Nightcap

  1. From Lahore to Lancashire: Untold stories from imperial Britain John Keay, Literary Review
  2. The younger sons in Jane Austen’s England had to work Richard Francis, Spectator
  3. How soon we forget Scott Sumner, EconLog
  4. Gin, sex, malaria, and American anthropology Charles King, Chronicle Review

On Translating Earnings From The Past

A few days ago, John Avery Jones published a great piece on the Bank of England blog (“Bank Underground”), investigating how much Jane Austen earned from her novels in the early 1800s. By using the Bank’s own archives and tracking down Austen’s purchases of “Navy Fives” (Bank of England annuities, earning 5%), Avery Jones backed out that Austen’s lifetime earnings as a writer was probably something like £631 – assuming, of course, that the funds for this investment came straight from the profits of her novels.

Being a great fan of using literature to illustrate and investigate financial markets of the past, I obviously jumped on this. I also recently looked at the American novelist Edith Wharton’s financial affairs and got very frustrated with the way commentators, museums, and scholars try to express incomes of the past in “today’s terms”, ostensibly vivifying their meaning.

For the Austen case, both Avery Jones and the Financial Times article that followed it, felt the need to “translate” those earnings via a price index, describing them as “equivalent to just over £45,000 at today’s prices”.

Hang on a minute. Only “£45,000”? For the lifetime earnings of one of the most cherished writers in the English language? That sounds bizarrely small. That figure wouldn’t even pay for the bathroom in most London apartments – and barely get you a town-house in Newcastle. The FT specifically makes a comparison with contemporary fiction writers:

“[Austen’s] finances compare badly even with those of impoverished novelists today: research last year by the Authors’ Licensing and Collecting Society found that writers whose main earnings came from adult fiction earned around £37,000 a year on average”

Running £631 through MeasuringWorth’s calculator yields real-price estimates of £45,910 (using 1815 as a starting year) – pretty close. But what I think Avery Jones did was adjusting £631 with the Bank’s CPI index in Millenium of Macroeconomic Data dataset (A.47:D), which returns a modern-day price of £45,047 – but that series ends in 2016 and so should ideally be another 7% or so from 2016 until May 2019.

 “This may not be the best answer”

Where did Avery Jones go wrong in his translation? After all, updating prices through standard price indices (CPI/RPI/PCE etc) is standard practice in economics. Here’s where:

untitled-1

The third line on MeasuringWorth’s result page literally tells researchers that the pure price number may not reflect the question one is asking. The preface to the main site includes a nuanced discussion about prices in the past:

“There is no single ‘correct’ measure, and economic historians use one or more different indices depending on the context of the question.”

When I first estimated Mr. Darcy’s income, this was precisely the problem I grappled with; simply translating wealth or incomes from the past to the present using a price index severely understates the meaning we’re trying to convey – i.e., how unfathomably rich this guy was. There is no doubt that Mr. Darcy was among the richest people in England at the time (his annual income some 400 times a normal worker’s salary), a well-respected and wealthy man of elevated rank. However, translating his wealth using a price index doesn’t even put him on the Times’ Rich List over the thousand wealthiest Britons today. Clearly, that won’t do.

Because we are much richer today in real terms, price indices alone do not capture the meaning we’re trying to communicate here. Higher real income – by definition – is a growth in incomes above the rise in prices. We therefore ought to use a more tangible comparison, for instance with contemporary prices of food or mansions or trips abroad; or else, using real income adjustments, such as GDP/capita or average earnings.

MeasuringWorth provides us with three other metrics over and above the misleading price-index adjustment:

Labour Earnings = £487,000
using growth in wages for the average worker, it reports how large your wage would have to be today to afford what Austen could afford on £631 in 1815. Obviously, quality adjustments and technological improvements make these comparisons somewhat silly (how many smartphones, air fares and microwaves could Austen buy?), but the figure at least takes real earnings into account.

Relative Income = £591,300
Like ‘Labour Earnings’, this adjustment builds on the insight above, but uses growth in real GDP/capita rather than wages. It more closely captures the “relative ‘prestige value’” that we’re getting at.

Both these attempt are what I tried to do for Mr. Darcy (Attempt #2 and #3) a few years ago.

Relative Output = £2,767,000
This one is more exciting because it captures the relationship to the overall economy. If I understand MeasuringWorth’s explanation correctly, this is the number that equates the share of British GDP today with what Austen’s wealth – £631 – would have represented in 1815.

Another metric I have been experimenting with is reporting the wealth number that would put somebody in the same position in the wealth distribution of our time. For example, it takes about £2,5m to qualify for the top-1% of British wealth (~$10m in the United States) distribution today. What amount of wealth did somebody need to join the top 1% in, say, 1815? If we could find out where Austen’s wealth of £631 (provided her annuities were her only assets) rank in the distribution of 1815, we can back out a modern-day equivalent. This measure avoids many of the technical problems above for how to properly adjust for a growing economy, and how to capture inventions in a price index – and it gets to what we’re really trying to convey: how wealthy was Austen in her time?

Alas, we really don’t have those numbers. We have to dive deep into the wealth inequality rabbit hole to even get estimates (through imputed earnings, capital stocks or probate records) – and even then the assumptions we need to make are as tricky and inexact as the ones we employ for wage series or prices above.

The bottom line is pretty boring: we don’t have a panacea. There is no “single correct measure”, and the right figure depends on the question you’re asking. A reasonable approach is to provide ranges, such as MeasuringWorth does.

But it’s hard to imagine the Financial Times writing “equivalent of between £45,000 and £2,767,000 at today’s prices”…

Liberty and the Novel I (Before Austen)

I’ve been working on Jane Austen and ethics recently. These ethical investigations have overlapped with considerations of politics and liberty, with regard to the progress of such ideas in the early nineteenth century when Austen was writing, along with the immediately preceding and following periods.

There is a well known Marxist view of the history of literature, which is that the novel (and other literary genres, but mostly the novel) can be seen as developing along with the development of the bourgeoisie, so that is progressive and emancipatory until the turning point year of 1848 when the bourgeois class at least in part turns against the progressive-democratic, working class, and national revolutions of the European Springtime of the Nations.

At this point the capitalist class flees from democracy, allying with the royalist and aristocratic forces to prevent a revolution that might overturn property relations as well as pre-democratic political forms. After 1848, the novel largely becomes inward looking and alienated from social reality, because of the ties of writers and readers to a bourgeois class trying to hold back socialist working class politics, or at least fears to ally with it.

The classic exponent of this view is the Hungarian philosopher Georg Lukács who was born into the Habsburg Empire and so wrote in German, very much continuing themes from German language philosophy, literary studies, and social science. The relevant texts include The Historical Novel and Studies in European Realism.

I do not write to advocate Lukács’ literary history and of course even less do I advocate his Leninist politics. However, he undoubtedly makes an important contribution. Not many people now, Marxist or otherwise, would advocate the more schematic elements of his literary history. Nevertheless he was continuing ideas he had before his turn to Marxism, as expressed in Theory of the Novel and Soul and Form and he was onto something with regard to the heroic and less heroic phases of literature.

The novel itself has non-heroic and even anti-heroic aspects. If we take Miguel de CervantesDon Quixote (1605 and 1615) as the starting point of the modern novel, a debatable proposition but not outrageously so, then the novel is something that starts with the mockery of the heroes of medieval knightly romance through a character trying to imitate them in real life Castile. It is a crude piece of social history to say this, but nevertheless it is roughly true that Don Quixote coincides with the growth of commercial Europe, trading across the Mediterranean and the Atlantic, as there is a growth of cities along with the increase in membership of the merchant and financial classes.

This is the sweet commerce rightly advocated by Charles-Louis de Secondat, Baron Montesquieu, but also the violent consolidation of European states and the growth of their overseas empires. This is not all pleasant, but then that makes it to some degree ‘heroic’, as heroism refers to struggle and triumph with limited regard for other concerns. The ‘heroism’ of Quixote is to observe the Spain of his time in his bizarre adventures, learning from experience and awakening from his illusions, if only on the point of death. He becomes disillusioned by experience so achieving a more inner awareness freed from the illusions of romances in an idea of authenticity which has its own romance. A romance that is very visible in the subsequent development of the novel.

Other inputs into the development of the novel include John Bunyan’s The Pilgrim’s Progress (1678), a religious story from England of salvation in an allegory focused on a hero called Christian. There was nothing new about texts of salvation, but this is a novel length narrative devoted to individual struggles with externalised representations of distractions from faith. It was read very widely in the English speaking Protestant world, turning theological concerns into a popular heroic narrative of release of the self from ungodly illusions, and references to it abound in later literature of a kind less guided by strict Reformation Protestantism. (to be continued)

Also posted at Stockerblog