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Historical Statistics of the United States, Volume Four: Economic Sectors

Author(s):Carter, Susan B.
Gartner, Scott Sigmund
Haines, Michael R.
Olmstead, Alan L.
Sutch, Richard
Wright, Gavin
Reviewer(s):Alston, Lee J.

Published by EH.NET (June 2006)

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Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright, editors, Historical Statistics of the United States, Volume Four: Economic Sectors. New York: Cambridge University Press, 2006. xiv + 1123 pp. $825 (for the five-volume set), ISBN: 0-521-85389-3.

Reviewed for EH.NET by Department of Economics, University of Colorado.

This volume brought back memories from my graduate school days. As part of the field exam in economic history at the University of Washington overseen by Robert Higgs, Morris Morris, Douglass North, Robert Thomas and Kozo Yamamura, we had a set of required readings that more than took up a summer. Higgs required us to read several of the NBER volumes in Studies in Income and Wealth. He also strongly encouraged us to buy the Historical Statistics of the United States. Over the years I have consulted Historical Statistics countless times and this new edition is far more than a simple update of earlier Census editions. To give you a sense of its magnitude, this edition of Volume Four has 1,123 pages devoted to “Economic Sectors” compared to 272 pages in my older edition. This volume is an incredible public good and I congratulate the editors and contributors for the care with which they assembled the data. Moreover the introductions along with the essays for each chapter could be compiled into a “stand alone” book on the evolution of the American economy. As my mentors did to me, I will do to my students: I will have them read all of the essays in this volume.

As Richard Sutch notes in his introduction to this volume, the Office of Management and Budget in 1945 “standardized the classification of industries and collection and reporting of data with the Standard Industrial Classification (SIC) system.” Each establishment or economic unit is classified into eleven broad divisions and then subsequently sub-divided, e.g. mining is one of eleven broad codes and then subdivided into metal mining (and others) and, within metal mining, as detailed as “metal cans.” Though the SIC system was replaced in 1997 to coordinate with other countries in North America, the data in this volume are organized along the lines of SIC codes still familiar to most of us. The editors have persuaded the experts in the profession to oversee each section and these experts in turn have brought on board others to write some sub-sections: Alan L. Olmstead — Agriculture with help from Julian M. Alston, Bruce L. Gardner, Philip G. Pardy, Paul W. Rhode, and Daniel A. Sumner; Gavin Wright — Natural Resource Industries; Kenneth A. Snowden — Construction, Housing and Mortgages; Jeremy Atack and Fred Bateman — Manufacturing; Daniel M.G. Raff — Distribution; Louis P. Cain — Transportation; Alexander J. Field – Communications; and Thomas Weiss- Services with help from Susan B. Carter on Utilities. Anyone familiar with economic history will recognize the editors as “naturals” to write essays as well as to oversee the assembly of the data.

The essays for each sector are not boring. As Alan Olmstead notes in Chapter Da. Agriculture: 4-7: “Underlying the data in this chapter is one of the epic stories in world history.” The movement out of agriculture in such a short span of time was phenomenal. The data when viewed in this context take on more life. Like Olmstead, Jeremy Atack and Fred Bateman set the stage nicely for the subsequent data, on manufacturing (Chapter Dd. Manufacturing: 4-575): “The industrial transformation was swift: the modest manufacturing sector of 1850 had evolved into a complex multiplant, multiproduct producer of manufactured goods by 1900.” After production, goods needed to be distributed. In 1930 Americans were scattered over three million square miles. Nearly half of the population was rural. As a result, Daniel Raff argues (Chapter De. Distribution: 4-705): “The scale of the problem of distribution is immediately apparent.” The size of the U.S. is impressive and moving goods and services across space is an incredible task. The distribution of good and services goes hand in glove with transportation as Louis Cain notes (Chapter Df. Transportation: 4-761): “Where people work and where they live, where goods are produced and where they are sold, are all determined in part by the transportation infrastructure.” With today’s internet mindset we think that modern communications only arrived in the 1990s, but Alexander Field (Chapter Dg. Communications: 4-977) reminds us that “There is a technological and historical context to these developments … the technological and regulatory issues we continue to deal with in the first decade of the twenty-first century did not arrive full-blown with the breakup of the Bell System or the explosive growth of the Internet.” The transition from a dominant agricultural country to a manufacturing powerhouse and now to an economy with a large service sector has raised some fears amongst social critics. Thomas Weiss aptly summarizes the concern of some critics (Chapter Dh. Services 4-1061): “the United States is becoming a nation of ‘hamburger flippers,’ who do not contribute much to the growth or vitality of the nation’s economy.” This volume may not make Oprah’s reading list, but as essays introducing mountains of useful data they are far more interesting than I expected. The stage-setting of the essays, the clarity of definitions of the data, the sources for the data and the index are superb. This volume will find a welcoming home on the shelves of all U.S. economic historians.

Lee J. Alston’s current research interests include political governance in the historical U.S. and present-day Brazil; and the determinants of tenancy in the historical U.S. and Latin America today. His two most recent publications are: Lee J. Alston and Bernardo Mueller, “Pork for Policy: Executive and Legislative Exchange in Brazil,” Journal of Law Economics and Organization 22, Number 1 (Spring 2006) 87-114; and Lee J. Alston, Jeffery A. Jenkins and Tomas Nonnenmacher, “Who Should Govern Congress? Access to Power and the Salary Grab of 1873,” Journal of Economic History (forthcoming, September 2006).

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Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Roosevelt, the Great Depression, and the Economics of Recovery

Author(s):Rosen, Eliot A.
Reviewer(s):Wicker, Elmus

Published by EH.NET (June 2006)

Eliot A. Rosen, Roosevelt, the Great Depression, and the Economics of Recovery. Charlottesville, VA: University of Virginia Press, 2005. xii + 308 pp. $39.50 (hardcover), ISBN: 0-8139-2368-9.

Reviewed for EH.NET by Elmus Wicker, Department of Economics, Indiana University.

The title of Rosen’s book can easily create the impression that it is about the economics of recovery from the Great Depression. Rather it is a history of Roosevelt’s New Deal and the story of how it came into being. The reader will not find an economic assessment of New Deal policies; there are no references to recent contributions to the debate either in books or professional economic journals.[1] After having read the book we still may ask: what does the evidence tell us about the success or failure of the many New Deal initiatives?

But Rosen is not an economist, and it would be unfair to hold his feet to the economist’s fire. His work must be judged by the standards of the historian. It is the very first task of the historian to describe what happened from a comprehensive examination of the surviving archives. And for the New Deal these records are numerous. Rosen lists over sixty sources of the papers of New Deal policymakers. What a grueling and time consuming ordeal! His account, however, is richer for the effort to uncover the origins of the NRA, AAA, and PWA, as well as the other agencies. His description is authoritative, sometime original, and always scholarly.

The first four chapters describe Roosevelt’s monetary experiments both domestic and international including the temporary departure from the gold standard, the gold buying policy and the repudiation of a debt settlement with our allies during World War I. The author details the growing tension within the new administration between those who would rely on a purely domestic stimulus and those who, like Cordell Hull, opted for free trade and the maintenance of the gold standard. Rosen denies that Roosevelt’s policies were exclusively responsible for the beggar-thy-neighbor policies of the 30’s. In his view Neville Chamberlain, the British Chancellor of the Exchequer, pushed Roosevelt toward his nationalist outlook. Tension accelerated when Roosevelt proceeded to detach the dollar from gold, terminating with the resignations of Dean Acheson and Lewis Douglas.

In at least two instances Rosen has suggested revisions of the conventional interpretation of the Roosevelt-Hoover relationship and the cause of the failure of the London Monetary and Financial Conference in 1933. The stand-off between Roosevelt and Hoover during the transition period, usually attributed to Roosevelt’s intransigence and general unwillingness to cooperate, was the result of Hoover’s efforts to obtain Roosevelt’s assurance “that there will be no tampering or inflation of the currency, that the budget will be unquestionably balanced even if further taxation is necessary.” It was Hoover’s guile to expect the incoming president to continue his failed policies.

In the second example, Rosen denies that Roosevelt was solely responsible for the failure of the London Monetary and Economic Conference, originally convened for the purpose of exchange stability after Roosevelt’s gold buying experiment. Rosen maintains that there was no longer any reason for the Conference. James Warburg, Roosevelt’s chief negotiator and Leith Ross, his British counterpart, had already agreed to a dollar discounted in a range of 15 to 25 percent, considerably less than what Roosevelt desired and effectively sealing the decision of the president to abruptly terminate further monetary policy negotiations.

If the old gold standard was no longer regarded as sacrosanct, neither was the balanced budget principle. New Deal fiscal policy required the abandonment of the balanced budget principle. Rosen attributes the initial stimulus for the policy shift to Laughlin Currie, Marriner Eccles, and Alvin Hansen, all of whom subscribed to the view of countercyclical budget deficits in contraction and surpluses in expansion. The Currie-Eccles approach implied active management of the economy. Countercyclical policy predated Keynes’s General Theory. This revolutionary shift in fiscal policy is described in chapters five and ten. Chapter Ten is labeled “The New Economics” but that term had already been appropriated to refer to the advent of Keynesian economics.

What is missing in an otherwise balanced account is any attempt to summarize current evidence on the extent of the stimulus provided by the unbalanced budgets. The countercyclical budget debate generated another debate on planning — how extensive it should be and where it would be most effective. The limits of planning is the subject of chapter seven, and the responsibilities of the National Resources Planning Board for planning in chapter 11.

Roosevelt rejected the principle of an independent Federal Reserve. For the first and last time the President of the United States assumed full responsibility for U.S. monetary policy. And Federal Reserve officials acquiesced without precipitating a crisis.[2]

Rosen has accomplished successfully the task of describing what the New Deal was about and how it came into existence. He is less successful, however, in providing an economic evaluation of the New Deal policies, especially what caused the economic recovery, an exercise requiring deeper penetration into the territory of the economist.

Notes:

1. See, for example, Michael Weinstein, “Some Macroeconomic Impacts of the National Industrial Recovery Act, 1933-1935.” In The Great Depression Revisited, edited by Karl Brunner (1981) and Frank G. Stendl, Understanding Recovery in the 1930s: Endogenous Propagation of the Great Depression (2003).

2. Elmus Wicker, “Roosevelt’s 1933 Monetary Experiment,” Journal of American History (1971).

Elmus Wicker is Professor Emeritus of Economics at Indiana University. His most recent book is The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed (Ohio State University Press, 2005).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Copyright and Other Fairy Tales: Hans Christian Andersen and the Commodification of Creativity

Author(s):Porsdam, Helle
Reviewer(s):Khan, B. Zorina

Published by EH.NET (June 2006)

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Helle Porsdam, editor, Copyright and Other Fairy Tales: Hans Christian Andersen and the Commodification of Creativity. Cheltenham, UK: Edward Elgar, 2006. vi + 172 pp. $85 (cloth), ISBN: 1-84542-601-0.

Reviewed for EH.NET by B. Zorina Khan, Department of Economics, Bowdoin College.

Once upon a time a professor of American Studies at the University of Southern Denmark had a cute idea. She would edit a volume of essays that employed the literary device of linking Hans Christian Andersen (1805-1875) to the authors’ own particular dicta on copyright policy. Helle Porsdam (for that is the name of our editor) herself would compose a preface to summarize the contributions of her essayists and to introduce Hans Christian (HCA) as the “best of story tellers” to those of us who were more familiar with Pikachu or Scooby Doo rather than the Little Match Girl. The truth is that the real HCA had little or nothing to do or say about copyright; but, rather than unpleasantly carping about minor details, let us, like all consumers of fables, ignore such inconvenient facts and turn our attention to the narration.

The first chapter is related by Lawrence Lessig, who starts out with the obligatory reference to HCA but cleverly employs a Dr. Seuss-like accent: “Knowledge is remix. Politics is remix. Remix is how we create. Remix is how we recreate. … Think a bit about this concept of ‘remix.’ Think a bit about ‘remix’ in particular before technology got into the mix. Think about it before Hollywood got in the mix” (p. 16). Lessig’s point is that we all recreate and reinterpret culture, either as writers, readers, viewers or commentators. Social constraints on our ability to reconstruct culture range from none (an animated discussion about a movie among friends) to state-imposed remedies (jail and a $250,000 fine for illegal copying of the same movie.) Technological innovations such as digitalization have had a dramatic impact on the culture of remixing: the “explosion” of copying on the Internet; the “war” and “battles” against piracy; and the “weapons” used to prevent illegal remixing. Copyright law, in this new regime, imposes prohibitively high costs on the creative process of remixing. The raconteur, as in all fairy tales, knows the way through this maze. One example is the nonprofit organization he founded, the Creative Commons, which specifies the commercial uses that can be made of works by the participants in the Commons.

Stina Teilmann, in the second chapter “On Real Nightingales and Mechanical Reproductions,” stays closer to the HCA trope (metalepsis?) and gives several examples of HCA’s fairy tales that centered on real versus imitation articles. Her article explores the issue of authenticity in the history of copyright laws in France and Britain. Initially a distinction was drawn between a copy (specific to printing and closely related to the original) and a reproduction (images that are clearly different from the original), but over time the two terms were conflated in copyright law. The Internet comprises the final stage of this conflation, where every copy is an original in itself, with the “same ontological status.” Since copyright law depends on the prohibition of the reproduction of originals, it “cannot cope with the order of sameness on the Internet” (p. 34). Leslie Kim Treiger-Bar-Am’s contribution, “Adaptations with Integrity,” can also be viewed as another facet of the issue of authenticity, since the essay examines one of the so-called moral rights of authors to control changes to their work. The chapter proposes (p. 62) that “modifications to all artforms, and of all types, ought potentially be actionable pursuant to the integrity right.”

In the realm of books, authenticity is frequently linked to the “authorization” of individual writers. Uma Suthersanen examines the way in which authors developed as stakeholders in the quest for an international copyright in the nineteenth century. The expansion of markets on both sides of the Atlantic enabled the emergence of a class of professional writers who lobbied for recognition of international copyrights. Charles Dickens was interested in international copyright and HCA knew Charles Dickens but the skeptical among us might have some trouble in viewing this as per se evidence that HCA was interested in copyright issues of the twenty-first century. Like the central characters in many HCA tales, Fiona Macmillan makes a virtue of necessity and acknowledges upfront that her article comprises “a flight of imaginative fancy” regarding what HCA might have to say about copyright rules today. She concludes by doubting that HCA “would have been sanguine about the picture of cultural homogenization and domination painted above” (p. 101), much less the commodification of culture. Michael Blakeney considers the “propertization of traditional knowledge” with an emphasis on the Australian experience.

Lee Davis, another contributor to this volume, is also concerned about digital cultural goods in the realm of copyright. The final chapter, by Marieke van Schijndel and Joost Smiers, imagines a (presumably better) “world without copyright.” Digital technologies, by “axing the roots of the copyright system,” have made copyright impossible or at least redundant; and for today’s developing countries, intellectual property “is nothing but a disaster” (p. 149). The alternative they propose is a model of usufruct without property rights, a model that might be applied equally to other forms of intellectual property, but they leave the working out of the technical details to a future date.

We may suppose that the editor of “Copyright and Other Fairy Tales” does not literally mean to imply that all claims in this book are akin to fairy tales. Still, as in effective fairy tales, at times the artless reader may be confused about the distinction between the authentic Hans Christian Andersen and HCA, the character created as a projection of the authors’ own views. The lack of recognition of his copyrights “sickened” Andersen; yet Porsdam is hopeful that he would agree with authors of the articles in her book who feel that “copyright is not and should not be considered as ‘property'” (p. 9). (An equally interesting literary exercise might be to assess what Edward Elgar would say about calls for the end of copyright.) As for copyright policy itself, this book is useful in offering several viewpoints, and if none of them is from an economist’s perspective we have only ourselves to blame for not paying more attention to this important subject. Moreover, I did learn the surprising fact that there is actually an HCA story that I have yet to read, called “Auntie Toothache.” Or was that just another abstruse metonym for intellectual property in the twenty first century?

B. Zorina Khan is Associate Professor of Economics at Bowdoin College, a member of the National Bureau of Economic Research, and the author of The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (Cambridge University Press, 2005).

Subject(s):Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Alanson B. Houghton: Ambassador of the New Era

Author(s):Matthews, Jeffrey J.
Houghton, Alanson B.
Reviewer(s):Westerman, Thomas D.

Published by EH.NET (June 2006)

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Jeffrey J. Matthews, Alanson B. Houghton: Ambassador of the New Era. Lanham, MD: Rowman and Littlefield, 2004. xxii + 263 pp. $27 (paperback), ISBN: 0-8420-5051-5.

Reviewed for EH.NET by Thomas D. Westerman, Department of History, University of Connecticut.

When done well, biography provides insights into history that monographs often lack. Jeffrey J. Matthews’s “diplomatic biography” of Alanson B. Houghton, the United States’ first post-Word War I ambassador to Germany, offers a helpful entr?e into the background of U.S.-European interwar diplomacy. Matthews, an associate professor of cross-disciplinary studies at the University of Puget Sound, tells the personal and professional story of Houghton, whom Matthews calls “the most influential ambassador in Europe” in the 1920s (p. xi). Matthews’ study of Houghton is not only a biography but also an argument about the complexity and dangers of interwar U.S.-European economic and diplomatic relations. Matthews argues that U.S. relations with Europe should not be characterized as “independent internationalism” but rather as “a conservative and frequently reactionary form of internationalism” and that Houghton “became not only its leading diplomat abroad but also the chief policy critic within the Harding and Coolidge administrations” (p. 4).

Matthews presents Houghton as a perceptive and farsighted diplomat who, before such a view was fashionable, advocated a coherent U.S. policy promoting European recovery, reconstruction, and stability. Houghton received his appointment to Berlin (and later London) through political patronage. He was educated at Harvard and in Germany. He inherited and expanded the family business — the Corning Glass Works — and served two terms as a congressman from New York. While in Congress from 1918 to 1922, he served on the foreign affairs committee and then on the powerful Ways and Means Committee. Houghton, it seems, was a good progressive Republican and “[d]uring his two terms, Representative Houghton proved less concerned with the division of federal authority and more interested in creating an effective and efficient national government” (p. 33). His appointment by President Warren G. Harding in 1922 was received positively by the Senate and the German government.

Matthews positions Houghton as the lynchpin in U.S.-German-European relations. Time and again, Matthews argues, Houghton served as an advisor, facilitator, and confidant to those in higher positions. This is especially evident in the discussion of the Dawes Plan of 1924-25 that sought to break the impasse over of German reparations. Indeed, Matthews titles one chapter “America’s Honest Broker” and tells us that upon Houghton’s appointment to London in 1925, he was “the most powerful ambassador in the world, and he meant to exercise his influence” (p. 117).

Houghton’s power derived from the confidence the White House had in him, the sober knowledge he had of German politics, and the friendships he formed in Berlin. He continued to advise on German matters even during his posting in London. Houghton was even rumored to be a possible nominee for secretary of state in the Coolidge administration. Though Europe was certainly a crucial focus for U.S. foreign policy, it was not the only important area of concern. Matthews’ thesis of a “conservative internationalism” may work well when applied to Houghton’s ambassadorship, but it would be interesting to see how well it would work when applied worldwide.

Though other politicians sought to restrain the emergence of U.S. power on the international stage, Houghton wanted to help implement that power in a responsible and efficient manner, particularly in Europe. This outlook did not simply stem from American vanity. Matthews writes that Houghton “meshed hardheaded realism with optimistic idealism” (p. 6) and that he understood “the integration of the global economy through raw material and capital exchanges, trade competition, and technology transfers … [and] he came to appreciate America’s changing position within the international system” (p. 41). Matthews positions Houghton as the main internal critic of the reactionary conservatism that seemed dominant in U.S. diplomacy, hampering European recovery and stability.

For instance Houghton criticized Secretary of Commerce Herbert Hoover’s plan in 1926 to “develop ‘the potent weapon’ of independent rubber supplies” (p. 160). The British had a monopoly on rubber and, Matthews asserts, Houghton feared such a policy would force the U.S. to “embark on a colonial policy that would ‘put us head on with England'” (p. 161). The so-called independence that Hoover advocated ran counter to the global (or, at least, U.S.-European) interconnectedness that Houghton perceived profitable. Rhetoric and policies such as Hoover’s harmed the United States’ standing as a leader for reconstruction because they antagonized European nations in the narrow hope of securing domestic favor. This is just one example of how Matthews uses Houghton’s ambassadorship as a way to illuminate the complexities of U.S. foreign relations in the 1920s and the difficulties related to the emerging global economy.

Matthews’s biography is the eleventh in the “Biographies in American Foreign Policy” series published by Rowman and Littlefield’s SR Books. His study of Houghton fulfills the series’ mission to “humanize and make more accessible those decisions and events that sometimes appear abstract or distant.” Matthews gives a human face and voice to the tense and complicated economic, business and political relations between the United States and Europe in this period. The author not only scoured the traditional source base of diplomatic historians — presidential libraries, newspapers, memoirs, and institutional archives — but he also had unrestricted access to Corning Incorporated’s store of family records in Corning, NY. Matthews was also able to glean remembrances from one of Houghton’s grandsons and conduct an interview with Andrew Elder, who worked for Houghton immediately after his ambassadorial work.

Thomas D. Westerman is a Ph.D. student at the University of Connecticut, Storrs where he is working on a history of the Commission for Relief in Belgium and its effect on the development of international institutional humanitarianism.

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Chimneys in the Desert: Industrialization in Argentina during the Export Boom Years, 1870-1930

Author(s):Rocchi, Fernando
Reviewer(s):Horowitz, Joel

Published by EH.NET (June 2006)

Fernando Rocchi, Chimneys in the Desert: Industrialization in Argentina during the Export Boom Years, 1870-1930. Stanford, CA: Stanford University Press, 2005. xviii + 394 pp. $70 (cloth), ISBN: 0-8047-5012-2.

Reviewed for EH.NET by Joel Horowitz, Department of History, St. Bonaventure University.

Argentina’s inability to sustain the prosperity, which in the late 1920s made it one of the richest countries in the world, has led to much speculation about the causes of that failure. Many have placed a good deal of the blame on Argentina’s failure to create a self-sustaining process of industrialization. However, as Fernando Rocchi (Chair, Department of History, Universidad Torcuato Di Tella, Argentina) points out in the book under review, there have been extremely few modern systematic studies of the early stages of industrialization. Many commentators have just accepted the view, which principally came from the industrialists, that early industrialization occurred in a largely hostile environment, since the primary providers of credit, the state owned banks, were unwilling to grant loans and little or no tariff protection was provided.

Rocchi sets out to shift this vision. His work is wide ranging, well written and extremely perceptive. It is based on an impressive array of sources, including but not limited to company and bank records and diplomatic archives. Given the state of the archives and libraries, this is an extraordinary accomplishment. In many cases, the author makes his point by showing how individual companies operated. In this way we can see the micro level, as well as the larger trends. As Rocchi points out, Argentine industrialization differed from the classical models since the country had little in the way of an artisanal tradition. Most of its skilled workers were immigrants. For Rocchi the key hindrance to industrialization lay in the small size of the market that prevented the achievement of enough efficiency to win markets abroad. This was despite the rapid population growth, creation of a national market, and a culture of consumption. Argentina also lacked key inputs such as coal and iron and had relatively high labor costs. Rocchi argues, quite convincingly, that industrialization was not constrained by the inability to obtain capital from the state controlled banks. He demonstrates, using the archives of the Banco de la Naci?n and the Banco de la Provincia de Buenos Aires, that numerous large and medium-sized companies did receive loans from state controlled banks. Companies also raised money on the stock market. He argues, however, that self financing, which was very common, may have been the best strategy given the volatility of consumer demand which depended on foreign purchases of Argentine exports. Rocchi does not really demonstrate that consumer demand was that much less dependable than in other countries.

How much tariff protection industry had is difficult to demonstrate given the complex way that rates were calculated, but Rocchi makes clear that industrial production was frequently protected by either protective or revenue tariffs. Arguments in congress show that critical support existed for the idea of protecting industry. Clearly the conditions for industrialization were much more complex than has usually been thought and it would be difficult to classify them as hostile.

Rocchi’s goals are larger than just showing the beginning of industry. He devotes a well crafted chapter to the creation of a consumer society in Buenos Aires, which in many ways resembled that of the contemporary North Atlantic world with department stores and the like. Harrods, the well known English department store, even had a branch in Buenos Aires. The author also includes a chapter on how Buenos Aires-based firms created national markets for themselves, intensifying the central role of the city in Argentine economics. Large firms were created, as were trusts. Rocchi also discusses how conflict with the labor force helped forge cooperation between industrialists.

Rocchi gives us a picture of a rather dynamic sector of the economy that responds relatively well to growing demands but is limited by the size and nature of the economy. This is a convincing argument but not one without flaws. The author is, at times, somewhat too determined to claim originality for his arguments. He clearly builds on others and while he has made by far the best case for his ideas, at times he does not give others all their due. More importantly, although the book purports to cover the period from 1870 to 1930, very little material exists for the period after the first fair presidential election in 1916. We therefore lack a full discussion of the impacts of World War I and of the 1920s. In the latter period the nature of industrialization shifted due to the intensification of direct investment by foreign firms, particularly from the United States. If one is going to make arguments about the nature of industrialization prior to the Great Depression, it would be helpful to know more about these changes.

Despite these caveats, Fernando Rocchi has given us an excellent work that has reshaped our vision of early industrialization in Argentina. It also helps us to understand some of the innate problems of the economy and shows why some of the prescriptions later given for the economy did not solve its problems. Like all good books, this should inspire further research. Anyone interested in the problematic history of the Argentine economy will find this book a stimulating and convincing work.

Joel Horowitz is Professor of History at St. Bonaventure University and is currently finishing a monograph on political mobilization in Buenos Aires between 1916 and 1930.

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: Pre WWII

The Federal Reserve System: An Encyclopedia

Author(s):Hafer, R. W.
Reviewer(s):Giedeman, Daniel

Published by EH.NET (June 2006)

R.W. Hafer, The Federal Reserve System: An Encyclopedia. Westport, CT: Greenwood Press, 2005. xxxii + 451 pp. $95 (hardback), ISBN: 0-313-32839-0.

Reviewed for EH.NET by Daniel Giedeman, Department of Economics, Grand Valley State University.

In the preface to The Federal Reserve System: An Encyclopedia, R.W. Hafer states: “The purpose of the book is to provide an introduction to the Federal Reserve and related topics. … If successful, this will be the first, not the last, book that you’ll read on the subject of the Federal Reserve.” By this standard, the Encyclopedia is a solid accomplishment as it provides clear and accessible expositions on a wide variety of topics related to the Federal Reserve System. Hafer, currently the Chair of the Department of Economics and Finance at Southern Illinois University, Edwardsville, served for a decade as a Research Officer at the Federal Reserve Bank of St. Louis, a position that clearly prepared him well to author this volume.

In total, the Encyclopedia contains 280 entries on an array of subjects including bank legislation and regulation, the commercial banking system, the conduct and goals of monetary policy, financial market panics, macroeconomics, policy credibility, policy transmission mechanism and problems in banking. The volume also contains approximately forty biographical entries on various Fed chairmen, U.S. presidents and members of Congress, traditional academic economists and other persons of relevance. (Additionally, Appendix B of the volume gives a chronological list of every Federal Reserve Board Chair, Vice-Chair and Member of the Board of Governors.)

The average entry length is approximately 700 words, but the lengths of entries vary fairly widely (the entry for Nancy Hays Teeters, for example, is only 75 words long while Hafer discusses the Great Depression for more than 2700 words). The entries are generally concise, comprehensible and self-contained (a key benefit for Hafer’s general audience that allows readers to quickly learn about the topic in which they are interested without having to invest significant time reading background material). Almost all entries end with suggestions for further reading, the majority of which are books or articles published in the various Federal Reserve Banks’ reviews.

With regard to economic history, the Encyclopedia opens with a thirteen page introduction outlining the history of central banking in the United States from Alexander Hamilton to the September 11th terrorist attacks of 2001. This introduction, which nicely provides historical context for the Federal Reserve and the development of monetary policy, ends with a reference list of twenty-six suggested books for further reading. In addition to the focus on history in the introduction, Hafer has incorporated history throughout the Encyclopedia, helping his readers to learn not just what the Federal Reserve is today, but also to understand the historical experiences that have shaped the Fed over time. Readers who take the time to read the entire volume (or at least find their way to the appropriate entries) will find that it provides a nice history of thought concerning the development of monetary policy in the United States.

By my rough count, approximately one third of the entries in the Encyclopedia have at least some historical bent to them. While some entries, such as “First Bank of the United States,” “Panic of 1907” and “Banking Act of 1933,” are for obvious reasons almost entirely historical in nature, Hafer also often places potentially ahistorical entries into their historical context. The entry on “Investment Banks,” for example, includes a paragraph discussing investment banking activities in the 1920s prior to the passage of the Glass-Steagall Act, while almost half of the four page entry on “District Federal Reserve Banks” focuses on the process of determining in which cities district banks would be located. Many of the biographical entries are a nice source of historical content (for instance, the entry for Nelson Aldrich contains a discussion of “Silver Republicans”). The biographical entries are also useful for tracing the evolution of ideas related to the implementation of monetary policy.

Despite my overall favorable impressions of Hafer’s volume, I do have a few minor quibbles. When I teach my course in Money and Banking, a question that comes up almost every semester is “Who owns the Fed?” While this question is answered in Appendix A of the book, which provides the Federal Reserve Act itself, Hafer’s target audience would likely find useful a separate entry devoted specifically to the topic of ownership of reserve bank stock. I mention this, in part, because there is currently no lack of misinformation available to the public concerning the “secretive and powerful Federal Reserve Bank” (as the back cover of the Encyclopedia itself describes the Fed) and Hafer’s book could have worked better to counter false or misleading information. Another slight modification readers might have found useful would have been if Hafer had augmented Appendix C to not only list the Federal Reserve Regulations and give their purpose, but also to have given the dates of their enactment, modification, and repeal, if applicable.

In summary, Hafer has succeeded in creating a concise, coherent, eminently readable introduction to the Federal Reserve System. While I think the Encyclopedia would be of somewhat limited usefulness for economics researchers, it will undoubtedly prove helpful to students and interested laypersons. Instructors, particularly those teaching Money and Banking or Macroeconomics, will likely find the volume useful in their courses and I also expect that instructors teaching economic or financial history will find ways to utilize the book in their classes. College libraries should add the Encyclopedia to their collections. High-school and public libraries would also benefit their readers by putting a copy of the book on their shelves.

Daniel Giedeman’s publications include “Branch Banking Restrictions and Firm Finance Constraints in Early-Twentieth-Century America,” Journal of Economic History (2005).

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Widows and Orphans First: The Family Economy and Social Welfare Policy, 1880-1939

Author(s):Kleinberg, S. J.
Reviewer(s):Moehling, Carolyn M.

Published by EH.NET (June 2006)

S.J. Kleinberg, Widows and Orphans First: The Family Economy and Social Welfare Policy, 1880-1939. Champaign: University of Illinois Press, 2006. xiv + 230 pp. $35 (cloth), ISBN: 0-252-03020-6.

Reviewed for EH.NET by Carolyn M. Moehling, Department of Economics, Yale University.

In 1890, the Pittsburgh Association for the Improvement of the Poor protested that widows endured “the unnatural responsibility of the wage-earner. Mothers are designed by nature to care for their own children, nor do they wish to place them in homes or other institutions” (p. 77). In the same time period, the Associated Charities of Fall River described one Margaret Dooley as “very trying” because she refused to leave her infant son in the care of a day nursery and take a job in the textile mills (p. 72). Jay Kleinberg, Professor at Brunel University, West London, ascribes these contrasting attitudes to the different employment opportunities of women in the two industrial centers and argues that such “local values” played an instrumental role in the development and implementation of social welfare policy in the early twentieth century.

Kleinberg makes her case by contrasting the experiences of women in Fall River, Pittsburgh, and Baltimore between 1880 and 1939. As Kleinberg notes, few poor widows or orphans recorded their experiences in writing; so she constructs snapshots from records of charity organizations, government documents, and samples of households collected from the 1880, 1900, and 1920 census schedules. These snapshots portray some commonalities in the hardships faced by widows in this period. But more poignantly, they reveal the stark differences in experiences of women in the three cities. In Fall River, the textile mills offered plentiful employment to women and children in the late nineteenth century. In 1900, half of all women ages 16 and over in Fall River were in the labor force (p. 34). Widows with young children, like Margaret Dooley, were hence expected to place their children in care and work in the mills. Widows with older children were likewise expected to take their children out of school to go to work in the mills. Charitable organizations provided help in finding work rather than providing relief to these women. In contrast, the steel mills of Pittsburgh offered very few jobs for women. There, an extensive private charity network developed to provide support to widows and their children. Baltimore had a more diverse economic base than the other two cities, but here economic opportunities varied greatly by race. White women could find work in canneries and garment factories, but African American women were generally limited to domestic work. Charitable organizations were also segregated by race. But as in Fall River, the availability of jobs meant that women of both races received little outdoor relief.

These differences in expectations and support structures persisted even as other forces narrowed the gaps in women’s economic circumstances. By 1920, the decline in child labor had all but eliminated what had been an important source of income for many widows’ families. The differences in widows’ employment rates narrowed as widows in Pittsburgh found work in garment factories and rolling cigars. Yet the attitudes born of the earlier differences remained entrenched and shaped the way public widows’ pensions were implemented in the three cities.

Although the administration of widows’ pensions was local, the influence of local values was constrained by the parameters of the state enabling legislation. Fall River granted few pensions compared to other cities in Massachusetts, reflecting the still strongly held view that women and children should work in the mills to support themselves. In 1915, it granted pensions to only 4.4 families per 10,000 residents compared to 13.7 per 10,000 residents in Boston (p. 115). But the grants provided in Fall River were more generous than those provided in Pittsburgh because of the differences in state funding across the two states. Pennsylvania, like Massachusetts, paid 50 percent of the costs of mothers’ assistance, but the funds allocated by Pennsylvania were much smaller. The inadequacies of the state funding forced localities to limit the number and the size of grants they awarded. In 1916, Pittsburgh received 1,843 applications for grants and investigated 800-900 of these, but could only fund 100 (p. 116). Widows’ aid did not allow women to leave the labor market despite the view that a mother’s place was at home caring for her children. A 1926 survey found that mothers’ assistance grants accounted for less than 40 percent of the income of families receiving aid in Allegheny County. A quarter of their income came from the earnings of the mother and another quarter from children over the age of 16 still living at home (p. 118). In Baltimore, the hostility toward outdoor relief delayed the granting of widows’ pensions until 1929. Maryland enacted a widows’ pension law in 1916 but left the administration and funding to the discretion of local governments. The mayor of Baltimore, James H. Preston, opposed the idea of using taxpayer funds to pay for pensions and sided with the views of organized charities that pensions should be privately funded or under the control of “scientific philanthropists” (p. 97). When new state legislation forced Baltimore to offer grants, the rolls were kept short and the grants small. Funds were provided only to maintain the children; the mother was expected to “forage for herself” (p. 123). The granting of pensions also displayed a strong racial bias. In 1930, African Americans accounted for 18 percent of the population, yet received only 9 percent of pensions (p. 123).

Aid to Dependent Children (ADC), enacted as part of the Social Security Act, muted the role of local attitudes since it provided federal funds and required the establishment of “state programs.” But even under ADC, local administrators had some discretion over who received benefits and how much they received. For instance, in Fall River, the “puritanical” local administrator required children to go to church to be eligible and the average payment per family was less than the statewide average (p. 158).

Other scholars have asserted the importance of regional attitudes in the implementation of social welfare policy, but Kleinberg, by presenting three in-depth studies, is able to flesh out this argument more fully. Chapters 3 and 4 persuasively articulate how the interactions between labor markets, private charities, poor relief, state legislation, and racial politics shaped the implementation of early public welfare programs. Kleinberg’s account of the influence of local conditions is much more nuanced than those produced by studies which have approached the issue from broader vantage points.

The other chapters of the book make less significant contributions. The early chapters are weakened by the absence of a discussion of how the census samples were constructed. Moreover, the experiences of widows in the three cities are rarely compared to the experiences of widows more generally. In fact, at many points the samples for the three cities are combined to make statements about widows in general. It would have been more appropriate — and not very difficult — to use the nationally representative samples of the Integrated Public Use Microdata Series (IPUMS) to make such statements.

The final chapter on the New Deal covers little new ground. However, it does serve to complete Kleinberg’s narrative of the history of social welfare programs in the three study cities.

Regional variation has been an enduring characteristic of the American welfare state. Kleinberg’s book provides greater insight into the origin and persistence of this variation.

Carolyn M. Moehling is Associate Professor of Economics at Yale University. She is currently engaged in a project looking at the political economy of the cross-state variation in mothers’ pension laws.

Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

At the Origins of Mathematical Economics: The Economics of A. N. Isnard (1748-1803)

Author(s):Van Den Berg, Richard
Reviewer(s):Porter, Theodore M.

Published by EH.NET (June 2006)

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Richard van den Berg, editor, At the Origins of Mathematical Economics: The Economics of A. N. Isnard (1748-1803). New York: Routledge, 2005. xvii + 461 pp. $115 (cloth), ISBN: 0-415-30649-3.

Reviewed for EH.NET by Theodore M. Porter, Department of History, UCLA.

This volume consists primarily of selections from the works of the French engineer and economist A. N. Isnard. Almost unknown in his own time, Isnard acquired a modest reputation retrospectively as a pioneer of mathematical economics. He was admired especially by L?on Walras, and William Jaff? attached great importance to Isnard’s Trait? des richesses as source for the mathematical framework of Walras’s theory of general equilibrium. Van den Berg, a lecturer at Kingston University in the U.K., helps to situate Isnard in relation to the economic thought of his own time and place, in critical engagement with such authors as Turgot, Rousseau, and, above all, Quesnay. However, Van den Berg invokes the modern style of economics as the reason to look back to Isnard, who stands justified before history as an avatar of mathematical economics, a precursor.

Isnard’s best-known work is the Trait? des Richesses (Treatise on Wealth), printed in 1781 at the author’s expense, and now rare. Van den Berg here exhumes Isnard’s other economic writings, many of them virtually unknown in our day and perhaps even in his. We have in this book only a fraction of Isnard’s writings; a complete edition would have run to several volumes. Anyone doing serious research on Isnard would have to consult the works in their entirety. Nevertheless, van den Berg has made a good choice, performing his most valuable service by bringing to the attention of economists and historians Isnard’s lesser-known writings. These include the Social Catechism (1784), which defends human dignity and responsibility against radicals such as La Mettrie and the Baron d’Holbach, while at the same time presenting economic motives as properly linked to moral behavior and to sociability. There are some policy pieces from the years of the French Revolution, including, in March of 1789, a defense of a “single tax” on net revenues of agriculture, industry, and commerce (and not alone, as the physiocrats recommended, on land), and another piece on taxation in 1791. Perhaps the most interesting is his “Reflections on the issue of the assignats” (1790), where he addresses in a general way the advantages and dangers of paper money, with clear reference to issues of immediate importance. Isnard rejected any simple quantity theory, as for example that any issuance of paper money leads inevitably to a proportionate inflation of the currency. He was especially concerned with questions of trust: the state should introduce assignats slowly and responsibly so that the public will not lose confidence in them. But cautious moderation was not the way of the Revolution, and Isnard’s worst fears were soon realized.

What does this book tell us about the sources and the character of Isnard’s economic mathematics? Anglophone as well as francophone scholars now know that French engineering corps — such as Ponts et Chauss?es (responsible for transportation networks) and Mines — cultivated, in the nineteenth century and beyond, a quantitative form of economics linked to the administrative and political challenges faced by these powerful state agencies. Several of these engineers, preeminently Jules Dupuit, pursued the economic aspect of these problems well beyond the demands of immediate practicality. Walras’s links to this tradition are also of interest, since he studied as an external student (i.e. he was not destined for service in the state corps) in the School of Mines. However, he chose not to take up the characteristic problems of French engineering economics such as working out a basis for deciding what transportation projects were economically justified and establishing a rational basis for the tolls.

I began with hopes that this volume might reveal interconnections between engineering and economic quantification from before the French Revolution. Van den Berg presents new research in the archives of the Corps des Ponts et Chauss?es, the Archives Nationales, and French regional archives in the Department of the Rhone to reconstruct the trajectory of Isnard’s career as a Ponts engineer. But the excerpted writings, at least, do not address the economics of public works, and the titles of Isnard’s engineering writings refer to arches and locks, with no indication that economics is at issue. Van den Berg is reticent on the connections, if any. He refers often to Isnard as “the engineer,” seeming to imply that his profession was relevant for his economics. For example: “The engineer’s views on taxation are a consistent development of the central notions of his economic theory” (p. 41); “The surprising Cath?chisme social … must be considered as developing parts of the engineer’s ‘science of man'” (p. 51). But no link is shown between his profession and his economic beliefs or style.

Van den Berg may well suppose that engineers can be expected to rely on mathematics in a way that literary economists would not. However, he does not attend to the history of engineering, and for example Antoine Picon’s authoritative L’Invention de l’ing?nieur moderne: L’Ecole des Ponts et Chauss?es, 1747-1851 is missing from his bibliography, as is the extensive scholarship on French mathematics (and sometimes also on economics) by Ivor Grattan-Guinness. One readily learns from research in the history of mathematics, science, and technology that the creation of the Ecole Polytechnique in the mid-1790s was of huge importance for the formation of engineers. The new polytechnic school, with its highly elitist patterns of recruitment and curricular preoccupation with mathematics, created a new sort of engineer, a type that would be rare outside of France until the mid-nineteenth century. Eighteenth-century French engineering used mathematics in a more sparing and more immediately practical way, and it would be interesting to compare Isnard’s economic quantification with contemporary engineering. For a historian, the question is not only whether mathematics was applied to economics, but also what sort of mathematics and how it was used.

It is necessary, then, to examine the role (and not merely to note the presence) of mathematics in Isnard’s economic writings. My impression is that his mathematics is often not very hospitable to what we might call an economic sensibility. Van den Berg refers (p. 34) to assumptions made for “mathematical convenience,” assumptions Isnard knew to be inaccurate. The formulation by Isnard that is sometimes seen as a precursor of general equilibrium mathematics treats the economy as a bookkeeper might. Costs of production, and hence values, are fixed. Economic actors divide their wares into what they need for themselves and what they will offer in trade, rather than letting this division be a function of the price structure. His solutions are reached arithmetically, with perhaps a rudimentary element of algebra. This is the sort of conception that economists nowadays sometimes associate with engineers, though it is far from clear to me that any of Isnard’s contemporaries thought of the economy this way. In his essay on paper money (assignats), Isnard rejects these radical simplifications. A doubling of the quantity of metal, he says, will not necessarily double the value of wheat in the currency of metal. Instead, a “new order” will establish itself “in offers and bids,” a “new order on which the change in value depends” (p. 296).

Van den Berg’s translations are fairly clear and free of anachronistic terms and concepts. Although he relies often on cognates when a different sort of word would be more accurate (for example, he renders confiance too often as “confidence” rather than as “trust”), the volume is a real translation, whose phraseology is almost always idiomatic, if not arresting. It is convenient to have the French on facing pages for comparison. This is, in short, a useful introduction to a mostly unsung economist, and on an appropriate scale. I don’t know how much more singing about Isnard is required.

Theodore M. Porter teaches history of science in the Department of History, UCLA. His books include Trust in Numbers: The Pursuit of Objectivity in Science and Public Life; Karl Pearson: The Scientific Life in a Statistical Age; and (co-edited with Dorothy Ross), The Cambridge History of Science, Volume VII: Modern Social Sciences.

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):18th Century

A Free Nation Deep in Debt: The Financial Roots of Democracy

Author(s):Macdonald, James
Reviewer(s):Wright, Robert E.

Published by EH.NET (May 2006)

James Macdonald, A Free Nation Deep in Debt: The Financial Roots of Democracy. Princeton: Princeton University Press, 2006. ix + 564 pp. $20 (paperback), ISBN: 0-691-12632-1.

Reviewed for EH.NET by Robert E. Wright, Stern School of Business, New York University.

Storied trade publishing house Farrar, Straus and Giroux (FSG) published A Free Nation Deep in Debt in cloth in 2003 but did not see fit to send a copy to EH.Net for review. Princeton University Press, the publisher of the new paperback edition technically reviewed here, is taking closer aim at the scholarly market. That is likely a good call. Though ably written, this book is closer in tone, density, and substance to a scholarly tome than a bookstore blockbuster. Likely, FSG was attracted to the book’s Niall Ferguson-esque Big Thesis: Democracies eventually defeat autocracies because “countries with representative institutions are able to borrow more cheaply than those with autocratic governments” (p. 4). Bond markets also strengthen democracies internally by giving citizens some of the proverbial power of the purse and by aligning their interests with those of their governments. Heady, important stuff.

To prove his thesis, James Macdonald, a British investment banker and independent scholar, has written a wide-ranging survey of the co-evolution of representative governments and public debt markets. He starts with the Old Testament, which he uses as a primary source to explicate the transition of societies from a Lockean state of nature to autocracy. Small family groups that highly valued leisure were subsumed or slaughtered by larger and more powerfully organized autocracies that forced their subjects through taxation to create economic surpluses. Autocracies soon came to control much of the ancient world but found it impossible to control the vast expanses of Asia, the forests and fjords of Northern Europe, or the jungles of Africa. A few small city states, often strengthened by alliances with other nearby cities, also managed to hold off the imperial advance for a time.

The ancient autocracies financed wars from savings, their legendary “treasure troves,” and equity contracts that divided the spoils of war. The democratic city states, by contrast, borrowed to fund resistance to imperial encroachments. “The picture that emerges,” however, was “not of a regular system of public finance, but of a series of improvised reactions to fiscal emergencies” (p. 36). The ancient Greeks, for example, moved toward modern public credit but never explicitly connected “the principle of voluntary contribution to the public funds and the principle of distribution of surplus assets” (p. 36). The result was a dizzying array of debt instruments, some forced and some voluntary, some paying interest and others not, most short-term but some in the form of life annuities. The Greeks sometimes found it difficult to honor their obligations but the extant documentation is too sparse to say anything more definitive about their creditworthiness.

Modern public finance had to await the emergence of a different group of city states some 1,500 years later in the northern Italian peninsula. There emerged, for the first time since the fall of Carthage, a group of states run by merchants instead of soldiers. Desperate to maintain their freedom from regional despots, the representative governments of Venice, Florence, and Genoa hit upon the notion of repayable taxes, levies upon which interest would be paid if the government’s finances allowed. To evade the Church’s then stringent usury prohibition, repayment of the principal sum was left at the pleasure of the government. The Venetians circumvented that inconvenience by making the right to receive the tax repayments transferable to third parties, which quickly led to the creation of a secondary market. “They had invented the bond market” (p. 77) as Macdonald writes, but the Italian city states did not regularly pay interest on their repayable taxes, the market prices of which spiraled downward. City states in northern Europe eventually improved upon the Italian model by avoiding forced loans and repayable taxes and religiously servicing their debts. The Dutch Republic was the major innovator here.

Medieval and Early Modern European autocrats also borrowed but almost invariably eventually defaulted. Unsurprisingly, they could not borrow as much or as cheaply as the Dutch, who won their independence by wearing down the once mighty Hapsburg Empire. By the end of the 80-year struggle, a majority of Dutch households were creditors to their government. Default, rebellion, or large scale tax evasion became unthinkable because the interests of the government and the citizenry were thoroughly intertwined.

After revolutions of their own in 1688 and 1776, the British and the Americans adopted Dutch-style finance, funding their wars in large measure by selling bonds to citizen creditors rather than resorting to punitive levels of taxation, ruinous inflation, or physical coercion. The democracies thrived, while autocracies in France, Germany, Russia, and elsewhere lost wars and rebellions. By World War II, however, government wartime financial techniques, including financial repression, rationing, and payroll deduction, had become so powerful that the great patriotic bond drives of earlier wars lost much of their importance. The wartime financial system of that greatest of autocrats, Adolf Hitler, looked eerily similar to that of the United States.

If Macdonald is right — and there is more than a little truth in this book — then adherents of the English “Country” and American Jeffersonian Republican traditions exaggerated the negative aspects of national debts. Far from endangering democracies, national debts bolstered them by enabling them to defeat powerful external and internal foes. Eternal interest was as much the price of liberty as eternal vigilance.

Authors who dare proffer such a Big Thesis confront numerous tradeoffs, the most important of which is that between depth and breadth. A twenty-page bibliography is always impressive, but less so for a book that covers several millennia of finance, government, and politics. Specialists will likely be disappointed with the treatment of their areas of expertise. (I cringed at several points in his discussion of the early U.S. monetary and financial systems.) But readers should concentrate on the forest rather than the trees and judge this ambitious and important book on its panoramic vision.

Robert E. Wright teaches business, economic, and financial history at the Stern School of Business, New York University. His most recent books include The First Wall Street: Chestnut Street, Philadelphia, and the Birth of American Finance (Chicago, 2005) and Financial Founding Fathers: The Men Who Made America Rich (Chicago, 2006, with David J. Cowen). He is currently working on a book tentatively titled Financing Freedom that will describe how the entire financial system, not just the government securities market, enabled America to vanquish its most dangerous enemies at home and abroad.

Subject(s):Military and War
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity

Author(s):Galenson, David W.
Reviewer(s):Ekelund Jr., Robert B.

Published by EH.NET (May 2006)

David W. Galenson, Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity. Princeton, NJ: Princeton University Press, 2006. xv + 233 pp. $30 (cloth), ISBN: 0-691-12109-5.

Reviewed for EH.NET by Robert B. Ekelund, Jr., Department of Economics, Auburn University.

David Galenson has repeated the hypothesis he examined in Painting Outside the Lines: Patterns of Creativity in Modern Art (2001) — that some great artists did path-breaking work at early ages while others created seminal art only later in life. This time, however, sculptors, poets, novelists and movie directors are said to be included in these two cohorts.

At base, Galenson believes that he has found a “new understanding of the life cycle of human creativity.” The basis of this new understanding is set out in Chapter 1 of his book. Again, as in virtually all of his previous and contemporaneous work, Galenson bifurcates art and other creative endeavors into two types — the “experimental” and the “conceptual.” According to the author, experimental innovators “repeat themselves, painting the same subject many times, and gradually changing its treatment in an experimental process of trial and error.” The epitome in the world of art, according to Galenson, is Paul Cezanne. In contrast, the conceptual artist makes “innovations motivated by the desire to communicate specific ideas or emotions,” with goals stated precisely before an image or “process” is produced. After this, their role is essentially finished. Lots of advance planning goes into this esthetic and Pablo Picasso is offered up as an exemplar of this type of artist. Galenson then argues that experimentalists produce their “most important ideas” late in their careers, while conceptual artists get to the same point much younger in their careers.

In Chapter 2, Galenson presents what he calls “evidence” for the above proposition(s). He examines auction prices and age-price profiles, textbook illustrations, museum collections and retrospective exhibitions for Cezanne and Picasso. Galenson then maintains (with good reason) that a binary division of the theory above will not do because there are “continuous” variations in art practitioners — “extreme and moderate.” With admittedly interesting and carefully selected anecdotes, the author further amends his initial proposition. Now, Galenson conjectures, “it might be hypothesized that extreme conceptual artists will tend to achieve their major contributions earlier in their careers than any other type of innovator” (p. 55, emphasis added) and, further, that “it may be possible for conceptual artists to evolve gradually into experimental ones, [but that] it is not likely that experimental artists can change into conceptual ones” (p. 60). There are, as Galenson tacitly admits, many exceptions to his theory.

Chapters 4 and 5 tackle, respectively, the implications of his theory (or theories) and its application to Old Master works. The globalization of modern art is caused, he argues, by the increasing dominance of conceptual art in the post-World War II era. The era of “isms” and experimental art was a product of the increasingly abstract art developing in Europe and America in the era of Abstract Expressionism and European modernism. The author concludes that “the dominance of conceptual approaches to fine art in the recent past has clearly served to accelerate the spread of new artistic ideas” (p. 93). Old Master painters, however, do not escape Galenson’s attention. Here he purports to show (given reproductions of their works in textbooks on art history to show “peak value”) that in three out of the ten of the most reproduced paintings the artists were “conceptual” and were below 30 years of age (one, Vermeer, was 29). For the remainder, alleged to be “experimental,” however, only three were 46 or over and three were in their thirties. One artist, Frans Hals, skews the data with age given at 79/84. The issues are “How old is old” and how can a sample of 9 artists tell us anything about the distinction Galenson is attempting to draw?

Chapter 6, the unique part of the book, pushes the distinction between conceptual and experimental innovators into other realms. Using highly selected individuals, quotations and interpretations, Galenson examines seven sculptors and eight poets, authors and film directors. Consider some of Galenson’s observations. With respect to writers: “Conceptual writers are more likely to base their works on library research and to strive for precise factual accuracy, whereas experimental writers typically rely on their own perceptions and intuition” (p. 134). Conceptual film directors, using the same logic, “often avoid linear narrative and conventional story lines” (p. 150), while experimental directors stress the importance of telling a story with a clear narrative. Distinctions such as these are so fuzzy and the samples used to produce credence for them so small that almost any close and selected biographical synopsis could produce any desired result.

Galenson reveals a certain depth of erudition and research in all this. Unfortunately there is no theoretical or empirical foundation to the main argument. There is no clearly demonstrable distinction between conceptual and experimental thought processes in art, music or any other kind of creative activity. Cherry-picked quotations and exhibitions aside, Galenson has not clarified the argument that creative thinkers can be dichotomized into seekers and finders. Anyone who has known a working artist (or poet) would recognize that these two processes are not divisible and, indeed, are often inextricably intertwined within the same work.

Measurement, if one can call it that, consists of anecdotes that Galenson selected to support the dichotomy. For example, age distributions of artists clearly matter if one is to use ex post rationalizing of peak valued work. Some artists die young, others do not. Most Old Masters had far more limited life spans, making peak value productivity a logical impossibility at older ages. Highly selected samples of artistic works do not help his argument either. There are many “great film” lists. Virtually all put The Godfather and Raging Bull on or near the top of the list. But Francis Ford Coppola and Martin Scorcese, clearly experimental directors in Galenson’s scenario, were only 33 and 38 at their executions. Consider another example. Was W. A. Mozart “conceptual” or “experimental” and would he have produced “peak valued” work had he composed to seventy years old? The point is that Galenson’s samples are simply inadequate. These and many other factors have an effect on outcomes. Plentiful exceptions to the experimentalist/older-conceptual/younger theory make the theory unbelievable. An added complexity to the theory of “extreme” and “moderate” does nothing to untangle this false dichotomy.

It may well be that there are different forms of creativity and that, in general, some genre of conceptual — often coupled with a “con” — art has replaced earlier forms. But in the art world there are other and likely better explanations than an artificially divided creative impulse. Post-World War II demand factors with lightening-fast taste changes is one reason and the use of “art as an investment” is another. These factors clearly have had an impact on auction prices, museum exhibitions and the “story” of art. The new seventh edition of the best-selling Jansen’s History of Art: The Western Tradition illustrates how the story of art history can be retold and retold in multiple ways and with different illustrations and emphases. The increased pace of conceptual artistic endeavor may also have much to do with the incentives of abstract artists in particular and the vastly lowered transactions cost in artistic “communications” of all types.

Galenson’s book, to be fair, is entertaining and informative in its own way and the study of factors affecting creativity is interesting. Unfortunately his study of bifurcated creativity will require a well-executed theoretical and empirical study to make any of his conclusions believable.

Robert B. Ekelund, Jr. is Edward and Catherine Lowder Eminent Scholar (Emeritus) in the Department of Economics at Auburn University and Acting Director, Jule Collins Smith Museum of Fine Art at Auburn University. He is the author of numerous papers on political economy, including studies in the Journal of Cultural Economics. He is the author of fourteen books, including The Marketplace of Christianity (MIT Press, forthcoming 2006) and is an amateur artist.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII