Streams: (Wednesday) Economic History Feed

Hoisted from teh Archives: Joseph Schumpeter on "Liquidationism"

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Today's Economic History: Joseph Schumpeter on "Liquidationism": "Three things strike me while rereading Schumpeter's 1934 "Depressions" (and also his 1927 Explanation of the Business Cycle):

  1. How much smarter Schumpeter is than our modern liquidationists and austerians--he says a great many true things in and amongst the chaff, which is created by his fundamentally mistaken belief that structural adjustment must be triggered by a downturn and a wave of bankruptcies that releases resources into unemployment. How much more fun and useful it would be right now to be debating a Schumpeter right now than the ideologues calling for, say, more austerity for and more unemployment in Greece!

  2. How very strange it is for Schumpeter to be laying out his depressions-cause-structural-change-and-growth theory of business cycles at the very same moment that he is also laying out his entrepreneurs-disrupt-the-circular-flow-and-cause-structural-change-and-growth-theory of enterprise. It is, of course, the second that is correct: Growth comes from entrepreneurs pulling resources into the sectors, enterprises, products, and production methods of the future. It does not come from depressions pushing resources into unemployment. Indeed, as Keynes noted, times of depression and fear of future depression are powerful brakes halting Schumpeterian entrepreneurship: "If effective demand is deficient... the individual enterpriser... is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros.... Hitherto the increment of the world’s wealth has fallen short of the aggregate of positive individual savings; and the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough..."

  3. How Schumpeter genuinely seems to have no clue at all that the business cycle is a feature of a monetary economy--how very badly indeed he needed to learn, and how he never did learn, what Nick Rowe and company teach today about the effects of monetary stringency on economic coordination.

  4. And, finally, how absolutely bonkers liquidationism and austerianism remain...

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Misapplied History...


I confess that I am a great fan of Applied History. Theoretical arguments and conceptual frameworks are, ultimately, nothing but distilled, crystalized, and chemically cooked history. After all, what else could they possibly be? And it is very important to know whether the distillation, crystallization, and chemical cooking processes that underpin the theory and made the conceptual frameworks were honest ones. And that can be done only by getting good historians into the mix—in a prominent and substantial way.

But if this is what "Applied History" is to be, AY-YI-YI-YI-YI-YI-YI!!!!

Niall Ferguson: Fetch the purple toga: Emperor Trump is here: "Think of Harvey Weinstein, the predator whose behaviour was for years an 'open secret' among precisely the Hollywood types who were so shrill last year in their condemnation of Donald Trump for his boasts about 'grabbing' women by the genitals...

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Document: Teddy Roosevelt (1907): The Malefactors of Great Wealth

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Document: Teddy Roosevelt (1907): Address of President Roosevelt on the occasion of the laying of the corner stone of the Pilgrim memorial monument "We can not as a nation be too profoundly grateful for the fact that the Puritan has stamped his influence so deeply on our national life. We need have but scant patience with the men who now rail at the Puritan's faults. They were evident, of course, for it is a quality of strong natures that their failings, like their virtues, should stand out in bold relief; but there is nothing easier than to belittle the great men of the past by dwelling only on the points where they come short of the universally recognized standards of the present...

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Books to Reread: John Maynard Keynes: Essays in Persuasion

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Books to Reread: John Maynard Keynes (1931): Essays in Persuasion: "Here are collected the croakings of twelve years—the croakings of a Cassandra who could never influence the course of events in time...

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NIkola Tesla


Wednesday Economic History: It is traditional to talk about Thomas Alva Edison. The most famous inventor in the world, "the wizard of Menlo Park", New Jersey, registered more than 1000 patents and founded 15 companies—including what is now called General Electric. But that story is too well-known. Let’s talk about Nicola Tesla instead.

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Thomas Jefferson: "I Tremble for My Country..."

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Live from Monticello: Human rationality can be thought of in three ways: as rational beings, as rational_izing_ beings, and as debating beings who reach rough consensus and are much smarter collectively than they were individually. One of the attractions—in the sense that we find ourselves compelled to register, wrestle with, admire, and loathe him whether we will or no—of Thomas Jefferson is that he was outsized and gigantic in all three of these aspects: Thomas Jefferson (1981): Notes on the State of Virginia, Query XVIII: Manners: "It is difficult to determine on the standard by which the manners of a nation may be tried, whether catholic, or particular.... It is more difficult for a native to bring to that standard the manners of his own nation, familiarized to him by habit. There must doubtless be an unhappy influence on the manners of our people produced by the existence of slavery among us...

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On Niall Ferguson's "The Pity of War", Plus Rebuttal: Hoisted from the Archives from Five Years Ago

T on Niall Ferguson's WWI Book:

His WWI book was awful. It's entire premise is anachronistic, and it shows the same predilection for snide ad hominem attacks as the rest of his writing.

I beg to differ. I thought that Ferguson"s World War One book was pretty good. It suffered to a small degree from AJP Taylor disease, but a very mild case only--you learn a lot from TPoW, while you learn nothing—in fact, your Δ(knowledge) < 0—from Tayllor's Origins of WWII

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John Peter Altgeld: Wednesday Economic History

John Peter Altgeld

Michael Maggidson (2000_: 1896: John Peter Altgeld: "John Peter Altgeld was born in the German village of Nieder Selters on December 30, 1847...

When he was about three months old, his parents brought him to the United States, settling in Ohio. After a brief stint in the Union Army during the Civil War, Altgeld read the law and was admitted to the bar in 1872. He served as city attorney of Savannah, Missouri and in 1874, was elected county prosecutor. He resigned this post after a year and moved to Chicago, where he established himself as a lawyer. He was married three years later. He soon began investing in real estate and made a small fortune.

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A Month-Long April Fools Festival of Kevin Hassett: Dow 36000 Round I

Clowns (ICP)

Is Kevin Hassett really going to chair the Council of Economic Advisers?

That gives me an idea. April Fools Season is started--32 days to April Fools Day inclusive. Can we find 32 examples of Kevin Hassett writing things that are really stupid--so stupid that they should have gotten him bounced from his cushy chair at AEI immediately for intellectual incompetence? The answer is yes--we could find 32 things from Dow 36000: The New Strategy for Profiting from the Coming Rise in the Stock Market alone. But the journey--one a day between now and April 1--will be rewarding...

Dan Froomkin reminds me of number 1, from the very sharp Barry Ritholtz:

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On Marc Levinson and His "The Box That Changed the World": Hoisted from the Archives

Shenzhen Skyline 2015

The Box That Changed the World (July 25, 2006): It is 40 feet long, 8.5 or 9.5 feet high, and eight feet wide.

It carries up to 29 tons in its 2,000 cubic feet of recommended available space – goods worth roughly $500,000 (or more) when sold at retail.

It, and what it carries, can be transported in a month anywhere in the world where there are suitable harbors, railways, locomotives, flatcars, truck tractors, diesel fuel, and roads.

It is the modern cargo container, and it is able to move non-fragile, non-perishable goods from any modern factory with a loading dock to any modern warehouse anywhere in the world for about 1% of retail value.

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Reading: Robert C. Allen (2003): Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution

Robert C. Allen (2003): Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution (Princeton: Princeton University Press: 0691144311) <>

The Big Question:

Was the Soviet Union an Asian economy, (like) a Latin American economy, a (central or western) European economy, or a settler-frontier economy?

  1. If it was an Asian economy, than it did well on economic growth--even though horribly (save in comparison to Maoist China, the Khmer Rouge, and the Korean Hereditary Dictatorship of the God-Kings Kim) in terms of societal well being.

  2. If it was a Latin American economy, it did OK in terms of economic growth--Allen says "good", but I think he overstates his case: "OK".

  3. If it was a (central or western) European economy, it did very badly--badly enough to prompt its bloodless overthrow.

  4. If it was a settler-frontier economy, its badness attains world-historical levels.

I reject Allen's conclusions, largely because of the regression-discontinuity study I did in the middle of the 1990s:

20140127 Econ 2 Intro to Microeconomics II key

The discontinuity between the countries on the left and the countries on the right is simply where Stalin's (or Mao's, or Giap's) armies stopped. The communist countries were, as of the moment that the Iron Curtain collapsed, missing 88% of their prosperity as measured by what seems and seemed to be the most natural yardstick.

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William W. Freehling: Cassius Marcellus Clay and His World

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William W. Freehling (1990): The Road to Disunion: Secessionists at Bay, 1776-1854 (New York: Oxford University Press: 0195058143) <>: "Kentucky, while not as southern as Virginia, was more western...

...Kentuckians suffered from the usual western problem: too much land, not enough laborers. Slavery, prime solution to labor shortages deeper in the Southwest, could never be as widespread in Kentucky’s cooler climes. A low percentage of slaves arguably intensified the labor shortage, for potential white settlers preferred free Ohio, immediately to Kentucky’s north.

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The Enigmas of Thomas Jefferson...

Cursor and 2017 01 30 The Enigmas of Thomas Jefferson pages

Every time I start thinking about Thomas Jefferson, I get distracted by the family psychodrama—and by the plight of the Hemings family—and by the fact that TJ named one of his sons by Sally Hemings, born at the start of Jefferson's second term as president, "Madison".

I wonder what Jemmy Madison thought of that, and whether Jefferson told him personally that he had done so...


Weekend Reading: Belle Waring: If Wishes Were Horses, Beggars Would Ride--A Pony!: Best Weblog Post EVAR (Smackdown/Hoisted)

Clowns (ICP)

A lot of intellectual energy in the early 2000s was a reaction to the installation by a five-to-four vote of a manifestly unqualified president--and the huge wave of justificatory bullshit that the Noise Machine generated around that in the form of clouds of misinformation to hide reality. People with platforms began calling it out, hoping to find other people to talk to to check whether they were being gaslighted or not.

The finest example of this I have ever seen was Belle Waring's Best Weblog Post EVAR from 2004. It's a thing to remember. If aspect of the Reagan presidency were real tragedy, and the entire Bush 43 presidency was tragic farce, what is this about to be?

Belle Waring (2004): If Wishes Were Horses, Beggars Would Ride--A Pony!: "I think Matthew Yglesias' response to Josh Chafetz' exercise in wishful thinking was about right...

...even if Brad DeLong's is more nuanced.

I'd like to note, though, that Chafetz is selling himself short. You see, wishes are totally free. It's like when you can't decide whether to daydream about being a famous Hollywood star or having amazing magical powers. Why not--be a famous Hollywood star with amazing magical powers! Along these lines, John has developed an infallible way to improve any public policy wishes. You just wish for the thing, plus, wish that everyone would have their own pony!

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Public Intellectualism: Wednesday Economic History

Public Intellectuals

A correspondent tells me that the Wall Street Journal has reviewed the book from our Notre Dame public intellectuals conference of three years ago and that, while the book is trashed, my piece is called "entertaining and enlightening" by the reviewer Daniel Johnson. This greatly pleases me--enlightenment is all one can hope for, and if one is entertaining as well one may be read even by those who do not get paid to do so. That makes my--personal--day, and I gratefully thank him.

Unfortunately, he also writes:

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Bob Allen and Friends: Before the Industrial Revolution

Preview of Untitled

How much to make of the post-1400 pre-1650 divergence between London and Amsterdam on the one hand and Valencia and Florence on the other? We want to grab for the explanation that the Black Death (and associated fourteenth-century demographic disasters) was a huge deal--and then things returned to Malthusian normal in southern Europe. But not so in northern Europe. And Delhi laborers are hanging up there, as well-off as Londoners (as best as Bob Allen and company can tell) in 1625 and 1650...

Parrots, Laissez Faire, Supply and Demand, and Political Economy

Preview of Parrots Laissez Faire Supply and Demand and Political Economy

Thomas Allen Horne: Property Rights and Poverty: Political Argument in Britain, 1605-1834: "To appeal to laissez-faire on all occasions, [J.R. McCulloch wrote]...

savors more of the policy of a parrot than of a statesman or philosopher...

Quote Investigator: Teach a Parrot to Say ‘Supply and Demand’ and You Have an Economist: "Dear Quote Investigator: There is a humorous saying about parrots and economists that is often attributed to the philosopher and satirist Thomas Carlyle...

...Sometimes the joke is simply ascribed to Anonymous. Here are three versions:

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A Note on the Jeffersonian Road Not Taken in American Economic History

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Whether Thomas Jefferson's vision of the future of America was coherent was unclear then and remains unclear now.

Jefferson, like most of his founding-father contemporaries, was steeped in one version of classical history: Roman history as a morality play. Jefferson and many, many of his revolutionary peers assumed that yeoman farmers--Cincinnati--were the only possible social class that could maintain a free republic. They all believed that Rome was a great, free Republic because of its fiercely-independent farmers who nevertheless loved their city and would--like Cincinnatus--drop their ploughs and instantly take up their swords to defend (and conquer), and then return to their ploughs after the war was over.

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Weekend Reading: Psuedoerasmus: State Capacity and the Sino-Japanese Divergence

Must-Read: I would add Mongkut and Chulalongkorn in Thailand, and Mohammed Ali in Egypt, to Pseudoerasmus's list here...

In a good world, this would be not a blogpost but a symposium. This would be a conference. Admittedly, since Pseudoerasmus is and probably must remain anonymous, he/she would have to teleconference in her/his disguised-voice avatar:

Pseudoerasmus: State Capacity & the Sino-Japanese Divergence: "Why China did not industrialise before Western Europe may be a tantalising and irresistible subject, but frankly it’s a parlour game...

...What remains underexplored, however, is the more tractable issue of why Japan managed, but China failed, to initiate an early transition to modern growth and convergence with the West. A recent paper argues that the gap in state capacity between Qing China and Tokugawa Japan was responsible for the divergence.

Please note, this blogpost disputes that argument:

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At the Origin of Gross Inequality (Wednesday Economic History)

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William Muss-Arnolt, trans.: The Man Who Has Seen All Things:

Around the enclosed space that is Uruk he walks, mighty like the wild bull, head raised high. None with weapon might challenge him as rival.

His men stand at attention, longing for his orders; but the old men of Uruk grouse that Gilgamesh has left no son to his father, for his arrogance has grown boundless. He has taken all their children, for is Gilgamesh not the shepherd of his people?

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"Mr. Lucky": From the Fifth Millennium BCE: Hoisted from Others' Archives from Eight Years Ago

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Buce: The Luckiest Horse in the Fifth Millennium BCE:

The subject for the day is the domestication of the horse--where and when and how and why, as recounted by David W. Anthony in his fascinating and absorbing new book, The Horse, the Wheel, and Language (2008)--and also a salute to the luckiest horse in the Fifth Millennium BCE. Per Anthony, the date is about 4800 BCE; the place is in what he chooses to call ‘the Pontic-Caspian steppes,’ just above the Caspian Sea. The ‘why’ is interesting: apparently not for riding, but for food—horses were big and meaty and could live over the winter in cold climates (riding came later).

As to ‘how,’ the flip answer is ‘it wasn’t easy,’ which is not surprising when you stop to think of it: horses—or, more precisely, stallions—are a notoriously tricky lot and they wouldn’t take kindly to being stabled or hobbled or slapped into harness. But as to precisely how, the DNA evidence provides a remarkable clue. Per Anthony:

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Today's Economic History: Dean Acheson on that Triangulating Bastard Grover Cleveland

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Dean Acheson: On that Triangulating Bastard Grover Cleveland: From Dean G. Acheson: A Democrat Looks at His Party:

At the end of the [nineteenth] century there was a lesser, but serious, missed opportunity for Democratic leadership in President Cleveleand's failure to grasp the significance of the Populist and labor unrest... and in his cautious and unimaginative approach to economic depression. The unrest... did not spring from a radical movement directed against the established order... or the constitutional system. It grew out of conditions increasingly distressing... on the farms and in the factories.

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Live from the Nineteenth-Century Equivocating Political Stump: Abraham Lincoln: Speech at Ottawa (August 21, 1858): "Now, gentlemen, I don't want to read at any greater length...

...but this is the true complexion of all I have ever said in regard to the institution of slavery and the black race. This is the whole of it, and anything that argues me into his idea of perfect social and political equality with the negro, is but a specious and fantastic arrangement of words, by which a man can prove a horse-chestnut to be a chestnut horse. [Laughter.]

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Weekend Reading: Eve Fisher: The $3500 Shirt - A History Lesson in Economics

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Eve Fisher: The $3500 Shirt - A History Lesson in Economics:

One of the great advantages of being a historian is that you don't get your knickers in as much of a twist over how bad things are today. If you think this year is bad, try 1347, when the Black Death covered most of Europe, one-third of the world had died, and (to add insult to injury) there was also (in Europe) the little matter of the Hundred Years' War and the Babylonian Captivity of the Church (where the pope had moved to Avignon, France, and basically the Church was being transformed into a subsidiary of the French regime). Things are looking up already, aren't they?

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Wednesday Economic History: Debt Servitude in Late Roman Antiquity

Anoup: Papyrus Oxyrhynchus 130:

To Apion my kind lord, lover of Christ and the poor, all-esteemed and most magnificent patrician and dux of the Thebaid...

...from Anoup, your miserable slave upon your estate called Phakra.

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Reading the Economic History Reading List of the Very Sharp "Pseudoerasmus of Chokurdakh"...

Well, the stars have aligned. I will be teaching nothing but economic history next year: Survey (graduate students), 20th Century (undergraduates), American (undergraduates), and European (graduate students). This provides, I think, an opportunity for a complete rethink of the curriculum: what to teach them and how to teach it...

Searching for inspiration, random googling for things I have not read before leads me to the economic history reading list of the smart-and-mysterious Pseudoerasmus, who thinks like a very sharp Jeffrey Williamson student and who claims to dwell in Chokurdakh in the Sakha Republic, population 2,367:

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Yes, that Chokurdakh. You have heard of it:

Chokurdakh Google Maps

So let me run through his reading list and pick up things he lists--and things that his listings make me think of--that I think have a very high value/length ratio:

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What Was Herbert Hoover's Fiscal Policy?: Hoisted from Five Years Ago

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What Was Herbert Hoover's Fiscal Policy?: In his Budget Message setting out his plans for taxes and spending for fiscal year 1932, Herbert Hoover begged Congress not to embark on any 'new or large ventures of government'. He admonished congress that even though 'the plea of unemployment will be advanced as reasons for many new ventures... no reasonable view of the outlook warrants such pleas'. And he boasted that he was proposing a balanced budget--even though revenues were mightily depressed by the Great Depression:

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Monday DeLong Self-Smackdown: DeLong (2000) Sees the Trees, But Overlooks the Forest as Far as the Macroeconomic Dangers of Low Inflation Are Concerned...


What a maroon this guy DeLong (2000) was!:

"The increased risk of deflation and depression in a low-inflation environment can be oversold..."

"Low inflation raises the chance that at some point the turning of the wheel of the business cycle will generate deflation. How great is this danger? How is it to be guarded against? The answer is: not very great. Low trend inflation does raise the chance that a contractionary shock might push goods-and-services price indexes down. But what we fear about deflation can be generated by asset price 'deflations' and foreign-currency debt 'deflations' as easily as by goods-and-services price index "deflations." A period of price stability certainly does not increase the chances of either of these alternative sources of contractionary shocks..."

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America's Historical Experience with Low Inflation: Hoisted from 1999

J. Bradford DeLong (2000): America's Historical Experience with Low Inflation, Journal of Money, Credit and Banking 32:4, Part 2: (November), pp. 979-993

Abstract: The inflation of the 1970's was a marked deviation from America's typical peacetime historical pattern as a hard-money country. We should expect America to continue to be a hard-money--low inflation--country in the future, at least in peacetime.

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"Gunpowder Empire": Should We Generalize Mark Elvin's High-Level Equilibrium Trap?

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OK. Popping the distraction stack again. A chance remark by the extremely sharp Cosma Shalizi when he came through Berkeley has caused me to spend a lot of time meditating upon a passage written by Bob Allen:

Robert Allen (2006): The British Industrial Revolution in Global Perspective:

The different trajectories of the wage-rental ratio created different incentives to mechanize production.... It was not Newtonian science that inclined British inventors and entrepreneurs to seek machines that raised labour productivity but the rising cost of labour... due to... Britain’s success in the global economy... in part the result of state policy... Britain['s] vast and readily worked coal deposits....

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Ploughing with Twelve Yoke of Oxen? 24 Oxen! In Israel in 1000 BC? Wednesday Economic History

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What field in the Levant could possibly require a plough pulled by 24 oxen? What is going on here?

1 Kings: 19:15-21:

And the Lord said unto [Elijah]: "Go, return on thy way to the wilderness of Damascus: and when thou comest, anoint Hazael to be king over Syria: And Jehu the son of Nimshi shalt thou anoint to be king over Israel: and Elisha the son of Shaphat of Abelmeholah shalt thou anoint to be prophet in thy room.

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Must-Read: If you have not been reading Dietrich Vollrath's weblog on economic growth, you should. He has been teaching the world a masterclass in understanding the patterns and determinants of economies' long-run growth trajectories:

The Persistence of Technology Dietrich Vollrath

Dietrich Vollrath: The Persistence of "Technology": "Diego Comin, Bill Easterly, and Erick Gong... 'Was the Wealth of Nations Determined in 1000BC?...

Continue reading "" »

Why Not Up the Mississippi?: Outtake from Cohen and DeLong, Concrete Economics

Preview of Why Not Up the Mississippi Outtake from Cohen and DeLong Concrete Economics

The conventional--pioneer--wisdom in American history is, still, that independent, entrepreneurial people settled the continent in small farms and established this civilization, pulling themselves up by their own bootstraps and building things through their own energy and enterprise, aided by democracy and the legal infrastructure of the free market.

This, of course, misses three big and immediate things:

  • First, the Amerindians who had been 12000 years in residence rightly objected--both to the plagues the European settlers brought that decimated their populations and then to the form the civilization being built took. Behind small-farm settlement stood conquest--and conquest requires governments and armies, not free-market association and catallaxy.

  • Second, a great deal of the surplus generated by the American economy--and used to finance its development--up to and beyond 1865 came from slavery--once again, not a free-market institution by any means.

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Agriculture the Worst Mistake in the History of the Human Race?: Today's Economic History

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Consider Jared Diamond's 1987 paean to hunter gatherers. While I find his article provocative and insightful, I also find it annoying. It seems to me that it mostly misses the most important parts of the story.

For one thing, it misses the importance of the dominant Malthusian mechanisms. The invention of agriculture and the domestication of animals provide an enormous technological boost to humanity both in terms of the number of calories that can be harvested by an hour of work and in terms of the ability of a society to make durable investments of all kinds that further boost its productivity. It is an absolute living-standard bonanza for the generations that discover it, and the generations that come after.

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Eugene Genovese: Slavery and Serfdom Are Good Things! Really!!

Delong typepad com 20120123 econ 1 lecture pdf

Hoisted from the Archives from Two Years Ago: At least, slavery and serfdom are good things when done by Communists like Uncle Joe Stalin, according to Genovese:

Eugene Genovese: On Eric Hobsbawm (1995): "But still Hobsbawm raises hackles...

...especially with his argument that the collectivization of agriculture saddled the Soviet Union with economic inefficiencies from which it never recovered. Here he betrays a small dose of the Bukharinite romanticism that would have had the Soviet Union choose a slower, steadier economic course. His evidence, and the soberest parts of his generally lucid analysis, suggest what he finally and virtually concedes, which is that Stalin knew what he was about, while Bukharin was whistling Dixie.

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Eric Loomis on Child Labor: Today's Economic History

Eric Loomis: This Day in Labor History: June 2, 1924: "The need for a constitutional amendment became apparent when the conservative Supreme Court overturned federal legislation regulating child labor in 1918 and again in 1922...

...In 1916, the Keating-Owen Act, which the National Child Labor Committee had lobbied for, overwhelmingly passed Congress and was signed by President Wilson. In 1918, the 1918 Supreme Court overturned it in Hammer v. Dagenhart, deciding that Congress had no authority to regulate products made by children. For anti-child labor activists, the only remaining strategy was a constitutional amendment. On April 26, 1924, the child labor amendment passed the House of Representatives and on June 2, the Senate. The text was simple:

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Today's Economic History: Leszek Kolakowski vs. The Hacks of the New Left

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Hoisted from 2006: Main Currents of Marxism: Back in the early 1970s, Leszek Kolakowski tells English historian E.P. Thompson what he thinks of him:

Socialist Register (1974): Your letter contains some personal grievances and some arguments on general questions. I will start with a minor personal grievance. Oddly enough, you seem to feel offended by not having been invited to the Reading conference and you state that if you had been invited you would have refused to attend anyway, on serious moral grounds. I presume, consequently, that if you had been invited, you would have felt offended as well and so, no way out of hurting you was open to the organizers.

Now, the moral ground you cite is the fact that in the organizing Committee you found the name of Robert Cecil. And what is sinister about Robert Cecil is that he once worked in the British diplomatic service. And so, your integrity does not allow you to sit at the same table with someone who used to work in British diplomacy.

O, Blessed Innocence!

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Today's Economic History: John Maynard Keynes (1931): Unemployment as a World Problem

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Unemployment as a World Problem

John Maynard Keynes :: Harris Foundation Lectures


I. We are today in the middle of the greatest economic catastrophe—the greatest catastrophe due almost entirely to economic causes—of the modern world. I am told that the view is held in Moscow that this is the last, the culminating crisis of capitalism and that our existing order of society will not survive it. Wishes are fathers to thoughts. But there is, I think, a possibility—I will not put it higher than that—that when this crisis is looked back upon by the economic historian of the future it will be seen to mark one of the major turning-points. For it is a possibility that the duration of the slump may be much more prolonged than most people are expecting and that much will be changed, both in our ideas and in our methods, before we emerge. Not, of course, the duration of the acute phase of the slump, but that of the long, dragging conditions of semislump, or at least sub-normal prosperity which may be expected to succeed the acute phase. Not more than a possibility, however. For I believe that our destiny is in our own hands and that we can emerge from it if only we choose—or rather if those choose who are in authority in the world.

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Today's Economic History: Economista Dentata: Publish or Perish, 16th Century Style: "'I got me such a name that King Henry III summoned me one day...

" discover from me if the memory which I possessed was natural or acquired by magic art. I satisfied him that it did not come from sorcery but from organised knowledge; and, following this, I got a book on memory printed, entitled The Shadows of Ideas, which I dedicated to His Majesty.

"Forthwith he gave me an Extraordinary Lectureship with a salary."

Today's Economic History: Adam Smith: Theory of Moral Sentiments, From Part IV: Of the Sentiment of Approbation

Adam Smith: Of the Sentiment of Approbation | Library of Economics and Liberty:

The utility of any object... pleases the master by perpetually suggesting to him the pleasure or conveniency which it is fitted to promote.... The spectator enters by sympathy into the sentiments of the master, and necessarily views the object under the same agreeable aspect. When we visit the palaces of the great, we cannot help conceiving the satisfaction we should enjoy if we ourselves were the masters, and were possessed of so much artful and ingeniously contrived accommodation....

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Must-Read: Adam Smith's "Invisible Hand" argument. It's not "markets are good". It is, instead, two moves:

  1. Complicated processes involving the interactions of large numbers of humans have emergent properties and produce outcomes that often are not and cannot be understand as intended by any one of the humans whose actions led to the outcome.

  2. Sometimes (often?) the emergent properties are those that we want to nurture and develop: as Bernard Mandeville first noted, one of the tasks of the clever statesman is to structure things so that the satisfaction of private vices does in fact yield public benefits.

Note that in this particular example, it is the (a) psychological home bias of merchants combined with (b) increasing returns in the agglomeration of economic activity that leads to the good outcome--and it is a good outcome for Amsterdam, not for Lisbon or Königsberg...

Adam Smith (1776): Wealth of Nations, Book IV, Chapter 2: "The capital which an Amsterdam merchant employs in carrying corn from Konigsberg to Lisbon...

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