Tag Archives: history

The education of an economist

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In the Financial Times this morning Deirdre McCloskey has a tantalising curtain-raiser for her forthcoming book, Bourgeois Equality: How Betterment Became Ethical, 1600-1848, and Then Suspect. Her argument is that it isn’t the accumulation of capital but rather innovation that is the engine of wealth, collective and individual:

“Taxing the rich, or capital, does not help the poor. It can throw a spanner into the mightiest engine for lifting up those below us, arising from a new equality, not of material worth but of liberty and dignity. Gini coefficients are not what matter; the Great Enrichment is.”

McCloskey has been on an anti-Piketty tour – see for example this by Evan Davis in The Spectator, and McCloskey herself speaking recently to the IEA. It’s intriguing that two of the economists most admired by progressive, anti-free-market, reforming economics people – McCloskey and Piketty – are in such disagreement.

The forthcoming book is the final volume in McCloskey’s trilogy, The Bourgeois Era, preceded by Vols 1 [amazon_link id=”0226556646″ target=”_blank” ]The Bourgeois Virtues: Ethics for an Age of Commerce[/amazon_link] and 2 [amazon_link id=”0226556743″ target=”_blank” ]Bourgeois Dignity: Why Economics Can’t Explain the Modern World[/amazon_link] (I reviewed the latter for the New Statesman.)

[amazon_image id=”0226556743″ link=”true” target=”_blank” size=”medium” ]Bourgeois Dignity: Why Economics Can’t Explain the Modern World[/amazon_image]

Occasionally I might disagree with Prof McCloskey, but I love her books. One of my all-time favourites is [amazon_link id=”0472067443″ target=”_blank” ]How to Be Human (though an economist)[/amazon_link] and of course her book with Stephen Zilliak, [amazon_link id=”0472050079″ target=”_blank” ]The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives[/amazon_link].

[amazon_image id=”0472067443″ link=”true” target=”_blank” size=”medium” ]How to Be Human: Through an Economist[/amazon_image]   [amazon_image id=”0472050079″ link=”true” target=”_blank” size=”medium” ]The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives (Economics, Cognition & Society)[/amazon_image]

I love even more the reading lists for her courses. Just look at the instructions for Economics 326: The History of Economic Thought, 2006, for example, or the graduate seminar Economics 263, or Economics for Humanists. It’s clear one would have to really work, but who wouldn’t want to be taught economics like this?

Order and disorder

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I’ve been looking for the first time in some years at Douglass North’s short book [amazon_link id=”0691145954″ target=”_blank” ]Understanding the Process of Economic Change[/amazon_link]. North won his Nobel for the application of institutional economics to economic history, or in other words at the role played in the shaping of institutions and hence events by transactions costs and property rights.

This book is about how different societies arrive at their set of institutions. In particular, what enabled the historically rare success of the United States in the 20th century in establishing an orderly and thriving society, able to adapt even in the face of conflicts and technological change? And why has this kind of success been so rare in history, given that order seems clearly preferable to disorder?

[amazon_image id=”0691145954″ link=”true” target=”_blank” size=”medium” ]Understanding the Process of Economic Change (The Princeton Economic History of the Western World)[/amazon_image]

His answer lies in the beliefs members of a society hold, especially their beliefs in the legitimacy of their economic and political institutions. The book identifies four conditions for a society to produce order in the face of change. They are:

– citizens have rights that imply limits to the behaviour of officials and politicians;

– there is a constitutional framework that limits the decision-making power of the government;

– property and personal rights are well-defined and legally protected;

– the state credibly commits to upholding these rights, protecting citizens against expropriation by public officials.

This isn’t dissimilar to the conditions set out by Acemoglu and Robinson in [amazon_link id=”1846684307″ target=”_blank” ]Why Nations Fail[/amazon_link] for institutions to be ‘non-extractive’ – and indeed, their book cites North’s work quite extensively.

[amazon_image id=”1846684307″ link=”true” target=”_blank” size=”medium” ]Why Nations Fail: The Origins of Power, Prosperity and Poverty[/amazon_image]

Much of North’s focus here is on how to improve the institutional framework in developing economies, but his criteria are clearly more general. But he ends with a word about the United States: “All societies throughout history have eventually decayed and disappeared. … There is no guarantee that the [US’s] flexible, adaptively efficient institutional structure will persist in the ever more complex novel world we are creating.” I wouldn’t want to forecast anything, but it isn’t obvious at present that order has the upper hand over disorder.

Your economic history suggestions collated

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A few days ago I asked, what economic history do economists need to know? Since then, I’ve thought of a few extra myself – although the list below barely still scratches the surface! Keep the ideas coming.

[amazon_link id=”0691143277″ target=”_blank” ]Power and Plenty[/amazon_link], Ronald Findlay and Kevin O’Rourke

[amazon_image id=”0691143277″ link=”true” target=”_blank” size=”medium” ]Power and Plenty: Trade, War, and the World Economy in the Second Millennium (The Princeton Economic History of the Western World)[/amazon_image]

[amazon_link id=”0226014746″ target=”_blank” ]The Institutional Revolution[/amazon_link], Douglas Allen

[amazon_link id=”0471295639″ target=”_blank” ]Against the Gods: The remarkable story of risk[/amazon_link], Peter Bernstein

[amazon_link id=”1847376460″ target=”_blank” ]The Prize: the epic quest for power, oil and money[/amazon_link], Daniel Yergin

[amazon_link id=”0140258264″ target=”_blank” ]Accidental Empires[/amazon_link], Robert Cringely

[amazon_image id=”0140258264″ link=”true” target=”_blank” size=”medium” ]Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition and Still Can’t Get a Date[/amazon_image]

Below, I’ve collated some of the additional suggestions other people have made.

Tom Clark, author of [amazon_link id=”0300203772″ target=”_blank” ]Hard Times: The Divisive Toll of the Economic Slump[/amazon_link], emailed: “Robert Shiller’s [amazon_link id=”0691123357″ target=”_blank” ]Irrational Exuberance[/amazon_link]. Arguably a bit old now, but still teaches you how to make sense of what’s going on in financial markets today in the light of decades of experience. Barry Eichengreen’s [amazon_link id=”0691139377″ target=”_blank” ]Globalising Capital[/amazon_link], which does the whole history of the global monetary system v elegantly in a couple of hundred pages. The classic [amazon_link id=”0765809443″ target=”_blank” ]Marienthal study[/amazon_link] of the effect of unemployment (which I read in full for Hard Times, and is a powerful as well as a nice quick read).” He also suggested Galbraith’s [amazon_link id=”014103825X” target=”_blank” ]The Great Crash 1929[/amazon_link].

[amazon_image id=”0691139377″ link=”true” target=”_blank” size=”medium” ][amazon_image id=”0691139377″ link=”true” target=”_blank” size=”medium” ]Globalizing Capital: A History of the International Monetary System (Second Edition)[/amazon_image]

[amazon_image id=”0765809443″ link=”true” target=”_blank” size=”medium” ]Marienthal (Ppr): The Sociography of an Unemployed Community[/amazon_image]

Robotenomics: “I’d recommend considering [amazon_link id=”B00D0DM4V2″ target=”_blank” ]Prophet of Innovation: Joseph Schumpeter and Creative Destruction[/amazon_link] by Thomas McCraw, and [amazon_link id=”1843763311″ target=”_blank” ]Technological Revolutions and Financial Capital[/amazon_link] by Carlota Perez.”

Christopher May: Karl Polanyi’s classic [amazon_link id=”080705643X” target=”_blank” ]The Great Transformation[/amazon_link]

Brian Labatte: A. Chandler, [amazon_link id=”1614275084″ target=”_blank” ]Strategy and Structure[/amazon_link]; A. Sloan, [amazon_link id=”0385042353″ target=”_blank” ]My Years with General Motors[/amazon_link].

[amazon_image id=”0385042353″ link=”true” target=”_blank” size=”medium” ]My Years with General Motors[/amazon_image]

Steven Clarke: “I’m currently reading David Landes [amazon_link id=”052153402X” target=”_blank” ]The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present[/amazon_link] and would thoroughly recommend it.”

Ronald Grey: [amazon_link id=”0230365353″ target=”_blank” ]Manias, Panics, and. Crashes. A History of Financial Crises[/amazon_link] by Charles Kindleberger

Duncan Green: Anything and everything by Ha-Joon Chang (from [amazon_link id=”1843310279″ target=”_blank” ]Kicking Away the Ladder: Development Strategy in Historical Perspective[/amazon_link] onwards) and Dani Rodrik ([amazon_link id=”0691141177″ target=”_blank” ]One Economics, Many Recipes[/amazon_link]).

Merjin Knibbe: [amazon_link id=”0307962431″ target=”_blank” ]Money, the unauthorized biography[/amazon_link]

Martin Chick tweeted:

Attlee8
@diane1859 My first year’s in British EH begin with Keynes, Essays In Persuasion; Meade Intelligent Radical’s Guide to Economy;
14/07/2014 07:52

Technology in history

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I’ll collate the economic history suggestions another time. Meanwhile, though, seeing a recommendation for David Edgerton‘s influential [amazon_link id=”1861973063″ target=”_blank” ]The Shock of the Old: Technology and Global History since 1900[/amazon_link] sent me to both that – which insists that there is too much cheerleading about invention and not enough focus on the implementation of technologies in specific historical contexts – and to his subsequent book, [amazon_link id=”0141026103″ target=”_blank” ]Britain’s War Machine: Weapons, Resources and Experts in the Second World War[/amazon_link].

The latter makes some contrarian arguments about the war. Edgerton argues that (a) Britain was the richest and most powerful combatant thanks to its imperial resources – it is a mistake to think of it as a beleagured nation standing alone begging for American charity, and Germany would (and did) struggle to combat it; and (b) the ‘declinist’ histories about Britain after the war (notably Corelli Barnett in [amazon_link id=”033034790X” target=”_blank” ]The Audit of War[/amazon_link] and  [amazon_link id=”0333480457″ target=”_blank” ]The Lost Victory [/amazon_link]etc) are mistaken, as relative decline was due largely to strong growth in other countries.

[amazon_image id=”0141026103″ link=”true” target=”_blank” size=”medium” ]Britain’s War Machine: Weapons, Resources and Experts in the Second World War[/amazon_image]

Edgerton’s argument is pinned on a materialist account of the resources and technology developed and used by Britain. Some of this evidence is very striking. One example is a graphic showing the vastly, vastly greater tonnage of bombs the UK dropped on Germany compared with German bombing of the UK – the horrors of the firestorms and mythology of the Blitz notwithstanding. It’s all very interesting. Britain’s early defeats led to a huge emphasis on increasing production, he writes, saying there was a “powerful sense that the war was a war of production,” with contemporary debate focusing on industrial efficiency, or the lack of it.

The importance of scientific advance in the conflict is obviously a well-known part of the story, from codebreaking (my favourite account is R.V Jones’s [amazon_link id=”185326699X” target=”_blank” ]Most Secret War)[/amazon_link] to the Manhattan Project. Edgerton adds to this the sense of Imperial power and the availability of material resources.

[amazon_image id=”185326699X” link=”true” target=”_blank” size=”medium” ]Most Secret War (Wordsworth Military Library)[/amazon_image]

His reinterpretation is certainly interesting, and it must always be fruitful to test received wisdom. His claim that postwar decline is misinterpreted is less convincing, however. Surely the loss of Empire is a decline, whether you think it was a good thing or not? And the transition to US superpowerdom postwar is clear.

I see from his website that Prof Edgerton is working on currently working on Capitalism, Empire and Nation: a new history of twentieth-century Britain, a forthcoming book for Penguin. That will be an essential read.

What economic history do economists need to know?

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There’s an interesting VoxEU column by Coen Teulings about the economic history economics students ought to know. The list is terrific for learning about economic growth and development, including for example Jared Diamond’s classic [amazon_link id=”0141024488″ target=”_blank” ]Guns, Germs and Steel [/amazon_link]and Paul Bairoch’s [amazon_link id=”B009NO0MH0″ target=”_blank” ]Cities and Economic Development[/amazon_link], as well as more recent entries like Acemoglu and Robinson’s [amazon_link id=”1846684307″ target=”_blank” ]Why Nations Fail[/amazon_link]. However, there are some obvious omissions – David Landes’ [amazon_link id=”0349111669″ target=”_blank” ]Wealth and Poverty of Nations[/amazon_link], Joel Mokyr’s [amazon_link id=”0691120137″ target=”_blank” ]Gifts of Athena[/amazon_link], [amazon_link id=”0691090106″ target=”_blank” ]The Great Divergence[/amazon_link] by Kenneth Pomeranz, not to mention some straightforward histories of the Industrial Revolution such as Bob Allen’s [amazon_link id=”0521687853″ target=”_blank” ]The Industrial Revolution in Global Perspective[/amazon_link]. There are some less obvious omissions too – James Scott’s [amazon_link id=”0300078153″ target=”_blank” ]Seeing Like A State[/amazon_link], maybe?

[amazon_image id=”1846684307″ link=”true” target=”_blank” size=”medium” ]Why Nations Fail: The Origins of Power, Prosperity and Poverty[/amazon_image]

Economics students certainly need to have more history included in their courses – I would favour weaving it in as well as offering separate courses, because much as students claim to want to study economic history, I’m not at all sure they walk the talk in large numbers. However, the list in the VoxEU column is only one strand of economic history. For industrial organisation courses, for example, what’s needed is business history. The Mokyr book might feature, but so also Alfred Chandler’s [amazon_link id=”B00BR5MIXY” target=”_blank” ]The Visible Hand[/amazon_link], or his [amazon_link id=”B00L6K91RG” target=”_blank” ]book about DuPont[/amazon_link], say, or a terrific book I read recently about Bell Labs, Jon Gertner’s [amazon_link id=”1594203288″ target=”_blank” ]The Idea Factory[/amazon_link].

[amazon_image id=”1594203288″ link=”true” target=”_blank” size=”medium” ]The Idea Factory: Bell Labs and the Great Age of American Innovation[/amazon_image]

I’m sure there are lots of other good suggestions out there – both books, and how to weave economic history into economic teaching. This summer I’m finalising my Public Policy Economics course to teach at the University of Manchester in the autumn so econ history suggestions for that are especially welcome.