Ten best papers/books in economic history of the last decades (part 1)

In my post on French economic history last week,  I claimed that Robert Allen’s 2001 paper in Explorations in Economic History was one of the ten most important papers of the last twenty-five years. In reaction, economic historian Benjamin Guilbert asked me “what are the other nine”?

As I started thinking about the best articles, I realized that such a list is highly subjective to my field of research (historical demography, industrial revolution, great divergence debate, colonial institutions, pre-industrial Canada, living standards measurement) or some of my personal interests (slavery and the great depression). So, I will propose a list of ten papers/works that need to be read (in my opinion) by anyone interested in economic history. I will divide this post in two parts, one will be published today, the other will come out tomorrow.

  • Higgs, Robert. “Wartime Prosperity? A Reassessment of the US Economy in the 1940s.” Journal of Economic History 52, no. 01 (1992): 41-60.

Higgs’s article (since republished and expanded in a book and in follow-ups like this Independent Review article) is not only an important reconsideration of the issue of World War II as a causal factor in ending the Great Depression, it is also an efficient primer into national accounting. In essence, Higgs argues that the war never boosted the economy. Like Vedder and Gallaway, he argues that deflators are unreliable as a result of price controls. However, he extends that argument to the issue of measuring GDP. In wartime, ressources are directed, not allocated by exchange. Since GDP is a measure of value added in exchanges, the wartime direction of resources does not tell us anything about real production. It tells us only something about the government values. As a result, Higgs follows the propositions of Simon Kuznets to measure the “peacetime concept” of GDP and finds that the prosperity is overblown. There have been a few scholars who expanded on Higgs (notably here), but the issues underlined by Higgs could very well apply to many other topics.  Every year, I read this paper at least once. Each time, I discover a pearl that allows me to expand my research on other topics.

  • Allen, Robert C. The British industrial revolution in global perspective. Cambridge: Cambridge University Press, 2009.

I know I said that Allen’s article in Explorations was one of the best, but Allen produces a lot of fascinating stuff. All of it is generally a different component of a “macro” history. That’s why I recommend going to the book (and then go to the article depending on what you need). The three things that influenced me considerably in my own work were a) the use of welfare ratios, b) the measurement of agricultural productivity and c) the HWE argument. I have spent some time on items A and C (here and here). However, B) is an important topic. Allen measured agricultural productivity in England using population levels, prices and wages to proxy consumption in a demand model and extract output from there (see his 2000 EREH paper here). As a result, Allen managed to compare agricultural productivity over time and space. This was a great innovation and it is a tool that I am looking to important for other countries – notably Canada and the US. His model gives us the long-term evolution of productivity with some frequency. In combination with a conjonctural estimate of growth and incomes or an output-based model, this would allow the reconstruction (if the series match) of a more-or-less high frequency dataset of GDP (from the perspective of an economic historian, annual GDP going back into the 17th century is high-frequency). Anyone interested in doing the “dirty work” of collecting data, this is the way to go.

  • Broadberry, Stephen, Bruce MS Campbell, Alexander Klein, Mark Overton, and Bas Van Leeuwen. British economic growth, 1270–1870. Cambridge University Press, 2015.

On this one, I am pretty biased. This is because Broadberry (one of the authors) was my dissertation supervisor (and a pretty great one to boot). Nonetheless, Broadberry et al. work greatly influenced my Cornucopian outlook on the world. Early in my intellectual development, I was introduced to Julian Simon’s work (see the best of his work here and here and Ester Boserup whose argument is similar but more complex) on environmental trends. While Simon has generally been depicted as arguing against declining environmental indicators, his viewpoint was much broader. In essence, his argument was the counter-argument to the Malthusian worldview. Basically, Malthusian pressures caused by large populations which push us further down the curve of marginally declining returns have their countereffects. Indeed, more people means more ideas and ideas are non-rival inputs (i.e. teaching you to fish won’t make me unlearn how to fish). In essence, rising populations are no problems (under given conditions) since they can generate a Schumpeterian countereffect (more ideas) and a Smithian countereffect (size of market offsets). In their work, Broadberry et al. basically confirm a view cemented over the last few decades that England had escaped the Malthusian trap before the Industrial Revolution (see Crafts and Mills here and Nicolinni here). They did that by recreating the GDP of Britain from 1270 to 1870. They found that GDP per capita increased while population increased steadily which is a strong piece of evidence. In their book, Broadberry et al. actually discuss this implication and they formulate the Smithian countereffect as a strong force that did offset the Malthusian pressures. Broadberry and al. should stand in everyone’s library as the best guidebook in recreating long-term historical series in order to answer the “big questions” (they also contribute to the Industrious Revolution argument among many other things).

  • Chilosi, David, Tommy E. Murphy, Roman Studer, and A. Coşkun Tunçer. “Europe’s many integrations: Geography and grain markets, 1620–1913.” Explorations in Economic History 50, no. 1 (2013): 46-68.

Although it isn’t tremendously cited yet, this is one of the best article I have read (and which is also recounted in Roman Studer’s Great Divergence Reconsidered). This is because the paper is one of the first to care about market integration on a “local” scale. Most studies of market integration consider long-distance trade for grains and they generally start with the late 19th century which is known as the first wave of globalisation. However, from an economic historian perspective, this is basically studying things once the ball had already started rolling.  Market integration is particularly interesting because it is related to demographic outcomes. Isolated markets are vulnerable to supply shocks. However, with trade it is possible to minimize shocks by “pooling” resources. If village A has a crop failure, prices will rise inciting village B where there was an abundant crop to sell wheat to village A. In the end, prices in village A will drop (causing fewer deaths from starvation) and increase in village B. This means that prices move in a smoother fashion because there are no localized shocks (see the work of my friend Pierre Desrochers who argues that small local markets were associated for most of history with high mortality risks). In their work, Chilosi et al. decide to consider the integration of markets between villages A and B rather than between country A and B. Basically, what they wonder is when geographically close areas became more integrated (i.e. when did Paris and Bordeaux become part of the same national market?). They found that most of Europe tended to be a series of small regions that were more or less disconnected from one another. However, over time, these regions started to expand and integrate so that prices started moving more harmoniously. This is an important development that took place well before the late 19th century. In a way, the ball of market integration started rolling in the 17th century. Put differently, before globalization, there was regionalization. The next step to expand on that paper would be to find demographic data for one of the areas documented by Chilosi et al. and see if increased integration caused declines in mortality as markets started operating more harmoniously.

  • Olmstead, Alan L., and Paul W. Rhode. Creating Abundance. Cambridge Books (2008).

This book has influenced me tremendously. Olmstead and Rhode contribute to many literatures simultaneously. First of all, they show that most of the increased in cotton productivity in the United States during the antebellum era came from crop improvements. Secondly, they show that these improvements occured with very lax patents systems. Thirdly, they show how crucial biological innovations were in determining agricultural productivity in the United States (see their paper on wheat here and their paper on induced innovation). On top of being simply a fascinating way of doing agricultural history (by the way, most economic history before 1900 will generally tend to be closely related to agricultural history), it forces many other scholars to reflect on their own work. For example, the rising cotton productivity explains the rising output of slavery in the antebellum south. Thus, there is no need to rely on some on the fanciful claims that slaveowners became more efficient at whipping cotton out of slaves (*cough* Ed Baptist *cough*). They also show that Boldrine and Levine are broadly correct in stating that most types of technological innovations do not require extreme patents like those we know today (and which are designed to restrict competition rather than promote competition). In fact, their work on biological innovations have pretty much started a small revolution in that regard (see one interesting example here in French). Finally, they also invalidated (convincingly in my opinion) the induced innovation model that generally argued that technologies are developped merely to ease scarcities of factors. While theoretically plausible, this simplified model did not fit many features of American economic history. Their story of biological innovations is an efficient remplacement.

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10 thoughts on “Ten best papers/books in economic history of the last decades (part 1)

  1. “In wartime, resources are directed, not allocated by exchange. Since GDP is a measure of value added in exchanges, the wartime direction of resources does not tell us anything about real production. It tells us only something about the government values. ”

    Ok but:

    1. GDP is a measure of what the economy produces. Whether or not you think a battleship or tank is a good thing, different economies can produce different numbers of those things. When the US entered WWII, it called upon the economy to produce these things and it did. There’s a reason the US was able to provide so much of the effort against the Axis and, say, Yugoslavia (one of the lesser known allies) didn’t.

    2. Absent a war, many Americans would have rather had new cars, steaks, even real butter and nylons. But there was a war and most Americans wanted the US to win it very badly. Most Americans were ok with not having a new car if they thought the US was churning out tanks and aircraft carriers to win the war faster. Free rider problems make it almost impossible to fund winning WWII through some type of purely voluntary exchange mechanism (i.e. a GoFundMe page?) but it does seem somewhat blind to say winning WWII was ‘the government values’ while the actual people of America valued consumer products and fun times more. In a democratic system there’s still a lot of mechanism that prevent the gov’t from reflecting the values of the people without distortion but you can’t pretend there is no reflection at all.

    • GDP is the measure of value exchanged by individuals. When the state writes X$ next to an aircraft carrier, all we’ve discovered is the marginal cost for the producer of that good. We don’t know the value to consumers. GDP attempts to use added value in freely made exchanges as a measure of “total welfare”. But it implies that it is somewhere between demand curve and supply curve. When the government decides to tax someone (or borrow) and buy it at X$, it writes X$ into GDP but do consumers value at such? GDP becomes an accounting fiction when in war and in presence of coercion.

      • “GDP is the measure of value exchanged by individuals. When the state writes X$ next to an aircraft carrier, all we’ve discovered is the marginal cost for the producer of that good.”

        1. I’m going to disagree. Gross Domestic Product. Gross means we are not netting against depreciation (i.e. we build a new bridge but we aren’t putting a negative in there for the old bridge that is rotting away slowly), domestic means inside the national borders, product means a good or service. Product is an aircraft carrier. Whether or not someone ‘wants’ it, it takes resources to produce one and some nations have the resources to make a lot of carriers and some couldn’t make one.

        2. How exactly do you measure ‘voluntary transactions’? A teenager works a job and has $10 taken out for social security taxes she goes to Wal-Mart and buys cheaper cosmetics than she would have otherwise because she has $10 less, her grandmother goes to Wal-Mart and buys ‘herbal supplements’ of dubious value. Do you back out the sale of the supplements because that isn’t really ‘voluntary’? A man buys a new car for $25K. But the car has airbags…maybe the man wouldn’t have purchased a car with airbags if the gov’t allowed it to be optional. Is GDP going up by $25,000 or $24,500? If you take this idea seriously then GDP only gets to be measured in a fantasy world where people imagine they could simulate what the economy would have done had all their preferred ideological policies been in place.

        “When the government decides to tax someone (or borrow) and buy it at X$, it writes X$ into GDP but do consumers value at such?”

        Actually most consumers value the goods and services at more than the price they paid…remember consumer surplus? The last guy to buy the toaster values it at X$, all the previous buyers valued it more but what goes into GDP is the price it sells for. GDP is not trying to add up ‘mental value’ on top of the value of the goods and services produced.

        And equally important government is not some alien entity that just landed upon society from space. I would say most people in the US wanted that aircraft carrier. Most people in Russia wanted to repel the German invasion. I’d even say most people in Germany wanted their nation to win the war. Zeroing in on the word ‘voluntary’ implies that these decisions were purely imposed….but imposed by whom? Pick even a non-democratic country like the USSR. When Stalin said “shift steel working factories to churning out as many guns and tanks as possible” this wasn’t just his ‘voluntary’ decision. In the USSR this happened because a lot of people under Stalin also agreed and implemented the order….as opposed to skimming off the top, making up excuses, blaming other managers for failure to achieve quotas, undermining the order by churning out shoddy products, etc. How exactly then do we ignore a massive increase in guns and tanks as an ‘involuntary’ transaction?

  2. VINCENT:

    Question:
    1 you’ve chosen historical and empirical works, but I don’t see that you’ve chosen any substantive change in theory. From what I’ve seen, most of what we’re doing is confirming established theory. Is that true?

    2 This might be more difficult to answer, but have we learned anything substantive about the major questions of the day: democracy, regulation, activist legislation (policy), the business cycle (boom/bust), the limits of monetary policy, the limits of fiscal policy, the lessons of the limits of economics as we practice it today?

    Thanks

    • No. For example, Higgs is basically debunking the Neo-Keynesian synthesis indirectly and provides a strong support to a New Classical/Austrian synthesis.

      For the second question: yes. I have libertarian leanings however and the more I do history, the more I see the “applied public choice” and it tells me about the limits of governments in improving living standards.

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