From a sweeping history of China covering three millennia to what econometrics papers can tell us about what made the world rich, it's been a fantastic year for economic history books. Davis Kedrosky, a student at Berkeley and publisher of Great Transformations, an economic history newsletter, picks some of his favourite economic history books of 2022.
Great Transformations: Writings and Research in Economic History
Thanks for recommending the best economic history books of 2022 for us. What was 2022 like as a year for economic history books?
2022 was probably the best year for economic history books since 2009, when two beloved classics—Bob Allen’s The British Industrial Revolution in Global Perspective and Joel Mokyr’s The Enlightened Economy—came out almost simultaneously. Some of the books on this list have the potential to achieve a similar status, as do others that I had to omit. I don’t know what this efflorescence says in particular about the discipline, because the books that I’m discussing are quite dissimilar in style, focus, and method from the economic history papers that you see in top journals. Economic history has been changing rapidly over the past two decades, as (especially in the United States) it’s been absorbed into mainstream economics as a subfield. Econometric efforts to use the past to analyze the present, or to test economic theories, have become increasingly important relative to studies attempting to understand past events. Despite greater interest in and funding for economic history research, as well as the influx of new quantitative analytical tools, I’m at least a little worried that these developments will crowd out the careful, laborious, and workmanlike reconstructions of the past that were once a staple of the discipline. But I hope that the great selection of titles this year is an indication that economic historians will continue to value the study of history as an end in itself, and not just as a source of data (though that’s important too!) for understanding the economics of the present.
There are two in-jokes among economic historians—one of which is, ‘when is Brad going to finish that book of his?’ But now, three decades after he first promised it, he’s actually done! Slouching Towards Utopia is a history of what DeLong calls the ‘long 20th century,’ the period from approximately 1870 to 2010. You might be able to detect a not-so-subtle reference to Eric Hobsbawm’s book, The Age of Extremes, which is subtitled ‘the short 20th century’ and covers 1914-1991. Delong decides to extend it, for the reason that instead of focusing on the cataclysm of the two world wars and the fall of the Soviet Union, he is looking at the great enrichment that occurs over this period. It’s about the transformation of first the North Sea region, then the North Atlantic, and finally parts of the rest of the world into an economic and industrial powerhouse.
He points to three main factors that drive this transformation: the first wave of globalization during the late Victorian and Edwardian eras, the industrial research lab, and the modern corporation. These were the prime instigators of a new wave of innovation that economic historians call the second industrial revolution—when applied science began to accelerate technological progress and economic growth through new, innovative sectors like steel, chemicals, and electricity.
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For DeLong, this surge forward in living standards and technology was what allowed humanity to finally escape the Malthusian trap and achieve sustained economic growth. Had these factors not come into play, DeLong hypothesizes that we would today inhabit a significantly less populous world—with perhaps around 5 billion people—and have steampunk technologies, maybe 1895 vintage.
It’s a book of titanic scope, covering not just the economic axis, which he emphasizes, but also the effects of the wrenching social changes of the period on North Atlantic political economy and the rise of neoliberalism. He’s tying together this great economic transformation with the dynamics of this period’s most important political movements, including the rise and fall of fascism and socialism. Particularly important to Brad is the three-sided intellectual debate between the two Austrians, Friedrich von Hayek and Karl Polanyi, and the British economist John Maynard Keynes. Hayek emphasized the importance of the market as a mechanism for coordinating economic activity; Polanyi, that markets create and sell “fictitious commodities”—land, labor, and money—that should actually be protected as rights. Keynes, who advocated state intervention in defense of the market mechanism, oversaw a “shotgun marriage” between the two that resulted in the “developmental social democracy” that prevailed in the Trente Glorieuses after World War II.
By calling it ‘slouching towards utopia,’ is DeLong suggesting we could have done better?
Yes, absolutely. DeLong readily acknowledges the enormous forward surge in living standards that transpired over the course of his ‘long 20th century’—from a society threatened by Malthusian catastrophe to (at least in the Global North) one of affluence and abundance. “Slouching is better than standing still, let alone going backward,” after all. But escaping “the realm of necessity” isn’t the only component of the utopian vision, and many other parts have not been fulfilled. DeLong cites the collapse of the Hayek-Polanyi alliance—postwar Keynesian social democracy—and the withdrawal of the United States as guardian of representative government in the 21st century as critical ways in which the utopian project has been derailed. Economic outcomes are still mediated by the market, which is a superb coordinating device, but does little to protect property rights other than those strictly defined by the government. And large inequalities of income and wealth persist within and between countries. Our mistake was abandoning the postwar compromise of allying markets with tactical state guidance under the crises of the 1970s.
Let’s move on to Mark Koyama and Jared Rubin’s book: How the World Became Rich: The Historical Origins of Economic Growth.
This book is perhaps the first book to extensively survey recent trends in the economic history academic literature. Over the last 20 years, as I noted above, economic history has become more aligned with economics, and particularly its empirical econometric tradition. Economic historians have become more like empirical microeconomists, using historical data to create ‘natural experiments.’ That basically means using historical situations to simulate the control and treatment groups that you might see in laboratory tests of drugs, based on what you know of the historical period, to identify some sort of causal effect. What effect did historical force X have on Y historical—or often modern-day—outcome? The canonical example that founded this literature was a 2001 paper by Daron Acemoglu, Simon Johnson and James Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation.” The paper leveraged variation in settler mortality in the developing world to show that institutions have a positive effect on economic development.
That spawned a new wave of literature over the following two decades, of which this book by Koyama and Rubin is really the most accessible and comprehensive introduction. They categorize all these papers into five major categories of explanation for why economic development happens. These are: geography, institutions, culture, demography, and colonialism.
“Over the last 20 years…economic history has become more aligned with economics”
Koyama and Rubin are by no means indifferent between the five factors. This book is not just a literature review, but also presents an original theory of economic development, explaining the Industrial Revolution, the Great Divergence (the separation of incomes between the Global North and Global South over the last two centuries) and then, finally, the recent convergence of leading parts of the developing world. They believe that while geography is important, it is mediated by culture and institutions, which can act to reverse the negative curse of geography, of having (say) limited access to the sea, which one might think would inhibit a country’s ability to participate in foreign trade. The central claim revolves around the role of representative institutions in limiting the ability of executives to arbitrarily interfere with entrepreneurs and innovators—a staple argument of the ‘new institutional economic history.’ Koyama and Rubin suggest that Britain succeeded in achieving modern growth because she possessed all of the advantages often mooted by historians as the factor explaining her take-off.
So I think that this book is something incredibly novel in the economic history literature. While the discipline has always been in the vanguard of using quantitative methods to study the past, most works have relied upon earlier research, and few recent books have the ecumenical scope that How the World Became Rich does.
Now let’s talk about The World the Plague Made by James Belich. What’s this book about?
Belich, unlike the authors of the two preceding books, is very much a historian. His interest is in the early history of globalization and the expansion of European settler economies. He takes this into studying the Black Death and its consequences. One paradoxical but widely-held view among economic historians is that while the Black Death was an absolute calamity in the short run—killing as much as half of the European population in the worst affected regions—it had positive long-run economic effects. Belich’s book is the most comprehensive survey and coherent theory of how economic development—in particular, the differentiation of Europe from the rest of the world—may have resulted from the Black Death.
His argument revolves around the stunning figure that 50% of Europeans died of the plague, revised upward from earlier estimates of a third or 30% mortality. That doubled the number of things that people owned per capita and this doubling of disposable incomes drove economic development from the demand side. People demanded more luxury goods: silk, sugar, spices, furs, gold, and also slaves. Demand for these things led to the expansion of trade from Europe because many of these goods are not found in Europe and needed to be sought from Asia and, eventually, the Americas. Manpower shortages, meanwhile, induced the development of labor-saving technologies, such as the water mill. These forces of innovation and globalization helped to turn Europe into a prosperous and commercialized society and he ties that in, at least in origin, to the Black Death.
Surely there’s a big downside to a halving of the labour force? How did people cultivate fields so they had enough food to eat?
Economists have long held that there are diminishing marginal returns to the application of any factor of production—so the more workers you have in agriculture, the less additional output each new person creates. In some regions of Europe, the centuries preceding the plague had seen an economic and demographic boom, with population densities increasing markedly from the low levels of the early Middle Ages. This mass of surplus labor meant lower demand for agricultural labor and reduced incomes for the workers themselves. Indeed, living standards declined to such an extent that it’s possible that the plague’s severity was exacerbated by poor nutrition. The loss of labor did, in some places, lead to a reduction in the cultivated area, but that effect was outweighed by increased worker productivity and greater demand for labor, which both served to increase real wages—which, in England, were greater than at any point prior to at least the eighteenth century. Secondarily, Belich also argues that mortality created incentives for the adoption of labor-saving technologies that substituted for human activity, helping to fill the gap. And the change in the relative price of labor merely meant that it paid to use more animals for plowing, transport, and milling, and to raise sheep rather than cultivate cereals.
Let’s go on to you next book, Pioneers of Capitalism by Maarten Prak and Jan Luiten van Zanden. What’s this book about and why should we read it?
This is a very interesting book about the development of the Netherlands during the early modern period, culminating in its 17th-century Golden Age. You’ve actually just done an interview with one of the authors, Maarten Prak. I find this period particularly fascinating because the Netherlands appeared to be close to an industrial revolution that never was. The region possessed a commercialized, capitalistic society with the world’s highest standard of living and a relatively advanced degree of political and economic liberalism. At the same time, there was an efflorescence of art, literature, intellectual culture, and philosophy. One good reason to find an explanation for why this happened is the paucity of data points for the pre-industrial era, in terms of episodes we can use to explain why, eventually, one country—Britain—did start to achieve sustained economic growth. The Netherlands had many of the indicators of impending development and, indeed, Britain in many ways imported Dutch institutions and culture (even its monarch!) in the years preceding the Industrial Revolution. There is good reason to believe that this cultural diffusion had some positive effect for economic growth.
So we should probably do more to understand the Netherlands. There are fewer people studying this period than there should be, just because, as an English language scholar, it’s hard to engage with French and Dutch sources. This book is an enormous contribution.
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Prak and Van Zanden are trying to explain why the Netherlands is the birthplace of modern capitalism. They want to refute three traditional arguments for why this happened: the Marxist view of enclosure and exploitation, often applied to Britain; Jan De Vries’s claim that the Dutch were free of feudalism; and, the strict institutionalist explanation—that liberal semi-democracy is better for growth than autocracy. They find all of these factors wanting. Instead, they look at the long-run origins of Dutch economic development, starting with its feudal, almost republican institutions during the late Middle Ages. They include cooperative institutions like guilds and urban associations, as well as the empowerment of independent cities in the region’s governance structure. These institutions were ultimately protected by the Dutch revolt from Spain. Whereas many other European countries during this period experienced a consolidation of absolutist rule, the Dutch managed to escape. This allowed them to preserve a relatively open society in which cities were autonomous and ruled by local merchant elites. They cooperated and competed with one another in producing an economically open society.
This was coupled with ecological crises that damaged the ability of the Netherlands to feed its own population, forcing the Dutch to engage in foreign trade to acquire the grain it needed. They had to industrialize to pay for that grain. That basically drove the center of European capitalism from Northern Italy to the coast of the North Sea in the Netherlands.
Last up we have The Cambridge Economic History of China, edited by Debin Ma and Richard von Glahn. What period does it cover and what sort of issues does it deal with?
These two colossal volumes cover much of the recorded history of China, from about 1000 BC to the present. Dutch economic history may be understudied, Chinese economic history is much more so. Chinese economic history is important, not only because China has historically been one of the world’s largest and most powerful states, but also because, up to the late Middle Ages, it had experienced precocious economic development, responsible for many key innovations that only surfaced in Europe centuries later. In these two volumes, Ma and von Glahn put together a massive collection of essays on thematic topics throughout the economic history of China.
As an early modern economic historian, I’m most interested in the first volume. There are some really fascinating essays, for example on the early development of Chinese fiscal capacity. While Western Europe had barely experienced any state formation, China was already building a fairly advanced state that collected quite a lot of taxes. The volume is influenced by the legacy of Kenneth Pomeranz’s The Great Divergence, which argues that because of ecological bottlenecks, China was unable to experience the breakthrough to industrialization that Europe did at the end of the early modern period. So the latter part—maybe two-thirds of the first volume—summarizes the research inspired by and evaluating that book, and looking at how China’s advanced market economy interacted with its agrarian institutions and its ecological resources. Pomeranz himself authors an excellent chapter on Chinese agriculture, detailing the transformation of the country’s crop mix toward cotton, tobacco, and maize; irrigation and crop rotations; and the factors contributing to stagnation during the eighteenth century.
The second volume is looking primarily at economic development surrounding the Opium Wars and the advent of Western adventurism into China, then moving on into the Communist period and, finally, its post-1978 economic transition into modern economic growth and semi-capitalist institutions. It’s animated by two fundamental questions: first, about the results (positive and/or negative) of European influence on China; and second, about the causes and nature of China’s late-20th-century growth miracle. This book is the most comprehensive survey of China’s economic history ever written and by poring through all of it, you’d be pretty close to becoming an expert.
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