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Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street

Author(s):Sedlacek, Tomas
Reviewer(s):Nelson, Robert H.

Published by EH.NET (July 2011)

Tomas Sedlacek, Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street.? New York: Oxford University Press, 2011. xii + 335 pp. $28 (cloth), ISBN: 978-0-19-976720-5.

Reviewed for EH.Net by Robert H. Nelson, School of Public Policy, University of Maryland.

Economics of Good and Evil was originally published in Czech in 2009.? To the admitted surprise of its economist author, Tomas Sedlacek, it sold more than 50,000 copies and was turned into a popular play with sold-out audiences at the Czech National Theatre in Prague.? Sedlacek served as an economic advisor to the first Czech President, Vaclav Havel (who contributes a Foreword), writes a popular Czech newspaper column, and is a member of the Czech National Economic Council.? He adapted the original Czech version to English so this new Oxford University Press edition is not merely a translation.

The best-selling status of Economics of Good and Evil is perhaps best understood as reflecting an ongoing Czech search for a new national religion to replace socialism and communism.? Any new faith likely to command wide assent in Czech society today will probably have to be, as was Marxist communism, itself a secular religion, perhaps again also grounded in economics.? As Havel writes in the Foreword, a main purpose of the book is to ask:? at a fundamental level ?what is economics?? What is its [deepest] meaning? Where does this new religion [of economics], as it is sometimes called, come from? and where ideally might it be heading?

As an economist, Sedlacek is a throwback to the tradition of Adam Smith, John Stuart Mill and Karl Marx.? There is no mathematics.? His scope of concern extends to the full state of the world and his method is to analyze the historic interactions of religion, economics and culture as they have come to shape modern economic thought.? He traces the beginnings of current economics as far back as the ancient Sumerians, then moves on to the Israelites of the Old Testament, the ancient Greeks, the Christian world, and finally comes to the modern age.??

Economic concerns have always been a central part of western civilization, and have been prominently addressed by leading thinkers of each era.? Modern economics, Sedlacek finds, is less distinguished by its new economic ideas than by its new outward manner of presenting economic insights that actually are in many cases of even ancient origin.? Economists today, however, are themselves often unaware of the original roots in the history of western thought of their own ways of thinking.

Sedlacek explains that even the teachings of modern ?scientific? economics have a significant underlying religious and cultural message.? He draws in this regard on the writings of Deirdre McCloskey who has contended for thirty years now that the formal economics of today is actually often metaphysics in disguise.? The scientific claims of mainstream economics are best understood as an imperial claim for religious authority, a new way of reasserting longstanding economic values, myths, and ethical creeds of the West in a deceptively ?modernist? and therefore supposedly newly authoritative cloak.

Sedlacek begins the exploration of such topics in Chapter 1 with an analysis of the ancient Sumerian Epic of Gilgamesh — believed to be the first mythical story ever put into written form.? In the Epic, he writes, ?the harlot was able to recast wild evil into something useful,? thus offering 4,000 years ago a ?first seed of the principle of the market?s invisible hand,? an economic principle that had in fact ?its predecessors as early as Gilgamesh.?? The organized city is seen in the Epic favorably as a place where individuals can master specific skills and thus collectively maximize their total outputs — or, as Sedlacek writes, as early as Gilgamesh — the first important writing in human history — we see a portrayal of ?the phenomenon of the creation of the city, [where] we have seen how specialization and the accumulation of wealth was born, how holy nature was transformed into a secular supplier of resources? for human benefit.? ???

Sedlacek turns in Chapter 2 to the economic messages of the Old Testament.? Two thousand years before the Protestant Ethic, ?for Hebrews, when a person does well in the (economic) world, it is frequently understood as an expression of God?s favor.?? The rule of law is sustained because for the Jews ?the Lord unequivocally preferred the judge as the highest form of rule.?? Long before modern science, ?Hebrew culture laid the foundations for the rational examination of the world. … [which] has its roots, surprisingly, in [Old Testament] religion.?? ???

Unlike the Greeks and most other ancient peoples, Sedlacek comments, ?the Jewish understanding of time is linear — it has a beginning and an end.? The Jews believed in historical progress, and that progress is in this world.?? These ideas, as Sedlacek says? set the original stage for the much later worship of economic progress as the modern path of the salvation of the world.? Indeed, the Old Testament offers a brand new ?perception of economic anthropology and ethos? that has survived to this day (if now in outwardly much altered forms) and played an important ?role in the development of modern capitalist economics.??

In Chapter 3, Sedlacek describes the writings of the Greek poet Hesiod who ?examined such things as the problem of scarcity of resources, and, stemming from that, the need for their effective allocation? — and therefore may appropriately ?be considered to be the first economist ever.? The Greek philosopher Epicurus develops a view of human behavior grounded in ?hedonism … that would later receive a more exact economization at the hands of J. Bentham and J. S. Mill.?? Sedlacek quotes Karl Popper approvingly to the effect that Karl Marx is a modern heir to Plato — they both ?offered a vision of apocalyptic revolution which will radically transfigure the whole social world? and thereby bring a new heaven on earth.

The ancient Greek philosopher Xenophon, a contemporary of Plato, Sedlacek ranks as ?a brilliant economist, who among other things dealt with the issue of utility and the maximization of yield.?? He also ?deals in detail with specialization, offers a lot of advice on both the micro and macro level, examines the favorable effect of incentives for foreign investors, and so on.?? Although few current economists have ever studied — or maybe even heard of — Xenophon, Sedlacek writes that ?to a certain extent, it could be said that his economic scope is wider and in many ways deeper than Adam Smith?s considerations.??

Sedlacek moves in Chapter 4 to the economic messages of the New Testament and the Christian world.? He notes that ?of Jesus?s thirty parables in the New Testament, nineteen (!) are set in an economic or social context.?? More broadly, ?Christianity builds a large amount of its teaching on economic terminology? and in the process renders a surprisingly wide range of ethical economic judgments.

In the theology of Augustine, in contrast to the Old Testament, ?the world appears evil, unfair, transitory, unimportant? — yielding a newly ascetic outlook that significantly influenced European civilization during the Middle Ages.? Yet, all through the history of Christianity there is a favorable view of work, that ?labor should provide man with pleasure and fulfillment,? that ?labor is even a responsibility for man: ?If a man will not work, he shall not eat,?? as the New Testament says in Second Thessalonians.

Eight hundred years later, drawing heavily on recently recovered writings of Aristotle, Thomas Aquinas reversed attention from Augustine?s inwardness toward examining the external world as a new focus of Christian theology.? Aquinas saw private property as necessary, and the just price for him was in essence the competitive market price.? In Aquinas? writings, as Sedlacek explains, ?reason could not have received higher recognition.? If practical discoveries can be truly proven [by rational methods], the traditional explanation[s] of the Bible must defer, because that interpretation was erroneous.?? For Aquinas, ?revolting against reason was … like revolting against God.?? With rational analysis thereby given such a powerful new religious authority, Aquinas and other scholastics played a key role in setting the stage for the scientific revolution a few centuries later and ultimately the shaping of modern economics.?

Sedlacek writes that ?Christianity is the leading religion of our Euro-American civilization.? Most of our social and economic ideals come from Christianity or are derived from it.?? Most economists today admittedly do not know much about this and would be surprised to learn, as Sedlacek argues, that much of contemporary economics still amounts to a secularized — and thus disguised — Christianity.

In the next three historical chapters of Economics of Good and Evil, Sedlacek delves into the more recent foundations of modern economics.? As he writes, ?Rene Descartes had a truly breakthrough influence on economic anthropology.?? In the seventeenth century, Cartesian philosophy opened the way to the vision of ?economic man [who] is a mechanical construct that works on infallible mathematical principles, … and economists are [therefore] capable of explaining even his innermost motives? through mathematical methods.? For the first time with Descartes, ?a mathematical equation becomes the [religious] ideal of truth.?

Sedlacek?s analysis of Adam Smith emphasizes his role as a natural philosopher who recognized that ?psychology, philosophy, and ethics are in reality at the core of economics.???? Smith has been recast by many later economists as a value-neutral defender of the free market who saw human motivation exclusively in terms of the expression of self-interest.? In reality, as Sedlacek notes, the ?invisible hand? is only mentioned once in Wealth of Nations, almost in passing.? Instead, Smith has a much more nuanced view of human behavior and the workings of the economic system — ?for us economists, I believe Smith?s legacy is that moral questions must be included in economics.?? The final edition of The Theory of Moral Sentiments was published after Wealth of Nations and thus might be considered Smith?s final word on economics and morality.? For Smith, Sedlacek writes, the appropriate ethical principles are ?the key question of economics.?

After the historical analysis, the concluding chapters of Economics of Good and Evil present what Sedlacek labels as his final ?blasphemous thoughts.?? He finds that the modern devotion to ?neverending growth? is a contemporary manifestation of the old idea of religious progress but now ?in different clothing — first in religious (heaven) and later in secular forms (heaven on earth).?? Revealing the true path of maximal economic progress has become the underlying ?raison d?etre for economics, science and politics and is something our civilization grew up with and simply counts? as an unexamined article of faith — as spread by the ?modern priests? of the economics profession.? Sedlacek believes, however, that economic progress, while overall a great benefit in the modern age, may have reached its useful limits, and any suitable economic religion of the future should better teach us to be more ?satisfied with what it [mankind] has, the progress it has already made.??

Admittedly, this would require a whole new methodological foundation for the field of economics.? If economic progress is not a basic goal, the pursuit of ?efficiency? would no longer have its current transcendent purpose — ?efficient? and ?inefficient? having become the secular economic substitutes for good and evil.? There might then need to be a return to earlier religious views in which satisfying ?work,? not consumption, becomes the greatest object of human value.

In recasting economics, Sedlacek argues, a necessary first step will be to deemphasize the role of mathematics.? The use of mathematical methods in economics, Sedlacek concludes, ?is useful but not sufficient. It is only the tip of the iceberg.? Below the mathematics lie much more fundamental issues? of institutions, culture, and basic belief — even of religion.? These issues do not readily lend themselves to mathematical methods.

Rather than exhibiting an introspective curiosity about the foundations of economics, Sedlacek thinks that too many current members of the economics profession are happily content to remain in the dark as to the true historical origins and the underlying ethical norms of their own field.? This is an almost willful blindness that is perhaps best understood as itself a religious statement, part of the general religious scientism that afflicts contemporary economics.? Full knowledge of the many historic antecedents of modern economics would be almost an embarrassment for current economic faith.

In Economics of Good and Evil, Sedlacek draws on a wide range of literature, economic and non-economic alike (there are probably more references to Wittgenstein than to any one twentieth century economist).? The book is well documented including exhaustive footnoting that often includes long direct quotes from original sources (many pages have as much content in the footnotes as in the main text).?

It is not possible in a short review such as this to do more than give the flavor of Economics of Good and Evil.? It is also not possible to say that Sedlacek is either ?correct? or ?incorrect.?? In a work of such broad historical scope, one seeking to rewrite the history of economic thought, a more authoritative judgment must await the test of time.?

A more appropriate test for a review such as this, I would suggest, is whether the book is ?interesting,? ?well informed and documented,? ?well argued,? ?accurate,? and — in the end perhaps the most significant matter of all — ?persuasive.?? These judgments are not reached by a scientific method.? For this reader at least, while there are certainly areas where I would disagree in some of the details, Economics of Good and Evil is a fascinating and provocative read.?

Works of such scope and ambition rarely come along in economics. (Indeed, some current economists may not regard the book as legitimately falling within the scope of ?economics.?? They might say it really belongs to the ?history of ideas,? if with a strong economic emphasis.)? For those economists interested in probing the deepest foundations of their own professional discipline, however, this book is highly recommended.

Robert H. Nelson is a professor of environmental policy at the School of Public Policy of the University of Maryland.? He is the author most recently of The New Holy Wars: Economic Religion versus Environmental Religion in Contemporary America (Penn State Press, 2010).? He also addresses the religious side of economics in Economics as Religion: From Samuelson to Chicago and Beyond (Penn State Press, 2001) and Reaching for Heaven on Earth: The Theological Meaning of Economics (Rowman & Littlefield, 1991).?? His email address is
Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (July 2011). All EH.Net reviews are archived at

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

Reconceptualizing the Industrial Revolution

Author(s):Horn, Jeff
Rosenband, Leonard N.
Smith, Merritt Roe
Reviewer(s):Jones, Eric

Published by EH.NET (July 2011)

Jeff Horn, Leonard N. Rosenband and Merritt Roe Smith, editors, Reconceptualizing the Industrial Revolution.? Cambridge, MA: MIT Press, 2010.? ix + 366 pp. $24 (paperback), ISBN: 978-0-262-51562-7.

Reviewed for EH.Net by Eric Jones, La Trobe University (emeritus).

This book reminds me of old introductory Great Powers courses that, week by week, discussed the early stages of industrialization in one large economy after another.? Here the scope is expanded for modern times by covering not only the former suspects, Britain, France, Germany, the United States, Russia, and Japan, but Scandinavia, Spain, Brazil, India and China in addition.? Several of the chapters offer notably coherent interpretations of the process of industrialization in addition to supplying descriptive material; most are informative.? The chief unexpected inclusion is Brazil, which de Gaulle ill-advisedly said was the country of the future ?and always will be.?? The most unexpected exclusions are surely Italy and Australia.? It is not clear what the decision rule was.? The whole is edited by Jeff Horn (Manhattan College), Leonard Rosenband (Utah State University) and Merritt Roe Smith (MIT), who each contribute a chapter besides jointly providing an introduction.

Reviewers who criticize the titles of books take them too literally and seldom have much else to say, as well as failing to understand that publishers often foist nicely searchable titles on reluctant authors.? Nevertheless I feel obliged to point out that the element of reconceptualization here is limited and far from systematic.? Insofar as a non-traditional vision of the industrial revolution does emerge, it heightens the roles of Chandler?s visible hand and continental European dirigisme.? Although these are already familiar parts of the story in several countries they are dwelt on here more than they used to be, as is the related role of armaments production and even geopolitics.? Two themes brought to the fore by Joel Mokyr (Northwestern), ?useful knowledge? and the Enlightenment, are also given good runs by several other contributors.?

Nevertheless the suggestions as to what was the key explanation of industrialization, or in certain cases delayed industrialization, diverge widely.? They include: for Brazil (which proves an interesting example) a lack of capital market institutions; for China, spending too much on defending the land empire; for India, the absence of autonomous economic policy; for Japan, more positively, cultural engineering by the state.? Perhaps these apparent inconsistencies mirror historical reality but the profession still seems to make heavy weather when constructing hierarchies of explanation, as opposed to listing sequences of factors.? An interesting exercise might be to tabulate the crucial factors proposed in the different chapters, and to investigate explicitly the status of each in all the other countries where it is scarcely mentioned.

One unfortunate feature that surfaces too often is a determined and occasionally intemperate assault on the British or sometimes entire (Western) European template for growth.? This is a straw man if ever there was one.? Trying to demote Britain?s primacy is a tired game, the statist nature of development elsewhere is perfectly well known, and the contribution to British industry of French science and a smattering of artisans from other countries has long been acknowledged.? It is high time to exclude the politics of resentment from economic history.

The situation is not helped by the casualness, endemic in the profession, about British geography.? We should be clearer where we are talking about.? The prime confusion arises from using Britain or British loosely, not acknowledging that these are not the same labels as England or English.? The chapter on China uses British, England and the British in three successive sentences, though strictly speaking they are not interchangeable.? It probably does not matter much in this instance but for a subject generally, indeed typically, concerned with quantities to take the risk of summing incommensurable columns is rather odd.? Thus Berg (Warwick University) stretches ?Britishness? to cover commerce and commodities produced in the entire British Isles whereas all six of her eighteenth century ?international brands? derived from purely English towns or counties.

Confronted with fifteen chapters by diverse hands I can only play favorites.? Mokyr?s chapter on the English Enlightenment and the origins of modern economic growth spreads its influence elsewhere in the book, as already noted.? His is a tightly argued piece that shows the merits of long professional experience, since it surveys all the familiar aspects but adds to them from his own emerging thought and the tenor of recent literature.? Inkster (Wenzao Ursuline College, Taiwan), who takes up some of Mokyr?s themes, similarly benefits from his long career in Japanese studies.? Bruland (Oslo and Geneva) provides detailed tables of Scandinavia?s imports of technology and the countries they came from, as early as the seventeenth century.? Her chapter is therefore more systematic than most and makes a genuinely novel contribution.? Perdue (Yale) develops a strong argument to the effect that the Qing in China suffered from Imperial overstretch through trying to defend a swollen land empire.? This is not to denigrate the remainder of the contributions but merely to pick out some especially interesting items in a collection which, while not precisely reconceptualizing the industrial revolution, does helpfully bring our understanding of it up to date.

Eric Jones, Emeritus Professor, La Trobe University, and former Professor, Melbourne Business School, is the author of Cultures Merging: A Historical and Economic Critique of Culture (Princeton University Press, 2006), and Locating the Industrial Revolution: Inducement and Response (World Scientific, 2010).

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Subject(s):Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
Industry: Manufacturing and Construction
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
19th Century
20th Century: Pre WWII

The Illusion of Free Markets: Punishment and the Myth of Natural Order

Author(s):Harcourt, Bernard E.
Reviewer(s):D'Amico, Daniel J.

Published by EH.NET (April 2011)

Bernard E. Harcourt, The Illusion of Free Markets: Punishment and the Myth of Natural Order. Cambridge, MA: Harvard University Press, 2011. 328 pp. $30 (hardcover), ISBN: 978-0-674-05726-5.

Reviewed for EH.Net by Daniel J. D’Amico, Department of Economics, Loyola University (New Orleans).

The Illusion of Free Markets is a fascinating attempt to understand public policy. There are both effective and ineffective responses to social problems. Human welfare requires interpreting complex social phenomena and affecting social change. To be fooled by an illusion is to be guided by a bad map.

Neoclassical models of political economy distinguish between markets and governments. Markets are presumed efficient when producing and allocating resources, but in some institutional environments, where property rights are poorly defined and information asymmetric, said to fail. Governments are presumed necessary and sufficient to solve market failures. Society suffers when either problem is misdiagnosed and/or either solution incorrectly prescribed. Bernard Harcourt thinks markets have been overrated. Histories of penology and economic thought help correct this.

The market versus government dichotomy dates to the classical school, when economists thought in terms of natural law. Markets were called natural because the price system is self-adjusting and socially coordinative. Neither shortages nor surpluses persist because prices change on the margin. Self-interest guides social welfare “as if by an invisible hand.” While economists favor markets because they produce and distribute tangible wealth, Harcourt is concerned that they under account social costs. In particular, natural law has supposedly borne complex consequences upon American criminal justice.

Markets were heavily regulated during the time of the classical school. Detailed codes of conduct governed all manner of commercial trade. Harcourt observes that Adam Smith and other classicals used the term ?policing? to refer to both commercial and criminal regulations. Harcourt prefers Foucault’s focus upon discipline over economists’ hard dichotomy. Historically, both markets and governments regulated behavior. Both were backed by physical punishments. The market was as disciplinarian as the state.

Harcourt is concerned, and rightly so, with features of American criminal justice. It appears racially biased, excessively severe and uniquely modern. He argues that these are the theoretical consequences of applied natural law. His historical narrative suggests that as the commercial realm was deregulated, disciplinary resources were directed into the penal sphere. Markets were presumed to be self-regulating, which drove a conceptual schism between lawful market behaviors and unnatural criminal actions. Theorists underrecognize the costs of social change invoked by deregulation because they presume the market natural. Today’s penal excesses are the presumed result of a growing network of anonymous contracts. Harcourt’s message: the notion that markets are free from coercion is an illusion, both yesterday and today. Privatization and deregulation are insufficient policy solutions to mass incarceration.

Harcourt’s comments are a welcome update to neoclassical orthodoxy, which has failed to give an explanation or policy reaction to mass incarceration. If one looks — as Foucault would suggest –? at different enforcement techniques (physical punishment versus torts and fines) used within the different legal spheres (criminal versus civil); or if one looks at the historical specialization of those techniques across those legal spheres, one notices the world is a very different place than it used to be.

Today the market versus government distinction parallels the civil and criminal law. Contract enforcements are maintained by the civil law. Criminal laws are enforced by incarceration. These separate legal spheres were not always distinct, nor were their enforcement resources specialized. Originally there was no criminal law. Physical punishments, such as arrest and jailing, facilitated market exchanges and resolved civil disputes; afterwards a separate criminal law developed. Then physical punishments became more reserved to enforce against crime.

Harcourt argues the doctrine of natural law ushered this process, and led to problematic criminal justice outcomes. Alternatively, Foucault’s historical perspective compliments an Austrian and Public Choice framework of political economy. Neither markets nor governments should be presumed to resolve each other’s failures. The efficient-market hypothesis and traditional public goods theory both risk misguidance by illusion. Enforcement technology is an important focus in so far as it affects the production and distribution of knowledge and incentives.

Austrian political economy emphasizes the distribution of economic knowledge throughout society. Governments differ from markets in how they produce and distribute economic knowledge — who, what, how, when and where to make and distribute goods. Public Choice political economy emphasizes the incentives that affect rational choice. Bureaucracies produce systematically different incentives than do for-profit markets.

An Austro-Public Choice political economy insists upon the behavioral assumptions applied to governments and markets being symmetrical. Neither market nor government decision-makers are perfectly informed nor perfectly incentivized to accomplish goals. The subsidy and administration of criminal punishments yesterday and today appear not to be an exception.

Harcourt interprets history as a slight against the characterization of commerce as non-coercive. Foucault says markets are disciplinary. Though not emphasized by Harcourt, the inverse also seems true. The history of physical punishments within the market sphere weakens the characterization of governments as particularly necessary for optimal criminal punishment. Presuming criminal punishment a public good may be just as illusionary.

When markets wielded physical punishments they appeared constrained from excess by the self-interests of disputants. Conflicts among traders were self-sorted for profit seekers. Punitive threats made compliance with financial and service court rulings more appealing. Contract violators were inclined to settle and civil plaintiffs sought tangible compensation for loss.

Contemporary criminal justice problems coincide with expanded market economies and decentralized government in the market sphere. An Austro-Public Choice perspective must reference how changes in knowledge and incentives yield such outcomes. On net federal government has grown, as has its role within the criminal justice system in conjunction with mass incarceration’s disconcerting results.

Physical punishment has become relegated to the enforcement of criminal law. Though contrary to Harcourt’s narrative, driven by the segregationist logic of natural law, this can be seen as driven by the self-interests of market and government actors. While market traders sought low cost and quantitatively predictable methods to resolve conflict, government capitalized as the monopoly provider of physical enforcements.

Today’s greater quantities of physical enforcement are not deployed to enforce civil contracts or tort compliance. Drug and immigration violators occupy most new prison space, unlikely prohibited by contract law. Rather than necessary and sufficient, democracy has proven ineffective to correct the racial, generational, gender, and substance-abuse disproportionality of criminal sentencing. Policy makers have little incentive to change such policies and ordinary citizens lack the necessary knowledge to implement institutional reform.

Daniel J. D’Amico is the author of “The Prison in Economics: Private and Public Incarceration in Ancient Greece,” in Public Choice. He is currently engaged in a long-term research project focused upon the political economy of mass incarceration.

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (April 2011). All EH.Net reviews are archived at

Subject(s):Government, Law and Regulation, Public Finance
History of Economic Thought; Methodology
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Francis Ysidro Edgeworth: A Portrait with Family and Friends

Author(s):Barbé, Lluis
Reviewer(s):Samuels, Warren J.

Published by EH.NET (August 2010)

Lluis Barb?, Francis Ysidro Edgeworth: A Portrait with Family and Friends. Northampton, MA: Edward Elgar, 2010.? xxxvi + 291 pp. $150 (hardback), ISBN: 978-1-84844-716 5.

Reviewed for EH.NET by Warren J. Samuels, Department of Economics, Michigan State University.


A glance at the subtitle of this book — A Portrait with Family and Friends — will suggest its unusual character, one derived from several sources with which the author, Professor of Economic Theory at Universitat Aut?noma de Barcelona, Spain, is both comfortable and candid.? Barb? writes that ?This book does not pretend to offer a profound intellectual portrait of Francis Ysidro Edgeworth; rather it is simply a personal portrait that can help us grasp his temperament and his feelings in order to better understand his development as an individual and as a social scientist? (p. xxiii).

The book does that and does it well.? I suggest, however, that Barb? has too narrow a view of what he has accomplished on behalf of other historians and methodologists of economic thought, in at least two respects:? (1) providing suggestive evidence of the comfortable fit of neoclassical economics in middle-class society and therefore that class?s receptiveness to neoclassical theory and ideas; and (2) providing evidence of how neoclassical economic theory was worked out during a major period of the transformation of economic theory. He has, intentionally or otherwise, provided both types of evidence at least in part because pieces of each type were to be found in his materials and in part because he was alert — sensitive to and receptive of its importance.? In regard to both (1) and (2), I doubt if any absolutely new type of evidence is presented; however, the evidence seems to be trustworthy.? The evidence was made and collected by members of Edgeworth?s extended family and professional colleagues in their correspondence to each other about their activities. The evidence was found in the hands of independent archivists.

Barb? was not alone in being comfortable with his project.? He received encouragement and assistance from a number of well-known economists.? The list includes Josep Fontana, Antoin Murphy, Jos? Luis Cardoso, A. W. Coats and John Creedy, who also contributed the Preface.?

Genealogical Matters

One source of evidence is the huge number of persons comprising Edgeworth?s extended family:? on his father?s side, an Anglo-Irish family of Protestant descent, and on his mother?s side, a Catalan family, much smaller in number but with at least some liberal and constitutionalist views.? The economist and statistician we know as Francis Ysidro Edgeworth was born in 1845, the son of Francis Beaufort Edgeworth (1809-1846) and Rosa Florentina Eroles (1815-1864). His paternal grandfather, Richard Lovell Edgeworth (1744-1817), was thrice widowed and altogether had twenty-two children. Eleven pages of genealogical diagrams were needed to identify the extended family, and it is incomplete.????????????????????

Barb? has made several genealogical discoveries. He has found that the future great economist and statistician had been given at birth the name, Ysidro Francis Edgeworth. After long being called Francis or Frank, however, he transposed his Christian names when he started publishing in 1876.?

Barb? also has corrected the misidentification of Edgeworth?s mother, Rosa Florintina Eroles, made initially by the Hispanist Lord Holland, and subsequently continued by Lord John Maynard Keynes and Sir John R. Hicks.? Her father was not the absolutist and anti-liberal Baron Eroles but General {?} Antonio Eroles i Sancho (1779-1840?).? The misidentification was partly predicated upon erroneously taking a name for a title.? The misinformation, however, helped overcome opposition by several female Edgeworth relatives to the (eventual 1831) marriage of his parents.? Those women had found Rosa Eroles deficient in social status and beauty.?

Barb? reports on related matters, which as a Catalan he apparently did not seek to find.? One possibility is established by the question, ?Yet what kind of honourable enterprises may a courageous militia commander undertake which allow him to get rich very rapidly??? He finds that ?we should not discard the possibility that part of Ecoles? income came from illegal trade or from the mere conveyance of smuggled goods? (p. 23).?

Several complications arise. The area in which Antonio Eroles and his family lived (bordering Andorra and France) was a center of the smuggling of Andorran tobacco, French mules and Canadian textiles (most commonly a cotton material printed on one side, roughly similar to calico and called indiana).? Also, Francis Beaufort Edgeworth translated indiana incorrectly as calico from the West Indies.? He also alluded to a gift of some mules from Antonio Eroles as an aid to the liberal cause.? One position was that smuggling was not a source of great wealth, only a means of supplementing one?s income during hard times (which. may very well have been frequent, perhaps so frequent as to seem to be, for all particular purposes, a permanent condition).

Other possibilities have Antonio Eroles being a (former?) stonecutter, performing questionable jobs for a superior, and, with his son, receiving higher salaries than their respective ranks warranted.? The actual military rank of the future bride?s father?s is uncertain.

Barb? suggests as another reputable alternative that Rosa?s father had retained unspent funds originally intended to pay soldiers who deserted when Spain was invaded by the Royalists in 1823. (Not everyone would consider that a ?reputable? explanation, though Antonio Eroles? relation to his commanding general and others is hazy.) Rosa?s age at the time is another complicating matter.? A further basis of the misidentification may have been Rosa?s ?childish version of the facts that her father had brought home,? namely ?to build a hospital in his native place? (pp. 22-23, quoting letter, dated July 1832, from Francis Beaufort Edgeworth to his mother Frances Anne Edgeworth). The letter offers still another explanation of her father?s rapidly accumulated wealth:? ?the father had been saving up money for a long time.? He had been a West Indies merchant dealing in indigo … and this money he was able to carry off in his hour of need? (pp. 22-23).? In 1830 Antonio Eroles and his family were political refugees in London.? Eroles worked with other anti-Royalists to organize expeditions moving through France against Spain (his rank may well have been self-adopted).? However, France, after reaching an entente with Ferdinand VII of Spain, reversed its policy of supporting expeditions to one of neutrality.? Eroles and his son, Isidro, were held under arrest by the French government for more than a year — and, inter alia, could not attend his daughter?s wedding.? Lord Holland, Lord Keynes and Sir Hicks have been corrected, but new questions have arisen.? The Edgeworth opposition to the marriage may have had some merit.

It is fascinating to think, as Ronald Coase has shown, that Alfred Marshall, undoubtedly the most influential economist of the period, was not exactly candid and honest about his family and ancestry.? With the nineteenth-century transformation of class structure, more people openly engaged in status emulation, even to the extent of misrepresentation.

The basis of those findings and, indeed, of much of the family history recounted by Barb?, was his discovery of a cache of some two thousand family letters and other documents that were archived in the National Library of Ireland and the Bodleian at? Oxford.? This principal discovery was precipitated by his visit, while touring Ireland, to the church and manor house of the Edgeworth family, now a senior citizens? residence, in Edgeworthstown, and his inquiry to a nun about any family letters or documents.?
The question of the identity and heritage of Edgeworth?s mother, with the concomitant opportunity to correct a Nobel Laureate (p. xxi), plus Barb? being a Catalan economist himself (p. xxi), motivated a fifteen-year research project.? It resulted in a novel — a ?fictional narrative on the most relevant events — both good and bad — that [the family] had witnessed? (pp. xxii) during roughly the period of Edgeworth?s life (1845-1926).? The novel, written in Catalan, won a literary prize and had a printing of 50,000 copies.?

The Comfortable Fit of Neoclassical Economics in Middle-Class Society

Barb??s portrait in the book under review is a set piece for Edgeworth?s family and class although the evidence is only suggestive.? Given people?s preferences, they tend to act in a manner congruent with the neoclassical model.

The family is large, active and interesting.? Early death by a new born and/or the mother was common.? Education, by either home tutors or organized schools is understood to be important for continuation and enhancement of class and individual position. To have in one?s family someone with an extraordinarily successful academic record is a mark of distinction.? For someone to go on and become a spectacularly famous scholar is even more impressive.? For a family to have more than one member recognized to be among the elite of their profession is unusual if not rare.? The Edgeworth family had at least two such individuals, Maria Edgeworth and her nephew, Francis Ysidro Edgeworth, and each was, in part, identified in terms of their activity pertaining to economics, in a period in which a main issue was whether or not the working class should be informed of the findings of Political Economy.? The aunt was particularly noted for her relationship to David Ricardo and to Sir William Hamilton.?? Other famous people who interacted socially with family members included Erasmus Darwin, James Watt, Joseph Priestly, Josiah Wedgewood, and Francis Galton.? Of course, on such matters one should not omit Edgeworth?s relations as a student with his and other professors.? The latter included John Kells Ingram at Trinity College Dublin and Benjamin Jowett and Thomas Hill Green at Balliol College Oxford.

Consideration of the relations of some family members to other famous people can hardly outdo the relations developed by the holder of the Drummond Chair at Oxford; the economist ranked second only to Alfred Marshall; the first editor of the Economic Journal, published by the Royal Economic society; president of the Royal Statistical Society, whose Guy Medalist he was five years earlier, and twice president of Section F of the British Association.? One cannot over-estimate the magnitude and importance of his relations to others.? As John Creedy knowingly commences his Preface, ?Edgeworth was a leading figure in the rapid development of economics during the last quarter of the nineteenth century and the first quarter of the twentieth century, by which time it was firmly established as an academic subject? (p. xii).? Creedy also notes that ?the period marks … a distinct change of emphasis in the study of economics, in the transition to neoclassical economics from the classical economics associated with Adam Smith? (p. xiii) and at least doubles Edgeworth?s importance by emphasizing that ?[h]e achieved eminence as a statistician as well as an economist? (p. xii).? In part due to his several highly visible positions, in part because he ?was a prolific and highly original author who, in a cosmopolitan age, had probably the widest correspondence with economists all over the world … a man? of enormously wide reading and considerable linguistic skills? (p. xii), he was indeed a leading figure.

But not all activity was laudable.? Excessive gambling and concomitant losses, alcoholism, extravagant spending, and/or failure in one?s career or position are deprecated.? One family member, an army officer serving in India was brought up on charges of participating in ?a heavy gambling affair.?? The family as a whole is not necessarily, even likely, to come to the rescue of a member exhibiting self-destructive, noxious, or harmful behavior.? Albeit not necessarily fully excluded from the group, such an embarrassing member would not have an affirmative, salient role.?

One individual had to be careful with money; another might become wildly independent at the tender age of seven (pp. 4-5) and require family control, to whatever extent if might be effective. Some activity in feudal or post-feudal institutions is likely (in the case of the family, Edgeworthstown, an inheritable community, which provided rent-paying tenants but also ?administrative headaches? (p. 210).? Upon inheriting the property in 1911 and having assumed his new role of landlord, under pressure from the Tenants? League, the Oxford professor lowered all rents by 20 percent (p. 211). Francis was ?just like his grandfather Richard Lovell Edgeworth. … also a Justice of the Peace in the best feudal tradition? (p. 153).

Support of and/or participation in scientific activities, here the Lunar Society, is found in varied activities.? Individuals and the class to which they belonged could encompass diverse beliefs, some rejecting religious creeds, some feeling that creeds were only fit and proper, some more or less willing to be associated with a particular creed and/or that some individuals wished to be, say, a Christian, or that one no longer held the youngster?s early intention to enter the church (in Edgeworth?s case, changing his mind twice, first, the church, and, second, law (pp, 85,163)).

Mistrust and disputes could develop between individuals and/or subgroups.? Some individuals were engaged in political activity (in either Ireland or England).? The same and/or other individuals could be engaged in social activities.? One could say, in retrospect, that family members contemplated the family as an institution, i.e., the family was something in which its members made investments akin to (we would say) human or social capital.? Relations among family members were manifest in the cache of letters.? Relations between family members and others were also manifest but more episodic.

Every family has episodes of the unusual.? One 13 year old managed to escape boarding school. Five years later, he deserted and his father had to pay ?10 to the Royal Navy for his expenses (p. 5).

The Act of Union provided for Irish representation in the two houses of Parliament.? One member of the family, in response to what he thought were non-democratic pressures, left the new politics completely (p. 7).

Maria Edgeworth was named an honorary member of the Royal Irish Academy, of which her father had been a founder. She is reported by Barb? to have greatly enjoyed the distinction, ?since she humbly considered that, despite her texts on education, she had no scientific merits whatsoever? (p. 31).? Barb? also writes that Maria ?was to her dying day the leading character in Edgeworthstown.? All decisions of any importance, especially financial ones, were referred to her.? She was active even in the education of Rosa?s children? (p. 37).?

On the basis of the foregoing information, and without passing judgment, I suggest that the businesslike, rationally calculating, order- and security-loving attitudes of what appears to have been held and acted upon by (at least) the Anglo-Irish members of the Edgeworth family were congruent with the middle-class belief system of neoclassical economics.

How Neoclassical Economic Theory Was Worked Out during a Major Period of the Transformation of Economic Theory

Both Creedy and Barb? focus on Edgeworth?s period as one in which economists transformed their discipline from classical into neoclassical economics.? This transformation centered on several lines.? One line was that of the meaning to be given to economic action.? A second line had to do with the scope and central problem of economics, especially the system of organization and control, or power structure.? A third line was the construction of a purely conceptual, i.e., a-institutional model of the economy.? A fourth line was the protocol stipulating what was required in the analysis of problems and the generation of solutions.? The stipulation that was worked out required the theorist or analyst to produce unique determinate equilibrium optimal solutions — typically competitive solutions.?

Through his utilitarianism, Edgeworth was clearly most importantly involved in the first line, the meaning to be given to economic action, but he seems to have had influence in the other lines as well.

Most economists have seemed to prefer to think that the transformational lines which they articulate on blackboards are somehow related to a given, transcendental economic order.? Barb??s study of Edgeworth suggests that any meaningful account of the transformational process in which he participated was one in which decisions were made, consciously or unconsciously, about the content of those four lines.? In this manner human subjective perceptions and preferences — all essentially assertions — dominate the process of defining and explicating the economy.? Particularly noteworthy is Barb??s view of Edgeworth that ?the most original subject in his research so far [i.e., by 1877] had been what he had called ?Exact Utilitarianism,? which was close to theoretical research in natural law? (p. 85).?? It seems to this reviewer that the adoption of a purely conceptual notion of the economy has been the equivalent in practice of combining those two concepts, even though the imagined ?exactitude? is either a fiction or wishful thinking.? Economists from at least the time of Alfred Marshall have sought to construct an economics that would facilitate and reinforce the status of economics as a science.? It appears to this author that notwithstanding the depth and brilliance of Edgeworth?s utilitarianism, his approach was too laden with ontological formulations to unequivocally comport with the desires of his high-theory oriented colleagues and their quest for the status of economics as a science.?

Although the construction of the protocols involved a number of ironies, I mention only the one involving the juxtaposition of purely conceptual categories in Edgeworth?s economics to the statistical techniques he created or adopted for handling empirical economic substance.

(Two terms — ontology and utilitarian — require a few words for sake of specificity and, hopefully, clarity.? One historiographic problem arises when one takes, for example, the elements of an eighteenth-century body of thought and defines one of those elements using a twentieth-century understanding of that element.

By ontology I mean that branch of metaphysics which deals with the absolute and ultimate nature of things.? It assumes that things have an ultimate nature that transcends both materiality and human choice, i.e., empirical economic substance.

By utilitarianism I intend to include Hedonism and Benthamism as theories of human nature, of ethics, of whose interests count/should count, of how meaning and values are worked out by the interactions among decisional agents, and so on.

Kevin Hoover emailed me, in his commentary on an earlier version of this review, that ?It is odd to me to identify ?the theory of bargain in the wide sense,? with utilitarian moral philosophy? as you do here.? Bargaining as analyzed by Edgeworth employs utility functions, but the mere fact of using utility functions does not itself implicate one in being a utilitarian in an ethical sense, Classical utilitarianism is not about bilateral bargaining in which one the individual puts himself first, but is a social/ethical doctrine that says that we ought to base policy on the good of all people properly aggregated.? Edgeworth was, no doubt, a utilitarian, as well as a user of utility functions, but the analysis of a bargaining itself can?t be the essence of his utilitarianism, since it is not necessarily utilitarian at all? (Hoover to Samuels, July 07, 2010).? The discussion in this section of my review derives from the central argument of this review, namely, that reformulated economic theory during 1850-1925 was worked out in a helter-skelter manner and reflected the philosophical and economic and other interests of individual economists and not the economy itself.)

Without intending to comment on Hoover?s commentary, I must say that one can use it to illustrate the main point of this review:? that the history of the transformation of economic theory during the period roughly 1850-1925 involved an ad hoc slicing and dicing of ingredients assembled without a recipe, or without a fully detailed recipe.? In the resulting array of positions one can find combinations of elements of ontological and of utilitarian theory.? The resulting dish was thus likely to taste differently from cook to cook and from several versions of the dish produced over a period of time by one cook.?

Creedy rightly suggests that the place to start is the Mathematical Psychics (1881), which was ?written right at the start of Edgeworth?s career as an economist? and which ?also provides the key to all his later work and his lasting importance to economists? (p. xii).? In a sense the transformation from classical to neoclassical economics was a retrenchment, from ?dynamic themes of growth and development? to ?the nature of exchange? (p. xiii).? The two were quite different visions.? The classical vision teased a theory of exchange out of the social product.? ?Edgeworth himself? later remarked ?that ?in pure economics there is only one fundamental theorem, but that is a very difficult one:? the theory of bargain in the wide sense?? (p. xiii).? The latter was principally utilitarian moral philosophy.? On the one hand, it signified utility maximization, for which a famous line by Malthus and numerous famous discussions by Bentham were directional precursors.?? On the other hand, the Edgeworth box illustrated the multiple (i.e., a range of non-unique) possibilities of trading, given different initial endowments. Both in its original form in the Edgeworth box and in the subsequent work of Pareto, a core of multiple possible but noncomparable efficient solutions existed.? ?The utility maximizing approach was immediately congenial to Edgeworth, who was steeped in utilitarian moral philosophy? (p. xiii). This was so notwithstanding the inability, inter alia, to settle conclusively on the terms of the initial endowments.? This had several consequences, each unpalatable to different economists: power governed efficiency, interpersonal comparisons of utility needed to be made, and questions of income and wealth distributions had logically to be determined prior to market exchange even though income and wealth distributions were influenced by market exchange. In working out/stabilizing solutions to this (and other) problems of disciplinary construction, some aspects were retained and others cast aside. For Knut Wicksell and others, for example, these factors provided substantial opportunities for different theoretical constructions — especially when presented in terms of indifference curves and contract curves, further refashioning or remodeling the contract curve into what Kenneth Boulding, the better part of a century later, thought should more appropriately be called the conflict curve.? (Economists have had enormous difficulty with topics into which enter both initial and consequential distributions, e.g., both the Stigler and Coase versions of the ?Coase theorem.?)?

The relationship between vision and theory of exchange could easily be variably identified.? Experience with increasingly market-organized economies could lead to a vision of action, price determination, and interpersonal relationships which, in turn, could lead to the centrality of a theory of exchange.? Conversely, it might appear that the central focus should be on the determination of price/value through exchange, a result of which would be transactions and hence ?the theory of bargain in a wide sense.?

One type of fastidious mentality might require a single ultimate determinant of price understood as value, e.g., labor command or embodied labor, or utility.? Another type could provide for multiple potential sources, such as the price-theory model which eventually became dominant, with the variables distributed in any particular case among the categories of demand, supply, and irrelevant.

As Creedy writes: ?The existence of a range of initial endowments has important implications.? First, without introducing further structure to the barter framework, it is not possible to say what the implied rate of exchange is, given only information about the preferences and endowments of individuals.? It results in ?indeterminacy? whereby all that can be said is that the actual trade depends on the relative bargaining strength of the traders? (p. xiv).? Needless, perhaps, to say, the identification of an economic reality of dependence of price structure and resource allocation on the result of relative power, was anathema to those who wanted to exclude considerations of power and any connotation of an important role for government in managing the structure of rights, because they sought either or both a ?pure? economics or a ?laissez-faire? economic policy by government.? Both objectives involved wishful-thinking.? To such economists, bargaining-power theories of prices and wages were not only ?bad? economics but they opened the door to ?bad? policy.? The eventual reconstruction of economic theory along the lines of Kenneth Arrow, Gerard Debreu, Paul Samuelson and others (though not Tjalling Koopmans) served to obfuscate the non-uniqueness of price and resource allocation, thereby rendering dubious the efficiency claims of the new welfare economics.? Koopmans established a survival requirement for Pareto optimality, thereby negating death as a marginal decision.? Not only did the adoption of the indifference-curve technique fail to mollify every dissenter and even some supporters, the institutionalist critique of the new welfare economics was shown to have merit at fundamental levels. But most high theorists, while personally/privately acknowledging the existence and impact of differential power on economic performance, seemingly preferred to leave neither themselves nor the discipline open to scrutiny and criticism. If law/rights are a function of legal (legislative and judicial) action, and if changes in relative rights led to (intentional and unintentional and/or foreseen/expectable and unforeseen/unexpectable) changes in economic performance, then actions by economic agents to influence if not capture the putative regulatory agencies of government (through which the putative rights, opportunities and exposures, and the existence, nature and structure of markets are in part formed) meant that certain hitherto excluded topics had to be included.

Reliance on utility led to the need to somehow identify utility in a manner which seemed to not only organize the relevant material properly but provided acceptable answers to questions about a utilitarian approach.? It should be noted that such terms as ?properly? and ?acceptably? refer either to some bargain among participants or a social contract by their ancestors and not necessarily agreement among philosophers.?

One effect is to introduce into the past, as the source of the present, the same problems encountered in the present independent of the past, including, as we have seen, opportunities for circular reasoning.

It was to the theory of utility that Edgeworth surely felt that he was making his most fundamental contribution in economics and would have preferred comprise the payoff of some of his statistical work.? He was absorbed in controversies over the measurement/measurability of utility, the relative meaningfulness of cardinal and ordinal utility, the possibility of transcending that conflict using the indifference curve, the nature of the utility function, the necessity of establishing interpersonal comparisons of utility or welfare, the relevance of the purpose to which the specific use of utility analysis would be made, and so on.? Moreover, no small proportion of the animosity with which he and others approached each other involved differences of opinion over the foregoing issues.?? This was the case with Leon Walras and Karl Pearson.

Differences of opinion or of belief have existed to the present day.? George Stigler was of the opinion that microeconomic theory did not come of age until it became required for authors of journal articles to stipulate utility functions.? Whether or not one believes that such was another case of economic theory being led down a false track, the following seems historically and epistemologically correct.?? In and about 2000 many of the same issues remained unsettled and unresolvable.? Economists continued to exercise a propensity to refer to like-minded ?authorities.? The result continues to resemble a carnival of the animals, with several groups following elderly leaders, much as judges cite favorable series of precedents.? In each case the function is the same: to identify or claim an authority(ies) through the use of which to assert positions or results.? Each new difference has elicited variations on old assertions but assertions they nonetheless remain.

The development of much (I do not say all) economic theory in the Edgeworthian period of its transformation was due to neither new fundamental ideas nor to more sophisticated means of theory appraisal and choice nor necessarily to more deeply knowledgeable economists.? It was due to regarding, disregarding and weighting differently certain positions that had been around for some time and continued to be discussed, from time to time, for almost a century.

To emphasize Edgeworth?s brilliance and eminence should not be to forget his failure to receive several academic appointments to positions to which he had applied.? Three from 1881 were to King?s College London (Philosophy), University College London (Political Economy), and University College Liverpool (Logic, Mental and Moral Philosophy and Political Economy) (see pp. 105-106, 128-129), his disagreements with others on technical matters of economic and statistical theory and their application, including with Marshall on the use of mathematics (pp. 101, 148,189, 204, 207,215-216) and that for some years he was poorly paid.

Barb? writes that: ?Edgeworth?s connection with King?s College London would span eleven years, from 1880 to 1890. These King?s College lectures were poorly paid, and although his inherited private income allowed him to survive comfortably, he repeatedly tried to secure a better academic position.? However, in order to succeed, he first needed to bolster his curriculum vitae and build a reputation in academic circles through his publications? (p. 92)?? I am not sure what exactly to make of Barb??s language.? Minimally, it may signify merely the operation of the historic ?publish or perish? incentive and reward system.? It may indicate a concern of Edgeworth about his consumption level or standard of living.? The period in question was neither one of economic growth nor a stable level of employment and income — and the next ten to fifteen or so years were worse.? He may either have changed the specifics of his status goal in life or come to appreciate that he could make a name for himself. Certainly more information is required as to the payment levels and policies in academia at the time, as to whether those who made salary decisions appreciated his contributions and potential, as to whether he hid his potential, perhaps inadvertently and (if so) for what reason, how he fared in comparison with others at his level at the time, and so on. Or perhaps he was a ?late? bloomer.? And possibly (for some interpreters, presumably) even if Edgeworth did not need the money of a well-paid academic position, he would have wanted the status (Hoover to Samuels idem).

[Kevin Hoover finds that ?There is a little contrariness and lack of charity in this [the foregoing] paragraph.? ?Private life,? whatever else it could mean, does not normally mean one?s intellectual or inner life, but one?s personal relationships with other people (family, friends, lovers, etc.). Barb??s point seems clear enough to me. And in fact, I find my own intellectual life to be wonderfully exciting, my ?private life? in the usual sense of that term is dry as dust and would make a really poor novel (Hoover to Samuels idem).]
I think that the difference between the professor whose intellect and self-perception is unbound as to range and depth, given training, experience, and innate ability in his or her enthusiasm and effort exerted and the professor who at worst is faking being one and the professor who allocates only so much effort as to qualify for promotion, tenure and merit raises, is reasonably clear to their colleagues and students.? Members of all schools of economic thought may be found in all the foregoing and still others.

It would be interesting, presumably, to know why Mathematical Psychics did not acquire its eventual status much earlier (though as recently as its centenary some thirty years ago, it was clear that the book remained objectionable to many).? Barb? devotes some three pages to reviews of the book published at the time it was published.? Edgeworth had distributed copies of the book to a number of people; some authored and published reviews, some sent him letters with comments.

When one juxtaposes Mathematical Psychics to the economics and social-science literature of the time, it is not inconceivable that it was too strange, too demanding, too alien for those to whom any serious consideration of utilitarianism or issues of equality versus inequality, or the issues of power, right and peace, such as one can find in the work of Thomas Hobbes and others, were repugnant, and so on. The book requires a high degree of personal confidence, due to training and experience, in philosophy and mathematics as well as economics/political economy.? It would not be surprising if its disposition, by many who might have learned from it, was to the class of books ?talked about but never read,? such as, for example, those of Adam Smith.

Conversely, it may be felt that Edgeworth?s own eminence is at least in part due to the subsequent dominance of the type of economics and statistics to which his work led, and then to the explanation of the dominance.

One lesson of the foregoing is that it is misleading to attribute the status of a scholar achieved late in his or her career to an earlier stage. Another lesson is that it may be misleading to attribute later developments and choices to earlier brilliant cognate formulations.
As Creedy writes, ?The importance of this new justification of utilitarianism cannot be exaggerated? (p. xv).? Among the issues were: (1) the identity of utility maximization and its utility in theory construction and policy, in part inasmuch as the term is a primitive one (i.e., lacks specificity and is therefore inconclusive); (2) the related existence of indeterminacy; ( 3) the use of a priori probabilities; (4) the adoption of utility maximization within the welfare economics of the Edgeworth box, with its assumption of utilitarianism as a principle of justice, that, as Edgeworth himself put it, ?in the? absence of any definite principle of selection, [an individual] has about as good a chance of one of the arrangements as another? (p. xiv), i.e., equal a priori probabilities, which requires that one easily can ignore the enormous multiplicity of sources of inequality in life, including the existence and structure of the control of government; (5) the ?willingness to accept … utilitarian arbitration in terms of choice under uncertainty?? (p. xiv); (6) the optimality of price under Paretian theory; (7) the difference between an equilibrium and how it is achieved in practice (p. xv); (8) whether recontracting can apply to whatever is thought of as the ?social contract? as well as to contracts for buying and selling; (9) whether all individuals (or classes) can form coalitions to improve their position, and which coalitions are and are not considered collusion; and (10) the status of ontological assumptions or usages in articulating utilitarianism (or any substitute) and of the assumptions on which they rest vis-?-vis ignoring them and utilizing primitive terms (for example, hedonism vis-?-vis other forms of utilitarianism) (cf. pp. 86-87).

Edgeworth is lauded by Barb? as a pioneer in the use of Lagrangian multipliers and determinants (p. 96).? Barb? also refers to an ?important instrumental improvement? that leads to the coincidence of lines of indifference (pp. 96-97) and to a mathematical proof of the greatest happiness principle (p. 98).? But Barb? makes clear that Edgeworth also tries to justify utilitarianism ?by basing it on a ?social contract?? (p. 99) and by the use of definitions and mathematical constructions that are esoteric and contrived (pp. 114-115).

Barb? treats ?the conceptual symmetry between the ?calculus of feeling? and the ?calculus of belief?? as amounting to a symmetry between utility and probability (p. 110).?? That, in my view is either a dead or a narrowing end compared with late twentieth century linguistics and analyses of belief systems.? On the other hand, the reconstruction of value theory (as above) managed to disparage the Marxian and other socialist vision(s) which had been the objective of at least a significant percentage of economists from the beginning of the period of transformation.? That is, not all esoteria have been treated equally.

Oddly, Barb? concludes that ?Edgeworth?s private life was quite devoid of memorable events? (p. 209).? I do not see how such a judgment can be sustained.? Edgeworth?s intellectual life was his private life. Every time that Edgeworth entered a classroom to give a lecture, every time he worked on and submitted a paper, every time he gave a paper at a professional meeting, every time he opened an envelope with a paper submitted to the Economic Journal, he savored a ?memorable event.?? Barb? points to the routine imposed by the annual academic cycle. Surely, there is more to Barb??s life, as I think there was to Edgeworth?s.

Be that as it may, and notwithstanding the limitations and channeling imposed by the availability of data for all biographers, Barb??s work is a well-done, almost unique study and it is a pleasure to recommend it to historians of economic theory in particular.

Warren J. Samuels is Professor Emeritus at Michigan State University.? His principal fields of research and teaching were the history of economic thought and the economic role of government.? His study, Essays on the Invisible Hand, will be published by Cambridge University Press early in 2011.

(The author is indebted to Kevin Hoover and Steven G. Medema for unusually insightful and helpful comments on an earlier draft of this review.)
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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):19th Century
20th Century: Pre WWII

Elgar Companion to Adam Smith

Author(s):Young, Jeffrey T.
Reviewer(s):Wight, Jonathan B.

Published by EH.NET (August 2010)

Jeffrey T. Young, editor, Elgar Companion to Adam Smith. Cheltenham, UK: Edward Elgar, 2009.? xxv + 374 pp. $215 (hardcover), ISBN: 978-1-84542-019-2.

Reviewed for EH.Net by Jonathan B. Wight, Department of Economics, University of Richmond.


The Elgar Companion to Adam Smith contains a set of papers by outstanding scholars, many of whom have made a career of studying Smith and have separately written book-length treatises on him. The reader is thus treated to a mature and nuanced treatment of Smith throughout. While the steep price will preclude many individuals from owning it, it is an essential work for research libraries to own.

The volume contains an introduction by the editor, Jeffrey Young, and nineteen papers mostly by economists, all but two of which are original for this collection. The articles ?give testimony to the richness and enduring appeal of Smith’s principles and wisdom? (p. xi).? The editor notes that he allowed contributors to write on topics they selected. This approach is an attractive feature of the book when you have high quality sources and it provides the reader with a window onto the issues of current importance for Smith scholars.

This volume is distinguished from the Companion to Adam Smith (Cambridge 2006) by its focus on questions of interest to economists and historians of economic thought, rather than mainly philosophical issues.? A theme of the book is the growing importance of The Theory of Moral Sentiments (TMS) to economists seeking to understand the role and evolution of institutions in society (e.g., systems of justice) and behavioral economics.?

The Elgar Companion has three sections.? Part one consists of six essays that address the philosophical antecedents that influenced Adam Smith’s thinking.? Part two consists of four essays on analytics, that is, on Smith’s economic model.? Part three consists of nine essays on applications and policy analysis.? This review deals with a subset of papers.?

The leadoff paper is a reprint of Deirdre McCloskey?s “Adam Smith, The Last of the Former Virtue Ethicists,” which appeared in History of Political Economy in 2008.? This is a classic and erudite exposition of an important idea that should be discussed among a wider audience of economists — namely, that in Smith the initial or ultimate judgment of what is good (or bad) cannot derive simply from a utilitarian construct.? Hence, McCloskey demonstrates for a variety of reasons that Smith?s Enlightenment project cannot be pigeonholed into modern economics.? The most compelling reason (not addressed in this chapter) has to do with the hardwiring of the human brain. Humans make intuitive judgments within a psychological context; logic follows but does not lead. This generates enormous implications for socialization.? Character involves the internalization of ideals of virtuous conduct that derive from exemplars in history, literature, and the arts (e.g., see Wight 2006).?

The virtue of McCloskey’s essay is that it places Smith’s ethics within the wider context of classical philosophy and Christian theology. It is interesting because the eighteenth-century Enlightenment produced two other ways of approaching ethical issues, one through Bentham?s utility and another through Kant?s logical rules and duties.? Economists have almost all fallen into the trap of putting Smith into the utilitarian camp.? As many of the other articles in this compendium show, there is much to learn from understanding Smith?s more behavioral approach.

Brendan Long in ?Adam Smith’s Theism? addresses an issue that has vexed readers since the eighteenth century.? Did Smith believe in God, and if so, what role did God play in the workings of Smith’s system? Long addresses three theories, that Smith was an atheist, that he was a Christian, and that he was a lapsed Christian.? Long puts forward evidence from Smith’s life experiences and writings to argue that Smith held to a ?moderate Christian theism? (p. 92).? This is a defensible position, but not likely to resolve the debate, since Smith himself left so many contradictory clues.? The compelling biographical evidence relies on Smith?s relationship with Hutcheson (who was certainly a Christian).? Smith’s beliefs would have been thoroughly vetted when he went up for the chair in logic at Glasgow University in 1751.? Smith?s religious views could also have changed over time, as reflected in his continued edits of religious materials in TMS.?

To most economists, it is not clear why Smith’s theology matters at all to his economic model; however, it may be quite important for the overarching system on which his economic model builds. If behind the invisible hand there is an omnipotent God, this could imply that the unintended consequences of market interactions are always positive or at least generally positive over a long period of time.? Jerry Evensky (in a later chapter) argues that Smith’s plan for a liberal society ?reflects Smith’s faith in a deity and his belief that the deity has made this liberal plan the human prospect? (p. 114).

Not all the authors see Smith’s contributions as positive. Salim Rashid, who has previously questioned Smith?s appeal, does so again here by addressing Smith’s contributions — or lack thereof — to economic development. Rashid aims to show that the main questions of development addressed by Smith had been dealt with in a better way by his predecessors and contemporaries. Moreover, Smith’s approach is so ?ethereal? that the Wealth of Nations is an ?unhappy landmark in the history of economic development? (p. 212).

While Smith was partial to the interests of the poor, particularly the working poor, Rashid argues that Smith’s sympathy does not translate into his policy recommendations.? Rashid?s rebuke boils down to several key criticisms.? First, Smith?s overemphasis on free trade and his lack of understanding of the coordinating role of government in development are major errors to Rashid. Rashid does not accept Jacob Viner’s assessment that Smith was sanguine about many types of government intervention.? Instead, Rashid argues that Smith?s ideology of unfettered markets comes at the expense of the poor.?

This seems like an unfair reading. One can disagree with Smith’s conclusions about the benefits of trade for development, but it is hard to argue that Smith favored the ideology of free markets even though he knew it would hurt the poor. Quite the contrary; Smith?s support of markets derives (I believe) from his motive to help the working poor.? Moreover, in some contexts, Smith?s approach bears consideration.? Lack of access to markets is still a major barrier to development in parts of sub-Saharan Africa, where forces of monopsony and monopoly create barriers that generate rents for elites. Smith?s contributions to understanding rent-seeking and decrying the mischief that passes for policymaking in mercantilist societies seems on-target. In addition, while Smith?s rhetoric promoted free trade, he never advocated shock therapy in carrying out reforms.? While Rashid might want to argue for industrial policy as a preferable alternative to free trade when institutions support it (e.g., with East Asia?s hierarchical, Confucian social norms), it could be a recipe for disaster in the wrong institutional setting.?

Second, Rashid faults Smith?s economic model for highlighting individual efforts and ignoring critical social interactions.? Smith never discusses the mechanisms — the ?coordinating vision? of the entrepreneur — that are needed (for example) to make the pin factory a success. This is an excellent point.? There is no explicit Coasian world of high transactions costs, for instance, that would lead anyone to start a company instead of remaining a single proprietorship, and each of the producer-agents specializes without conversation or collaboration.? This is a valid criticism, but can be taken too far; Smith does show an interest in social relations in production, although it is subtle.? In the invisible hand that appears in The Wealth of Nations, Smith analyzes the forces at work that would lead entrepreneurs to invest their capital domestically rather than export it. One important factor leading to home investment (and hence to the beneficial character of the invisible hand in this case) is knowledge about the moral character of the traders that one would encounter and could trust.? Hence, social relations enter into Smith?s economic thinking, although not to the extent one might hope.? Despite these comments, Rashid?s chapter is stimulating.?

Further elaboration on Smith?s view of government is found in a paper by Steven Medema and Warren Samuels.? In response to those who claim Smith favored only limited government, the authors note that ?If government and law seem anathema in the Wealth of Nations, they are part of Smith?s obvious and simple system of natural liberty, that is, of the natural order of things? (p. 307).? In contrast to Rashid, these authors believe Smith?s views can and must be discerned from studying the totality of his output because Smith?s work is ?grounded in multiple paradigms? (p. 300).? Smith took different things for granted in different contexts, and a researcher who ignores the unstated totality will depart with an ?undernourished? formulation.? The totality consists in understanding Smith?s tripartite model of a working society: first, an individual?s social interactions and sympathies that lead to self-control via a moral conscience; second, the laws and rules that produce external control by authorities; and third, the market, which imposes its own regimen of discipline.?

Smith notes that laws and institutions evolve and evolution is often instigated by biased sources with personal gain in mind.? Government plays an integral role in Smith?s conception of economic life, even though in the particular time and circumstance of his writing, the dominant evil was excessive government manipulations in favor of the rich.? In short, natural liberty does not trump all else, as exemplified by this quote from WN:

But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed. (p. 312)

A number of papers endeavor to ground modern discoveries in the insights of Adam Smith.? To mention a few, Maria Paganelli does so for experiments, Amos Witztum addresses general equilibrium, and James Buchanan and Yong Yoon tackle stochastic demand and increasing returns.? These are an interesting, if necessarily incomplete, collection of papers in this section.? What seems conspicuously absent, in light of the 250th anniversary of TMS and the 150th anniversary of Darwin?s On the Origin of Species, is any paper addressing the importance of Smith to economic researchers using Smith as a spring board for understanding evolution, mirror neurons, neuroeconomics, and other concepts that may constitute Smith?s most important insights for the next few decades.?

This critique aside, the Elgar Companion to Adam Smith is an outstanding collection by a gifted group of writers, and is highly recommended.?? The list of contributors is:?? V. Brown, J.M. Buchanan, S.C. Dow, J. Evensky, P. Groenewegen, S. Hollander, G. Hueckel, D.M. Levy, B. Long, D. McCloskey, S.G. Medema, L. Montes, M.P. Paganelli, S.J. Peart, S. Rashid, W.J. Samuels, A.S. Skinner, G. Vivenza, A. Witztum, Y.J. Yoon, and J.T. Young.


K. Haakonssen, editor, (2006), The Cambridge Companion to Adam Smith (Cambridge University Press).?

J. Wight, (2006), ?Adam Smith?s Ethics and the ?Noble? Arts,? Review of Social Economy, 64 (2): 155-180.?


Jonathan Wight is Professor of Economics and International Studies at the University of Richmond.? Recent research has focused on human instincts as a way of understanding Smith?s invisible hand and Smith?s ideas on informal learning and moral learning.? He is the author of the academic novel, Saving Adam Smith: A Tale of Wealth, Transformation, and Virtue (2002).?

Copyright (c) 2010 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (August 2010). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The World of Private Banking

Author(s):Cassis, Youssef
Cottrell, Philip
Reviewer(s):Austin, Peter

Published by EH.NET (June 2010)

Youssef Cassis and Philip Cottrell, editors, The World of Private Banking. Aldershot, UK: Ashgate Publishing, 2009.? xxv + 302 pp.? $115 (hardcover), ISBN: 978-1-85928-432-2.

Reviewed for EH.NET by Peter Austin, Department of Interdisciplinary Studies, St. Edward?s University.


Occasionally, one has the chance to look simultaneously at something historical and something very much still with us.? This applies to the business of money that, if all goes well, is almost invisible to everyday life.? Today issues of finance are more visible than usual and a realm that prides itself on discretion is under scrutiny. The World of Private Banking represents a time when discretion and reputation were all.? This edited volume contains fifteen chapters that group and connect in a sensible manner, so that reading the whole creates an impression of something greater than the sum of its parts.? It is hugely descriptive though, for the most part, it is not new scholarship.? It covers various aspects of private banking from the late eighteenth century to the First World War, and a bit beyond.? It has an expansiveness that belies the simplicity of its title.

If there is one name associated with private banking, it is Rothschild, and it is with this five-tentacled bank that the collection begins.? In his ?Rise of the Rothschilds,? Niall Ferguson portrays the bank as it was — a sort of multinational.? He is most concerned with origins, the rise of the organization between 1810 and 1836 — that is, before the great banking changes of the mid-nineteenth century.? Derived from his two-volume history, this essay is the collection?s one case study and concerns itself with Rothschild?s size, its bond-dominated business, the partnership structure, the family itself, and reasons for the bank?s success, including its well-known communications network.

In its role as ?The World Pump,? the Rothschild House might today be called a ?non-state actor,? and like today, myths grow up around the inclinations and capabilities of such organizations.? As Ferguson describes, Rothschild was indeed powerful, even in its early decades, based on a number of factors — not least of which was its great geographical reach, and its reliance not on a single market.? Ferguson?s account is florid with personalities and comments about the ingredients of Rothschild?s operations.? One of the most interesting aspects here is Ferguson?s revelation that the House often improvised in its operations, had no systematic accounting, and lost track of considerable amounts of money.? If there is a weakness to this excellent essay, it is that the Ferguson does not choose or prioritize the most important elements of Rothschild?s success.? Was it superior communication, ruthlessness toward rivals, Jewish solidarity??? In the end, for Ferguson, it appears that Rothschild?s performance came from a combination of things, but the bank remained at heart a family concern, from which emanated its intensity and its methods.

In the three decades after 1815, Rothschild?s closest rival was Barings, and John Orbell?s comment on the British house complements Ferguson well.? Rothschild was much larger than Barings, but in his ?Private Banks and International Finance in the Light of the Archives of Baring Brothers,? Orbell highlights the unparalleled range of Barings? financial activities that assured it greater profitability.? Ferguson?s lens focuses squarely and powerfully on one large piece of the private banking puzzle: Rothschild.? By contrast, I believe Orbell does in exemplary fashion what this collection does as a whole so well: reviews and explains the vocabulary, mechanics, and roles associated with the international finance generally; the merchant/private banking enterprise specifically.?

Orbell?s primary assignment here is to articulate the private banks? source of greatest strength and longevity: its international scope.? From Calcutta, Canton and Madrid to Rio de Janeiro, New Orleans and Moscow, Barings was active, and this remained an advantage that private banks maintained over their joint-stock rivals even after these began to eclipse private bankers in home markets after about 1850.? Not only does this chapter locate Barings? activities geographically, it places them in relation to Baring rivals.? Perhaps of all chapters, Orbell?s is unique for its weaving together of merchant banking themes with archival resources.? The gaps are most interesting.? In my own work on Barings in Canada, Massachusetts and England, I can indeed confirm the perplexing absence of material in the Barings record to do with trade finance before 1900.? But in all, the Barings archive is complete and quite well-managed.? It is an orderly record of one of the most important merchant banks to fuel modernization and growth around the world, particularly in the nineteenth century.? Orbell illustrates this process magisterially.

Barings was one of the nineteenth century?s great international financial enterprises.? In the United States, however, it had no peer before 1840, and Edwin Perkins takes a look at Barings? operations there, along with snapshots of five other major banks in the United States in his essay, ?The Anglo-American Houses in the Nineteenth Century.?? A scholar whose early work focused on the House of Brown, Perkins describes the activities of banks in the antebellum United States when it was an emerging market in the way we think of China, Brazil, or India today.? Perkins reminds us that the American market exploded with activity after the Civil War, and that it was European capital flowing increasingly to maturing American financial institutions that helped to settle and develop the enormous home market of the United States — a home market so large and rich that the United States has historically deemphasized exports since independence. The largest theme in Perkins? work is this transition to American financial control on its own soil.

In the 150 years or so before 1914, private banks were exclusive entities.? Today, they are most often found within larger public companies as in the so-called ?private banking? division of a Wells Fargo Bank or even a Charles Schwab.? The salience of Perkins? essay is that we know that the development of a mature American banking system gained traction with the withdrawal of Barings after the financial difficulties of the Andrew Jackson years; that the reasons for withdrawal by Barings were varied, but in part had to do with the disagreeable style, pace, and practices of American finance.? In the portraits of a Brown, a Seligman, a Kuhn Loeb, or a Morgan, this essay previews the rise of raw American financial power released in the 1840s, and subsequently developed.? The fortunes of discrete patrician private banking of the kind described here, particularly British, correspond inversely with the development of the American market and the spread of American democracy and values.? Perkins? essay describes the transition from a time when Anglo-American houses prioritized Britain and British finance to a time when they prioritized business on the western side of the Atlantic.?

International themes continue with Alain Plessis? interesting article on the ?eccentric, quasi-magical world? of the so-called ?Haute Banque? — a very ?small group of powerful houses? in Paris, usually partnerships, international in orientation, whose membership was unofficial, changeable, and difficult to define.? Their mystery was increased because (with the exception of Rothschild) Plessis finds these French banks left few records compared to their British and American counterparts.? Unraveling events in business history is notoriously difficult — in financial history, particularly so.? In contrast to other fields, personalities attracted to commerce and money tend not to be expressive, impressionistic or prone to lengthy description since they tend to see more value in action rather than thinking and writing.? There are exceptions here of course, but the haute banque?s secrecy is in line with Pierpont Morgan?s French aphorism of ?pense moult, parle peu, ?cris rien? (?think a lot, say little, write nothing?).

International operations were the lifeblood of many private banks.? But in the phrase of Alain Plessis, the Parisian haute banque was ?a world open to foreigners? in a manner unlike others in private banking.? Plessis describes cosmopolitan organizations ?incompletely assimilated? into French elite society since they had roots of foreign origin and desired to keep connection with family members outside France.? To be sure, origins and loyalties were by country.? They were also by faith.? He describes wedlock alliances among Christians and among Jews in order to build banking organizations; of major Jewish and Protestant bankers and their children married off to foreign wives and husbands, to people established in France but with foreign origins, often of the same religion as themselves.? Here was international banking with a vengeance.? Here was the source of the Rothschild mystique, a combination of myth and reality mentioned by Ferguson, made more mercurial and (for those so inclined) more mysterious by family members moving around from country to country for intelligence to find new markets and to keep family ties current.?

Plessis on the haute banque introduces the reader to the general phenomenon of religious and ethnic minorities in trade and finance.? Armenians in Turkey, Chinese in Malaya, Greeks in Cairo, and Lebanese in Buenos Aires come to mind.? Here, authors Ginette Kurgan-van Hentenryk and Martin K?rner concentrate on the idea of financial solidarity along religious lines with their chapters on Jewish and Protestant banking.

Kurgan-van Hentenryk broadens aspects of Plessis? essay as she covers the origins of the haute banque at the time of the Bourbon Restoration, a closed circle of twenty banks of Protestant and Jewish financiers that placed loans for Europe?s conservative monarchies after 1815.? But she does so much more.? Here is the story of Jewish private banking and its spread across Europe in the nineteenth century with imminent names like Stern, Bischoffsheim, Bleichr?der, Fould, Oppenheim, Goldschmidt, Cassel, Lazard, Mendelssohn, Seligman, and Rothschild; and later in the United States with Warburg, Schiff, Goldman, and Soros.

Kurgan-van Hentenryk divides Jewish banking activity into four phases: the Hofjuden period, the nineteenth century through the First World War, the interwar/Nazi period, and the post-1945 years.? At all times, she says, Jewish private banking based itself on trade — whether in commodities, capital, or most recently in ideas and services.? It is a fascinating journey in many respects.? The author emphasizes that, particularly before the 1850s, much of the Jewish private banking story took place in Austria and the German states (Vienna, Frankfurt-am-Main, Cologne, Hamburg, Berlin), from which it ramified to other parts of Europe, the United States, and Europe?s colonial possessions.?

It is the story of financial diaspora.? It is also the story of risk-taking in the face of adversity.? Much of Kurgan-van Hentenryk?s essay discusses Jewish participation in projects many non-Jewish private bankers spurned: railroads and early industrial finance.? In this regard, Jewish private bankers, as described, were integral to the early development and promotion of joint-stock banks that culminated in the creation of the Cr?dit Mobilier in France, and the so-called D-banks in Germany.? Kurgan-van Hentenryk illustrates the quick changes to finance during the middle decades of the nineteenth century with the new ?mixed? banking or joint-stock instruments.? Joint-stock banks were, after all, as key to the finance of the 1871 Franco-Prussian War indemnity as private banks (Barings, Rothschild) had been to the Napoleonic indemnity of 1815.? The shift of instruments so profound over just a few decades seems worthy of the phrase ?Big Bang.?

What did not change was a certain anti-Semitism that persisted on the Continent, of course, well into the twentieth century.? It was a prejudice, according to Kurgan-van Hentenryk, not easily mitigated by wealth, accomplishment, or education.? In this regard, she describes a defensive and fascinating kind of clannish behavior, the important role of women for family ties, and a historical pattern of strict endogamy with a goal to deepen networks, and to conserve and increase wealth among families.? Weaving through her account is the presence of the Rothschilds, and it is unclear if the general fortunes of Jewish bankers were hurt or helped by the blossoming of the Rothschild house after 1815.? In this excellent account, the differences, if any, between Sephardic, Ashkenazi, and even Hasidim Jews in their associations, networks, or business successes are also unclear.? After musing on the influence of Jewish financiers in politics, Kurgan-van Hentenryk ends with a question ?what path is next for Jewish private bankers: integration or some sort of innovation?? Whatever the path, she implies adaptability and survival for Jewish bankers, private or not.

Following this account, Martin K?rner turns our attention to Protestant financiers, who he says operated ?from Lisbon to St. Petersburg? by the eighteenth century.? Though a minority, the place of Protestant bankers was historically much less clear for K?rner than Jews are for Kurgan-van Hentenryk, even in the wake of the Reformation.

K?rner describes solidarity among Protestant bankers in the sixteenth century, and the financial networks that started to form — first in several parts of Switzerland, later between various European Protestant groups in the German states and between Huguenot factions in France.? This said, K?rner devotes most space to the growth of Swiss (Calvinist) financial power, particularly in relation to France.? He recounts in highly technical terms the money transfer routes of Protestant bankers who used Geneva as a financial hub, and, like several essays in this collection, K?rner?s account is useful for explaining the mechanics of government loan finance.? But the chapter remains in large measure a description of Swiss Protestant bankers? influence on the French crown.? Starting with the reign of Louis XIII, K?rner depicts the start of a sort of Huguenot haute banque which only grew in influence with the French court as demand for capital increased under the ambitious Louis XIV.? What is fascinating to see here is Catholic monarchs who elevated Protestant bankers to positions of social and political power in Catholic countries in periods of inter-denominational pressure.? This is particularly arresting when the pattern survived in France even after the 1685 revocation of the Edict of Nantes.?

It is indeed interesting to see K?rner explain how Huguenots fled France during her wars of religion and set up shop as merchants and bankers in all the economic centers of Europe.? The difficulty here is that, except for Paris, these other ?economic centers of Europe? are, in the main, given short attention.? And while this essay has clear strengths, it leaves significant areas tantalizingly unaddressed.? Lutherans, Anglicans, Anabaptists, and Methodists are unmentioned, as well as the regions in which they operated.? Did they form networks?? Even if this essay?s focus were only Swiss/Calvinist?French relations, one large weakness would remain.? K?rner does not provide a reason why Catholic monarchs and princes did not employ Catholics bankers.? It is true that Catholics at times accepted Protestants to avoid the services of Jews, as K?rner mentions, but were Catholic bankers inadequate to solve the financial exigencies that befell France, for example, after her Religious Wars?? Were the financial troubles of the pre-Revolutionary decades so unusual that His Most Catholic Majesty Louis XVI could only summon the services of the talented and Protestant Jacques Necker?? K?rner is frustratingly mute.?

If Ferguson (Rothschild), Orbell (Barings), and Perkins (Brown et al.) treat the overarching development of the private bank, the volume?s editors, Youssef Cassis and Philip Cottrell, treat its crisis in two substantial contributions.

In his masterful ?Private Banks and the Onset of the Corporate Economy,? Cassis describes the emergence of a ?new bank? between 1835 and 1865 which he says represented a seismic change in savings and financial participation by the populations of Europe.? This joint-stock, deposit, and investment banking vehicle presaged the onset of unprecedentedly large capital accumulations demanded by a rapidly-industrializing European society in the half-century before the First World War.?

Cassis? essay is a description of slow change across time, not decline and quick fall.? It first reviews what a private bank was — its character, purpose, legal form, and pedigree.? Cassis then describes the great advantage of the private bank in the long term: not the servicing of small and medium-sized businesses in its various domestic locales, but the financing of international trade and the issuance of foreign loans — that is, the exclusive world of the haute banque.? Though a French term, Cassis touches this idea of the haute banque from Paris and Brussels to Berlin and Vienna, and the discussion is a good complement to Plessis? chapter.? However, if there is an emphasis here, it is Britain where one can see the effect of joint-stock banking on private bankers most clearly.? The decline of the private banker, says Cassis, was no steeper than in Britain, ?yet nowhere did private bankers flourish more than in the City of London.?? Here he presents the central paradox of the nineteenth century related to joint-stock ascendancy: while private bankers lost ground as domestic deposit institutions throughout Britain as a whole, they redoubled their commitment to international activities which strengthened financiers in the City, particularly in short-term acceptances.

Philip Cottrell drives home Cassis? case of Britain with his study of the actual mechanisms that changed finance in the City of London: by legislation of 1826, the arrival of limited liability laws and the explosion of domestic limited joint-stock banking in the early 1860s, measures he calls collectively ?London?s First ?Big Bang.?? In addition, Cottrell surveys the competition to private banks, particularly in the international sphere after the growth of joint-stock banks.? Written about so well by Geoffrey Jones, these limited-liability laws followed by the 1862 Companies Act greatly expanded overseas corporate banks and colonial banking, and even spurred the formation of myriad varieties of finance companies.? ?The ?Big Bang? largely sounded the death knell of personal private enterprise within most of London?s financial markets,? writes Cottrell.? ?Private banking persisted in the City, but its days were numbered.?? As Cottrell and Cassis comment, the decline would take time, and David Kynaston also contributes to this discussion of decline (see below).? Cassis and Cottrell (among others in this collection) voice the central irony that private bankers themselves sowed the seeds of their own destruction by sometimes creating joint-stock banks as vehicles to finance industrial projects that, in the end, despite the private bankers? best efforts at control, ultimately replaced them, certainly domestically.

Dieter Ziegler gives us a look at Germany.? Specifically, he asserts that Alexander Gerschenkron?s explanation for the first capital driver of nineteenth-century German industrialization should be private banks, not universal banks.? Here we have a specific substantiation of Kurgan-van Hentenryk?s account (?Jewish Private Banks?) of the origins of the D-banks.? We also have a substantiation of both Jewish and private inputs to railroad and industrial finance before the full onset of joint-stock banking, which was resisted with few exceptions (e.g., Bavaria) throughout the German states, including Prussia.? Inspired by the Credit Mobilier after 1852, nevertheless, Ziegler finds that innovative consortiums assembled by private bankers in the German states and Hapsburg empire ?proved to be the decisive factor for the nascent universal banks? that financed the earliest railroad projects (e.g. 1836, from Vienna to Bochnia in Galicia).

Of course, one of the facts of banking is that joint-stock banks began to trump private bank capital in Europe and the United States after 1850.? Nevertheless, Ziegler is concerned with timing.? Gerschenkron neglected to show that the first successful joint-stock banks were founded by experienced private bankers.? Thus the start of Gerschenkron?s leading sector take-off had a private bank ?spark-plug.?? By the mid-1850s when the first stock credit banks were founded, the basic railway net connecting almost all important Zollverein States was already built.?

Ziegler says that historians should tweak Gerschenkron to include the input of private bankers in the German industrial story.? What of Italy?? Do we need to adjust Gerschenkron?? Luciano Segreto thinks so.? In his ?Private Bankers and Italian Industrialization,? Segreto describes a pre-unification Italy with few consequential financial institutions, a peninsular quilt of regions and cities through which a few private bankers threaded their way often as Protestants or Jews, and who had the strongest financial contacts with interests outside Italy itself.? He finds no competence or inclination to cooperate on anything like an Italian Zollverein.?

At times, Segreto gives the impression of impatience with the historical circumstances he describes before the birth of the Kingdom of Italy.? In the pre-unification period, for example, Segreto describes attempts to form Italian financial organs based on sericulture or shipbuilding in the manner of Belgium?s Soci?t? G?n?rale, or the later Cr?dit Mobilier and Credit Anstalt.? He laments, however, that these enterprises were ?too advanced for the times and above all for the socio-economic context in which [they] operated, [which were before unification] still loath to make a coherent commitment to industrial development.?

Many things changed in the 1870s.? Suddenly, there were national projects and private bankers who had once individually identified only with particular states or with foreign interests were called on to underwrite large projects with a nationwide scope such as railroads — so that bankers from Genoa, Turin, Livorno, and Florence were brought together for a common purpose.? Cooperation also occurred on a regional basis with no banking center more active than Milan, now free from Austrian surveillance.? Segreto points out that, by the 1880s, Milanese commercial banks had joined forces with banks in Turin and Genoa.? The assembly of an Italian credit system led to a national banking system and Segreto parallels the fever of bank establishment with that of antebellum American or Meiji Japan.? In this expansive environment, Segreto implies, private bankers with political ties were active in such sectors as foodstuffs, petroleum, textiles, mining, transport, and real estate but they were, in Segreto?s words, ?flanked by the large commercial banks.??

Unfortunately parts of this essay are quite difficult and vague, making it unclear until the last section what exactly private bankers? roles were in post-unification Italy.? Moreover, Segreto presents mixed banks as a feature of Italy by 1914.? But it is far from clear how we got here.? Whatever the path, however, the destination emerges from Segreto?s essay.? He asserts that private bankers played a particular role after 1890 — something Segreto calls ?functional ?re-specialization.??? After several decades in which ?all operators in the sector? (I assume financial) were kind of industrial-financial generalists, Segreto finds that private bankers switched to the role of facilitator and smooth point of contact between industry and the mixed bank.? He sees? the private banker as the subtle deal-closer in a mixed bank venue, and substantiates his assertion with a persuasive chart that? lists private banker involvement in 31 major industrial enterprises in Italy from 1884 to 1913.? Segreto also reports the decline of private banker ranks in the years after the First World War.? He implies that the less-than-subtle events of the 1920s and 1930s had something to do with this.

J.P. Morgan?s motto may have been to ?write nothing? (ecrit rien).? When carried out, this makes business history research difficult.? However, written archives do exist and readers will find four sections (five authors) on archives of various family businesses and banks in this collection — two British, one Continental, and the Rothschilds that straddled both.? These essays break up The World of Private Banking nicely and provide updates, insights, and personnel connected to research collections.? They also tease researchers with leads to plug holes in the financial history literature.

Except perhaps for John Orbell?s chapter on the well-established Barings, the archive chapters remind the reader that the nature of archives is fluid.? Even with the oft-studied House of Rothschild, Melanie Aspey points out that a large portion of records of the Vienna branch were retrieved from Moscow less than a decade ago.? Aspey?s partner on the Rothschild archive chapter, Victor Gray, corroborates Niall Ferguson?s comment that the papers remain split among the French, Austrian, English, German and the Italian (Naples) branches.? Of these, London is most complete.? But according to Gray, we may never know what we are truly missing since all the Houses of Rothschild were subject to what all private banks are subject: periodic purging by family members.?

Still, millions of letters need cataloguing due to volume, difficulty of categorization, and language — of which six are used in the Rothschild papers.? Language is a barrier also to what Victor Gray sees as the treasure trove of the House: the Judeo-German (Judendeutsch) correspondence in German using Hebrew letters.? These are Rothschild family and business letters used to skirt competitors and to survive as Jews in the police state of Metternich.? As of 1998, only one in seven of these letters was translated.? Additionally, there are hundreds of thousands of international letters from Rothschild correspondents and agents which are starting only now to get scholarly attention, but remain largely unexplored.? John Orbell mentions something similar about Barings? London Wall accounting records which (I can attest) are vast, complete, yet seldom used; and await the eyes a scholar of a certain temperament.?

As Gray and Aspey?s archive discussion complements Ferguson?s Rothschild chapter, so Gabriele Teichmann?s discussion of the papers of Salomon Oppenheim Jr. & Company complements Ziegler?s chapter on private bankers and German industrialization.?? For that matter, one could sensibly pair it with Kurgan-van Hentenryk?s ?Jewish Private Banks.?

Teichmann?s chapter is useful as an advertisement for an archive of intrinsic importance.? Oppenheim was an institution active in the many industrial sectors of a country which, upon unification, proved the most potent in twentieth-century Europe: Germany.? In her discussion of archive resources and the Oppenheim family, Teichmann highlights Cologne, a pivotal city for the history of the industrial Rhineland, and hence for the history of twentieth century Europe.? And it is not without irony that this contributor to German vitality was a Jew.

The last part of Teichmann?s account called ?Social Studies? explores family related topics of the Oppenheims.? This is the exclusive focus of Fiona Maccoll?s ?Banking and Family Archives? in this fourth of four archives chapters.? Here, Maccoll reinforces the idea of family as a cardinal difference between private and other bank types.? Initially, I found Maccoll too prolix with step-by-step family data — that is to say, who said what, to whom, and when.? This task is for the researcher to discover and present.? However, the archivist can be the handmaiden in this endeavor, and Maccoll does this.? Her chapter steers the reader to archival materials that involve people, family, and relationships.? Seemingly banal, the idea of family was one of the distinguishing entrance criteria for private bankers until its twilight in the late twentieth century.? And it is the potential for personal information relevant to operations that is so seductive about the Rothschild Judendeutsch letters, according to Gray and Aspey.? For Maccoll, though, family papers provide data on private banking operations — sometimes indirect, sometimes oblique — that simply does not exist in other banking venues.

Some material in these chapters will not be as useful to those familiar to archives as to those newer to the field.? Still, the range presented here from French (Gray and Aspey) to German (Teichmann) to British (Maccoll and Orbell) has something for everyone, regardless of experience.? Finally, the internet has transformed so many things, and private bank archives are no exception. Gray addresses these issues at some length in regard to the Rothschild archives.

I suppose it could be said that a banker spends half his life making money, the other half giving it away.? Pat Thane touches on the issue of ?giving it away? in her chapter ?Private Banking and Philanthropy: the City of London, 1880s-1920s.?? It is one of the half dozen essays one should read here if pressed for time, not for its superiority per se, but because it bears on a dimension of money-making not touched elsewhere in the collection.? Thane?s chronological focus is tight, her themes limited for the most part to the British Royals and Jewish philanthropy, and her essay is effective as it stands.? Readers may grow impatient with Thane?s dependence on Frank Prochaska?s work for her Edwardian discussion.? And though there is rich coverage of Baron and Baroness de Hirsch, the Bischoffsheims, and Ernest Cassel, some will likely find the account less than satisfying with Schroeder?s the sole House outside the Jewish sphere.? What of Barings, Hambro, and Coutts, or the Quaker legacy?? To say nothing of moving the chronology to the earlier decades of the nineteenth century?? These queries aside, I suspect that the ambition of the essay was deliberately and ruthlessly limited, and, for what it does, it does quite well.? My complaints are meant to inspire others to complete the task that Thane has begun.? She has whetted appetites terrifically.

David Kynaston closes this collection with thoughts on the years in the City after private banking?s ?moment? has passed: its denouement from 1914 to 1986.? He depicts a vocation aware of its decline — a ?closed world, in which family, wealth and social connections counted for more than industry or ability.?? He describes a world anchored to a past ideal, a pre-1914 order of Old Etonians, ill-suited to compete in a time that was starting to see nothing irregular or wrong with the rise of a clerk to bank president.? One example of Kynaston?s idea of nebulous decline? is Edmund de Rothschild?s 1998 memoir, A Gilt-Edged Life.? Here, Kynaston describes a floating comfortable life; a scion of a rather laconic, somewhat frivolous dying breed — reminiscent of the exhaustion of Thomas Mann?s Buddenbrooks — without the animal spirits needed to survive in the rough and tumble world of the later twentieth century.??? Kynaston? illustrates this sense of floating among private banking families with other convincing anecdotes of the 1950s, 1960s, and 1970s.? The second ?Big Bang?? (see Cottrell for the first) made this intangible sense of? drift and decline abruptly concrete for the private City banker in 1986, as the Houses of Lazard, Warburg,? Hill Samuel, and others — once financial whales — became minnows, and new whales arose with names like Citibank, Chase Manhattan, and Banker?s Trust.? My own work on Barings illustrates this well.? Its conservative principles allowed the partnership to weather the Panic of 1837 brilliantly.? Unfortunately, Barings? culture learned the wrong lessons from these successes, and it failed to adapt and innovate in later years.? Indeed, the first time Sir Peter Baring had heard of the ?clerk? Nicholas Leeson, it was too late.? Certainly in its classic form, Kynaston artfully declares the demise of private banking in the City, for only after death can one call for obituaries, which he does.? In the main, the private banks are gone.? Long live the private banks, Kynaston says — in house histories!

One need not read this book chapter by chapter in order.? I recommend the reader start anywhere in the book and fan out.? I have followed this free course in my remarks above.

In closing, one of the virtues of this collection is the overlapping explanations by several authors of the same terms of trade and finance.? Multiple mentions of acceptances, bills of exchange, country banks, merchant banking in different contexts, as well as key dates in the financial history of the period that this volume represents provide a review for the expert, a primer for the novice.

Technically, I appreciated the publisher?s choice to choose footnotes over less convenient endnotes.? Wherever located though, the citations and bibliography present a fantastic tour of current and classical literature on finance and banking with lacunae only of Peter Temin, W.W. Rostow, John McCusker, and Peter Rousseau.

This is not easy material.? However, the level of writing in this volume is high, no doubt made higher by skilled editing.? The uses of this collection are many, not least as a tonic for the current American fashion to present globalization as something new.? On most every page, one finds accounts of men and organizations working in the business of international affairs, indeed global since the start of the nineteenth century.? Part research guide, part family history and part financial/trade primer, this collection is, finally, part museum-piece — for the world of the private banker is largely gone.? Nonetheless, like good museums, this book repays a visit, has much to teach about the present, and presents important things knowledgably and with style.


Peter E. Austin is a historian at St. Edward?s University in Austin.? He is the author of Baring Brothers and the Birth of Modern Finance (Pickering & Chatto, 2007).? He is currently at work on a book on the 1960s.

Subject(s):Business History
Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century
20th Century: Pre WWII

Triumph of the South: A Regional Economic History of Early Twentieth Century Britain

Author(s):Scott, Peter
Reviewer(s):Wardley, Peter

Published by EH.NET (October 2009)

Peter Scott, Triumph of the South: A Regional Economic History of Early Twentieth Century Britain. Aldershot, UK: Ashgate, 2007. xiv + 324 pp. ?65 (cloth), ISBN: 978-1-84014-613-4.

Reviewed for EH.NET by Peter Wardley, Department of History, University of the West of England, Bristol.

In the Triumph of the South, Peter Scott, Director of the Centre for International Business History and Professor at the University of Reading, has drawn upon his research into specific aspects of interwar British economic and social history to provide an overview of regional development between 1870 and 1939. Scott?s investigations, that have utilized neglected or under-utilized sources, encompass the origins of British regional policy, private sector industrial estates, the nature of the English property market and its agencies, working class house-ownership, hire purchase, and the institutional barriers that impeded transport rationalization in both the coal mining industry and the coal carrying trade undertaken by British railway companies. At the heart of this study are chapters informed by this research that describe and analyze dynamic components of the interwar British economy: the new manufacturing industries of Greater London, the labor market that characterized the interwar industrial estates, and the long distance migration of workers recruited to the new factories. By contrast to vibrant industrial development in the ?South,? the manufacturing sector of depressed ?outer-Britain? experienced only limited innovation; relatively few new plants were established, the expansion of employment in the factories associated with the ?New Industries? was relatively small and their labor productivity was relatively low. Oddly, given the clearly demonstrated relative advantage of the ?South? in the provision of services, and the relative importance of these activities in both the region?s prosperity and economic expansion, apart from tourism the services sectors receive relatively little attention. For example, to select one specific dimension of change, whereas much is made of the failure to embrace technical innovation exhibited by the ?old staples,? and especially the coal industry, no mention is made of the comprehensive implementation of mechanization undertaken by British financial companies at the end of the 1920s. Furthermore, not only is the measurement of productivity growth in services presented here as a more problematic exercise than recent research has demonstrated but the early twentieth century domestic service sector is described as ?a very large employer, with very limited potential for productivity gains? (p. 24). In the context of this study, this is somewhat odd: if this were so in the interwar years, what then was the motive of those who purchased the millions of household appliances produced on the industrial estates so carefully enumerated here?

Scott?s authoritative treatment of the aspects of the interwar years he has so closely researched also stands in contrast with his less convincing consideration of the longer run historical context. The introductory chapters demonstrate a range of basic problems that are conceptual and definitional in kind, reflecting geo-political and economic ambiguities that could lead astray a more naive reader. It would have been useful to indicate very clearly that ?Britain? in this period is a political fiction as the functioning state was the ?United Kingdom,? a union of Britain and Ireland before 1921 and Britain and Northern Ireland after. In this book England gets the lion?s share of attention, Scotland some consideration, Wales little and Ireland none. This constrained perspective has broader analytical and interpretative consequences. A somewhat pessimistic stance towards British economic performance before the First World War depends to a large extent on a comparison of British income per capita data (Table 3.2, p. 33) relative to that of the world?s more developed economies. However, George Boyer?s chapter on ?Living Standards, 1860-1939? (Boyer, pp. 282-83; 294-95), the source upon which Scott relies, is not unmisleading in this context. Boyer, citing data estimated by Angus Maddison, and without mention of this distinction, reports the national income per capita of a ?Britain? which is really an ahistorical United Kingdom, a hypothetical economy defined by political boundaries that would be drawn only in 1921. Nevertheless, Maddison does provides disaggregated estimates for Irish and British income per capita, and it is the latter that Scott should be interested in, given that his story relates specifically to Britain. When Britain, strictly defined, is compared to the United States of America, the relative gap in national income per capita in 1913 is shrunk from that reported of just over five percent to less than three; by analogy to conventional measures of statistical significance, while the former might just about warrant mention, the latter difference would be usually be regarded as insignificant. Moreover, the same comparative perspective indicates that in 1913 British income per capita was in excess of thirty percent higher than that of Germany or France; how many Britons would not now be delighted by the restoration of a similar lead relative to the current level of output per person achieved in Germany and France? Clearly, and contrary to Scott?s gloomy prognosis, on the eve of the Great War the British economy was not failing.

This somewhat negative view also colors analysis of British economic agencies, especially the firms that populated the Victorian economy, and questionable assumptions bolster a rather thin international perspective. Although Britain was the location of most of the world?s largest industrial enterprises at the time of the Great Exhibition of 1851, and probably a third of the world?s largest companies in 1912, with Germany assumed wrongly here to outstrip Britain on this count, much is made of the detrimental consequences of the relatively small size of British firms. However, the significance of firms at the lower end of the corporate spectrum is also interpreted somewhat narrowly. It is difficult to see the existence of well-developed networks of small and medium enterprises (SMEs) that had been established in Britain in the nineteenth century as, per se, a peculiarly national impediment to economic growth. After all, the significant contribution to German economic development of the Mittelstand is well-established in the literature. Moreover, Philip Scranton has told a similar story concerning the contribution of the SMEs, which also saw the development of clusters, networks, external economies and regional specialisms, to American economic development before 1939. Given these international comparisons, that suggest otherwise, and taking the long run view, I remain puzzled also by the statement that, ?Sectoral specialisation appears to have been originally developed as a means of coping with Britain?s poor inland transport links? (p. 15). It is less surprising to read, however, that ?Poverty in rural Britain was even more widespread than in towns and cities? (p. 1).

The empirical database underpinning the introductory chapters that consider regional development in a quantitative framework are provided by statistics extracted from the United Kingdom Census of Population by Clive Lee and published in his British Regional Employment Statistics 1841-1971 and the recently published associated estimates of income per capita for British regions derived by Nick Crafts. Inspection of these data prompt the undisputable conclusion that London was not only the most prosperous region within the British economy in 1871 but that it subsequently and consistently enjoyed the more dynamic economic path to the twentieth century and beyond. Taking a long-run perspective this was only the restoration of a preeminence that had its origins in Norman, Saxon or even Roman times. However, the popular and enduring appeal of the Industrial Revolution does tend to color and even distort our views of British economic development such that the much remarked upon growth of manufacturing in the peripheries, especially cotton textiles in south Lancashire, woolen textiles in west Yorkshire and ferrous metal production and processing in south Wales, central Scotland and the north east of England, crowd out the relatively undramatic and less exotic incremental developments in Bristol, Birmingham and, especially, London. And London, often regarded as synonymous with the ?South,? provided England?s most populated urban center, its cultural center, the social focus of its elite, and the political capital that served first, England, then England and Wales, then the United Kingdom and, ultimately, at least until its more recent imperial retreat, the British Empire and its world. In this sense the ?Triumph of the South? has been persistent and enduring, a process of consolidation and confirmation rather than the outcome of a late nineteenth and early twentieth century contest that saw London emerge as the dominant victor over the industrial ?North? (which often stands as shorthand for all the British periphery). Put quite simply, and galling though this is to many a subject of British crown, the South rules.

This narrative was clearly established by Lee?s The British Economy since 1700, a pioneering text sensitive to regional differentiation that might have had more credit than allowed here as it also highlights the historic significance of the London?s national and international financial predominance, the consequences of London?s role as the global market place for international services, the impact of government policy, and the nature of labor processes found in Britain?s industrial heartlands. Moreover, not only have variants upon these themes long populated the continuing debate among economists and economic historians concerning British ?Declinism? but they also informed two highly visible critiques of more recent economic policy: first, the politically significant but economically ambiguous thesis propounded in the Sunday Times in 1974 by Robert Bacon and Walter Eltis that identified Britain?s problem in their diagnosis of ?Too Few Producers? and, a decade later, the proposition that services, and especially financial services, were privileged by policies introduced by Margaret Thatcher?s governments and then continued by New Labour, with damaging consequences for industry and the ?North.? These same issues now arise with the current reconfiguration of British politics produced by our contemporary recession.

Here I would suggest that Scott?s unique selling point is, his specialist research topics indicated above apart, the strong argument he proposes concerning the detrimental consequences of London?s successes and the resultant bifurcation of the interwar British economy that operated to the detriment of the ?North.? He opines that ?the ?Dutch disease? effect of London?s growing invisibles surplus progressively crowded out the commodity exports of Britain?s provincial regions? and that this was accentuated by re-investment overseas of surpluses on invisible trade which further enhanced its ?growing comparative advantage as a rentier and services-exporting, rather than industrial, nation? such that the growth of non-wage income ?began to crowd out its provincial export industries? (p. 281). However, although this thesis of relative regional deprivation is propounded with keen enthusiasm, if not zealous certainty, it remains largely untested and leaves at least two major questions abegging. The first asks if the adoption of economic policies less permissive to economic development in the ?South? would have resulted a better outcome for those who lived and worked in the ?North,? let alone higher incomes per capita across the whole economy? The second inquires as to the nature of an alternative economic policy regime that would have produced the beneficent counterfactual implicit in Scott?s story? Both questions loomed large for contemporaries and neither prompted an easily defined or uncontested policy response. Just as today.


Boyer, George. ?Living Standards, 1860-1939,? in Roderick Floud and Paul Johnson (eds.), 2004. The Cambridge Economic History of Modern Britain, Vol. II: Economic Maturity, 1860-1939, pp. 280-313. Cambridge: Cambridge University Press.

Crafts, Nicholas. 2005. ?Regional GDP in Britain, 1871-1911: Some estimates,? Scottish Journal of Political Economy, 52, pp. 1-24.

Lee, C.H. 1979. British Regional Employment Statistics 1841-1971. Cambridge: Cambridge University Press.

Lee, C.H. 1986. The British Economy since 1700: A Macroeconomic Perspective. Cambridge: Cambridge University Press.

Maddison, Angus, 1995. Monitoring the World Economy. Paris: OECD.

Maddison, Angus (Home Page) ?Statistics on World Population, GDP and Per Capita GDP, 1-2006 AD.? Scranton, Philip. 2000. Endless Novelty: Specialty Production and American Industrialization, 1865-1925. Princeton: Princeton University Press.

Peter Wardley has written on “The Commercial Banking Industry and Its Part in the Emergence and Consolidation of the Corporate Economy in Britain before 1940,” Journal of Industrial History (October 2000) and [with Norman Gemmell] ?The Contribution of Services to British Economic Growth, 1856-1914,? Explorations in Economic History (1990). His more recent research appears in ?A Global Assessment of the Large Enterprise on the Eve of the First World War: Corporate Size and Performance in 1912,? a chapter published in Youssef Cassis and Andrea Colli (eds.) Business Performance in Theory and History (forthcoming, Cambridge University Press).

Subject(s):Urban and Regional History
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

Economics in Russia: Studies in Intellectual History

Author(s):Barnett, Vincent
Zweynert, Joachim
Reviewer(s):Samuels, Warren J.

Published by EH.NET (May 2009)

Vincent Barnett and Joachim Zweynert, editors, Economics in Russia: Studies in Intellectual History. Burlington, VT: Ashgate, 2008. xviii + 198 pp. $100 (hardcover), ISBN: 978-0-7546-6149-8

Reviewed for EH.NET by Warren J. Samuels, Department of Economics, Michigan State University.

This collection of neatly-defined and well-structured interpretive essays illustrates how written histories of economic thought can vary depending on several distinctions. One distinction concerns whose thought a historian includes. One can concentrate, following Mark Blaug, on what is understood to be economic theory, pursued by largely academic, professional economists, or, following Joseph Dorfman, also include non-academic, non-professional people. A second distinction concerns the mutual impacts of the two mentalities on each other. A third distinction has to do with the homogeneity or heterogeneity of each mentality. A fourth distinction concerns the relation of the economic system, with its distinctive economic practice and system of social control, to the two mentalities. No one of the resulting stories is necessarily correct, but one interpretation can be more accurate than another, though more than one interpretation can often relate to a particular situation.

Accordingly, Russian economic thought of Muscovy in the sixteenth and seventeenth centuries oscillated between the doctrines of mercantilism and those of the Middle Ages. The ideas of some authors remained subordinated to religious, legal and political discourses, especially the vast fusion of state and church which tended to strictly limit the range of independent thinking. Nonetheless, the principal topics were the system of land ownership, money and trade ? with written texts dominated by religious discourse and political practice influenced by mercantilist concepts.

The eighteenth century manifested the conflict between the radical economic reforms of Peter the Great and Catherine II, on the one hand, and the continuing medieval social structure, on the other. Liberal rhetoric was silenced by autocratic claims for enforcement of absolute power. Later thinkers and statesmen helped to develop the system of finance and banking, unintentionally, one supposes, establishing some of the institutional foundations of the initial Russian industrial economy of the late nineteenth century. Writers combined liberal ideas with a Hamiltonian state promoting economic modernization. The targets were given by practice and the government.

Academic research and teaching was initially institutionalized in the early nineteenth century. The teaching of political economy commenced in 1804; the first textbook in political economy published in Russia (written in French, six volumes, a compilation of Smith, Turgot, Say, et alia) appeared in 1815; and the first chair was established in 1819. Some later academicians sought to articulate the ethical foundations of economics, some of them arriving at socialism, including Christian socialism. Several essays serve to suggest that economics cannot be formulated independently of the concrete conditions of time and space, though that does not prevent differences of interpretation and formulation by scholars in any given time and place. The point obviously applies to normative economics but also to positive economics. But the story is more complex and lengthier. Selig Perlman lectured that Marxism was (more or less surreptitiously) taught in the schools before 1917. One school of interpreters argued that until the 1890s Russian economists largely followed, even imitated, Western economists. Socialist ideas gained popularity first and foremost not economists among but the educated public. In 1917 the October Revolution replaced one system of social control of belief and practice with another. In 1927 the Communist Party line ostensibly changed from world revolution to socialism in one country coupled with praise for those early economists who had been close to Marxism and denigrated the Western non-Marxist imitators. Within three years, the Soviet Union adopted collectivization, planning and industrialization. After 1991, Soviet economics was denigrated in favor of both pre-Soviet and especially, eventually, Western mainstream economics. More recently, criticism of both the handling of transition to a market economy and the increasing influence of Western mainstream economics (imitation or transfer?) has emerged, along with discussion of a ?Russian school of economics.?

That is the overall account which emerges from the thirteen chapters written by twelve authors. Each essay attempts to interpret the work of key individuals, issues or concepts of particular periods.

Chapter 1, authored by the co-editors, is a nice six-page introduction and summary. It is preceded by a very useful four-page ?timeline? of the major events of Russian history.

Chapter 2, written by Danila Raskov, examines economic thought in Muscovy.

Chapter 3 discusses the Russian version of the Enlightenment (Leonid Shirokorad).

Chapter 4 examines the ideas and contributions to institutional innovation of three reformers of the monetary system in the early nineteenth century (Alla Sheptun).

Chapter 5 interprets what amounts to conflicts between different assertions of a ?natural order,? between rationalism and empiricism, between one or more conceptual models of the economy and one or more efforts at identifying the ?actual? economy, between German idealism and French rationalism, and between liberalism, socialism, the ideas of Friedrich List, German historicism, and conservative romanticism (Joachim Zweynert).

Chapter 6 takes up the pursuit of an ?ethical? basis for political economy, namely, socialism, by Mikhail Tugan-Baranovsky, and Christian socialism, by Sergei Bulgakov (Natalia Makasheva).

Noting that the co-editors distinguish at this point between the pre- and post-1917 periods and the corresponding chapters, I move on to chapter 7, which deals with the ideas and status of A. V. Chayanov, but which also misses the opportunity to compare and contrast Chayanov and N. D. Kondratiev as agricultural economists (William Coleman and Anna Taitslin).

Chapter 8 examines Russian ?migr? economists in the U.S., and, to a lesser extent, in Europe. It helps explain the predominance of mathematical and statistical approaches to economics taken by those who escaped Hitler and Stalin which, along with the ideas and formulations of Austrian-school economists, eventually had a marked transformative impact on the mainstream of U.S. economics. Among the Austrian-School ?migr?s were Ludwig von Mises, Joseph Schumpeter, Gottfried Haberler, and Fritz Machlup. Among the Russian ?migr?s were Simon Kuznets, Jacob Marschak, and W. W. Leontief (Vincent Barnett).

Chapter 9 presents the lives and work of two Russian economists exiled in 1922, Boris Brutzkus and Sergei Prokopovich, the former a Russian Jew and economic liberal, the latter from a noble family but transformed by his investigation of West Siberian villages during the great famines of 1891-92. The two men were later among the first students of the Soviet economy although having different careers and ideas as well as origins (Shuichi Kojima).

Chapter 10 is on the debate in the U.S.S.R. during 1941-53 on the law of value, interpreted by the chapter?s author, Michael Kaser, to have been a serious blow to economics in the U.S.S.R., one administered by Stalin. During 1956-1958, however, it began to be clear that ?a significant stage in the transition of Soviet economics from Marx to Marshall was complete? (p. 154). The emergence of a relativist value theory (demand and supply theory of price) and the eclipse of an absolutist single-valued value theory (labor theory or marginal utility theory of value) came about for both political and economic reasons in both worlds. In Europe and the United States, price theory came to be seen as both more empirically meaningful and more ideologically, i.e., politically, useful; in Russia during the period covered by Kaser, labor (the labor theory of value) was increasingly seen among economists as inadequate for planning purposes and was increasingly adversely but, writes Kaser (p. 151), not arbitrarily affected by political context.

Chapter 11 identifies the years after Stalin?s death as, in effect, an amalgam of elements (Pekka Sutela). It was a period of scientism, of varieties of Soviet economics, and of stages of economic reform. The stages were: decentralization, market pricing, and incomplete transition to commodity and labor markets. The central topics of reform discussions were on enterprise self-management, and impersonal owners such as pension funds. Not surprisingly, the authorities continued to be sensitive to anything resembling private property.

In the two-page chapter 12 the co-editors observe, first, ?that the progress of economic ideas in Russia was (and still is) inextricably connected to matters of economic policy and also to issues of governmental control? (p. 187). They also urge recognition that ?recent developments in Russia … [include] a tendency [as in the past] toward the ?state capture? of key branches of the economy, increasing restrictions on political liberty, and a low conviction rate regarding serious crimes against persons critical of the Russian government such as journalists. Even if no cases, so far, have been reported of economists being subject to direct political pressure, it does not take much imagination to conceive of such a case in the near future? (pp. 187-188). The co-editors conclude with two points: they do not believe that the mix of Western and native Russian ideas constitutes ?the existence of a ?Russian school? of economic thinking? (p. 188) in the same sense as is meant by such terms as ?Austrian school,? ?Cambridge school,? or ?Chicago school.? Second, they call attention to how little the economics of Marx, Engels and Lenin have been mentioned within this volume. ?Russian economics had a long and distinguished history before 1917? and ?[Marx] was by no means a dominant figure in pre-revolutionary Russian political economy? (p. 188).

Economics in Russia can be recommended as a nicely designed and executed collection of essays which provides insight into a history of economic thought in some respects different from that of the West and in other respects rather similar.

The co-editors correctly point to the centrality of the issue of ?precisely what developmental path the country should take.? They also note ?the extensive presence of ideology in the history of Russian economic thought? and (correctly) reject the argument that it is due to the features of a ?Russian character.? They suggest that in Russia the issue of development path has been heatedly controversial since the time of Peter the Great and claim that that ?might explain (in part) why economics was more strongly politicized [in Russia] than it was in many Western countries? (p. 2).

The view that controversy over development path explains the greater politicization of economics would likely be shared by many, perhaps most, historians of economic thought. The matter of development path is indeed a central issue of economic policy. It did not, however, arise in Russia with Peter the Great. The controversy between mercantilism and medievalism, in which mercantilism was the initial stage of capitalism, was about development path and preceded Peter the Great.

The key question, however, is whether differences in degree of politicization have existed, to be explained by controversy over development path. I do not want to overdo the point but the question of degree of politicization is not only important in itself but it casts light on how decision making on and interpretation of economic policy should be handled by the historian of economic thought.

There has been no conclusive difference in degree of politicization; any such perception is a function of one?s normative selective prior assumptions. The question of development path has not been unique to Russia. It has been, for example, central to policy debate in the United States. I cite the conflict between Pilgrim religious fundamentalism and money-making (trade) as rival ways of life that arose in (more accurately, was brought from England to) the Massachusetts Bay Colony in the early- and mid-seventeenth century. The conflict continues to this day, in more complex forms and in different circumstances, most notably in presidential elections and the on-going formation of and conflict between secularism and religious fundamentalism. One was not more politicized than the other. Even if one or the other supporting group claims more than they actually want, expect or are willing to settle for, the approach to development path is at least expressed in terms of different discourses, each of which is political, whatever their content .

My view is based on several considerations, including: (1) Acceptance of the underlying fact and importance of the legal foundations of the economy, and through it the normative elements in economic policy and the choice of the incidents of the development path. Such acceptance only minimally relies on evidence founded on ideological doctrine. It especially reflects my perception of universal pragmatic practice. (2) Such pragmatism not only accurately describes the United States (and, of course, elsewhere) but has been facilitated, protected, encouraged and, more subtly, taught by the First Amendment?s rejection of an establishment of religion and its protection of the freedom of speech and of the press, and the rights of the people peaceably to assemble and to petition the Government for a redress of grievances, as well as through the use of various other clauses of the Constitution in the ?protection of property.? (I use that trope even though in other circumstances I would insist that property is property because it is protected and not that property is protected because it is property.) Pragmatism also accurately describes the jurisprudential processes through which the meaning of the Constitutional clauses and concepts themselves, e.g., property, are worked out. (3) The relatively greater heavy-handedness of the state in Russia has been either more salient or more selectively perceived than in the United States, which may reflect either ?reality? or the greater effectiveness of relatively light-handed social control in the latter country or the relatively small percentages of its population which thinks seriously of the federal government, state government, local government, indeed all government, as fundamentally infringing on their freedom. (By ?seriously,? I intend to be understood to mean something different from electoral and comparable rhetoric, but not necessarily requiring the ?litmus test? of an immediate willingness if not desire to resort to armed force in open rebellion.) (4) The multiple meanings of ?politicization? is another factor. It has been used to signify the introduction of politics (itself multiply defined) into areas of life in which it hitherto has been absent, to refer to institutions that are political (meaning having to do with decision making, or the exercise of power) by their very nature and/or to suggest that a decision has not been made on the respective merits of the relevant alternatives but in order to insinuate considerations of political-party advantage into the process. (5) Another factor is the eclipse or obfuscation of other possible paths by the success of the path actually ?chosen? and followed, perhaps as if that path was inevitable, say, due to the absolute nature of things.

It has been only (!) two to three hundred years since the eighteenth century, in which the values and policies of the Enlightenment first prospered, in which naturalism made major explicit inroads on supernaturalism, and in which society and its institutions were relatively widely seen to be a matter of policy and neither the natural nor the supernatural order of things. Ideological and normative propositions, typically having a complex relation to power, are operative in the making and conduct of policy and the social reproduction or alteration of socioeconomic structure. As for politicization, I know of no conclusive way in which a medieval or feudal structure and its world view can be conclusively shown to be more, or less, politicized than a mercantilist, capitalist or socialist/communist system. A change in power structure may (or may not) lead to a change of ideology that is typically more important than a change in power structure generated by a change in ideology. My key point is that no one ideology is more politicized than another.

Consider, for example, the interpretations of the United States made in the 1930s and in 2009. Franklin Delano Roosevelt and John Maynard Keynes were seen by many as socialists and antagonistic to capitalism whereas others saw the innovations of the New Deal as saving capitalism for the capitalists, or whomever. The amply evident present-day situation pits President Barack Obama against the Republicans of the House of Representatives. I suggest the following as a possibility ? the Republicans understand that the President?s program is geared to support business (investment) in part through bail-outs, etc., helping selected types of business rather than supporting households, especially lower- and middle-class families. The flow of spending can work, or not work, in different ways. Consider that consumption spending, even if financed by home bailouts of some sort, may lead to an increase in the expected rate of profit of businesses and a fall in liquidity preference by various groups, including those engaged in real or portfolio investment, or increase the distraction of the working class from recognizing or even speculating that it is capitalism that President Obama is saving while more or less increasing the possibility of upward mobility by the children and grandchildren of the masses, which is what President Obama seems at least to desire. (The reader will recall that in their concluding chapter, Barnett and Zweynert note a tendency in Russia ?toward the ?state capture? of key branches of the economy? (p. 187). It would be ironic if the bailout and stimulus packages (notice the play of metaphors) (and, to a lesser but not insignificant degree, the imposition of moral and/or legal constraints on the remuneration of corporate executives) that have become (as of April 2009) the centerpiece of the Obama administration?s anti-depression policy represented an area of Galbraithian (or other) convergence between U.S. capitalism and Russian post-Soviet organization; and possibly even more ironic if the packages represented the capture of business(es) by government in place of or in addition to business capture of government agencies and branches.)

Assume the foregoing is a meaningful account. Joseph Schumpeter pointed out the irony of a European labor party successful at the polls yet, instead of being able to introduce socialism (whatever that might have meant to them), they became the managers of a continuing, if somewhat revised, capitalism. In the dialectic of politics it is sometimes, perhaps often, the continuing task of each party both to abet and to limit the other, for example, in Moscovy. Performing that task transcends the vagaries of ideological perception.

If investment increases (say. due to an increase in the expected rate of profit generated by a newly optimistic psychology), income will tend to increase, as will also consumption. The reverse will also likely happen, i.e., a story of shocks coupled with either positive or negative multipliers. One point is the multiplier account. Another point is that, ceteris paribus, income can change as a result of a policy-induced change in either consumption (working, through the expected rate of profit, on investment) or investment (working, through the marginal propensity to save, on consumption). Each sequence is accompanied by its heroic account. One group of voters applauds one; another resonates with the other. Those who invoke a one-sided view of the two processes narrow the possibilities permitted by economic theory. But neither view is more ideological or more politicized than the other. The same applies to tax versus subsidy externality policies.

Religious people who are successful in life in their own mind, may tend to dispose of their discretionary income in a trade-expanding way; similarly, people engaged in trade who are successful may act in a religion-enhancing way. Neither practice is more ideological or more politicized than the other.

Apropos, therefore, of this and other books, on the Russia of Moscovy, policy might have reflected Eastern Orthodoxy or mercantilism or both, but be interpreted as the opposite. I submit, first, that any story told about the different pieces of Russian history, like that of the U.S., could stress one side or the other, yet the evidence remain incapable of conclusive affirmation of either side. I submit, second, that neither Eastern Orthodoxy nor mercantilism is more ideological or more politicized than the other. I submit, third, that any one-sided choice of a story is a function of sentiment or ideological position coupled with a desire to have a seemingly absolute account whose value is more important for influencing present-day policy than for interpreting the past. I should not be understood as attributing such to the motives of either the editors or the other authors, but to the logical situation of interpretation. There is no one complete, true history; there are interpretations.

One reader of a draft of this review suggested that by the time that the questions of politicization and of controversy over development path were largely and practically ?solved? in the Western countries, they were still on the agenda in Russia. I believe that they have neither ever been solved nor off the agenda in the Western countries. To that reader politicization means the entry of policy and ideology into practical solution policies and into economic theory; that it is impossible to either estimate the degree of politicization or eliminate it; and that its degree and meaning depend on political and legal arrangements, hierarchical system of power and so on. This reader also feels that no history of economic thought can be the ?true? story, only a story bearing signs of their time, place and the views of the people who were engaged in doing economics. This reader also believes that intellectual history cannot be reduced to one or two problems, however important they might be: intellectual history is a multi-stream process.

Another reader of the draft identifies as a missing issue differences in state attempts to control intellectual discourse. The actions can take different forms: the termination or intimidation of professors who challenge the dominant political ?line? or ?consensus,? government funding of economic research with a pronounced bias favoring ?mainstream? research where ?mainstream? reflects both professional orthodoxy and the economic system around which orthodoxy and the national economy is built, and so on.

All of which suggests that the work of contemporary historians of economic thought is richer and less presumptuous than the work of earlier generations. The history of economic thought is itself a vast interpretive field with numerous opportunities for interpretation.

Warren J. Samuels is Professor of Economics, Emeritus at Michigan State University. He is the founding editor of Research in the History of Economic Thought and Methodology. His book of essays on the use of the concept of the invisible hand is in the initial stage of the production process.

Copyright (c) 2009 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (May 2009). All EH.Net reviews are archived at


Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

The Patron?s Payoff: Conspicuous Commissions in Italian Renaissance Art

Author(s):Nelson, Jonathan K.
Zeckhauser, Richard J.
Reviewer(s):Barnes, Bernadine

Published by EH.NET (February 2009)

Jonathan K. Nelson and Richard J. Zeckhauser, The Patron?s Payoff: Conspicuous Commissions in Italian Renaissance Art. Princeton: Princeton University Press, 2008. xviii + 234 pp. $39.50 (hardcover), ISBN: 978-0-691-12541-1.

Reviewed for EH.NET by Bernadine Barnes, Department of Art, Wake Forest University.

Much of Italian Renaissance art history is centered on the artist and how life experiences determine the appearance and meaning of art objects. This is a tendency with roots in the Renaissance (particularly in the writings of Giorgio Vasari) and carried on in numerous ?life and works? books found on many a coffee table. The patron in these sorts of studies is often cast as the oppositional character in the drama of artistic creation. A test of wills ensues and (of course) the artist wins out, producing the great painting or sculpture that we now admire. Patronage studies ? usually less glossy ? attempt to balance the picture, and the best of them examine with subtlety how works of art convey the patron?s ideas about power and belief. However, this shifts our focus from the intention of the artist to the intention of the patron. Indeed, Dale Kent?s recent monograph on Cosimo de? Medici?s patronage is even subtitled ?The Patron?s Oeuvre,? suggesting a body of work that ?expresses? the personality of the man who paid for the art, rather than its makers? personalities.

Nelson and Zeckhauser take a different approach, one that avoids the two-player drama. They see the relationship of the patron and artists as more collaborative, and yet self-interested on both sides. The authors use game theory and the economics of information as frameworks to recast the relationships. In short, the patron is seen as the principal in a transaction, initiating the project and specifying certain desired outcomes; the artist, on the other hand, is seen the agent, charged with fulfilling these desires and financially rewarded for completion of the project. The principal/patron has a stake in the project because it is a visible sign of his/her status; the artist agrees to work on behalf of the patron to make products that will achieve this end while increasing his own value for future commissions. There are costs involved for both parties ? not just monetary costs, but costs of effort and the possibility of failure. Finally, both artist and patron work within constraints ? not only financial limits, but also limitations due to availability of prime locations and the best artists, and the more intangible constraint of decorum.

All this effort is aimed at an audience that is always variable and sometimes invisible, since some of the most important members of the audience are heavenly. While the choices made by patron and artist can be documented with some precision, the responses of the audience are, as the authors admit, almost always conjectural. Sometimes audience reactions are voiced in surviving letters, but usually these are filtered through the opinions of those who wrote treatises or biographies. In an age before incessant surveys, these really cannot be considered a cross-section of viewers who actually saw the painting, or even of the intended audience ? which may be defined as a more restricted and knowledgeable group who could make sound judgments about the merits of the art or its message.

Nelson and Zeckhauser carefully explain game theory and the economics of information in the introduction, where they provide examples that draw from everyday experience (indeed they use their own project as one of those examples) and clarify how this approach differs from more typical patronage studies. The first and second chapters further define the players, costs, and constraints involved in ?the patronage game?; the examples in these chapters are chosen from a wide array of Italian Renaissance commissions. The third chapter deals with signaling based upon the work of Michael Spence, who provides a forward to this book. Again, Renaissance ideals and practices provide examples, and they include discussions of magnificence in treatises, using fine majolica containers for pharmaceuticals, and the strategy of staging a triumphal procession for an aspiring duke. Finally in the fourth chapter, the authors discuss examples of signposting and stretching, wherein art serves to highlight positive or disguise negative messages about the patrons. Most of the examples in this chapter are portraits well-known to art historians, but they are given fresh interpretations when seen through the lens of these concepts.

The five concluding chapters present case studies. The first, by Nelson and Zeckhauser, considers the costs of acquiring and decorating private chapels in Florence, as well as costs for services like masses that can be considered ?tie-ins? for these projects. Here the benefits to patrons come in the forms of social prestige and spiritual well-being, and the authors demonstrate how patrons made trade-offs depending on their position in Florentine society. In his essay on patronage by the fourteenth-century members of the Alberti family, Thomas Loughman explores how strategies meant to enhance prestige in republican Florence could extend through generations. Kelley Helmstutler Di Dio focuses on the sculptor Leone Leoni and the manner in which Leoni called attention to his wealth and learning in the design of his own home, while downplaying any reference to his (still not well appreciated) profession. (Although I couldn?t help but wonder if the predominance of sculpture on the facade of his remarkable house in Milan isn?t in itself a proclamation of pride in his profession.) In an interesting essay on Mantegna?s Madonna della Vittoria, Molly Bourne suggests that the ?victory? proclaimed by the painting was questionable ? the patron Francesco II Gonzaga used the imagery to ?spin? his image to viewers who did not know the facts. The final chapter, by Larry Silver, is a broad-ranging test of the theories, using an assortment of examples including Rubens?s work for Marie de? Medici, the status-conscious collecting practices of wealthy women in nineteenth century America, self-portraits of artists, and buildings like the Isabella Stewart Gardner Museum and Rubens?s house.

These are all well-written, interesting, well-researched essays, varying in chronological range and in geographical focus. Most of the authors see the patrons controlling the situation, although artists? attempts to signal status are demonstrated in the essays dealing with self-portraits and artists? houses. Art historians are very attuned to the ways paintings, sculpture, or architecture convey prestige, so it probably is no surprise that the authors of the case studies make use of signaling and signposting, rather than working through details of costs and constraints, and how each player ? patron and artist ? negotiates within these constraints. The framework that Nelson and Zeckhauser construct in the first chapters of the book suggests more can be done with cost-benefit analyses, and their own discussion of the Carafa chapel in Santa Maria sopra Minerva in Rome provides a good example. Here, Carafa?s choice of locations and his attempts to wrest Filippino Lippi away from his work for the wealthy Filippo Strozzi in Florence are documented in written sources, while changes to drawings suggest ways that the patron controlled the appearance of arrogance in the milieu of papal Rome. The close examination of this evidence points to the benefits of collaboration ? not just between artist and patron, but between art historian and economist.

Bernadine Barnes is a professor of Renaissance art history at Wake Forest University. Her most recent book is Michelangelo in Print: Reproductions as Response in the Sixteenth Century (forthcoming, Ashgate Publishing, 2009).

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):Medieval

Genres of the Credit Economy: Mediating Value in Eighteenth- and Nineteenth-Century Britain

Author(s):Poovey, Mary
Reviewer(s):Mitch, David

Published by EH.NET (January 2009)

Mary Poovey, Genres of the Credit Economy: Mediating Value in Eighteenth- and Nineteenth-Century Britain. Chicago: University of Chicago Press, 2008. x + 511 pp. $59 (cloth), ISBN: 978-0-226-67532-9.

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

In recent decades, literary critics have generated a body of scholarship that they have come to label the New Economic Criticism. This body of work defies ready summary but suffice it to say that it represents the interest of literary critics in economic literature and matters economic from a variety of perspectives. It has become sufficiently extensive to be the subject of the edited volume by Woodmansee and Osteen (1999). New economic critics are publishing book length studies with major academic presses, hold important chairs in university literature departments (e.g. Marc Shell at Harvard, Catherine Gallagher at Berkeley), and are producing new generations of literature doctorates. Mary Poovey (Samuel Rudin Professor in the Humanities and Professor of English, New York University) is one of the leading new economic critics and her latest work Genres of the Credit Economy can be seen as a contribution to this field and certainly draws heavily on it; on pages 10-14 she provides her own distinctive overview of this field of literary criticism.

Poovey?s book itself is an exercise in what could be called genre analysis and it is both apt and ironic as she herself notes on p. 14 that her latest work further confirms her own originality in producing new intellectual genres. This ability is already on display in one of her earlier books, A History of the Modern Fact (1998), which can be described as a history of epistemology in work on economic and social affairs. That book put forward the plausible, albeit provocative, claim that by the first half of the nineteenth century, writers on economic and social affairs had come to emphasize quantitative measures regarded as objective facts as the foundation of knowledge and policy discussion in contrast with a previous skepticism of such facts. The social constructionist perspective evident in her 1998 book is amply on display in her latest effort. To my mind, she is fundamentally correct in the underlying premises both of her earlier book and of her new one. A History of the Modern Fact presumes that ?quantitative objective facts? in actuality entail considerable amounts of political and social interpretation (e.g. election vote counts, census population totals, national income measures, cost of living and poverty indexes). Her latest book presumes that the functioning of a modern credit economy fundamentally entails elements of trust. I suspect that one could readily find widespread agreement with both premises with the latter in particular being perhaps self-evident. However, in the case of her earlier book there are issues to be raised regarding her chronology of changing cultural attitudes towards quantification in social affairs, her degree of mastery of vast bodies of both contemporaneous literature and more recent historiography, and the extent to which the changes in epistemological cultural attitudes she maps out are primarily relativistic or have entailed genuine social progress. For a quite skeptical take on Poovey?s earlier book by a leading historian of science see Margaret Jacob?s essay in History and Theory (2001).

?Genres of the Credit Economy states in its opening sentences that it tries to address two questions that arise from Poovey?s earlier book: ?If the kind of knowledge that contemporary society values is really the modern fact, then why does the discipline of Literary studies matter? What can Literary scholars do?? (p. 1). As Poovey explains in a footnote to this passage, these dilemmas arise insofar as prioritizing facts tends to devalue the activity of interpretation, the activity that would seem the focus of Literary studies. Although Poovey at points (p. 14) labels her latest book as a history, its chronological development is less linear than in her previous History of the Modern Fact. Her latest book alternates between tracing general intellectual trends and fine-grained textual analysis of specific works; she jumps back and forth in time in her consideration of various genres. After setting forth her general thesis that imaginative, economic, and monetary forms all emerged as distinctive genres in response to the rise of a credit economy, the core of Poovey?s text consists of detailed readings concentrating on modes of argumentation, organization, and style in selected works of economic and imaginative literature written in Britain between 1650 and 1870.

Poovey acknowledges that other intellectual genres that she does not consider were involved in the modern differentiation of economics and literary criticism; she points in particular to natural philosophy (p. 5). However, she notes ?a conviction that many contemporary scholars share ? that economics and Literary studies have some special relationship to each other.? She goes on to argue that the two fields should be studied together because of a common concern with what literary critics term the problematic of representation. Poovey defines the problematic of representation as ?one way scholars describe the gap that separates the sign from its referrant or ground (of value or meaning), whether the gap takes the form of deferral, substitution, obscurity? (p.5). It is perhaps apparent why the relation between sign and referrant should be an on-going concern of literary scholars; however, she argues that financial crises have also brought this problem to the fore in the fields of economics and finance and that it is useful to consider the parallel treatments of this problem in the cases of the two disciplines. She also takes note of the frequent employment of financial themes by nineteenth century British novelists.

Another term sometimes used by literary critics also recurs throughout her discussion: naturalized (or alternatively naturalization). By naturalization Poovey means a process by which behaviors which are initially new and strange and hence subject to suspicion and scrutiny become customary and taken for granted. She emphasizes its importance for the use of new types of monetary instruments in a credit economy: ?money has been naturalized: through the social process that I describe in this book, money has become so familiar that its writing has seemed to disappear and it has seemed to lose its history as (various forms of) writing? (p.3). To highlight the significance she attaches to these two terms, she introduces each of them by placing them in italics in the text (pp. 3, 5). And one of Poovey?s central claims is that both naturalization and the problematic of representation were central to functioning of money in the rise of the modern credit economy.

In a preamble, she describes the emergence of imaginative literature, financial writing, and monetary instruments as distinctive written genres over the course of the eighteenth century in Britain. She argues that all three genres developed as ways of ?naturalizing? the use of money and hence of dealing with the problematic of representation inherent in monetary instruments: that such instruments frequently only symbolize some underlying item of value without guaranteeing access to the item itself.

The first two self-identified chapters of the book consider writing about money in the seventeenth and eighteenth centuries. The first chapter takes up the attention given by contemporaries between the late seventeenth and early nineteenth century to the problematic of representation inherent in money. She backs into this through looking at J.R. McCullough?s collection of pamphlets dealing with money. She gives particular attention to Joseph Harris? ?An Essay upon Money and Coins? published in 1757-58, in which he challenges the ideas that either the imprint on a coin?s face or its metallic content is its source of value. Then after quickly touching on Locke?s views on the nature of money, she fast-forwards to debates in the early nineteenth century involving Ricardo, McCullough, and Macaulay among others on the desirability of convertibility between coins, paper money, and bank notes. In the last section of the chapter, Poovey offers the intriguing suggestion that writing regarding money in the eighteenth century frequently blurred the distinction between fact and fiction and she identifies a fact/fiction continuum in this regard. The second chapter looks at episodes in what she identifies as generic differentiation of treatments of Money. She notes that Defoe?s work frequently blurred fact/fiction distinctions and in particular focuses on a manuscript of his since labeled Roxanne. Poovey argues that it was later editors who classified this work as fiction; she suggests that one of Defoe?s aims in this text was the non-fictional one of explaining the workings of credit. One example of the insights her literary background provides is her observation (p. 98) that Defoe employed the classical oral rhetorical device of elaboration, i.e. offering long lists in order to engage listeners in an imaginative flight, in written form, with a similar aim of engaging the reader?s imagination. She turns to parallels between James Steuart?s work on Political Economy and Fielding?s novel Tom Jones, noting similarities in the treatment of personal character in each. She then notes Adam Smith?s more abstract mode of argumentation in contrast with Steuart?s more fictionalized narrative. The chapter concludes with observations on the blend of fact and fiction in Thomas Bridges? Adventures of a Bank-Note (1770-71), a work based on depicting the perspective on passing surroundings a bank note might have as it made its way from holder to holder, including intervals when tucked in a woman?s bosom (p. 149).

A first ?interchapter? then takes up the rise of book publishing and of the issuance of bank commercial paper. This really constitutes her brief notes on matters that are pertinent to issues elsewhere in the book; as she notes herself, these issues have been taken up in much greater depth by other authors; indeed each of these topics deserves and has been given book length treatment by others and I did not find the 17 pages she devotes to them sufficient to add much further insight to this other work.

Chapters three and four take up the emergence of economic writing as a distinctive set of genres in the early nineteenth century. Chapter three takes note of increasing skepticism about the workings of the growing credit economy. It examines publications by critics of paper money such as William Cobbett and John Francis Bray. Chapter four takes up the differentiation of writing on economic theory from financial journalism. After giving relatively brief attention to David Ricardo?s employment of abstraction in his theoretical work, she focuses at some length on J.R. McCullough as a writer engaged in both economic theory and journalism. She then turns to Walter Bagehot?s and D. Morier Evans? emergence as specialized economic journalists while attributing to William Stanley Jevons the effort to define economics as a narrow specialist science, giving particular attention to his interest in developing a sun spot theory of the business cycle. Poovey?s general argument in this chapter is that economic journalism and abstract economic theory became increasingly differentiated in the early to mid nineteenth century as part of a social process of naturalizing credit instruments. Economic journalists such as Bagehot and Evans instilled familiarity with the financial system and depicted the occasional crash or panic as an aberration from normal stability. At the same time the emergence of abstract economic science as practiced by Jevons with his work on sunspot theory ? precisely because it employed arcane, mysterious techniques apparently at variance with observable reality ? in Poovey?s view helped establish an expertise which could testify to the value of bank money. This authority provided a way of dispelling doubts about credit instruments implied by the problematic of representation.

Chapter Five then turns to literary authors and suggests that Wordsworth and Coleridge were keen to separate aesthetic from commercial value in literature. Poovey suggests that their concerns were motivated by the growth in demand for cheap popular publications. In a second interchapter, Poovey notes that recent work by literary critics on Harriet Martineau employs formal aesthetic criteria of organic unity in evaluating Martineau?s work though claiming to deviate from literary formalism. She then proposes an alternative approach to interpretation she labels ?historical description? as a means of engaging with texts while placing them in a larger historical narrative. She illustrates her approach in Chapter Six which offers meticulous readings of novels by Austen, Dickens, Eliot, and Trollope focusing on passages in which financial matters come to the fore. Her arguments include the audacious economic determinist claim that Jane Austen?s Pride and Prejudice was in large degree a response to the Bank Restriction Act of 1797: the breach of promise to redeem bank notes with gold explicit in the Bank Restriction Act according to Poovey motivated Austen?s interest in portraying Elizabeth Bennett?s concern about her potential broken promise to thank Mr. Darcy.

The book concludes with a four page ?Coda? in which Poovey bemoans both the low current prestige of literary studies in comparison with that of economics in modern American and British universities and the divide that has arisen between the two disciplines.

Recent economic events would seem to make it abundantly evident that the modern economy is a credit economy and that loss of confidence in credit instruments and their underlying connection to value can wreak economic havoc. Thus, Poovey?s theme is certainly timely. The book itself raises numerous stimulating questions and surveys a wealth of literature both past and more contemporary with which I, for one, was not previously familiar.

One general issue of evaluation posed by her book is that implied by the questions she poses in her introduction ? namely whether a post-modernist literary critic can bring any useful tools to bear in understanding the history of economics, economic history or modern economics. Quite possibly, new economic critics, including Poovey, are aiming their work primarily at fellow literary critics; but as Poovey herself wonders in the passage cited above from her introduction, should those outside of this guild take the burgeoning body of work by new economic critics seriously?

Difficulties are certainly evident with the scope of Poovey?s book. While the range of her reading is impressive both in contemporary sources and in the more recent historiography both of social scientists and literary critics, there are notable omissions in her surveys of relevant literature. Moreover, at points she openly acknowledges not having completed her scholarly homework and assumes an alarmingly nonchalant attitude about not having done so. These issues surface when at points she fails to distinguish or at least elides the fields of economic history and the history of economic thought. This shows up in a particularly egregious manner in her introduction (pp. 9-10) in which she admits her inability to trace out the relationship between the modern discipline of economics and its nineteenth century precursors and blames this on the lack of interest of modern economists in the history of their discipline. She then states (p. 10), ?I can only hope that some day an economic historian will write a version of this history from the other side so that Literary scholars like myself can see how this discipline?s present informs the way we understand its past.? I presume that she means ?historian of economics? rather than ?economic historian? in this passage. Poovey clearly has done some reading in the history of economics and indeed even cites such standard works as Schumpeter?s History of Economic Analysis. I am not clear on what are the requirements for Poovey?s desired ?history from the other side? or why Schumpeter?s work or Mark Blaug?s less compendious Economic Theory in Retrospect or the Warren Samuels, Jeff Biddle, and John Davis edited Companion to the History of Economic Thought would not suffice. It would seem that Poovey simply ran out of energy in trying to master the history of economics as well as modern economics. So why undertake to write the parallel histories of economics and literary criticism from a modern perspective unless one is prepared to take on the admittedly formidable task of reading reasonably deeply in the comparison discipline as well as one?s own discipline? Later (p. 94) she claims that ?economic historians rarely consider Defoe?s writing at any length.? However, the works she cites to illustrate this are all histories of economics. No mention is made of early modern economic historian Peter Earle?s book entitled The World of Defoe.

Given Poovey?s focus on the rise of the credit economy, a particularly glaring omission from her bibliography is Anne Goldgar?s Tulipmania (2007), which provides particularly rich documentation of the psychological reactions and issues of trust and betrayal associated with the mid-seventeenth century Dutch tulip bubble. Perhaps Goldgar?s book came out too late for Poovey to incorporate it in her own analysis. In her discussion of the problem of monetary shortage no mention is made of the important study by Thomas Sargent and Francois Velde, The Big Problem of Small Change (Princeton, 2002).

Central parts of Poovey?s argument are often based on a complex and extensive secondary literature. While she does have her own distinctive take or twist in most of these instances, she frequently does not succeed in the space she has allotted in convincingly expounding the arguments and evidence in question. For example, her claim that money is simply one form of written literary genre comes across as a bit contrived in the 25 pages she devotes to it in comparison with Deborah Valenze?s book length study, The Social Life of Money in the English Past or Carl Wennerlind?s article ?Money Talks but What Is It Saying? Semiotics of Money and Social Control.? Poovey (p. 59) does acknowledge and cite extensively from Valenze?s work while arguing for her own greater emphasis on the role of other written genres in naturalizing money as a genre.

I found the organization and coverage of Poovey?s book rather fragmented and indeed cubist in nature; by cubist, I mean offering shifting perspectives on a given object rather than a cohesive, continuous overview. This may in large part reflect her unabashed use of the tools of literary criticism. Rather than attempting any sort of comprehensive or connected overview, Poovey picks and chooses particular works for intensive analysis. While her choices are intriguing, they also seem idiosyncratic. I was unaware before reading Poovey?s book of Thomas Bridges? Adventures of a Bank Note; and its premise of a banknote?s eye view of the world is interesting. However, it is less evident to me that this work is central to understanding eighteenth century literature on finance.

Although Genres of the Credit Economy considers examples of how the fields of economics and literary criticism treat the problematic of representation, at the end of the day it doesn?t really develop the comparisons and contrasts between them. This, in part, stems from the book?s cubist organization as it jumps back and forth between time periods and subject areas and genres without offering a developed concluding chapter that pulls together her take on how writing on finance and economics has dealt with the problematic of representation inherent in financial markets in comparison with how literary studies have done so.

Poovey?s book itself has the phrase ?mediating value? in its subtitle; at points she does take up the contrast between market value and aesthetic value. And she does note issues regarding the influence of market criteria on aesthetic values raised both by nineteenth century authors and subsequent critics; both groups of writers essentially employed aesthetic values to assess the workings of the market. Yet she does not consider work by economists that discuss the engagement between the market and the aesthetic, both using the market to evaluate aesthetics and the use of aesthetics to evaluate the market. Thus no mention is made of the work of David Galenson, among others, that uses art auction prices as a means of assessing relative artistic or aesthetic merit or the work of Tyler Cowen that argues that market forces of competition lead to cultural richness and diversity rather than bland homogeneity, as is commonly alleged. Nor does she consider arguments by Cowen (2008) regarding how literary works can provide fodder for developing economic models, nor Frank Knight?s claim that ?economics is a branch of aesthetics and ethics to a larger degree than of mechanics? (1935, p. 97) ? and she only briefly touches on the work by McCloskey regarding rhetorical forms in economic argument.

Poovey?s choice of end point for her study in the 1870s would seem to derive from her focus on the relationship between the problematic of representation and the rise of the credit economy. She argues that by the 1870s the field of economic theory had become differentiated from financial journalism. Both endeavors in her view served to naturalize how the credit economy deals with the problematic of representation ? financial journalism by providing familiarity and economic theory by providing the authority of the technical expert. In the meantime, imaginative writing and literary criticism had begun to develop its own distinctive approach to the problematic of representation through emphasizing elite aesthetic values over popular taste in literature.

However, by abruptly ending her account of disciplinary differentiation in the 1870s, it seems to me that Poovey forestalls consideration of important aspects of both continuity and change central to understanding evolving contrasts and relationships between the economic and literary fields of endeavor. One literary genre that has been persistently used by economists and writers on economics over the centuries as a means of reaching general audiences is the parable and its kindred, the fable and the allegory. She does give some mention to Daniel Defoe?s and Harriet Martineau?s use of the parable. Yet the continuity of this tradition would seem worthy of further consideration. She makes no mention of Mandeville?s Fable of the Bees (though she does give brief attention to Mandeville in History of the Modern Fact). And after taking up Martineau in the second interchapter, Poovey drops further consideration of this genre. But notable nineteenth century practitioners include Frederic Bastiat in France and more recently in the U.S. Paul Heyne and Russell Roberts, as well as the pseudo-nominal Angus Black and Marshall Jevons among others. (Richard Stern, the novelist, was invited to review Marshall Jevons? Fatal Equilibrium for the Journal of Political Economy under George Stigler?s editorship and Stern did not give it very high literary marks.) Perhaps Poovey?s focus on the financial sector accounts for her decision to treat this genre only briefly. However, Hugh Rockoff?s article on the Wizard of Oz as a monetary allegory and subsequent literature (Hansen 2002; Dighe 2002) suggests scope for literary critics to consider the persistence of this genre even with a narrower focus on financial and monetary matters.

The employment of the genres of the parable, fable, and allegory in economic writing raises the more general question of whether an examination of the relationship between economics and literature should focus on how each field has engaged with ethics, the nature of human happiness, politics, and social policy. It can be argued that increasing concerns to establish economics as a science, with strong empirical and formal foundations ? i.e., to distinguish economics from political economy on the one hand and to emphasize the importance of aesthetic, conceptual and formalistic concerns in the study of literature on the other ? have displaced or at least obscured an underlying concern with ethics and human well-being common to both economics and literary studies. These are issues of long standing pedigree (see for example the work of Frank Knight, Lionel Robbins, Matthew Arnold, Chris Baldick, Wayne Booth, and Deirdre McCloskey). While this theme is not given much consideration in Poovey?s book, it is a central focus in the book by Poovey?s student, Claudia Klaver, A/Moral Economics. However, many of the key developments in this regard in both disciplines seem to me to have occurred in the later nineteenth and early twentieth century as each became increasingly centered in academic institutions. Despite Poovey?s claim that it is common concern with the problematic of representation that leads to an inherent affinity between economics and literature, one might well think that the underlying architectonic discipline is ethics rather than economics or literary criticism despite intellectual imperialistic tendencies of each of these latter two disciplines. But Poovey?s 1870 cutoff for her study would seem to preclude examination of this issue.

Poovey?s take on the differentiation of economics and literary studies does allow for both external, societal influences and internal disciplinary considerations in both fields. However, it seems to me that she does put more emphasis on external social influences in the cases of economics and financial journalism than literary studies, casting British economists and financial journalists as running-dog lackey apologists for an emerging credit economy. One danger of genre analysis is that genres themselves become reifications based on overly rigid boundaries between fields of intellectual endeavor. One central issue she poses is the degree of specialization which has occurred not only between such broad spheres of endeavor as writing on economic affairs and imaginative literature but also within such spheres. One of the chief merits of Poovey?s study is bringing into play a rich array of ephemeral and journalistic publications in conjunction with more enduring classics of economic theory. Poovey?s underlying premise is the common presumption of the inevitability of increasing intellectual specialization. In her account, eighteenth century writers such as Defoe and Smith covered a broad range of topics even within a given work ? with Defoe in particular blurring the fact and fiction distinction in his coverage of financial affairs. Then in the early nineteenth century, in her view, work on economic theory came to be distinguished from writing aimed at popular audiences, in turn distinguished from coverage offered by financial journalists. Similarly, literary writers were increasingly concerned to emphasize the importance of distinctive aesthetic imperatives from those of the market for popular literature. In her concluding ?Coda,? she suggests that in the early twenty-first century, it is unusual for academic economists to produce work aimed at a general audience, citing in a footnote Steven Levitt?s Freakonomics and Robert Shiller?s Irrational Exuberance as exceptions, while it is even rarer in her reckoning for literary critics to write for general audiences.

However, taking the case of economics, it is of interest to consider longer term trends in the extent to which prominent economists have continued to cross the borders or even simultaneously engage in not only academic work on economics but also economic policy making, business endeavors, and writing aimed at student and general audiences, even if economists in general are not necessarily renaissance people. One can begin with the case of David Ricardo, who at various points in his career engaged in stock broking and service in Parliament as well as writing on economics. If Ricardo?s writing on economics was in some sense more intellectually specialized than Adam Smith?s, he was far more engaged than Smith in business and political endeavors. And although Poovey depicts William Stanley Jevons as emblematic of the narrowing of economics into a largely theoretical, mathematical, and university-centered discipline, she considers only his work on marginal utility and sun spot theory. She makes no mention of Jevons? influential policy-oriented publications including Methods of Social Reform, The State in Relation to Labour, and The Coal Question. And there is certainly a long line forward of prominent academic economists who have been active in policy circles as well as producing introductory textbooks and other literature aimed at general audiences such as Alfred Marshall, John Maynard Keynes, Paul Samuelson, and Milton Friedman. Currently Ben Bernanke?s introductory economics textbook is still in print and coming out in new editions while he serves as Federal Reserve chairman following his quite successful academic career at Princeton and another Princeton academic, Paul Krugman, the latest Nobel laureate in economics, is also an introductory textbook author, New York Times columnist, and television talking head ? to name just a couple of many possible current examples. And academic economists have also pursued financial ventures, as the notorious 1997 episode of Nobel-laureates Robert C. Merton?s and Myron Scholes? involvement in the Long-term Capital Management debacle illustrate. In other words, the increasing specialization of texts by genre does not necessarily reflect a corresponding specialization of the authors who write them. In the case of economics, one could explain some of this by the extensive market both for textbooks and popular economic commentary in contrast with, say, fine imaginative literature. Publishers, perhaps, have much stronger economic incentives to induce leading economists to produce introductory textbooks and work aimed at popular audiences than to do the same for literary critics. Books by Jacques Derrida, Michel Foucault, or Stanley Fish may not have the sales potential of those by Milton Friedman or Paul Krugman. But this still leaves the ongoing pattern of those who have pursued successful careers in both academic economics and economic policy-making from John Maynard Keynes to Lawrence Summers.

A parallel issue unexplored by Poovey and presumably occurring after her end period of the 1870s is the apparent increasing separation between those who write imaginative literature and those who produce criticism of it. The examples of literary criticism she cites in chapters 5 and 6 are primarily by those also engaged in imaginative writing such as Wordsworth, Coleridge, and Trollope. This raises the question of whether the divide between those who write imaginative literature and those who produce literary criticism has become wider than the gap between those who write on economic theory, those who craft economic policy, those who write economic journalism, and those who engage in financial affairs. And if this is the case, what accounts for the greater degree of specialization by those engaging in literary studies than in economic studies? Have the underlying ethical commitments of economists to social well being been stronger than those of more ivory tower literary critics? Although Poovey does not explore these issues, her mode of genre analysis should at least be credited for giving rise to them.

Poovey mentions J.R.McCullough?s activity as a book and pamphlet collector but omits consideration of those in subsequent generations who engaged in this activity. Some might infer that an increasingly analytical mind set resulted in the extinction of the economist bibliophile, although Poovey herself does not explicitly state this. However, W.S. Jevons, who in the eyes of literary scholars such as Claudia Klaver and Poovey had quite narrow analytical interests, in fact appears to have been a quite keen economics bibliophile. By Keynes? account, Jevons transmitted this bug onto the famed economics book collector and Cambridge economist, Herbert Foxwell. And Keynes himself was an avid antiquarian book collector (Keynes, Essays in Biography; Harrod, Life of Keynes). The importance of the book and pamphlet collector for establishing the dimensions of various intellectual realms and genres may warrant further consideration. Foxwell?s collections formed the basis for both the Goldsmith?s and Kress libraries and these collections have now entered electronically searchable cyberspace as the Making of the Modern World database. Keynes thought highly enough of Foxwell?s contributions to economic science as to pen a 23-page obituary for the Economic Journal on Foxwell?s demise in 1936.

Despite the limitations that I think are evident in Poovey?s book, the genre perspective she offers is worthwhile for pointing to alternative intellectual boundaries and for posing questions that may not readily occur to those working within the disciplines she considers. She usefully brings into play a rich array of contemporary and ephemeral literature bearing on economic and financial matters. And her notion of the fact-fiction continuum raises interesting issues about alternative relationships between evidence and theory. The new economic criticism more generally can be seen as providing economists and more specifically historians of economics and economic historians a means of addressing what could be called the Robert Burns problem: seeing ourselves as others see us. My own impression is that while historians of economics and economic historians have not totally ignored the new economic criticism, they have hardly embraced it with enthusiasm. Offsetting any inclination to welcome those with an interest in one?s own subject matter, are likely primordial instincts to defend professional turf boundaries and claims of scholarly expertise. Furthermore, I suspect that much of the new economic criticism is grounded in an ideological outlook that some historians of economics would perceive as uncongenial. Thus Poovey in her concluding Coda (p. 419) refers to ?the longing for an alternative to the market model.? The extent and complexity of this body of work is a further reason for outsiders to neglect it; the new economic criticism, at least from this reviewer?s limited experience, is not an easy read yet there seems lots of it to process before one can claim to have much sense of it. Nevertheless, the new economic criticism probably does deserve further attention by historians of economics and economic historians. As Robert Burns reminds, seeing ourselves as others see us can free us from many a blunder and foolish notion as we become more aware of the louses crawling on our own bonnets.


Matthew Arnold (1869), Culture and Anarchy.

Chris Baldick (1983), The Social Mission of English Criticism 1848-1932, Oxford: Clarendon Press.

Frederic Bastiat (1845), ?The Candle Makers? Petition,? Economic Sophisms.

Mark Blaug (1997), Economic Theory in Retrospect (fifth edition), Cambridge: Cambridge University Press.

Wayne C. Booth (1988), The Company We Keep: An Ethics of Fiction, Berkeley: University of California Press.

Angus Black (1970), A Radical?s Guide to Economic Reality, New York: Holt, Rinehart & Winston.

Angus Black (1971), A Radical?s Guide to Self-Destruction. New York: Holt, Rinehart, & Winston.

Thomas Bridges (1770-71), Adventures of a Banknote (four volumes). Reprint: New York: Garland, 1975.

Robert Burns (1786), ?To a Louse: On Seeing One On a Lady?s Bonnet, At Church.?

Tyler Cowen (2000), In Praise of Commercial Culture, Cambridge: Harvard University Press.

Tyler Cowen (2004), Creative Destruction: How Globalization Is Changing the Worlds? Cultures, Princeton: Princeton University Press.

Tyler Cowen (2008), ?Is a Novel a Model? in Sandra J. Peart and David M. Levy eds. The Street Porter and the Philosopher: Conversations on Analytical Egalitarianism, Ann Arbor: University of Michigan Press.

Ranjit Dighe (2002), The Historian?s Wizard of Oz: Reading L.Frank Baum?s Classic as Political and Monetary Allegory, Westport, CT: Praeger Publishers.

Peter Earle (1977), The World of Defoe, New York: Atheneum.

Robert Frank and Ben Bernanke (2008), Principles of Macroeconomics, New York: McGraw-Hill/Irwin.

David Galenson (2001), Painting Outside the Lines: Patterns of Creativity in Modern Art, Cambridge: MA: Harvard University Press.

Anne Goldgar (2007), Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, Chicago: University of Chicago Press.

Bradley Hansen (2002), ?The Fable of the Allegory: tThe Wizard of Oz in Economics,? Journal of Economic Education, 33 (3): 254-64.

Roy Harrod (1951), The Life of John Maynard Keynes, London: Macmillan.

Paul Heyne (1973), The Economic Way of Thinking, Chicago: Science Research Associates.

Margaret Jacob (2001), ?Factoring Mary Poovey?s A History of the Modern Fact,? History and Theory, 40 (May): 280-89.

Marshall Jevons (1985), The Fatal Equilibrium, Cambridge, MA: M.I.T. Press

William Stanley Jevons (1866), The Coal Question: An Enquiry Concerning the Progress of the Nation and the Probable Exhaustion of Our Coal-mines, London: Macmillan.

William Stanley Jevons (1882), The State in Relation to Labour, London: Macmillan.

William Stanley Jevons (1883), Methods of Social Reform and Other Papers, London: Macmillan.

John Maynard Keynes (1936), ?William Stanley Jevons,? Journal of the Royal Statistical Society.

John Maynard Keynes (1936), ?Herbert Somerton Foxwell,? Economic Journal. Reprinted in The Collected Writings of John Maynard Keynes. Vol.X, Essays in Biography, London: MacMillan St. Martin?s Press.

Claudia C. Klaver (2003), A/Moral Economics: Classical Political Economy and Cultural Authority in Nineteenth-Century England, Columbus: Ohio State University Press.

Frank Knight (1935), ?The Ethics of Competition.? Reprinted in The Ethics of Competition and Other Essays, New York: Harper.

Frank Knight (1935), ?Economic Psychology and the Value Problem.? Reprinted in The Ethics of Competition and Other Essays, New York: Harper.

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Steven Levitt and Stephen J. Dubner (2005), Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, New York: Harper Collins.

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Bernard Mandeville (1924), Fable of the Bees: or, Private Vices, Publick Benefits (With a Commentary Critical, Historical, and Explanatory by F.B.Kaye), Oxford: Clarendon Press.

Deirdre McCloskey (2006), The Bourgeois Virtues: Ethics for an Age of Commerce, Chicago: University of Chicago Press.

Donald McCloskey (1985), The Rhetoric of Economics, Madison: University of Wisconsin Press.

Mary Poovey (1998), A History of the Modern Fact: Problems of Knowledge in the Sciences of Wealth and Society, Chicago: University of Chicago Press.

Lionel Robbins (1932), An Essay on the Nature and Significance of Economic Science, London: Macmillan.

Russell Roberts (2002), The Invisible Heart: An Economic Romance, Cambridge, MA: M.I.T. Press.

Russell Roberts (2006), The Choice: A Fable of Free Trade and Protectionism (third edition), Prentice Hall.

Russell Roberts (2008), The Price of Everything: A Parable of Possibility and Prosperity. Princeton: Princeton University Press.

Hugh Rockoff (1990), ?The Wizard of Oz as a Monetary Allegory,? Journal of Political Economy 98 (4): 739-60.

Warren J. Samuels, Jeff E. Biddle, John B. Davis, editors, (2003), A Companion to the History of Economic Thought, Malden, MA: Blackwell Publishing.

Thomas J. Sargent and Francois R. Velde (2002), The Big Problem of Small Change, Princeton: Princeton University Press.

Joseph Schumpeter (1954), History of Economic Analysis, London: Allen and Unwin.

Robert J. Shiller (2000), Irrational Exuberance, Princeton: Princeton University Press.

Richard G. Stern (1986), ?Review of The Fatal Equilibrium by Marshall Jevons,? Journal of Political Economy 94 (3): 683-84

Deborah Valenze (2006), The Social Life of Money in the English Past, Cambridge: Cambridge University Press.

Carl Wennerlind (2001), ?Money Talks, But What Is It Saying? Semiotics of Money and Social Control,? Journal of Economic Issues 35 (3): 557-74.

Martha Woodmansee and Mark Osteen, editors (1999), The New Economic Criticism: Studies in the Intersection of Literature and Economics, London: Routledge.

David Mitch is Professor of Economics, University of Maryland, Baltimore County (email: He is the author of ?Market Forces and Market Failure in Antebellum American Education: A Commentary? Social Science History (Spring, 2008). He is currently revising an essay on ?Chicago and Economic History? for the forthcoming Elgar Companion to the Chicago School of Economics and is also working on high stakes educational testing in Victorian England.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):Europe
Time Period(s):19th Century