Veblen, institutions and ideas

Veblen: The Making of an Economist Who Unmade Economics by Charles Camic isn’t a biography of Thorstein Veblen so much as an intellectual history. Although there is biographical detail, its purpose is to situate Veblen in his milieu, not only from an immigrant midwstern farming family but also in at the birth of academic economics in the United States in the later decades of the 19th century. This was an era when universities were being founded, some on the model of research universities imported by men who had studied in Germany. It was also a time when economics was in flux, with a progression from classical economics – and Mill’s textbook – to institutionalism on the German historical model to the new marginalism.

Camic makes two central arguments. One is that – contrary to the firm impression shaped by the only major biography to date – Veblen was far from being an outsider. On the contrary, he studied with the leading economists of the day (such as John Bates Clark, or Richard Ely), spent years on the faculty at the University of Chicago where he edited the Journal of Political Economy, wrote many academic articles and was invited to give lectures at other top departments. He was, Camic very convincingly argues, at the heart of the academic economics of the day until late in his career. Only at the end did he fall off the top rungs of this ladder, and then because of his personal entanglements and not for any intellectual reason.

The other claim is that Veblen’s economics, and indeed his entire intellectual formation, was due to an environment in which the idea of evolution pervaded everything. Hence it was not surprising that the evolution of institutions should play such a major part in Veblen’s economics. It was not because he was an outsider that Veblen condemned the ‘nonproductive’ rich in Theory of the Leisure Class, but because he considered American social and economic institutions had evolved in a parasitic, an extractive, direction. Consistent with this argument, when he wrote about economic theory, he firmly condemned the new marginalist approach as ahistorical: how could the marginalists fail to see that the marginal productivity of the rich nore no relation to the value they could extract from the economy? One might today readily agree the same point about the monopoly capitalists of big tech, but the subtitle of the book is odd – far from Veblen successfully unmaking economics, the marginalists went on to hold sway until relatively recently and are hardly down and out even now.

Nevertheless, this is a really interesting book, in effect a sociological study of the formation of the top US economics departments still dominating the profession globally today, the years when they separated from other disciplines, and were characterised by a pluralism reflecting the ferment of debate within the profession. It left me thinking what a shame it was that Veblen had left the academic world before the end of his career – he ended up writing for popular publications – because although individuals rarely turn the tide by themselves, he might have influenced what became a close-to-monoculture in economics (to borrow the evolutionary metaphor). For example, in his final academic post at Stanford he published (in 1908 and 1909) significant articles – unknown to me before this – about the “intangible assets of the community” and their role in production, the “storehouse of knowledge”. How modern this sounds. But he was kicked out of Stanford for an indiscreet relationship, and that was that. I have read Theory of the Leisure Class, and found it almost unreadable. Nevertheless, I’ll be toddling off to have a look at these two late articles.

I enjoyed reading Veblen – one for anybody interested either in the man himself or in the history and sociology of economics. It certainly succeeds in over-turning the prevailing myth that Veblen was an outsider. Iconoclast perhaps, but from within the heart of academic economics for much of his career.



From Hobbes to Locke – and back again?

I’m a fan of Deirdre McCloskey, but accept that her writing style is a bit marmite – it’s always clear but she has a rather arch tone which some readers don’t like. Some of her books are also rather long, and the three in her terrific Bourgeois Era trilogy, The Bourgeois Virtues, Bourgeois Dignity and Bourgeois Equality, fall into this camp. They repay the time required, drawing as they do on McCloskey’s extensive reading and research (to get a flavour of how extensive, look at some of her posted course syllabi here).

Now, however, anybody unwilling to commit the time to the whole Bourgeois Era trilogy can read instead this new summary version by McCloskey and Art Carden, Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Where Acemoglu and Robinson’s Narrow Corridor takes inspiration from Hobbes, this book is inspired by Locke, and argues that liberty is the key to the great enrichment of the past two and a half centuries.

At a time when the mood – and reality – of the times is swinging toward state intervention in the economy – and rightly so, given the potentially Hobbesian world to which the combination of market power and pandemic have brought us – it’s all the more important to keep an open mind and take these arguments from economic liberty seriously. Don’t be put off by the blurbs on the back from Stephen Davies of the IEA and Matt Ridley. Besides, the sweep of McCloskey’s historical knowledge is such that the book is just a good read (if you like the tone), and a fraction of the length of the trilogy!



A brace of Leviathans

As welcome distraction from the misery of not being able to see any close family at Christmas after all, I’ve read (late, I know) The Narrow Corridor: How Nations Struggle for Liberty by Daron Acemoglu and James Robinson.

The basic argument is well known. Inspired by Hobbes’ Leviathan, they argue that nations experience a dynamic whereby there is a sort of saddle path (a narrow corridor) between not enought government (‘absent Leviathan’) and too much (‘despotic Leviathan’). To stay in the corridor (‘shackled Leviathan’), there needs to be a balance of power between government (which has to be strong enough to be effective) and society (which has to be strong enough to prevent government tipping off the path in either direction. Slightly oddly, they call this the Red Queen effect after the on-the-spot race between Alice (in Wonderland) and the Red Queen – odd because it is never made completely explicit that they’re referring to a dynamic process rather than an adequate balance. I infer the former, but it’s implicit in the examples that make up the bulk of the book.

For there is a whistle stop tour of pretty much all of recorded human history. I’m not sure this works well, although at least the book is only a third of the length of Thomas Piketty’s Capital and Ideology, which came with its own tote bag. I have to confess I started to read the latter but was not distressed to find it quarantined in my office in the March lockdown. The first section of that is all history. It’s fantastic that top economists have discovered history of course, but it’s difficult to get the right focal length – what’s the right amount of detail to inform readers without it becoming classic economic imperialism? I did enjoy reading the book, but personally, I’d have edited down The Narrow Corridor’s capsule histories.

Other quibbles. The book seems to demonstrate the struggle for stability and absence of conflict at least as much as for liberty, despite the subtitle and blurb emphasising liberty only. Hobbes was more in the territory of order versus anarchy. There’s even a hand grenade on the paperback cover. And, having spent most of the book presenting the three Leviathans as exhausting the possibilities (there’s a neat diagram), the ‘paper Leviathan’ is introduced to deal with countries that govern despotically and at the same time incompetently – think some Latin American or African states. And perhaps some formerly-shackled Leviathan countries heading in that direction…..

Having said all this, well worth a read, as well as a useful reminder that there have been dark times before and yet things go on.




Technology old and new

For the usual kind of slightly random reason, I re-read David Edgerton’s excellent book The Shock of the Old this past week (having read it when published in 2006 as he was an interviewee on an Analysis I was presenting []). It’s generally aged very well, and is of course a necessary corrective to technology hype. The main argument is that the history of technology tends to be told as a a breathless account of inventors and shiny new inventions, rather than the more representative but complicated story of economic conditions and uneven diffusion and use. So at any moment in time, many overlapping technologies serving the same basic needs will be in use around the world.  What’s more, the same hype gets recycled. For example there’s a quotation from George Orwell in 1944 complaining that people were over-hyping the ‘death of distance’ due to the airplane and radio, when the same claims had been made before 1914!

It is undoubtedly true that different technologies overlap in use, and indeed there’s quite a large economics literature about diffusion and the need for complementary investments before inventions and innovations deliver productivity benefits.  To this extent, Edgerton is railing against an imaginary foe. He is also very sniffy about the concept of ‘weightlessness’, which he misinterprets as a claim about declining employment shares for primary and secondary sectors of the economy. It is not this, but rather a description of the distribution of value added in the economy, and one that has been borne out fully by trends in the past 2 or 3 decades.

The other point that he seems to me to under-play – oddly, given his emphasis on the importance of contest for the use of technologies – is that they are all social. There are countries unable to provide a reliable electricity supply not only because they are low or mid-income but because they do not have the institutions to support the complex supply arrangements: not just sub-Saharan Africa but also California. Or take the book’s example of the Pill, which it argues is an incremental change in contraceptive technologies. Yes and no. Each of the Pill’s characteristics – women in control, reliable, and not requiring a fitting by a doctor – might seem a small shift from condoms, douches, IUDs and diaphragms, but together they did deliver a compelling new method and a radical change in social relations.

Having said all this, The Shock of the Old is a bracing corrective to techno-hype, something certainly still needed.

41HeTZgQv0L._SX324_BO1,204,203,200_(This is the new edition – I have the old one so haven’t read the new intro.)


Making the impossible happen

I have totally enjoyed One Giant Leap: The impossible mission that flew us to the moon, by Charles FIshman, out now as a paperback. It covers everything about the Apollo mission, from the Cold War context (the shock of Sputnik and Gagarin) and JFK’s political calculations and Congressional debates, to the practicalities of the science, design and manufacturing, to the lasting consequences for global society. The Soviet lead in space stimulated the US space effort, but Kennedy himself was lukewarm about America being first on the Moon. Fishman argues that the assassination of the President ensured the continuation of the mission because it became a memorial to him.

One key long-term consequence is that the mission to get humans on the moon brought about the digital revolution. Fishman makes a totally persuasive case that NASA was such a large-scale and demanding, perfectionist purchaser of integrated circuits that it ensured they became faster, more reliable and cheaper with every passing year. Transistors had only been around for 10 years but were too large and power hungry for the new performance demands of manned space flight. NASA bought most of the chips made in the US during the 1960s. The first ones cost $1000 each, in 1962 they were under $100 each, in 1963 $15 each and $7.68 by 1965.

The other long-term impact was to turn ‘technology’ from something scary and Dr Strangelove-like to do with nuclear weapons and mutually assured destruction into something benign and aspirational, the challenge of conquering space for all humanity, albeit planting US flags on the Moon. “The race to the Moon … invoked the wonders of science, with about as much drama as could be imagined.”

The sections about managing the huge engineering project across multiple suppliers, manufacturing to the essential high standards, obessing over details, making key design decisions are all totally fascinating. MIT’s Instrumentation Lab was writing all the software – itself a new word in the early 1960s – and this threatened to delay the launch beyond Kennedy’s ‘before the decade is out’ deadline, so complex and crucial was the task. “It was the first of a whole new kind of engineering projects,” Fishman writes. There was no prior know-how about how to run these. Indeed, big, complex software engineering projects all too often still go wrong. Humans got to the moon and safely back because of the attention to detail on the part of NASA engineers.

The Apollo project was made all the harder by the fact that the onboard computer had to fit within one cubic foot, and its memory contained just 589,824 0s or 1s. So its software was – literally – woven by hand. MIT and NASA HQ had tapes and punch cards. On the spacecraft itself, the programs required to get to the Moon, land the Lunar Module, take off again, dock in space with the Command Module, and return to Earth, there was no room for these bulky items. The punch cards were taken to an old textile factory in Waltham, Massachussetts, where women who had woven fabric, or manfactured watches, in previous jobs now wove software into ‘core rope memory’ at special looms. Their old skills made them the only kind of workers with the know-how to weave computer memory. When the women struck for a while in the mid-1960s, everything their supervisors and managers produced until the strike was over, had to be scrapped.

This is the kind of detail that made me love the book. But the wonder of the Apollo Mission is also part of the enjoyment. I have a vague memory of watching Neil Armstrong, sitting in my PJs along with my older siblings; our family had got our first TV for the occasion. I ended One Giant Leap feeling vaguely optimistic as we approach the end of a dreadful year. Human societies can do impossible, wonderful things, with a combination of political vision and support, and engineers.