Published by EH.Net (May 2022).

Lawrence H. Officer. A New Balance of Payments for the United States, 1790–1919: International Movement of Free and Enslaved People, Funds, Goods and Services. New York: Palgrave Studies in American Economic History, Palgrave Macmillan, 2021. xxxiii + 415 pp. $150 (hardcover or paper), ISBN 978-3-030-66098-7.

Reviewed for EH.Net by John Devereux, Department of Economics, Queens College, City University of New York.

This book provides a definitive treatment of the U.S balance of payments from 1790 to 1919. There is rich U.S tradition in this area. The 1960 NBER volume Trends in the American Economy in the Nineteenth Century contained two seminal articles on U.S external transactions. Douglas North covered 1790 to 1840, while Matthew Simon covered 1840 to 1916. Three years later, Robert Lipsey produced his estimates of the U.S external terms of trade after 1879. North went on to win the Nobel Prize in Economics. Lipsey had a distinguished career at the NBER and Queens College. Simon, also of Queens College, died in 1968. For the last 60 years their magisterial work has formed the basis for what we know about U.S. external transactions over the eighteenth and early twentieth centuries.

Much has changed since the early 1960’s. So it is time for a fresh look at historical measures of the U.S balance of payments. Accordingly, Lawrence Officer set out to revise North and Simon. To accomplish this, he gathered the information, published and unpublished, that has appeared over the last six decades. He also revisited earlier sources – including sources missed by North and Simon. It has taken him ten years, but he has accomplished his task in this book.

Officer has two objectives. The first is to put the U.S balance of payments from 1790 to 1919, where the official series begin, on a consistent basis, as previous work joined together series which were often incomplete and which used different approaches and different measures. More importantly, Officer expands coverage and improves the quality of the estimates. It would take a much longer review to even list the improvements in existing series. But the creation of new measures of the U.S net asset position and better measures of service trade are particularly noteworthy. The effort required to accomplish all of this is immense.  Consider the estimates for tourism. This requires 82 series for ocean fares (p. 283). In addition, Officer has to construct a new U.S CPI, and he generates measures of domestic U.S passenger transportation for rail, stagecoaches, etc.

Officer’s thoroughness is shown by the fact that he revisits earlier work by going back to the original sources and correcting errors of transcription, etc. He accomplished all of this, it would appear, working on his own without an army of research assistants. North, Simon, and Lipsey benefitted greatly from the institutional support of the NBER. Alas, the NBER no longer fills this function and Officer works on his own. The resulting book is a model of scholarship – he presents all his results; he outlines his methods and assumptions; he is modest and thoughtful; and he is generous in his praise of earlier work. Indeed, he dedicates the book to North and Simon. North is, of course, a towering figure. But Simon is a forgotten scholar whose wonderful work deserves recognition. Officer’s criticisms, when he makes them, are measured and fair.

The book is a major contribution to U.S economic history. To be sure, it does not change the broad outlines of what we know about U.S trade and foreign indebtedness before 1919 – North and Simon did their work well. But Officer puts the estimates on a firmer basis. Take the external terms of trade. Officer covers commodity and service trade for the entire period where most work in economic history is for commodity trade. He improves deflators and replaces the fixed weight price indices with a more appropriate deflator. The result is that we now have an external terms of trade series for the U.S from 1790 to now that is superior to the estimates for other developed economies. Throughout, Officer either improves on previous work or he provides new series.

Overall, the book is a monumental effort and its mastery of disparate sources puts it on a par with classics such as Lebergott (1964). It will surely stimulate further research. Officer’s early work on the dollar-pound exchange rate is partly responsible for the literature on long run real exchange rates which rehabilitated purchasing power parity (see Lothian and Taylor, 1996). This book will have a similar impact. To provide one instance, the improved measures of U.S foreign assets/liabilities will facilitate work for economic history along the lines of Lane and Milesi-Ferretti (2007).

The book is not an easy read. Officer starts off with a review of previous estimates. Next, there is a long digression on the movement of people. Following this, he outlines how he constructs each series, chapter by chapter. Only at the end of the book does Officer draw the series together and talk about his overall results. I would prefer that he start with the big picture. Throughout, the writing is dense and assumes considerable knowledge. To understand the basic issues with historical measures of U.S external transactions, the reader is advised to consult North and Simon before starting Officer. There are other difficulties. Officer provides important new series, but the summary statistics do not indicate how they differ from the old. Given the extensive reliance on interpolation, it would also help if he gave some indication of possible error margins. All in all, these are minor quibbles. A more serious problem is that some of the most important series appear only as diagrams – including the external terms of trade and the various price series. This is due to space constraints, but it is unfortunate. The author, or the publisher, should consider making all the series available in spreadsheet form on their websites.

References

Lane, Philip R., and Gian Maria Milesi-Ferretti. (2007) “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004.” Journal of International Economics 73: 223-250.

Lebergott, Stanley. (1964) Manpower in Economic Growth: The American Record Since 1800. New York: McGraw-Hill.

Lipsey, Robert E. (1963) Price and Quantity Trends in the Foreign Trade of the United States. Princeton: Princeton University Press for the National Bureau of Economic Research.

Lothian, James R., and Mark P. Taylor. (1996) “Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries.” Journal of Political Economy 104: 488-509.

North, Douglass C. (1960) “The United States Balance of Payments, 1790-1860.” In NBER Conference on Research in Income and Wealth, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth, Vol. 24. Princeton: Princeton University Press for the NBER.

Simon, Matthew. (1960) “The United States Balance of Payments, 1861- 1900.” In NBER Conference on Research in Income and Wealth, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth, Vol. 24, Princeton: Princeton University Press for the NBER.

John Devereux is professor of economics at Queens College, City University of New York. His areas of research are International Economics and Economic History.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

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Jeff Biddle. Progress through Regression: The Life Story of the Empirical Cobb-Douglas Production Function. Cambridge: Cambridge University Press, 2020. xii + 334 pp. $110 (hardback), ISBN 978-1108492263.

Reviewed for EH.Net by Alexander J. Field, Professor of Economics, Santa Clara University.

Jeff Biddle has written an intellectual history of the Cobb-Douglas production function. Actually, he argues, it’s a history not of the function itself, which predates Cobb and Douglas, but a method for estimating its parameters using ordinary least squares, to wit, regressing the log of an output measure on a constant and logs of labor and physical capital inputs. To be fair, the study offers some of both.

The concept of a production function is best understood in the context of an agricultural experiment station. The yield of a plant (output) can be thought of as dependent on the quantities of a variety of inputs: water, fertilizer, sunlight, for example. The incremental (marginal) products of these different inputs can be measured through controlled experiment, varying the amount of one input while everything else is held constant. From such data one can hope to identify and describe mathematically a function linking the flow of output to the amounts of various inputs, and the rapidity with which the incremental product declines with additional doses, holding other inputs constant. The production function for a particular plant species would be understood to have a real, objective basis in biochemistry, and could be assumed to be similar for all specimens of the same species.

Substitute a particular physical product for an agricultural crop, and the concept, it would seem, can be extended to manufacturing. The production function would now reflect an underlying engineering reality and could be assumed similar in different establishments or firms producing the same good. Given observational data on different combinations of inputs, the underlying function could in principle be identified.

But that’s not what mathematician Charles Cobb and economist Paul Douglas actually attempted. Initially they ran time series regressions where the unit of observation was the entire U.S. manufacturing sector, followed by a study on Massachusetts and then estimates using data from the state of Victoria in Australia. There were and are multiple problems in extending the biological analogy to these larger aggregates and including on the right-hand side just two aggregated inputs, labor and capital. Both are heterogeneous, capital much more so than labor. One can perhaps argue that labor has a natural metric, the person-hour or person-year, but there is no such metric for the wide variety of physical capital goods. Although one would like measures of capital service flow, one will almost invariably be stuck with gross or net stock data serving as proxies. And even if depreciation in market value of different vintages of different types can be measured accurately, service flow deterioration will in almost all cases run more slowly than the decline in market value (depreciation). The extreme case is Oliver Wendell Holmes’ one hoss shay, which fell apart all at once after 100 years. The service flow (and presumably the rental rate) remained the same for a century, but a 98-year-old shay would still command a much lower market value than one which was new or almost new.

Robert Solow dismissed the prospect of calculating capital service flows as “utopian” (1957, p. 314), but today the Bureau of Labor Statistics and other OECD statistical agencies do make a run at it, distinguishing between productive stocks, constructed to grow pari passu with service flows, and wealth stocks (what the Bureau of Economic Analysis calculates). Economics researchers seem largely unaware of these procedures, or, arguing that deterioration in service flow runs geometrically at the same rate as the declines in market value, maintain that a distinction between productive and wealth stocks is unnecessary.

Assuming one does have measures of productive stocks, should there be a utilization adjustment? Douglas felt as did Solow and others after him, that one was needed. My own view is that its desirability is questionable, given that deterioration of fixed capital service flow is largely unaffected by how intensively buildings or equipment are used. The rate at which a building’s roof wears out, or a machine becomes obsolete, are illustrative of forces other than utilization that can govern both deterioration and depreciation. Douglas regretted he was not able to make such an adjustment; Solow made one.

There remains the problem of how one aggregates a sectoral output consisting of many different types of physical products. Is it acceptable to use value added? And the challenges continue. Assuming one can develop plausible measures of the service flows from aggregated labor and capital, is it reasonable to assume that the production functions used in making different products are all the same? Really? Elasticities of substitution are the same, as are the marginal products of ‘capital’ and ‘labor’? Doesn’t that present serious aggregation problems? And, in a cross-section regression, if the production functions are indeed the same across different products, and both market and input markets are all perfectly competitive, wouldn’t all firms and all sectors exhibit the same proportions of capital to labor (at least in long term equilibrium), in which case the regression would suffer from extreme multicollinearity, making it nearly impossible to estimate parameters of an aggregate production function with any degree of precision?

The challenges seem daunting. And yet I would hazard that a sizable majority of economists and economic historians (present company included) refer in their research and teaching to Cobb-Douglas functions, often acutely aware that they are engaged in some hand waving. In describing the initial and continuing reaction to the Cobb-Douglas enterprise, Biddle’s book discusses almost all of these concerns, and gives economic researchers an opportunity to reflect on the nature of their own handwaving and whether or not it is justified given the uses to which their inquiries are put. It is particularly useful to revisit the language used by scholars such as Solow (pp. 248-49) or Zvi Griliches (pp. 294-95) as they finesse these issues and compare their rationales with one’s own.

The book is primarily focused on developments from the 1920s through the 1970s and is divided into two main parts, each with three chapters, followed by a concluding chapter (part III). The materials studied for the most part are published journal articles, and the method for each is to provide an explication of the key arguments along with varying degrees of commentary and evaluation. Following a brief introduction, chapter 1 covers the initial time series studies as described in Cobb and Douglas’s 1928 American Economic Review article and Douglas’s 1934 book, The Theory of Wages, along with initial reactions and criticisms, and subsequent time series studies by Douglas and coauthors.

Chapter 2 is principally focused on debates with economist Horst Mendershausen, who came at Cobb and Douglas from several directions. The most damaging argument was that one could not simply assume “the” production function remained unchanged over multiple decades, and use variation in capital and labor inputs to identify a function that was in fact a moving target. Mendershausen would not be the last to raise this objection. It is perhaps not accidental that around this time Douglas switched from time series to cross-section studies. This avoided some of the hoary problems of adjusting for price changes of capital goods in accounting for depreciation and net additions in building up an inflation adjusted time series of a physical capital wealth stock. But, in moving to cross sectional data with different industries serving as the unit of analysis, one could still wonder whether all industries faced a similar production function. Cleverly, Douglas used the possibility that a few did not in explaining large residuals (differences between the predicted and actual value of production based on his regression estimates) (p. 100). Other complaints voiced by Mendershausen revolved around the fact that all three of the key series moved upward fairly systematically over time – as well as questions about whether it was reasonable to maintain the hypothesis that output was the dependent variable and labor and capital were independent right-hand variables. A number of authors argued that the question of which was dependent and which independent should be decided by “objective” statistical inquiry, whereas Douglas argued, I think convincingly, that one could use knowledge about how the world works to justify the assumption that labor and capital service flows produced output, rather than vice versa.

Douglas’s academic career was interrupted in 1942 when he enlisted in the Marines and then, following a short postwar coda, ended when in 1948 he ran successfully for the U.S. Senate. Chapter 3, the final chapter in part I, covers Douglas’s presidential address to the American Economic Association (AEA), in which he summed up his contributions, as well as additional commentary and criticism from the 1940s. The latter included Jan Tinbergen’s observation that in the cross-sectional studies, variations across industries in capital-labor ratios could come about only if different industries had different production functions, or if different regions faced different labor or capital supply conditions, and thus different factor prices. But the latter could not be the case if input markets were truly competitive. The chapter continued with discussion of papers by Melvin Reder, Martin Bronfenbrenner (an earlier coauthor with Douglas) and Jacob Marschak and William J. Andrews. In his valedictory address to the AEA, Douglas mentioned none of these (p. 130).

Part II of the book is concerned with “diffusion” of Douglas’s research program, spotlighting research in two areas that grew out of his initiative: agricultural economics (chapter 5) and growth accounting (chapter 6). Prior to developing these two “case studies”, in chapter 4 Biddle covers three somewhat unrelated developments during the 1950s: the treatment of the Cobb-Douglas research program in the first econometrics textbooks, the 1957 critique by E.H. Phelps-Brown, and the development of the CES (constant elasticity of substitution) production function of which the Cobb-Douglas function was a special case. Chapter 5 is organized around the work of Earl Heady and a group at Iowa State University. The appeal of the research program within that subdiscipline has already been mentioned. Even where the studies were observational rather than experimental, the greater prevalence of single product firms and the practical questions farmers were concerned with helps explain why the research program was attractive.

Chapter 6 covers growth accounting. With the burgeoning postwar interest in economic growth came empirical attempts to partition advance into the portion attributable on the one hand to input growth conventionally measured and on the other hand to scientific, technological, and organizational progress. The fundamental growth accounting equation is obtained by differentiating both sides of the Cobb-Douglas function with respect to time and can be estimated by running the change in the log of output against a constant and changes in the logs of capital and labor inputs. In that sense the efforts are an offshoot of the Cobb-Douglas program. Biddle acknowledges however, that few growth accounting studies used this method, instead preferring a pure accounting exercise, with the residual calculated as the difference between real output growth and a weighted average of the two key inputs.

One can still argue that growth accounting has a lineage stretching back to Cobb-Douglas. These weights are usually based on factor shares, and Cobb and Douglas maintained that the coefficients on labor and capital they were estimating should equal marginal productivities, which in turn would be reflected in factor shares. But one can question whether that linkage really matters for growth accounting. One of the attractions of such work is that it can be less demanding of commitment to some of the standard production function baggage (p. 280). Even if one remains agnostic about marginal productivity theory, one can argue that weighting by factor shares remains as good a practice as any, and proceed accordingly. Biddle makes an interesting point in crediting Solow with explicitly tying the growth accounting program to the production function framework, insisting that one was separating shifts of a production function from movements along it (p. 251). Indeed, Biddle sees that as Solow’s most important contribution, since little else in the 1957 article can be said to be truly original.

This book can be read profitably by those with interests in the twentieth century history of economics and econometrics, and, more specifically, in production functions and attempts to estimate them. I acknowledge and respect the efforts of the author to be fair to all participants, but at times I wished for a more consistent balance of exposition and evaluation. A work such as this can add value if the author can capture with more clarity and in shorter compass what the original author(s) argued. Simply recapitulating the main arguments, however, can invite readers to ask whether it would not be better simply to read the original texts, a query I frequently posed and acted upon (almost all of the articles are available on JSTOR). Now and again in the book Biddle offers his own judgments. I would have appreciated more articulation of his point of view.

A minor issue: the author repeatedly uses the words homogenous and homogeneous interchangeably. Only the latter is appropriate in charactering a mathematical function.

Reference:

Solow, Robert M. 1957. “Technical Change and the Aggregate Production Function.” Review of Economics and Statistics 39 (August): 312–20.

Alexander J. Field is the Michel and Mary Orradre Professor of Economics at Santa Clara University. He is the author of A Great Leap Forward: 1930s Depression and U.S. Economic Growth (Yale University Press, 2011) and The Economic Consequences of U.S. Mobilization for the Second World War (Yale University Press, October 2022).

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Jenny Jansson. Crafting the Movement: Identity Entrepreneurs in the Swedish Trade Union Movement, 1920–1940. Ithaca, NY and London: ILR Press, an imprint of Cornell University Press, 2020. xi + 200 pp. $19.95 (paperback), ISBN 978-1501750014.

Reviewed for EH.net by Erik Bengtsson, Associate Professor of Economic History, Lund University.

The first sentence of this book is: “The Swedish reformist labor movement of the twentieth century constitutes a success story.” Jansson, a political scientist at Uppsala University, says, “A strong Social Democratic Party–Socialdemokratiska arbetarpartiet (SAP)—and high union density paved the way for an extensive and comprehensive welfare state and diminishing wage inequality,” and that a “key component” in this success is “the labor movement’s extraordinary ability to mobilize the majority of the working class early on in its mission.” The purpose of Jansson’s book is to explain why the Swedish trade union movement chose a reformist way in the interwar period when, after the radical challenges of the 1910s (Syndicalism, Communism), they had to handle radical critiques and dissent. The authors suggests that the reformist way was connected to the success of the Swedish labor movement.

Her argument centers on the actions and strategies of trade union leaders, who in Jansson’s parlance acted as “identity entrepreneurs.” The trade union leaders recognized competition from the radical trade union confederation SAC (founded in 1910) and from communists in their own unions and acted strategically to reinforce a reformist identity among rank and file trade unionists.

After an introductory chapter which briefly presents the context and the argument, chapter 2 gives a more comprehensive context under the headline of “Problems identified by the LO leadership.” Here we are introduced to the syndicalist unions and to the communists challenging reformist leadership within the dominant LO (Landsorganisationen, or Trade Union Confederation) federation of unions. Chapter 3, “A plan for identity management,” studies the LO leadership in the early 1920s and how they identified the radical challenges and handled them. The LO leaders strengthened their control over the Workers’ Educational Association (ABF), created a new trade union magazine to spread news and ideology to unionists, reinforced reformist agitation among rank-and-file unionists and non-unionized workers, and in 1929 started a central school (Brunnsvik) for trade union education. Chapter 4 analyzes identity construction in the educational materials spread among LO members through the Workers’ Educational Association. The focus is on the syllabi and literature for the courses “Trade union studies” and “Organizational studies.” Chapter 5, “Implementing the education strategy,” which is the longest chapter, combines the national level with the local level as it presents the evolution of workers’ education in Sweden in the 1920s and 1930s on the aggregate level, as well as a local study of workers’ education in the mill town of Skutskär, dominated by the Stora Kopparberg corporation. Chapter 6, clocking in at 10 pages, provides the conclusions of the book.

Crafting the Movement is a focused, interesting study of the role of workers’ education in the Swedish labor movement. It is a slim volume which presents its argument in a lean, efficient way. On the way, we learn much about the role of workers’ education in the history of Swedish Social Democracy. However, there is also a problem with the slimness of the presentation, not on the empirical level but for the overarching argument to convince. Jansson states, with reference to research in organization studies, that “the process of identity formation is never completely top-down because ‘organizational members are not reducible to passive consumers of managerially designed and designated identities’.” (p. 45) But in the conclusions to another chapter, she states that “Organizational members can indeed be controlled through identity formation.” (p. 99) In practice, the analysis to a high degree follows the latter formulation: organization leaders are front and center in the analysis, and the rank and file appear to be an anonymous mass that is molded by the leaders to the right reformist way of thinking.

Jansson presents the years around 1920 as a “critical juncture” (pp. 43, 157) for the Swedish labor movement, choosing between reformism and revolutionary ways, but I would argue that a fuller explanation of the earlier history would show that the revolutionary way was less likely as an alternative than it seems in Jansson’s account. There were surely communists and syndicalists in Sweden, but for historical reasons, they never became as powerful as in, say, Germany, Italy, or Spain. Geoff Eley, in the classic survey of European labor movements Forging Democracy (2002), discussed why some national labor movements became predominantly revolutionary and others predominantly reformist. Eley showed how late extensions of suffrage fostered cooperation between liberal and labor parties, and the Swedish case, where national suffrage before 1909 was given only to one fifth of adult men and no women, is a very good example of this. As Eley points out, in Sweden, Liberals and Socialists collaborated around the overarching aim of universal suffrage in the 1890s, 1900s and 1910s, and this strengthened the reformist vein in the SAP (Eley, pp. 67–68). We should remember that it was a Liberal-Social Democratic coalition government that carried through the reform of universal suffrage in 1918. Historians like Madeleine Hurd (Public Spheres, Public Mores, and Democracy: Hamburg and Stockholm, 1870-1914, 2000) and Sven Lundkvist (Folkrörelserna i det svenska samhället 1850–1920, 1977) have also shown how the Swedish labor movement was colored by its decades of collaboration with Liberals, and studies of workers’ libraries by Marion Leffler (Böcker, bildning, makt: Arbetare, borgare och bildningens roll i klassformeringen i Lund och Helsingborg 1860-1901, 1999), Hans Larsson (Tidstecken : Stockholms arbetarbibliotek och samhällskroppens utformning, 1892-1927, 1989) and others have shown the degree of “bourgeois” influence on workers’ reading already around the turn of the twentieth century. Against this background, the choice of a reformist strategy in the early 1920s appears less as the outcome of a completely open “critical juncture,” and more as the outcome of a decades-long tradition of politics and workers’ education. This by no means invalidates Jansson’s emphasis on the strategic use of workers’ education to strengthen the reformist tendency in the trade unions, but her argument would have been more well-rounded and precise had she positioned it against this background of popular movements and workers’ libraries, back to the 1870s.

In the concluding chapter, Jansson discusses the contributions of her study as: “By constructing an organizational identity based on reformism, the LO undoubtedly helped mobilize workers to vote for the SAP. By identifying that dynamic, this study presents one more piece in the puzzle of understanding the strength of the SAP. However, this book’s main contribution to understanding Sweden concerns labor market relations rather than the political party sphere.” (p. 164) She points to a key finding of the book: “The novel aspect that this study brings to industrial relations research in general, and to understanding Swedish industrial relations in particular, is that the spirit of consensus was established among the workers before the Basic Agreement was reached.” (p. 165) At least since the study of Walter Korpi and Michael Shalev (“Strikes, Industrial Relations and Class Conflict in Capitalist Societies,” 1979) it has been an accepted stylized fact that the Swedish labor market in the 1920s was one of the most strike- and lockout-intensive in the industrialized world, in contrast to the spirit of cooperation after 1938. However, Jansson in her reconstruction of the reformist ideology of the union leaders in the 1920s shows how by then the leadership was already propagating a conciliatory view of the employers and their organization. In this way, Jansson’s study has presented new evidence both on the reformist road of the Social Democratic party in Sweden, and on the road to union-employer collaboration in the Swedish labor market.

Erik Bengtsson is Associate Professor of Economic History at Lund University. His research focuses on historical income and wealth distribution, and political history.

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Published by EH.Net (May 2022).

Louis Hyman. Temp: The Real Story of What Happened to Your Salary, Benefits, and Job Security. New York: Penguin Books, 2018. xii + 388 pp. $17 (paperback), ISBN 978-0735224087.

Reviewed for EH.Net by Sanford M. Jacoby, Distinguished Research Professor of History, Management, and Public Policy, University of California, Los Angeles.

Louis Hyman’s Temp is a history of what economists term “alternative work arrangements” and others “the gig economy.” Despite the title, workers supplied by temp agencies form only one part of the book. It also considers other types of nonstandard workers: independent contractors, on-call workers, and workers provided by contract firms. The book rests on the assertion that the standard employment model—characterized by direct, dependent employment of substantial duration, with some risk insurance provided by the employer—is giving way to these alternatives. Some of the same terrain has been canvassed in Erin Hatton’s historical study Temp Economy (2011) and David Weil’s The Fissured Workplace (2014).

Temp is gracefully written, straddling general and academic audiences. The sweep is broad, covering the last seventy years. Temp contains original archival material, especially on Manpower, one of the largest and earliest (but not the first) temp agencies.

Chapter 1 discusses the origins during the 1930s of “good jobs”—the standard employment model that was propelled by unions and by New Deal labor policies. The next three chapters examine the rise of new employment models during the postwar decades. First came the growth of temporary clerical positions staffed by women supplied by agencies like Manpower. Lacking pensions, health insurance, and the expectation of continuous employment, temps were cheaper than full-time workers. Chapter 3 is a brief history of McKinsey, the consultancy, which adopted another alternative to standard employment, the up-or-out partnership. Chapter 4 turns to the Bracero guest worker program, which began in the 1940s as a way of regulating low-wage farmworkers brought from Mexico. Hyman views the Braceros as a precursor to widespread reliance on undocumented workers.

Chapters 6 through 9 focus successively on the three decades between 1960 and 1990. Manpower and McKinsey adapted to the multidivisional (M-form) conglomerates and multinational corporations of the 1960s, but then had to shift gears as those organizational forms unraveled during the 1970s and 1980s. It all came together in Silicon Valley in the 1980s, where consultants advised tech companies to adapt to cyclical and product life-cycle instability not only with temps but a panoply of other job types: on-call workers, independent contractors, freelancers, and undocumented workers. It’s unclear how employers choose among these options, which vary in their economic and regulatory logics.

Chapter 11 is the book’s longest, where we meet the downsizing and restructuring of the 1990s, with the focus mostly on tech. It led to the burgeoning of “temp slaves,” “Microserfs,” and “disposable workers”—the Gen-Xers closed out of stable jobs in the corporate core. The narrative passes quickly through other topics, including subcontracting and misclassification, as well as leased workers.

The last two chapters jump to the present. First we meet Uber and Instacart, and also the scheduling algorithms that have turned retail and other jobs into a just-in-time system of on-call work. It gets confusing when robots, blockchains, digital cooperatives, and bitcoin are tossed into the mix. Finally, the book takes a stab at public policies to ameliorate the loss of income and employment security that full-time jobs provide. Here Hyman pieces together a melange of proposals that are in the zeitgeist: infrastructural spending to take up labor market slack created by robotization and offshoring; revision of labor and employment law to accommodate gig work; and a universal basic income that would ameliorate the insecurity of flexible work. Flexibility, says Hyman, is the new reality, and rather than fighting it “we can find a way to provide a new American dream that is, in essence, the oldest one of all—to declare our independence.”

One concern with the book is that it’s overambitious. It moves rapidly through a plethora of topics, so that the analysis becomes superficial in several places. General readers may welcome the fast pace, but academics may find themselves overwhelmed by generalizations. What is variously called a thesis, guiding argument, or central theory is difficult to discern.

Contrary to the book’s thrust, alternative work arrangements are not sweeping the labor market. The share of employment accounted for by temps, contract workers, and on-call workers was stable between 1995 and 2017. The fourth and largest group—independent contractors—saw its employment share rise two-tenths of one percent during that period. In all, alternative work arrangements represent about 10 percent of jobs (not including part-time work). These data are from the Bureau of Labor Statistics. A re-analysis by Katharine Abraham and Susan Houseman finds an increase in alternative arrangements from 1995 to 2005, and a subsequent decline nearly to the 1995 level. They also find that dissatisfaction with alternative work arrangements is high. Most workers do not like most of these jobs.

In Europe, alternative arrangements are more heavily regulated than in the Anglo-Saxon countries, out of a concern that it’s important to protect full-time jobs. Recently, however, the UK and US have stepped up regulation. Courts and regulators have ruled that Uber drivers and other gig workers actually are employees who have been intentionally misclassified to cut costs, as with temp workers during the 1950s. On the other side are economists, like the late Alan Krueger, and employers like Uber, who assert that gig workers can’t be jammed into the Procrustean bed of the standard employment model. Hyman seems to agree with that assertion but could have done a better job defending his position.

Despite these criticisms, the book surely will find its way into these policy debates. I found its breadth impressive, the evidence original and interesting, and the prose engaging.

Sanford M. Jacoby (sanfordjacoby.com) is Distinguished Research Professor of History, Management, and Public Policy at the University of California, Los Angeles. He is the author of Labor in the Age of Finance: Pensions, Politics, and Corporations from Deindustrialization to Dodd-Frank (Princeton University Press, 2021).

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Published by EH.Net (May 2022).

Libor Židek. Centrally Planned Economies: Theory and Practice in Socialist Czechoslovakia. London and New York: Routledge, 2019. xiii + 257 pp. £29:59 (paperback), ISBN 978-0-367-72862-5.

Reviewed for EH.NET by Nigel Swain, Department of History, University of Liverpool.

It is difficult to know how to react to this work. Books on central planning in Eastern Europe are a rarity, so it is to be welcomed on those grounds. Czechoslovak central planning does not figure greatly in the literature because, discounting the blip associated with the Prague Spring, it scarcely reformed its economy, so a book on Czechoslovak central planning is doubly welcome. The book is unique in including interviews with individuals involved in the planning process. Furthermore, a generation of students for whom Eastern European-style socialism is an unknown universe could potentially learn much from the sections of boxed text that provide concrete illustrations of more abstract discussions.

But Židek has been poorly served by his publishers. This is a book by Czechs, for Czechs, written in Czechish. Little thought has been given to adapting his manuscript to a western audience or to the basic editorial values of clarity and concision; and it screams out for native-English-speaker copy editing. It is a difficult read and, sadly, the Czechish is least comprehensible in its unique contribution: the interviews. The book makes little reference to the established western literature on central planning but is deeply indebted to Czech-language secondary sources with which most western readers (including myself) will be unfamiliar.

The first chapter is written by Lucie Coufalová and presents the context in which the planning system operated, the formal and informal institutions of the socialist system. There is a Czech contradiction in its framing: it adopts the now-orthodox theoretical perspective of totalitarianism, yet it is at its best presenting specificities and complexities which do not easily fit this theory: the multi-party political structure, the loyalty oaths that teachers had to swear, the elements of the Criminal Code most commonly used to prosecute dissidents, the rules for foreign travel, high levels of divorce and abortion, the relative insignificance of religion, the standard tropes of ‘those who do not steal from the state, steal from their families,’ and endemic, minor corruption.

The remainder of the book covers reasonable topics: the theoretical background of Marxism-Leninism, the formal structures of planning, the practice of planning, macroeconomic results, followed by a conclusion. But there is much repetition and circularity. Themes are constantly reprised for no clear reason. The chapter on theory reveals nothing new, but surprisingly there was almost nothing on the labour theory of value, which Hungarian economists certainly took seriously, even if pricing there, as in Czechoslovakia, was ultimately based on trial and error. The chapter on formal planning structures contains some interesting information about the specifics of the Czechoslovak model and the role of the ‘production economic units’ (VHJ). There is much that is new for the cognoscenti, but the significance of the detail is not made clear. Czech and Slovak readers will learn in much detail how their socialist economy functioned, but Anglo-Saxon readers will struggle to distinguish the general from the particular.

The fourth chapter, on the system in practice, is where the interviews come into their own, but the reader is distracted by sections recapitulating issues, such as ownership and nationalisation, which have been considered previously. There then follows a discussion of planned versus market in which Židek seems to accept that a market of a kind existed because negotiations took place at all levels in the planning hierarchy. Eventually, the standard features of centrally planned economies emerge: shortages and stockpiling of goods and workers generally and hiding reserves from planners in particular; pursuit of enterprise or, more accurately, managerial, rather than national interests; soft budget constraints; the influence of the party at both local and national levels; all-pervasive ignorance within an imaginary omniscient planning hierarchy, which could be mitigated to an extent if you had the right contacts. In the (slightly Czechish) words of one interviewee, ‘the whole system had only one goal and it was to win the bonus, not to meet the plan. It was just a technical means and it was manipulated with and cheated and revised, simply so that the bonus conditions were met.’ (p. 146) The discussion, in boxed text 4.3, of the role of the secret service is interesting and not usually included in studies of central planning. Box 4.5 gives a summary of methods of manipulating plans: when numbers did not fit, plans were adjusted. The text is unusual too in covering the ‘non-plan’: areas where economic activity took place entirely beyond the scope of the plan, the classic example being the Slušovice agricultural cooperative.

Chapter five addresses the macroeconomic results of central planning beginning with a graph showing declining rates of growth in GDP and net material product. A table showing how the plan for Škoda was revised constantly between 1976 and 1980 so that it gelled with actual production seems more relevant to the preceding chapter. There is discussion of half-hearted plans for economic reform, the extent of the informal economy (including that developed by Vietnamese guest-workers), and classic problems of socialist economies: failing to move from extensive to intensive growth or away from high energy consumption, reliance on undemanding Comecon markets, investment cycles, the bias towards heavy industry, outdated technology, the constant labour shortage, prices, and the problems of multiple exchange rates. There are interesting boxed texts on the Baťa shoe company, ‘Action Z’ (‘voluntary actions’ to make up for shortcomings of the plan), industrial espionage, Škoda cars, and, again, the Slušovice agricultural cooperative. The conclusion recapitulates the key findings in a characteristically Czech way: as a dialogue with an imaginary defender of central planning.

Nigel Swain is Honorary Senior Research Fellow in the Department of History, University of Liverpool. He has published extensively on the economic, social, and political history of socialist Eastern Europe.

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Published by EH.Net (April 2022).

David Courtwright. The Age of Addiction: How Bad Habits Became Big Business. Belknap Press, 2019. ix + 325 pp. $27.95 (hardcover), ISBN 978-0674737372.

Reviewed for EH.Net by Emily Dufton, author of Grass Roots: The Rise and Fall and Rise of Marijuana in America (2017).

As late as the 1960s, historian David Courtwright notes in his erudite and witty new book The Age of Addiction: How Bad Habits Become Big Business, “people swam in waters in which there were relatively few addictive hooks. Chief among them were cigarettes, alcohol, and drugs.” The first two hooks were powerful and widely used – half a trillion cigarettes were sold in 1962, and anyone who has seen Mad Men knows the culture of alcohol consumption at the time – while the use of licit and illicit drugs, though growing, was limited only because “the last were expensive, risky, and often hard to obtain” (p. 206).

But over the course of the next six decades, the waters were filled with many more hooks. New and even more enticing intoxicants took advantage of technological shifts: cocaine morphed into crack, caffeine and alcohol into Four Loko, heroin into fentanyl. Other temptations also appeared. The size of a typical American meal ballooned, and the sugar and salt levels of cheap and ubiquitous snack foods exploded. In the internet age, screens gave us instant access to gambling, porn and shopping, and to apps that delivered hits of dopamine with likes and retweets. By 2019, when Courtwright published his book, the waters were so thick with tempting hooks that there was rarely a place to swim without one.

It would be almost impossible to avoid these hooks anyway, since everything on them was purposefully designed to appeal to humanity’s greatest strength and flaw: our limbic system, “the part of the brain responsible for feeling and for quick reaction, as distinct from dispassionate thinking” (p. 6). The limbic system is a series of neural circuits that make possible the positive emotions that embed pleasure in our lives. Like Proust’s madeleine, our limbic system binds together pleasure, motivation, and long-term memory, so that when something feels good, the limbic system lets us remember it – and to seek it again.

But the limbic system also makes us sitting ducks for the mushrooming number of hook-holders, the entrepreneurs of pleasure who sell “engineered excess” to keep us coming back for more (p. 224). On these hooks hang everything that gives us good feelings (the burst of pleasure from chocolate, or a drug’s intoxicating high), or, more importantly, the substances that banish the blues (the opioids that delay withdrawal, or the drink that lets you forget). In a system Courtwright calls “limbic capitalism,” good feelings are for sale every day, everywhere, at all times, via a “technologically advanced but socially regressive business system in which global industries, often with the help of complicit governments and criminal organizations, encourage excessive consumption and addiction” (p. 6).

This places the average person in a perilous position. A powerful global industrial system views individuals as little more than consumers, and seeks to take as much of their money as possible by repeatedly selling them something, regardless of whether it’s good for them or not. “Every business wants to be the next Cinnabon, selling an irresistibly tempting product,” Courtwright writes. “The products can be legal, illegal, or a bit of both” (p. 229). But by continuously making pleasurable products widely available, Courtwright argues that limbic capitalism disrupts the biological process of hormesis, in which certain chemical compounds are beneficial in small doses but harmful or lethal in large amounts. “In brief, civilized inventiveness weaponized pleasurable products and pastimes,” Courtwright continues. The “age of addiction” is the inevitable result (p. 9).

This engenders one of Courtwright’s most valuable insights, which is that the concept of “addiction” goes far beyond the usual questions of criminal activity, moral relativism, or the disease model. Instead, addictions “begin as journeys, usually unplanned, toward a harmful endpoint on a spectrum of consumption.” In other words, in the realm of limbic capitalism we’re all consumers, and those struggling with addiction have been overwhelmed by their consumption. For Courtwright, “an addiction is a habit that has become a very bad habit, in the sense of being strong, preoccupying, and damaging, both to oneself and others” (p. 3). While this is bad for the individual, it’s very good for business, which is precisely why Courtwright fears limbic capitalism – and the dangerous levels of addiction it produces – is here to stay.

This is natural territory for Courtwright, who has been one of America’s most eloquent chroniclers of the history of drug and alcohol use for decades. But The Age of Addiction expands Courtwright’s focus into other areas – food, gambling, shopping, porn – to show how our desire for pleasure and intoxication has created an unprecedented commercial environment, where unrestrained free market capitalism actively and enthusiastically offers addictive substances and experiences, regardless of their inevitable social toll. For the millions of Americans currently struggling with substance use disorders or other addictions, “the heaviest costs are borne by those who lose control over their consumption, who also happen to be the most socially and genetically vulnerable. If capitalism is socially progressive, limbic capitalism is often socially regressive. Sometimes it is savagely so” (p. 227).

The Age of Addiction offers dire warnings about our society, but it does so in elegant and often witty language. Only someone like Courtwright, with his lengthy career and deep knowledge, could draw the line of addiction studies between the moment when Neanderthals and homo sapiens were first crossbreeding to Nora Volkow and the National Institute on Drug Abuse today. Courtwright also uses non-traditional rhetorical devices to make his points – two instances of dialogue between fictional combatants are particularly fun to read – to make it clear that this book, written as Courtwright retired from the University of North Florida, is the work of a master scholar who has dedicated his career to illuminating drug history and is now having fun as he expands his scope.

Courtwright was honest about the reactions his ideas first provoked. In one of the dialogues, he quotes a critic who complained, “I wrote on the title page of your manuscript, ‘NO SOLUTIONS’” (p. 225). In response to the threat of limbic capitalism, which clearly values profits over health, Courtwright offers few alternatives, though he agrees with the drug policy expert Mark A. R. Kleiman, who argued thirty years ago for Americans to take a stand “against excess” (p. 246). Still, limbic capitalism’s millenia-long path to offer us a constant smorgasbord of tempting, if dangerous, delights wouldn’t have happened if there weren’t buyers – supply exists because of demand – and I wished Courtwright had mentioned some of the people who have successfully found a way out of limbic capitalism’s grasp. For example, Physician Health Programs are immensely effective at helping individuals overcome drug addictions, and anti-consumerism organizations like Adbusters and Reverend Billy and the Church of Stop Shopping have denounced the dangers of unfettered capitalism for decades.

Nonetheless, the primary contribution of The Age of Addiction is a vastly important one. Courtwright has long been America’s leading voice on the history of drugs, and now he has shown how, in the world of limbic capitalism, addiction is promoted as a marketing tool for a wide variety of products, ones that guarantee customers, often for life. But there is a way out. If we can understand that we’re being used – by the companies, cartels and conglomerates who see us less as people and more like walking ATMs – the most radical action we can take is to stop buying what we’re being sold.

Emily Dufton holds a PhD in American Studies from George Washington University. She is the author of Grass Roots: The Rise and Fall and Rise of Marijuana in America (Basic Books, 2017), and is currently working on Addiction, Inc.: Medication-Assisted Treatment and the War on Drugs, which was awarded a J. Anthony Lukas Work-in-Progress Award in 2021.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (April 2022).

Alex Millmow. The Gypsy Economist: The Life and Times of Colin Clark. Singapore: Palgrave Macmillan Press, 2021. xx + 396 pp. $119.99 (hardback), ISBN: 978-981-33-6945-0.

Reviewed for EH.Net by Adrian Darnell, Retired Professor of Economics, Durham University.

Colin Grant Clark was born in 1905; he was educated at Winchester College and Brasenose College, Oxford, from where he graduated in Chemistry in 1928. His interest in statistics and economics was born of studying statistics in his curriculum and having attended some of Lionel Robbins’ lectures extra curricula. Clark’s interest in economics was furthered at the Oxford Labour Club and then within the University Adam Smith Society, to which Clark’s greatest contributions were to illuminate theoretical discussions with voluminous statistics designed to bring the conversations ‘down to earth.’ Robbins introduced Clark to Hugh Dalton and later William Beveridge, for whom he worked as a research assistant at the London School of Economics in 1928–29; he then worked with Allyn Young and in 1929 left London for Liverpool, where he worked for Alexander Carr-Saunders. During this time he ran unsuccessful parliamentary campaigns as a Labour candidate in North Dorset (1929), and later at Liverpool Wavertree (1931) and South Norfolk (1935).

In 1930 he was (to his surprise, apparently) appointed as research assistant to the newly convened National Economic Advisory Council (NEAC). However, when Clark was invited by Ramsey MacDonald (an avowed protectionist) to write a case for protectionism Clark (who favoured devaluation and expansion of the domestic economy) chose to resign in 1931 rather than compromise his principles. Keynes, a member of the NEAC, having been impressed by Clark’s command of data, then secured him a lectureship in statistics at Cambridge.

In 1937 Clark accepted a position with the Queensland government and stayed in Australia in various government roles, all of which afforded him the opportunity to pursue his own research. In 1951 he took secondment to the Food and Agriculture Organization in Rome, and then to Chicago (1952), before taking the Directorship of the Agricultural Economics Research Institute at Oxford (1952–69). He returned to Australia in 1969 as the Director of the Institute of Economic Progress at Monash (1969–78) and finally he was a Research Consultant to the Department of Economics at the University of Queensland until his death in Brisbane in 1989. Today Clark is, perhaps, best known for his work on national income and development economics.

This biography is a most illuminating account of Clark and his work, the man and his times, and provides a comprehensive assessment of his many economic contributions. The picture painted is of a most stimulating and heterodox thinker, a man who had no formal training in economics or economic methodology, and a man who revelled in being annoying!

Clark was a prolific writer of books and academic and newspaper articles and a broadcaster whose work appears to have attracted both praise and criticism, not always in equal measure. The source of much criticism had two sources: his lack of training in the subject and a suspect methodology were often evident; and his later work, especially after his conversion to Roman Catholicism in 1940, seemed to some to rely (often implicitly) upon Catholic thought, as distinct from economic thought and evidence.

Clark’s methodological approach was clearly influenced by his chemistry studies, and his ‘scientific’ economics stressed ‘the careful systemisation of all observable facts, the framing of hypotheses from these facts, predictions of fresh conclusions on the basis of these hypotheses, and the testing of these conclusions against further observable facts’ (1940, p. vii). He expressly prioritised observation over theory: he praised Australian economists for their ‘respect for observed facts in preference to long chains of theoretical reasoning’ (1940, p. ix), but his lack of a theoretical framework and an overreliance on (not always robust) data was criticised. Clark believed ‘many of the laws of economics could be deduced from comparative observations rather than from an a priori position’ (p. 43), did not recognise that observations are always seen through a particular window of theory, and expressly relegated economic theory. His approach relied heavily on the quality of statistics, and his early work on national income sought, successfully, to provide good data. The National Income 1924-31 was a major work, developing the earlier work of Bowley and Stamp (1927); he brought quantitative flesh to Keynesian concepts and, for the first time, distinguished between national income and national product.

This work was well received but, like almost all his work it seems, it attracted criticism in at least equal measure. There is a recurring theme to the reception he generated: he was regularly criticised for sloppiness, poor methodology, and allowing unstated principles (notably Catholic principles) to influence his analysis. One example must suffice. Clark’s (1967) Population Growth and Land Use was described as ‘a source of pleasure, information and challenge’ (Spengler, 1968, p. 228, in Millmow p. 279) but the book’s controversy stemmed from the level of scholarship on the one hand and his views on birth control on the other. Davis (1968, p. 133) observed that ‘the tools of scholarship are casually handled with frequent omission of authors, dates or titles, occasional misspellings, ambiguous labelling of charts and tables, use of derived figures and unexplained inconsistencies, disregard of contrary arguments and evidence’ and concluded that ‘Clark’s reputation and his skill with words and numbers give his argument a halo of credibility that may mislead the untrained eye’ (in Millmow, p. 284). Davis further suggested that Clark had ‘massaged his data to fit his thesis.’

Clark was nominated several times for the Nobel prize yet was never successful (p. 7). Millmow, I think, has more than adequately answered the question ‘why not?’. Clark’s work lacked a firm theoretical foundation and he ‘took delight in entertaining perverse views’ (p. 4). He was never appointed a full professor of economics and chose not to pursue his pioneering early work on National Income Accounting, moving on to write in less prosaic areas of economics. That Clark was well known for holding and promulgating unorthodox views may also have been a factor, especially as Millmow’s biography leads the reader to conclude that he deliberately sought to annoy.

Two examples may suffice. First, in 1962, speaking to the theme of the problems of growth in the Australian economy he drew upon his ideas of the last 20 years and asserted that it took ‘Australia a long time to learn’, that Australia had foolishly ‘set out to manufacture everything’, ascribed Australia’s ‘mediocre growth’ to protectionism, low levels of education, low growth of the labour force, developing industry at the expense of agriculture, and especially an ‘aversion to competition’ and a dependency on ‘government to put things right’ (pp. 309-10). One discussant (Crawford, 1962, p. 30) observed ‘we have been given a typical Colin Clark production . . . bristling with comment calculated to irritate, very revealing of his own prejudices on many subjects, it is nonetheless full of shrewd insights and worthwhile provocations’ [my emphasis]. Not only were his comments designed to irritate, but this was typical.

As a second example, Clark spoke in a debate on abortion law reform in Sydney in 1972. On the other side of the debate was Germaine Greer. Clark remarked to Greer, “I don’t know what to call you: Miss Greer or Mrs?” to which she replied, “Call me Doctor” (cited in Wyndham, 2012, p. 359).

Here we have a splendid biography. Clark, the idiosyncratic polymath shines from every page, but the title is troubling. While Arnold’s The Scholar Gypsy may well have been Clark’s favourite poem (p. 11), since that poem’s subject is an Oxford scholar who gives up his academic life to join a band of Gypsies, absorbing their customs and seeking the source of their wisdom, the picture of Colin Clark painted by Millmow doesn’t quite fit. Clark never gave up academe and nor does he seem to have sought to absorb others’ customs nor seek their sources of wisdom: on the contrary, he comes across as more interested in having others absorb his ways of thinking and understand his wisdom.

References

Bowley, Arthur L., and Josiah Stamp. The National Income 1924. Oxford: Clarendon Press, 1927.

Clark, Colin G. The National Income 1924-31. London: Macmillan, 1932.

Clark, Colin G. The Conditions of Economic Progress. London: Macmillan, 1940.

Clark, Colin G. Population Growth and Land Use. London: Macmillan, 1967.

Crawford, John Grenfell. ‘Discussion.’ In John Wilkes (ed.), Economic Growth in Australia. Sydney: Angus & Robertson, 1962.

Davis, Kingsley. ‘Colin Clark and the benefits of an increase in population.’ Scientific American 218(4): 133-138 (1968).

Spengler, Joseph, J. ‘Review of Population Growth and Land Use by C. Clark.’ Annals of the American Academy of Political and Social Science 380: 228 (1968).

Wyndham, Diana. Norman Haire and the Study of Sex. Sydney: Sydney University Press, 2012.

Adrian Darnell is Retired Professor of Economics at Durham University. He has published extensively on econometrics and its history.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (April 2022).

Deirdre N. McCloskey and Art Carden. Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Chicago: University of Chicago Press, 2020. 232 pp. $25.00 (hardback), ISBN: 978-0226739663.

Reviewed for EH.Net by Joel Mokyr, Northwestern University.

For half a century Deirdre McCloskey has been a member of the starting lineup of economic history. The author of numerous books and hundreds of research papers and essays, her magnum opus is the monumental “Bourgeois Trilogy” that appeared between 2006 and 2016 and laid out her view of economic history and much else in about 2,000 pages. The slim volume here, co-authored with Art Carden, summarizes her views of what she has termed the “Great Enrichment” and makes it accessible to a wider public. In every way, this comparatively slim volume is vintage McCloskey: written in a rather informal conversational style, she states her views in her inimitable crystal-clear prose. She is relentless in her dismissal of other scholars she disagrees with and concepts she finds misleading, often with devastating bon mots. Thus the concept of capitalism is “a scientific mistake compressed in a single word” and the mistaken historians who elevated new-world slavery to a first-order cause of the Great Enrichment are told that “slavery was bad enough without ornamenting it with bad history and bad economics.” Indeed.

The book makes a powerful case for a classical liberal society: what accounts for economic success and growth is liberty. Other elements such as institutions, science, trade, resources and so on may have a mattered a bit, but the indispensable element that did it all was freedom from coercion, from regulation, and from oppression. That freedom was absent for most of human history, and it emerged only in Britain and the Low Countries in the seventeenth century. The Bourgeoisie, a group much maligned by the “left-wing clerisy,” are really the heroes of our prosperity and the “bourgeois deal” as they call it and as reflected in the well-chosen title of the book was the main driver that led to modern prosperity. The deal was simple: give us our freedom and we’ll make the economy grow. We’ll take the risks, but if we succeed, we’ll be rich and so will (almost) everyone else. The idea was so powerful and successful that it spread worldwide and has lifted up most economies on the planet. Hence, the majority of humanity is immensely richer than ever before and material life is better than ever before. That is the economic history of the modern world in a nutshell.

The explanandum, of course, is familiar to every undergraduate student of economic history. But the explanans may not be. The first sentence of the book’s preface is “The theme of our book is simple and true. But controversial.” Perhaps one might wonder, if this is all so self-evident, and the evidence so overwhelming, why is it still controversial? The message should be very attractive: freedom is obviously an attractive concept, something people are willing to die for. If an additional benefit is that it also makes us rich, what’s not to like? Why do not more people embrace the libertarian account that McCloskey and Carden tell here? Moreover, academics are also members of the bourgeoisie: why resist the idea that they are the heroes of the tale?

Much of the book — derived from Volume 2 of the McCloskey Trilogy — consists of the demolition of alternative explanations of the Great Enrichment. These interpretations are viewed not so much as completely wrong as inadequate: too small, too late, too early. Only the Bourgeois Deal, concluded in the centuries before the Industrial Revolution, will do. The logic is powerful: people are entrepreneurial, they are ingenious, they are acquisitive. Give them a chance, let them loose, and they find opportunities to enrich themselves, and in the positive sum of economic development they will make everyone richer as well (even if not as rich as they are — but that does not bother the authors).

McCloskey and Carden clearly have no sympathy for the idea that what drove the Great Enrichment was something called state capacity, the ability of nations to create governments that helped create law and order, provide public goods, and solve coordination problems. Its importance has been stressed by both economic historians such as the late Larry Epstein and economists such as Tim Besley and Torsten Persson. It is striking that the regions that the authors point to as the birthplace of the Bourgeois Deal were actually areas in which economic regulation was tight and taxation was heavy. To be sure, after 1825 many of the most onerous coercive measures in Britain were abolished (the Corn Laws only in 1846), but the first century of the Industrial Revolution took place in a rather oppressive political environment where “liberty” may not have been the best characterization of the state of society. The apex of the British laissez faire economy took place after, not before the Industrial Revolution. In later cases, industrialization and growth occurred in economies such as Russia and Japan in the first half of the twentieth century, where individual liberty was not a priority.

This book makes a strong argument for ideational history. The idea of unfettered economic activity, as expressed so powerfully by Locke and his followers (above all, of course, Adam Smith), is the “engine” that drove the economies of the West into the Great Enrichment. Yet there is something odd in the argument as presented here: while the authors, like all liberal writers, are firmly committed to the wisdom and power of the market, and while this book presents a strong case for the historical importance of ideas, it does not dwell on the market for ideas. There is little here that explains how the idea of freedom and unfettered markets actually caught on. After all, as the book notes, there was powerful resistance from many corners, and the victory of liberalism was by no means assured. It was driven, they say, by successful revolutions (in sixteenth century Netherlands and seventeenth century England), the printing press, and the reformation. Had these not taken place, the Enrichment may not have occurred. Europe was not better, it was lucky. But ideas do not just catch on because of their future benefits: they have to be debated and sold in a market for ideas, in which its proponents persuade their audience based on the evidence, the logic, or the ethics of the idea. Yet surprisingly the market for ideas makes no entry in a book devoted to the praise of markets and the power of ideas. Indeed, it could be argued that in their account liberalism’s success was precisely due to what happened in the market for ideas. Intellectuals from Locke and Smith down persuaded the people that mattered of ideas that led to economic growth.

The emphasis on ideas leads to the other question that the book raises. The period they describe as crucial to the emergence of the main elements of the Great Enrichment corresponds with the Age of Enlightenment. Yet the Enlightenment, arguably one of the most powerful cultural movements in history, plays no role in their account despite its commitment to ideas. Writing the economic history of modern economic progress without the Enlightenment is the ultimate prince-less Hamlet. Historians have recently rescued it from the dismissive attitudes of a misguided revisionist historiography, as exemplified by Ritchie Robertson’s recent tour de force (though it ignores economic history). Which precisely were the enlightenment ideas that mattered? A belief in liberty, free markets, and small government surely was part of it, although a disturbing number of philosophes felt that growth was too important to be left to the private sector and needed help from a friendly government. What the French called dirigisme was basically an attempt to recruit the government to help entrepreneurs in their endeavors. Britain was exceptional in its laissez faire approach to economic development — and even there the government was not altogether absent.

Above all, what is missing in this book is any serious acknowledgment of the role of what people at the time called “useful knowledge” — an understanding of natural phenomena and regularities. In many places of the book, the author invoke ingenuity as the force for progress. But how is ingenuity to lead to sustained growth without knowledge? Ingenuity and technological progress do not drop down from heaven as soon as liberty is declared. Skills, technical savoir faire, and dexterity have to be produced and created in the system. Increasingly it was realized that such skills needed to be augmented by an understanding of the natural regularities of mechanics, energy, and materials. The Enlightenment realized that natural philosophy could be harnessed to material needs, from fighting smallpox to finding longitude at sea to pumping water out of coal mines. McCloskey and Carden will have none of it. Science, they say, was unimportant as the driver of growth, because so many advances were made without it.

This assessment hinges on a somewhat narrow definition of what we mean by useful knowledge. The basic idea was one of progress, and progress was to be achieved because knowledge — both propositional and prescriptive — was cumulative. Progress occurred because in a well-functioning market for ideas, better insights about nature would beat out inferior opponents. Lavoisier’s chemistry replaced phlogiston and caloric, and vaccination pushed out the antiquated resignation that smallpox was a divine punishment for our sins. None of those triumphs, and countless others, were accepted without fierce resistance, and their victory was never assured. But this is why the story cannot be told without placing the Industrial Enlightenment on center stage. What the Industrial Revolution needed was knowledge: science, when appropriate, augmenting and supporting the often tacit knowledge of workmanship and materials, but also many other things: practical arithmetic (as shown in a brilliant forthcoming article by Kelly and Ó Gráda), the use of better tools and equipment, an understanding — often instinctive — of mechanics, heat, and chemical processes.

In short, a society that was free but ignorant would not grow. Unlike what Carden and McCloskey imply, ingenuity was not an automatic and passive link between freedom and prosperity. The sense that a systematic cataloguing and understanding of natural phenomena and regularities was needed to achieve progress permeated the thinking of the people who brought it about — including those who had no science themselves. As scientific knowledge expanded, people latched on to it and drew from it to come up with new ideas that made life better. Uneducated tinkerers, by themselves, could not have turned the Industrial Revolution into sustained growth. Inventions can be made serendipitously, without the faintest understanding of why and how they work; but such advances soon bog down. What we need now, then, is a serious discussion of how the elements of the Enlightenment interacted, that is, how personal freedom and the right incentives helped create the surge of practical knowledge and ingenuity that actually created the means for the Great Enrichment.

Liberalism, as it emerged in the West and as described in this book, was part and parcel of the European Enlightenment — though (like everything else in the writings of the eighteenth-century philosophes) it was disputed and doubted. Yet the Enlightenment was much more than liberalism, and if all that it had created was a belief in personal freedom and less restrictive government, its effects on the Great Enrichment may have been more modest. What counted was a belief in progress — material as well as social and political. Not all the prescriptions toward the perfection of society worked equally well — and perhaps that may be why the Enlightenment became something of a whipping boy for some writers influenced by the lamentable “Frankfurt School.” But on the matter of economic growth, the eighteenth-century intellectuals basically got it right. Material progress, the philosophes felt, was driven above all by knowledge and its accumulation, its testing in the market for ideas, and its application by engineers, mechanics, and entrepreneurs. These were the real causes of the Great Enrichment. Everything else — trade, politics, literacy, imperialism, and a host of other factors enumerated and dismissed by McCloskey and Carden — depended on that.

What, then, should we think of the role of “freedom” in economic growth? The question will be debated for generations and McCloskey has done our profession a great service by setting the terms of the debate. A large number of scholars would argue that rather than “laissez faire” policies, enlightened and competent governments could support and drive economic growth. As the late Alice Amsden has shown in her The Rise of the Rest, such governments existed. Without sufficient state capacity to guide and support development, many of the conditions for a Great Enrichment may not be there. Could there be such a thing as “too much liberty” just as there clearly was a thing such as too much coercion? In a forthcoming book, The Rise and Fall of Laissez Faire, Walker Hanlon shows how over the course of the nineteenth century Britain slowly retreated from a rather extreme form of laissez faire and introduced elements of regulation, coercion, and the welfare state to correct for some of the most undesirable consequences of the Industrial Revolution. So did every industrialized nation, some more, some less. Even the individualist and freedom-loving United States was dragged into a (partial) retreat from extreme liberalism, not just because most people demanded it, but because it was the right thing to do.

Perhaps the authors should consider this: liberalism depends on markets, and markets can fail. Part of liberty should therefore consist of society’s right to choose a certain amount of coercion and regulation by the state, to avoid such unacceptable outcomes as child labor, toxic chemical pollution, millions of people without medical insurance, and the poisoning of considerable portions of the population by pharmaceutical firms selling addictive substances. Somewhere between a libertarian free-for-all economy, and the horridly coercive worlds of Stalin and Mao, there is a goldilocks-like middle ground, far from optimal perhaps, but more livable than the alternatives. It is that middle ground that the Enlightenment strove for. In an imperfect world, that is the best we can do.

References

Amsden, Alice H. The Rise of “The Rest”: Challenges to the West from Late-Industrializing Economies. Oxford University Press, 2001.

Besley, Timothy, and Torsten Persson. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton University Press, 2013.

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

Hanlon, Walker W. The Rise and Fall of Laissez Faire. Princeton University Press, forthcoming.

Kelly, Morgan, and Cormac Ó Gráda. “Connecting the Scientific and Industrial Revolutions: The Role of Practical Mathematics.” Journal of Economic History, forthcoming.

Robertson, Ritchie. The Enlightenment: The Pursuit of Happiness, 1680–1790. New York: Harper Collins, 2021.

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2022). All EH.Net reviews are archived at http://www.eh.net/Book-Reviews.

Published by EH.Net (April 2022).

Jim Phillips, Valerie Wright and Jim Tomlinson. Deindustrialisation and the Moral Economy in Scotland Since 1955. Edinburgh: Edinburgh University Press, 2021. ix + 285 pp. $110 (hardback), ISBN 978-1474479240.

Reviewed for EH.Net by Professor William A Wardle, former Principal of York St. John University, and James Watt College of FE/HE.

This is a work of considerable merit and of significant interest to an academic audience within and beyond the boundaries of economic history. It is the product of a team at the Adam Smith Business School at Glasgow University, well-rehearsed in articles on this topic. Their intention to connect economic circumstances to the current, exaggerated nationalist mood in Scotland leads them to overemphasise a linear pattern and understate how the material presented could connect to wider, comparative debates.

With its economic focus and political innuendo, it is a work that fits well within the Scottish-branded field of political economy. At one level, we have a very informed narrative of the sequence of deindustrialisation, itself passing through three phases. The description of the openness and vulnerability of the Scottish economy at the outset is supplemented by a characterisation of a developing sense of futility: not only the failure to be competitive in the market but to even convince key investors and policymakers of the viability of continued investment, whether through commercial funds or government intervention. The other dimension of the book is as a contribution to the understanding of the economic antecedents of modern nationalism in Scotland. In both domains, the question of Scottish ‘exceptionalism’ is raised. Frustratingly, the work poses these exciting questions but without suggesting direct answers, and comparative analysis is left relatively undisturbed.

The work engages with political and societal causes and consequences of deindustrialisation as it proclaims its central interpretation: that deindustrialisation was a managed process in Scotland until malevolent external influences disturbed its progressive path. This intervention – sometimes indifference – created unanticipated closures and levels of unemployment, and disrupted permanently the political equilibrium. Collateral damage was inflicted on urban communities, setting in train a chain of local political reactions culminating in the nationalist surge of the early 20th century. Until the 1970s, the authors see deindustrialisation as a managed, collaborative process between government and workers.  The suggested substantivist narrative is that this Scottish experience was dislocated by the new Westminster politics and ideological determination of the late 1970s, transforming trust into confrontation and a new, nationalist surge. Devolution, intended as a solution but implemented as a compromise, could not check the vented political anger at what appeared to be externally imposed and repeated blows to the Scottish economy.

This hypothesis is presented by the authors on the basis of deep understanding of both wider processes and the relevant case studies: shipbuilding on the Clyde, car manufacturing at Linwood, and the history of Timex in Dundee. It is a balanced selection covering, respectively, an increasingly non-competitive traditional sector; an intermediate modern one; and a risk laden endeavour to introduce a new car manufacturing capacity into virgin industrial hinterland.  The range of source material is impressive in both the use of primary sources and interviews. Interestingly, the interviews are focussed on representatives of the labour force, which may contribute to a running accusation that employers and politicians failed to sustain their duty of care.

The distinctive narrative of deindustrialisation widens and deepens understanding of sequence and consequence in Scotland. It raises also interesting questions about connection to wider debates about the connection between global and local. The lens widens only as far as to embrace the political economy of Scotland’s Central Belt, where economic damage and disappointment were greatest, matched by the most severe political reaction to the established political order, dominated by the two unionist parties, Conservative and Labour. The authors make it clear that not only was deindustrialisation well in train before the breakdown of moral economy but that, in fact, the manner of deindustrialisation shattered the structure of this reciprocal moral bargain.

The coexistence of the terms ‘deindustrialisation’ and ‘moral economy’ in the title perhaps promises more than it delivers. The analysis presents a scenario where, before the 1970s, the moral economy underpinned the earlier transition to new industrial formats and outputs in Scotland. The consequence was political stability, preserving the established unionist choreography displayed by Conservative and Labour parties.

A counterfactual question emerges as to whether deindustrialisation could have been arrested or slowed down in Scotland if the protocols of the moral economy had been maintained. International influences and global competitiveness were undoubtedly predominant in affecting the performance in the three sectors identified. The unanswered question is about different employer reactions, alternative investment decisions, and government policies which would protect industries rather than throw them to market forces.

The headline combination of ‘deindustrialisation’ and ‘moral economy’ raises two points of comparison. First, how different, and for what reasons, was Scotland’s pattern of deindustrialisation? Second, how did a ‘moral economy’ in Scotland differ from such configuration elsewhere. On the first point, the book does not engage with extensive comparison.  Perhaps understandably, it is concerned with the distinctive Scottish narrative. Yet there is a sense in which the description of external policy shifts and exposure to market forces is underplayed, leading to over-statement of the importance of the breakdown of consensus. This selectivity overlooks longer-term and endemic performance failings in shipbuilding; fundamental design, process and costing faults in the rushed production of cars at Linwood; and over-expectation and around new investment in Timex in Dundee. In other words, had the traditional industries run out of road and the newer manufacturing sectors based on exceptional support and decisions that were political rather than accountable in business terms?

The core argument that ‘forced deindustrialisation’ from the 1970s challenged and ultimately destroyed a working and sustainable moral economy could be seen to gloss over a reality in which the mutual relationship actually inhibited necessary change. The moral economy was underwritten by a list of supportive centralised actions, including regional policies, government subsidy, biased and benevolent government measures and arm-twisted private investment. Moral economy was, in fact, a multi-layered rather than binary dialogue, more complex than a worker-employer/government dialogue. Its existence, in spirit as much as substance, provided artificial protection against the realities of modernising traditional industry or meeting the rigorous entry criteria of new industries.

On the second issue, the nature of Scotland’s moral economy, the nagging issue is one of stretched comparison, or credibility. The description and analysis of the dialogue and common ground between employers, government and workers are entirely convincing. Less so is the direct linkage to E P Thomson’s coinage of the term ‘moral economy’ as pertaining to a particular set of rural circumstances in the eighteenth century.

Presented with a failure of consensus, or reciprocity, the recourse of workers and citizens in Scotland’s central, deindustrialising belt was to embrace newer political perspectives, notably Scottish nationalism. These aspects of the book demonstrate a drift in its narrative to a form of economic anthropology. The overarching mood of moral economy is depicted initially as a relationship of trust between employers, including government, and labour. The pattern of the breakdown of moral economy, according to the authors, occurs over three phases, matched to the sequence of deindustrialisation. The loss of moral economy accelerates as the deindustrialisation reaches its latter phases. At the same time, the political momentum quickens.

The loss of moral economy worsens the effects of deindustrialisation, but did not cause it. In particular, from the 1970s, there had been a shift in government perspective on its obligations, engendering a militant, disruptive response on the part of organised labour. These events, in turn, began a political sequence weakening the strength of the unionist position and undermining the predominance of the Labour Party in Scotland’s Central Belt. Scottish nationalism had new energy, a new set of causes, and in the invigorated Scottish Nationalist Party, a new platform.

The detailed research on the three industrial sectors is not really connected to the wider set of global influences. Instead, the book emphasises the distinctive, pattern of events in Scotland and attributes accountability for industrial loss. With its focus on specific sectors and in a restricted geographical area, the work derives its central hypothesis from a given, and restricted, set of factors. As such, the work is argumentative rather than comprehensive, and not a panoramic account of Scotland’s economic performance.

It is a compelling account of the origins of Scotland’s new political direction. As the authors emphasise, deindustrialisation was well under way before the moral economy broke apart. Indeed, they assert that Scotland’s prior experience was one of accommodation and compromise rather than confrontation. This perspective leaves us with the question of its sustainability. Notwithstanding the shift in political direction from the 1970s, was the moral economic bond strong enough to withstand the external shocks generated in the international economy?

This tight, well-disciplined book promotes deeper understanding of Scottish deindustrialisation. Equally, it contributes not only to the generic debate on ‘moral economy’ but also to the understanding of the options available to participants in the economic drama. In Scotland, the workforce could select from the trilogy of economic actions identified by Albert Hirschman – Exit, Voice and Loyalty – but in reverse order. It is also a set of case studies around the interaction between local and global circumstances, affecting industries of different vintage and type.

Professor William Wardle is a former Principal of York St. John University, and James Watt College of FE/HE. He has been a member of the Scottish Higher Education Funding Council and his bespoke consultancy engages internationally with institutions, agencies and governments.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

Published by EH.Net (April 2022).

Deirdre N. McCloskey and Art Carden. Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Chicago: University of Chicago Press, 2020. 232 pp. $25.00 (hardback), ISBN: 9780226739663.

Reviewed for EH.Net by Joel Mokyr, Northwestern University.

For half a century Deirdre McCloskey has been a member of the starting lineup of economic history. The author of numerous books and hundreds of research papers and essays, her magnum opus is the monumental “Bourgeois Trilogy” that appeared between 2006 and 2016 and laid out her view of economic history and much else in about 2,000 pages. The slim volume here, co-authored with Art Carden, summarizes her views of what she has termed the “Great Enrichment” and makes it accessible to a wider public. In every way, this comparatively slim volume is vintage McCloskey: written in a rather informal conversational style, she states her views in her inimitable crystal-clear prose. She is relentless in her dismissal of other scholars she disagrees with and concepts she finds misleading, often with devastating bon mots. Thus the concept of capitalism is “a scientific mistake compressed in a single word” and the mistaken historians who elevated new-world slavery to a first-order cause of the Great Enrichment are told that “slavery was bad enough without ornamenting it with bad history and bad economics.” Indeed.

The book makes a powerful case for a classical liberal society: what accounts for economic success and growth is liberty. Other elements such as institutions, science, trade, resources and so on may have a mattered a bit, but the indispensable element that did it all was freedom from coercion, from regulation, and from oppression. That freedom was absent for most of human history, and it emerged only in Britain and the Low Countries in the seventeenth century. The Bourgeoisie, a group much maligned by the “left-wing clerisy,” are really the heroes of our prosperity and the “bourgeois deal” as they call it and as reflected in the well-chosen title of the book was the main driver that led to modern prosperity. The deal was simple: give us our freedom and we’ll make the economy grow. We’ll take the risks, but if we succeed, we’ll be rich and so will (almost) everyone else. The idea was so powerful and successful that it spread worldwide and has lifted up most economies on the planet. Hence, the majority of humanity is immensely richer than ever before and material life is better than ever before. That is the economic history of the modern world in a nutshell.

The explanandum, of course, is familiar to every undergraduate student of economic history. But the explanans may not be. The first sentence of the book’s preface is “The theme of our book is simple and true. But controversial.” Perhaps one might wonder, if this is all so self-evident, and the evidence so overwhelming, why is it still controversial? The message should be very attractive: freedom is obviously an attractive concept, something people are willing to die for. If an additional benefit is that it also makes us rich, what’s not to like? Why do not more people embrace the libertarian account that McCloskey and Carden tell here? Moreover, academics are also members of the bourgeoisie: why resist the idea that they are the heroes of the tale?

Much of the book — derived from Vol. 2 of the McCloskey Trilogy — consists of the demolition of alternative explanations of the Great Enrichment. These interpretations are viewed not so much as completely wrong as inadequate: too small, too late, too early. Only the Bourgeois Deal, concluded in the centuries before the Industrial Revolution, will do. The logic is powerful: people are entrepreneurial, they are ingenious, they are acquisitive. Give them a chance, let them loose, and they find opportunities to enrich themselves, and in the positive sum of economic development they will make everyone richer as well (even if not as rich as they are — but that does not bother the authors).

McCloskey and Carden clearly have no sympathy for the idea that what drove the Great Enrichment was something called state capacity, the ability of nations to create governments that helped create law and order, provide public goods, and solve coordination problems. Its importance has been stressed by both economic historians such as the late Larry Epstein and economists such as Tim Besley and Torsten Persson. It is striking that the regions that the authors point to as the birthplace of the Bourgeois Deal were actually areas in which economic regulation was tight and taxation was heavy. To be sure, after 1825 many of the most onerous coercive measures in Britain were abolished (the Corn Laws only in 1846), but the first century of the Industrial Revolution took place in a rather oppressive political environment where “liberty” may not have been the best characterization of the state of society. The apex of the British laissez faire economy took place after, not before the Industrial Revolution. In later cases, industrialization and growth occurred in economies such as Russia and Japan in the first half of the twentieth century, where individual liberty was not a priority.

This book makes a strong argument for ideational history. The idea of unfettered economic activity, as expressed so powerfully by Locke and his followers (above all, of course, Adam Smith), is the “engine” that drove the economies of the West into the Great Enrichment. Yet there is something odd in the argument as presented here: while the authors, like all liberal writers, are firmly committed to the wisdom and power of the market, and while this book presents a strong case for the historical importance of ideas, it does not dwell on the market for ideas. There is little here that explains how the idea of freedom and unfettered markets actually caught on. After all, as the book notes, there was powerful resistance from many corners, and the victory of liberalism was by no means assured. It was driven, they say, by successful revolutions (in sixteenth century Netherlands and seventeenth century England), the printing press, and the reformation. Had these not taken place, the Enrichment may not have occurred. Europe was not better, it was lucky. But ideas do not just catch on because of their future benefits: they have to be debated and sold in a market for ideas, in which its proponents persuade their audience based on the evidence, the logic, or the ethics of the idea. Yet surprisingly the market for ideas makes no entry in a book devoted to the praise of markets and the power of ideas. Indeed, it could be argued that in their account liberalism’s success was precisely due to what happened in the market for ideas. Intellectuals from Locke and Smith down persuaded the people that mattered of ideas that led to economic growth.

The emphasis on ideas leads to the other question that the book raises. The period they describe as crucial to the emergence of the main elements of the Great Enrichment corresponds with the Age of Enlightenment. Yet the Enlightenment, arguably one of the most powerful cultural movements in history, plays no role in their account despite its commitment to ideas. Writing the economic history of modern economic progress without the Enlightenment is the ultimate prince-less Hamlet. Historians have recently rescued it from the dismissive attitudes of a misguided revisionist historiography, as exemplified by Ritchie Robertson’s recent tour de force (though it ignores economic history). Which precisely were the enlightenment ideas that mattered? A belief in liberty, free markets, and small government surely was part of it, although a disturbing number of philosophes felt that growth was too important to be left to the private sector and needed help from a friendly government. What the French called dirigisme was basically an attempt to recruit the government to help entrepreneurs in their endeavors. Britain was exceptional in its laissez faire approach to economic development — and even there the government was not altogether absent.

Above all, what is missing in this book is any serious acknowledgment of the role of what people at the time called “useful knowledge” — an understanding of natural phenomena and regularities. In many places of the book, the author invoke ingenuity as the force for progress. But how is ingenuity to lead to sustained growth without knowledge? Ingenuity and technological progress do not drop down from heaven as soon as liberty is declared. Skills, technical savoir faire, and dexterity have to be produced and created in the system. Increasingly it was realized that such skills needed to be augmented by an understanding of the natural regularities of mechanics, energy, and materials. The Enlightenment realized that natural philosophy could be harnessed to material needs, from fighting smallpox to finding longitude at sea to pumping water out of coal mines. McCloskey and Carden will have none of it. Science, they say, was unimportant as the driver of growth, because so many advances were made without it.

This assessment hinges on a somewhat narrow definition of what we mean by useful knowledge. The basic idea was one of progress, and progress was to be achieved because knowledge — both propositional and prescriptive — was cumulative. Progress occurred because in a well-functioning market for ideas, better insights about nature would beat out inferior opponents. Lavoisier’s chemistry replaced phlogiston and caloric, and vaccination pushed out the antiquated resignation that smallpox was a divine punishment for our sins. None of those triumphs, and countless others, were accepted without fierce resistance, and their victory was never assured. But this is why the story cannot be told without placing the Industrial Enlightenment on center stage. What the Industrial Revolution needed was knowledge: science, when appropriate, augmenting and supporting the often tacit knowledge of workmanship and materials, but also many other things: practical arithmetic (as shown in a brilliant forthcoming article by Kelly and Ó Gráda), the use of better tools and equipment, an understanding — often instinctive — of mechanics, heat, and chemical processes.

In short, a society that was free but ignorant would not grow. Unlike what Carden and McCloskey imply, ingenuity was not an automatic and passive link between freedom and prosperity. The sense that a systematic cataloguing and understanding of natural phenomena and regularities was needed to achieve progress permeated the thinking of the people who brought it about — including those who had no science themselves. As scientific knowledge expanded, people latched on to it and drew from it to come up with new ideas that made life better. Uneducated tinkerers, by themselves, could not have turned the Industrial Revolution into sustained growth. Inventions can be made serendipitously, without the faintest understanding of why and how they work; but such advances soon bog down. What we need now, then, is a serious discussion of how the elements of the Enlightenment interacted, that is, how personal freedom and the right incentives helped create the surge of practical knowledge and ingenuity that actually created the means for the Great Enrichment.

Liberalism, as it emerged in the West and as described in this book, was part and parcel of the European Enlightenment — though (like everything else in the writings of the eighteenth-century philosophes) it was disputed and doubted. Yet the Enlightenment was much more than liberalism, and if all that it had created was a belief in personal freedom and less restrictive government, its effects on the Great Enrichment may have been more modest. What counted was a belief in progress — material as well as social and political. Not all the prescriptions toward the perfection of society worked equally well — and perhaps that may be why the Enlightenment became something of a whipping boy for some writers influenced by the lamentable “Frankfurt School.” But on the matter of economic growth, the eighteenth-century intellectuals basically got it right. Material progress, the philosophes felt, was driven above all by knowledge and its accumulation, its testing in the market for ideas, and its application by engineers, mechanics, and entrepreneurs. These were the real causes of the Great Enrichment. Everything else — trade, politics, literacy, imperialism, and a host of other factors enumerated and dismissed by McCloskey and Carden — depended on that.

What, then, should we think of the role of “freedom” in economic growth? The question will be debated for generations and McCloskey has done our profession a great service by setting the terms of the debate. A large number of scholars would argue that rather than “laissez faire” policies, enlightened and competent governments could support and drive economic growth. As the late Alice Amsden has shown in her The Rise of the Rest, such governments existed. Without sufficient state capacity to guide and support development, many of the conditions for a Great Enrichment may not be there. Could there be such a thing as “too much liberty” just as there clearly was a thing such as too much coercion? In a forthcoming book, The Rise and Fall of Laissez Faire, Walker Hanlon shows how over the course of the nineteenth century Britain slowly retreated from a rather extreme form of laissez faire and introduced elements of regulation, coercion, and the welfare state to correct for some of the most undesirable consequences of the Industrial Revolution. So did every industrialized nation, some more, some less. Even the individualist and freedom-loving United States was dragged into a (partial) retreat from extreme liberalism, not just because most people demanded it, but because it was the right thing to do.

Perhaps the authors should consider this: liberalism depends on markets, and markets can fail. Part of liberty should therefore consist of society’s right to choose a certain amount of coercion and regulation by the state, to avoid such unacceptable outcomes as child labor, toxic chemical pollution, millions of people without medical insurance, and the poisoning of considerable portions of the population by pharmaceutical firms selling addictive substances. Somewhere between a libertarian free-for-all economy, and the horridly coercive worlds of Stalin and Mao, there is a goldilocks-like middle ground, far from optimal perhaps, but more livable than the alternatives. It is that middle ground that the Enlightenment strove for. In an imperfect world, that is the best we can do.

References

Amsden, Alice H. The Rise of “The Rest”: Challenges to the West from Late-Industrializing Economies. Oxford University Press, 2001.

Besley, Timothy, and Torsten Persson. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton University Press, 2013.

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

Hanlon, Walker W. The Rise and Fall of Laissez Faire. Princeton University Press, forthcoming.

Kelly, Morgan, and Cormac Ó Gráda. “Connecting the Scientific and Industrial Revolutions: The Role of Practical Mathematics.” Journal of Economic History, forthcoming.

Robertson, Ritchie. The Enlightenment: The Pursuit of Happiness, 1680–1790. New York: Harper Collins, 2021.

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor, (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2022). All EH.Net reviews are archived at http://www.eh.net/Book-Reviews.