peter Meyer’s chapter, there is no formal modeling in this book.  When on display (and not often) the econometrics would be right at home in any 1980s issue of Explorations in Economic History.  There is some unevenness in substance and execution across the chapters, not uncommon in Festschrift.  I could have done without the Szostak chapter and its unnecessary eleven-step “program” of recommended behavior for today’s economic historians (“Focus on economic growth.  Focus some more.”)  It reminded me of sterile debates over the “New Economic History” that consumed far too much time (and journal space) back in the 1960s and 1970s and which are irrelevant today, in my personal experience.

What the essays do possess collectively is a studied, patient eye for historical context and clarity of exposition that has always been part and parcel of Joel Mokyr’s work, traits that he has most effectively transmitted to his students.   There is also an abundance of deep respect and affection for the dedicatee that shines through in every chapter.   Social capital runs very high in the Mokyr extended family, as this volume effectively demonstrates.

Robert A. Margo is the current President of the Economic History Association.  His most recent books are Human Capital and History: The American Record (co-edited with Leah Boustan and Carola Frydman) and Enterprising America: Businesses, Banks and Credit Markets in Historical Perspective (co-edited with William Collins), both published by the University of Chicago Press.

Copyright (c) 2015 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 (administrator@eh.net). Published by EH.Net (May 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
History of Technology, including Technological Change
Labor and Employment History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Rockefeller Philanthropy and Modern Social Science

Author(s):Seim, David L.
Reviewer(s):Critchlow, Donald T.

Published by EH.Net (December 2014)

David L. Seim, Rockefeller Philanthropy and Modern Social Science. London: Pickering and Chatto, 2013.  ix + 265 pp. $120 (cloth), ISBN: 978-1-84893-391-0.

Reviewed for EH.Net by Donald T. Critchlow, Department of History, Arizona State University.

In this age of excessive wealth, the Rockefellers, John D. and his son John D. Jr., in the early twentieth century provide an example of how great wealth can be used to better the world.  Through the establishment of the Rockefeller Foundation, huge sums of money were given to philanthropic causes.  The Rockefeller Foundation’s greatest contribution arguable lay in the advancement of medicine, but its efforts in education and the social sciences were notable.

Historian David Seim focuses his short book on the Rockefeller philanthropy in the social sciences from 1900 through 1920.  Seim eschews deep analysis for a straight-forward narrative of Rockefeller involvement in a wide-range of projects to support individual social scientists, advance social science research and education, and institutionalize the social sciences within universities and inter-disciplinary research institutions.  His book reads like a lengthy institutional report on a dizzying array of projects, but the wealth of information contained in his study is rewarding for any scholar interested in the history of the social sciences, university education, race relations, and public policy in the twentieth-century.

The period from the late nineteenth century up to the Great Depression starting in 1929 can be described as the “Golden Age” of the American social sciences. The emergence of the modern social sciences in this period, so ably described by historians such as Thomas Haskell, Barry Karl, Lawrence Cremin, Mary Furner, and others, projected an optimism that empirical social science research could better the world. The accumulation of empirically derived knowledge about human behavior and nature, these early social scientists maintained, was critical to reforming society, ensuring progress, and overcoming what they believed was a lag between scientific and technological advancement and traditional culture and customs. The confidence of early social scientists in their role in advancing society manifested hubris, but in the process American higher education was transformed and the social sciences became institutionalized. John D. Rockefeller, his son, and a brilliant staff played a critical role in this transformation.

Having earned a fortune in oil, John D. Rockefeller, a devout Baptist, believed that his wealth should be put to use in bettering the world.  At first he directed his charity toward mostly missionary organizations, educational institutions, and projects. From the outset he gave significant funds to African-American and Native American causes, including black seminaries and Indian schools. Overwhelmed by requests for support — sometimes reaching hundreds of letters each day — Rockefeller hired Dr. Frederick T. Gates, a Minneapolis minister, to organize his philanthropic activities. After retiring in 1896 from business, John D. Rockefeller joined with his son, John D. Junior, to direct his philanthropy. In 1901, they decided to establish the Rockefeller Institute for Medical Research. This was followed by the establishment of the General Education Board, which directed much of its money toward the South and black education. In 1913, they established the Rockefeller Foundation. With the specific goal of serving “The Well Being of Mankind throughout the World” (Seim, pp. 58-59). The Rockefeller Foundation collaborated with the Carnegie Institution and the Russell Sage Foundation in promoting the social sciences.

The first efforts of the Rockefeller Foundation were small, providing financial support to the Bureau of Social Hygiene, a Division of Industrial Relations, and an Institute of Economics (1922), which later developed into the Brookings Institution.  The Bureau of Social Hygiene provided support for research into the “prostitution problem,” eugenics, and the establishment of Margaret Sanger’s American Birth Control League.

The turning point in Rockefeller’s involvement in the social sciences came with the establishment of the Laura Spelman Rockefeller Memorial Fund in 1918, named after Rockefeller’s late wife. With an original endowment of $13 million, later extended to $74 million, an extensive program developed providing funds to assist the well-being of women and children and providing major resources to an effort to promote the broad advancement of knowledge, methods and application in the social sciences. The first years of the Spelman Memorial Fund focused on women and children, including support for the East Harlem Health Center, the Maternity Center Association of Manhattan, the YMCA and YWCA, the Boy Scouts and Girl Scouts, the Salvation Army, and the American Child Health Association. Headed by Beardsley Ruml, a University of Chicago trained Ph.D., who had studied with James R. Angell, the Memorial Fund turned its attention to the advancement of the social sciences in 1923. Key advisers such as Abraham Flexner, Raymond Fosdick, and Henry Embree played important roles in shaping the Memorial Fund program.

Seim details the multiple activities of the Spelman Memorial Fund through specific grants to educational institutions, individual research projects, the creation of research centers, and areas of research.  Seim ably outlines the full extent of these projects, showing how Ruml and his associates carefully developed and directed a program to fund the social sciences in America.  The major focus of this program was to redress what was seen as a cultural lag in American society, and to develop knowledge useful to maintaining what was described at the time as “social control” in human behavior. By social control, as Seim observes, Rockefeller people meant social advancement. This was a reform agenda that sought to distinguish between narrow business and class interests and empirical research by non-partisan expertise.

As these research programs developed, Ruml and his advisers expressed particular concern that funds be targeted toward institutional advancement within the universities and interdisciplinary organizations. Ruml did not limit funding to only American universities. In 1923, the London School of Economics began a long-term relationship with the Rockefeller Foundation.

In America, Ruml targeted funding major institutions, including the University of Chicago, which was founded largely with John D. Rockefeller money in 1892. Spelman Memorial funds provided vital in developing what became known as the Chicago School in Sociology. Much of the Chicago school of sociology focused on studies of ethnic and race relations. This focus on race relations was evident as well in funding to the University of North Carolina, where major research was conducted on the state and the means of bettering race relations in the South. At Columbia University in New York, Rockefeller funded major research on black southern migration to the North. Major Spelman Memorial grants went to Harvard University, especially to support the pioneering work of G. Elton Mayo.  Other funding — also on race relations — went to Western Reserve University in Cleveland, and Charles S. Johnson at Fisk University. A graduate student of Robert E. Park at University of Chicago, Johnson published in 1930 The Negro in American Civilization.

Spelman Memorial funds were directed to China, the Soviet Union, Sweden, and Western Europe, often toward research in what now would be called economic development. Seim notes that one of the black marks on Spelman Memorial funding during this period was support of eugenics research in the United States, as well as in Australia and Germany, where funds were used to support the Kaiser Wilhelm Institute for Psychiatry and the Kaiser Wilhelm Institute for Anthropology, Eugenics and Human Heredity. At the same time, Ruml supported research in international relations with a particular goal of aiding the League of Nations. Major funding helped launch the Social Science Research Council, under the direction of University of Chicago political scientist Charles Merriam. Less attention was given to the humanities, although the fund directed some funding toward historians, especially in France.

Seim ends his study with the merging of the Spelman Fund into the Rockefeller Foundation in 1929.  In accomplishing his intent to explain “the creation of the ideal of neutral, public-oriented social scientists (p. 239), Seim does not evaluate more fundamental questions raised by the rise of specialized, empirical social science research. The mindset of Ruml and the Rockefeller Foundation assumed that empirical social science research would improve the world. In many ways, it did and continues to do so today. Yet the mindset of early Rockefeller Foundation officers often precluded larger fundamental questions that had been explored by earlier philosophers and political thinkers: The ancient Greeks, Plato and Aristotle, asked basic questions as to the meaning of truth, justice, and a good society?  Adam Smith and David Hume examined what makes for a well-ordered society?  Alexis de Tocqueville, less than a century before the founding of the Rockefeller Foundation, asked about the relationship of equality and liberty in a democratic society, while warning of a “soft-despotism” that comes with a breakdown in civil society and the rise of a bureaucratic state. Already in the 1920s, political thinkers such as Ludwig von Mises and F.A. Hayek were challenging the hubris of economic planners and regulators. Earlier thinkers may have reached wrong conclusions, but debate over these fundamental issues rests generally outside the realm of narrow empirical social science research, as envisioned by the “new” social science in the early twentieth century.

The new social scientists in this golden age rejected the deductive reasoning of the past –the ancient Greeks and Christian theologians. The new social scientists found such debate maddening and ultimately irresolvable.  Yet, without dismissing the importance of the contributions that empirical modern social science can impart to our understanding of the world — often funded then and today by philanthropic foundations — the question that should have confronted the promoters of the new social sciences was simply: Are we too narrow, too exclusive, and too confident as to the ultimate contribution which we can make to what makes for a just, well-ordered, liberal society in our often facile dismissal of previous thinkers?

Donald T. Critchlow is Director of the Arizona State University Center for Political Thought and Leadership. His most books include The Brookings Institution: Expertise and the Public Interest in a Democratic Society; When Hollywood Was Right: How Movie Moguls, Film Stars, and Big Business Remade American Politics; and A Very Short Introduction to American Political History (forthcoming).

Copyright (c) 2014 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 (administrator@eh.net). Published by EH.Net (December 2014). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):History of Economic Thought; Methodology
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

John Allan James: A Scholarly Remembrance

Submitted by: Chris Hanes, Hugh Rockoff, Mark Thomas and David Weiman

John anniversary 2013

John entered the MIT graduate program during the early, lofty days of the “new” economic history, and emerged as one of its most deft, sensible and versatile practitioners.  His PhD dissertation—directed by Peter Temin—exemplifies the promise of this new approach to historical analysis.  It addresses a central issue in American political economic development, the formation of a more integrated (or “perfect”) money market in the late nineteenth-century.  Influenced by the earlier contributions of Lance Davis and Richard Sylla, John set out to document systematically the timing and spatial extent of this financial innovation, and then to explain why it occurred where and when it did.  He adapted current finance theory (CAPM) to the historical context by incorporating possible market imperfections due to spatial factors such as local market power.  He collected mounds of data on national banks across the country to derive average annual loan rates—the key variable to be explained —over the period 1888 to 1911.

John’s results, subsequently published in his early scholarly articles (one of which was awarded the prestigious Arthur H. Cole prize by the Economic History Association) and then masterfully synthesized in his book Money and Capital Markets in Postbellum America, still constitute the received wisdom on this topic.  Part of the staying power of John’s work can be attributed to the wide range of techniques that he mastered and used.  John refined the art of descriptive statistics especially graphical analysis—or “eye balling the data” in his words—but he also built sophisticated models and tested them using the most current econometric methods.  And then true to his calling as both economist and historian, he constructed a compelling narrative showing the interaction between popular (or in the case of regional interest rates, more accurately Populist) politics and banking development.  First, he showed that the convergence of bank rates to levels in the Northeast occurred unevenly across the regions of the U.S.  It was most pronounced in the Midwestern and Pacific Coast states, and least evident in the South.  The latter observation was the subject of a separate article on Southern financial underdevelopment, and resurfaces in his recent co-authored research on the evolution of the American currency-monetary union.  Second, he dated this convergence from the late 1880s, timing which defied the alternative hypotheses based on the formation of a national commercial paper market (which occurred earlier) and passage of relevant federal banking reforms (in 1900).  Finally, his results emphasized the importance of local market power as a factor in explaining the delayed and uneven narrowing of regional interest differentials.  Reinforcing this conclusion, John marshaled statistical and qualitative evidence relating the erosion of bank market power to the liberalization of state banking laws in the 1880s, but only where populist candidates challenged incumbents.  Regional differences in the risks of lending, although present, it turned out were of secondary importance in explaining regional differences in interest rates.

John’s subsequent research shows his continued fascination with the manifold, profound transformations in the American economy from the Civil War era through the Roaring Twenties.  He contributed significantly to the debates over the first and second industrial revolutions in a series of articles on the causes and consequences of technological innovation over the nineteenth century.  He first investigated whether labor scarcity induced American manufacturers to adopt more capital-intensive, labor-saving (that is mechanical) innovations.  His most widely cited paper on this issue, co-authored with then University of Virginia colleague Jonathan Skinner, provided the definitive resolution of the “labor scarcity” paradox, showing that new mechanical technologies substituted for relatively scarce skilled labor but were strategic complements to unskilled labor and natural resources.  In turn, the James-Skinner view corroborates empirically an alternative frontier thesis, which emphasizes America’s relative abundance of natural resources and not the lure of abundant farm land on labor supplies.  Applying a similar production function analysis to the late nineteenth century period, John also furnishes one of the few statistical tests of Alfred Chandler’s influential thesis relating shifts in the pattern of technological innovation to the rise of big business.

The James-Skinner article is also noteworthy for its application of general equilibrium simulation modeling in economic history.  John had first deployed this methodology in his analysis of U.S. tariff policy before the Civil War.  Armed with a new sophisticated—and disconcertingly intractable—technique for deriving general equilibrium outcomes, John corroborates the conventional view on the distributional impacts of antebellum tariffs: all other things equal, they burdened Southern cotton exporters but benefitted Northern manufacturers and their workers.  At the same time he challenges the mainstream by suggesting that average tariff rates across the period may have been economically “optimal.”

John also made many important contributions to the general macroeconomic history of prewar United States. Working solely and with several co-authors including Christopher Hanes, Jon Skinner, and Mark Thomas, John’s program embraced pay and wealth inequality during the first industrial revolution; public and private savings behavior and economic growth; unemployment-inflation dynamics and the shifting Phillips curve relationship; and changes in the sources and extent of unemployment and cyclical fluctuations.  John’s work in these areas appealed to macroeconomists and made use of the latest econometric methods.  His 1993 article in the American Economic Review pioneered the use of structural vector autoregression analysis in economic history.  A decade later he published another paper in the AER, which used nineteenth century wage data to look for evidence of downward nominal wage rigidity, a phenomenon that had only recently become a focus of research in monetary policy (and has become even more relevant in the post-2008 slump).  Though much of John’s work in these areas appeared in general-interest economics journals, it displayed all the virtues of the best economic history.  John was careful to account for peculiarities of historical data and institutions, and to point out the implications of his findings for the larger sweep of American social history.

John’s foray into the history of U.S. savings tackled thorny questions at the macro and micro levels.  Complementing his earlier work on the impact of Civil War debt repayment (or public savings) on late nineteenth century growth, John, in tandem with Skinner, analyzed the dramatic rise in the personal savings rate during the first industrial revolution (published in a volume that placed him among the elite in the profession).  True to form, they identified a novel mechanism operating through changes in the occupational rather than the age distribution of the population.  And ironically (at least for John), their results downplayed the importance of financial market innovations, such as the spread of deposit banking so important in his earlier work.  But typical of John’s commitment to following the lead of the data, he could not and did not resist the apparent paradox.

A number of years later John investigated the microeconomics of saving behavior with former Virginia graduate student Michael Palumbo and colleague Mark Thomas.  Grounded in the historical equivalent of ‘big data’—almost 28,000 observations of late 19th century working-class households from Federal and State Bureau of Labor Statistics surveys—they modeled the distribution of savings by age group, derived estimates of the persistence of family income and savings rates over time, and then simulated wealth accumulation by 10,000 model households.  Their striking conclusions challenged critics of old-age insurance and working-class profligacy: workers did not save at higher rates in the era before Social Security than in the 1980s.  They also showed that few late nineteenth century working class households saved enough before age 65 to meet their living expenses in old age (an expected 10 more years of life), and conjectured that they likely depended on their children, in particular co-habitation with an older son or daughter in the very houses where they had raised their families.  Further research revealed that workers smoothed their consumption over a medium-period time horizon, indicating the influence of precautionary savings motives in response to a world of considerable riskiness from unemployment, illness, incapacity, and premature death of the household head.  Attesting to his growing interest in Japan, John (in work with Isoa Suto) extended this approach to Japanese savings behavior in the era before the social safety net.[2]

John’s other major contributions to the micro-economic foundations of macro-economic outcomes focused on wage and unemployment dynamics in late 19th century labor markets.  In characteristic fashion, he collected all available data on these topics and then framed questions of historical and current import.  Besides challenging earlier research showing signs of nominal wage rigidity, John also investigated and did not find evidence of increasing wage inequality over the period.  On the unemployment front, he estimated flows into and out of jobs based on the 1885 Massachusetts census, and found evidence of significant positive duration dependence, for employment and non-employment spells.  With a vaster dataset (containing over 100,000 observations), John estimated the natural rate of unemployment in 1909 to be just under 6 percent, strikingly similar to estimates today.  To explain this relatively high rate, his simulation analysis, which divided the labor market into stable-primary and floater-secondary workers, pointed to an eclectic mix of factors: seasonal disturbances for many stable workers, lay-offs for workers in cyclically sensitive sectors, and brief, relatively frequent spells for the floaters.  The paper, co-authored with Mark Thomas, won John his second Arthur H. Cole Prize from the Economic History Association.  Their joint work also challenged the findings of Christina Romer by showing that unemployment was more cyclically volatile during America’s first Gilded Age than it was during its Golden Age (in the post-WWII period).  His broader conclusion from these various strands of research is both simple and striking—labor markets and the macro-economy worked differently in the past and historians need to focus on the role of changing institutions and changing policies to try to explain how and why history matters.

Just prior to his sudden and untimely death, John returned to a topic briefly addressed in his dissertation and subsequent book on banking-financial markets in postbellum America.  At a St. Louis Fed conference, he presented data showing the increased efficiency of a largely private, decentralized banking system in greasing the wheels of commerce by moving money from one location to another, even across the country, at relatively low cost.  Teaming up with David Weiman, they explained this trend by the formation of a tiered network of correspondent banks centered on New York.

James and Weiman elaborated this initial paper into a book-length project to explain the evolution of this neglected economic infrastructure from the demise of the Second Bank of the United States to the formation of the Fed.  Informed by current policy debates, they conceived these transformations in terms of the “benefits and costs” of alternative institutional forms—private versus public and hierarchical networks versus bureaucracies.  En route, they decided to write on the Civil War era banking legislation, which institutionalized the emerging private correspondent banking network.  Their initial foray uncovered a striking connection between the adoption of a common currency and a longer-term trend toward a “more perfect” bank money (or payments) union.

Armed with this serendipitous result, James and Weiman have broadened the scope of their project to show the complex interplay between the “punctuated” evolution of the interbank payment network and the American monetary union.  Conceived along these lines, their book (in progress with a manuscript expected by the end of 2015) will complete what for John was a lifetime’s exploration of the development of the banking system in postbellum America.  Banks, we know, are peculiar financial institutions, both credit and payments intermediary.  John’s first book Money and Capital Markets analyzed their former dimension, and his forthcoming book will attend to the latter.

John’s scholarly contributions cannot be measured solely by his outstanding research record.  He was an academic mensch, to use a most fitting Yiddish expression.  John never refused the thankless tasks of a productive scholar—the endless referee reports, book reviews and discussant comments—but even when critical, he always struck a constructive tone sweetened with a good dose of his dry wit.  (In the case of the discussants’ role, we should also note that ever the cosmopolitan John would rarely pass up the opportunity to venture far and wide to see new sites and especially opera productions.)  But John’s spirit truly shone through in his interactions with younger scholars from all walks of intellectual life.  He was an intellectual gourmand ever curious to broaden his own substantive and theoretical-methodological horizons, but also a genuinely gifted mentor who guided others down their own paths, not his own.  And he was always ready to share his data, and willing to explain how to use them.  This aspect of John’s career can be best measured by the outpouring of affection from his “juniors,” who now can proudly call him a colleague, collaborator, and friend.  And they all describe him in virtually identical terms: brilliant, probing, curious, supportive, generous, decent, kind, humane, compassionate and passionate.  We are sure that this list is not complete but can attest to one fact.  John will be sorely missed by all of those whose lives he touched so profoundly.

Selected Highlights from John’s Career

Capitalism in Context: Essays on Economic Development and Cultural Change in Honor of R. M. Hartwell, ed. (with Mark Thomas). Chicago: University of Chicago Press, 1994.

Money and Capital Markets in Postbellum America. Princeton: Princeton University Press, 1978.

“Political Economic Limits to the Fed’s Goal of a Common National Bank Money: The Par Clearing Controversy Revisited” (with David F. Weiman). Research in Economic History.

“Main Street and Wall Street: The Macroeconomic Consequences of New York Bank Suspensions, 1866 to 1914” (with David F. Weiman and James A. McAndrews), Cliometrica,7 (2013), 99-130.

“The National Banking Act and the Transformation of New York Banking after the Civil War” (with David F. Weiman), Journal of Economic History, 71(June, 2011), pp. 340-364

“Early Twentieth-Century Japanese Worker Saving: Precautionary Behavior before a Social Safety Net” (with Isao Suto), Cliometrica, forthcoming.

“From Drafts to Checks: The Evolution of Correspondent Banking Networks and the  Formation of the Modern U.S. Payments System, 1850-1914” (with David F. Weiman), Journal of Money, Credit, and Banking, 42 (April, 2010), pp. 237-265.

“Consumption Smoothing among Working-Class American Families before Social

Insurance” (with Michael Palumbo and Mark Thomas), Oxford Economic Papers, 59 (October, 2007), pp. 606-640.

“The Political Economy of the U.S. Monetary Union: The Civil War Era as a Watershed” (with David F. Weiman), American Economic Review Papers and Proceedings, 97 (May, 2007), pp. 271-275 .

“Romer Revisited: Long-term Changes in the Cyclical Sensitivity of Unemployment” (with Mark Thomas), Cliometrica, 1 (April, 2007), pp. 19-44.

“Have American Workers Always Been Low Savers?” Patterns of Accumulation among Working-Class Households, 1885-1910,” (with Mark Thomas and Michael Palumbo), Research in Economic History, Volume 23, Amsterdam: Elsevier, 2005. Pp. 127-175.

“Financial Clearing Systems” (with David F. Weiman). In Richard Nelson, ed.,

Complexity and Limits of Market Organization, New York: Russell Sage, 2005. Pp. 114-155.

“A Golden Age? Unemployment and the American Labor Market, 1880-1910” (with Mark Thomas), Journal of Economic History, LXIII (December, 2003), pp. 959-994.

“Wage Adjustment under Low Inflation: Evidence from U.S. History” (with Christopher L. Hanes), American Economic Review, 93 (September, 2003), pp. 1414-1424.

“Industrialization and Wage Inequality in Nineteenth-Century Urban America” (with Mark Thomas), Journal of Income Distribution, 9 (2000), pp. 39-64.

“Savings and Early Economic Growth in the United States and Japan,” Japan and the World Economy, 11 (1999), pp. 161-83.

“The Early History of Nominal Wage Rigidity in American Industrial Labor Markets,” Rivista di Storia Economica, XIV (December, 1998), pp. 243-73.

“The Rise and Fall of the Commercial Paper Market, 1900-1930.” In: M. Bordo and R. Sylla, eds., Anglo-American Finance: Financial Markets and Institutions in 20th Century North America and the UK, Homewood, IL: Dow Jones-Irwin, 1996. Pp. 219-59.

“Reconstructing the Pattern of American Unemployment Before World War I,” Economica, 62 (August, 1995), pp. 291-311.

“Job Tenure in the Gilded Age.” In: George Grantham and Mary MacKinnon eds., Labour Market Evolution, London: Routledge Kegan Paul, 1994. Pp. 185-204.

“Economic Instability in Nineteenth-Century America,” American Economic Review, 83 (September, 1993), pp. 710-31.

“The Stability of the Nineteenth-Century Phillips Curve Relationship,” Explorations in Economic History, XXVI (April, 1989), pp. 117-34.

“Sources of Savings in the Nineteenth-Century United States” (with Jonathan Skinner). In: Peter Kilby, ed., Quantity and Quiddity: Essays in U.S. Economic History in Honor of Stanley Lebergott, Middletown, CT: Wesleyan University Press, 1987. Pp. 255-85.

“The Resolution of the Labor Scarcity Paradox,” (with Jonathan Skinner), Journal of Economic History, XLV (September, 1985), pp. 513-40.

“The Use of General Equilibrium Analysis in Economic History,” Explorations in Economic History, XXI (July, 1984), pp. 231-53.

“Public Debt Management Policy and Nineteenth-Century American Economic Growth,” Explorations in Economic History, XXI (April, 1984), pp. 192-217.

“Structural Change in American Manufacturing, 1850-1890,” Journal of Economic History, XLII (June, 1983), pp. 433-60.

“The Optimal Tariff in the Antebellum United States,” American Economic Review, LXXI (September, 1981), pp. 726-34.

“Some Evidence on Relative Labor Scarcity in Nineteenth-Century American Manufacturing,” Explorations in Economic History, XVIII (September, 1981), pp. 376-88.

“Financial Underdevelopment in the Postbellum South,” Journal of Interdisciplinary History, XI (Winter, 1980), pp. 443-54.

“Cost Functions of Postbellum National Banks,” Explorations in Economic History, XV (April, 1978), pp. 184-95.

“The Welfare Effects of the Antebellum Tariff: A General Equilibrium Analysis,” Explorations in Economic History, XV (July, 1978), pp. 231-56.

“Banking Market Structure, Risk, and the Pattern of Local Interest Rates in the United States, 1893-1911,” Review of Economics and Statistics, LVIII (November, 1976), pp. 453-62.

“The Conundrum of the Low Issue of National Bank Notes,” Journal of Political Economy, LXXXIV (April, 1976), pp. 359-67.

“The Development of the National Money Market,” Journal of Economic History, XXXVI  (December, 1976), pp. 878-97.

“Portfolio Selection with an Imperfectly Competitive Asset Market,” Journal of Financial and Quantitative Analysis, XI (December, 1976), pp. 831-46.

[1] Composed by Christopher L. Hanes (SUNY-Binghamton), Hugh Rockoff (Rutgers University), Mark Thomas (University of Virginia), and David F. Weiman (Barnard College, Columbia University)

[2] John had earlier explored the different historical savings patterns in Japan and the U.S. and their implications for economic growth.