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Chronicle of Higher Education December 1, 2014
The Fall and Rise of Economic History
By Jeremy Adelman and Jonathan Levy
"Irritated, one shoos it out the door, and almost immediately it climbs
in through the window." Without the concept of capitalism, the late
French historian Fernand Braudel once wrote, it was impossible to study
economic history. But the reverse is equally true: We can’t understand
capitalism without economic history.
Once a mainstay of history departments, economic history was, with
historians’ complicity, seized in the mid-20th century by economists who
sucked the culture and chronology out of it and turned it into an
obscure province of mathematical formulas. There it languished. The
field became increasingly uncool. By the 1990s, to be a materialist in
the age of Michel Foucault and Pierre Bourdieu was to be
"deterministic"—in other words, a dinosaur. So economic history further
retreated to economics departments, where many self-described economic
historians had already been gathering under the banner of the "new
economic history."
The past decade has exposed some fundamental problems with that division
of disciplinary labor. The now-old "new" economic history either fizzled
or has become so technical, so unrecognizable to anyone who cannot wield
its finely tuned analytics, that few historians can engage with it.
Meanwhile, fewer and fewer economics departments now consider
history—including the history of economics itself—a relevant domain of
disciplinary inquiry, with many of the top departments having eliminated
economic history from their programs altogether.
Lately historians have started to take it back, spurred by a demand to
better understand the roller coaster of capitalist life, particularly
how inequality and globalization factored into the recession. The
economic crisis pushed courses on the "history of capitalism" to the top
of the charts in history departments around the country, even making
front-page news in The New York Times. With conferences, courses, and
book series, the history of capitalism, one of the few areas of inquiry
where job postings are growing, is on the verge of becoming an
established subfield. The runaway success of Thomas Piketty’s Capital in
the Twenty-First Century (Harvard University Press) raised even higher
the political and intellectual profile of capitalism and its history.
In this way, a prodigal-son subfield has returned. Historians do not
leave political history to political scientists, or social history to
sociologists. Why should economic history be left to economists,
especially when they ignore it? Besides, the humanities might well
benefit from the revival of a field that once served as a bridge to the
social sciences.
The history of capitalism performs heroic service, but bereft of a
broader grasp of the history of economic life, it can’t provide deep
insights into the makings of systems of production, circulation, and
distribution. Capitalism is a latecomer in that story, and, like all
latecomers, more reliant on its precursors and alternatives than its
apostles and critics like to admit. There can be no history of
capitalism without an economic history near its explanatory core.
Like democracy or modernity, capitalism is a historical problem,
specific to time and place. If only because it eludes easy definition,
it must be studied from different perspectives, with different
historical methodologies. There are social histories of democracy,
intellectual histories of democracy, and, of course, political histories
of democracy. The economy could be the subject of similar multiple
approaches. But it is not. It has been treated as a realm apart.
This is a surprising state of affairs. Looking back to 1960 or even
1980, one would not have predicted the eclipse of economic history. From
the Progressive Age (1900 to 1930) onward, it was almost de rigueur to
proclaim the material roots of everything and to tie one’s research to
the broad spirit of reform. Capitalism’s postwar "golden age" was good
for economic history, as it was for the world economy. The pairing of
"social and economic history" was the fallback working methodology of
many professional historians. The works of Eric Hobsbawm, Thomas C.
Cochran, and Braudel himself were touchstones. Even books by the first
generation of new economic historians, such as Robert Fogel and Stanley
Engerman’s Time on the Cross: The Economics of American Slavery (Little,
Brown and Company, 1974), were read and reckoned with by noneconomic
historians. Surely globalization, the ascendance of China, and the rise
of Apple should have continued to fuel the field.
A confluence of several forces broke things up. By the 1960s, economic
history was increasingly associated with development economics, at a
time when that field was seen as running out of steam. It often took the
likes of Alexander Gerschenkron and R.H. Tawney as departure points and
was preoccupied with identifying (or debunking) catalytic factors in the
"takeoff," as W.W. Rostow put it in The Stages of Economic Growth, to
modern economic growth. Here the importance of the economy—while often
disaggregated into various sectors, industry almost always the leading
one—was taken as a given. Further, many economic historians concerned
themselves with the economic growth of nation-states—bounded entities in
space, which grew (or not) across a nation’s chronology. Postwar
economic history became a modern enterprise aimed at explaining how to
expand the pie.
Behind the scenes, though, the consensus was coming apart. Some say a
change took place in 1960, when the editing of The Journal of Economic
History passed to William Parker and Douglass North, two economists with
deep interests in historical processes but also commitments to
sophisticated statistical methods. The English Economic History Review,
the French Annales d’histoire économique et sociale, and even Past &
Present stayed true to their narrative roots but eventually suffered
from dwindling readership, or chose to diversify or rebaptize themselves.
The features of what was dubbed "the new economic history" are well
known. Chiefly there were three—an evidentiary style that preferred
numbers to narratives, an effort to disaggregate variables to test
causal claims about growth, and a reliance on the methodological
individualism of neoclassical economics to make inferences about
behavior, even of groups. William H. Sewell Jr. has charted the rise of
quantitative styles and the demise of narratives in economic-history
journals. In 1965-66, only 8 percent of Journal of Economic History
articles boasted mathematical equations. By 2008 the count was 62
percent, by which time 90 percent of the articles contained statistical
tables.
The preference for numbers was less troublesome than the assumptions
hitched to them. The neoclassical economics behind the new approach
claimed to hold the keys to both current and future equilibrium states.
But it did not have a theory about time, about how to move from one
state to the next. That posed problems because grappling with time is
what historians do. While the "cliometricians," as they dubbed
themselves without irony, offered findings that fit an all-purpose
economic theory, they collapsed history into a static formula, a global
equilibrium for a world of possessive individualists. Coincidentally, if
less consciously, the prospect of intervening for the purposes of reform
faded away.
Economic history seceded from the study of history generally. After all,
the point of going cliometric was to subject the study of the past to
the more-rigorous scientific norms of economics and formal models. True,
the occasional historian has dared venture into the domain of economic
theory. But if Niall Ferguson’s recent pitfall into Keynesian economic
theory is any indication, it’s not a game for the faint of heart. Or the
humble.
A second consequence was less perceptible and took more time to play
out. The rise of cultural history in particular, and the engagement with
more-interpretive social sciences in general, turned more and more
historians away from structures and statistics and toward meanings and
mentalities. Among the meanings to be dissected using that interpretive
approach were categories that economists used with happy abandon, like
"labor," "credit," and "industry." Institutions and innovations, rather
than the results of individual and group responses to incentives, were
studied as social and cultural constructs. For some, especially those
influenced by Foucault, the drive to modernity was less about a grand
narrative of making plenty and more about micronarratives of power and
alienation.
So, one side went causal while the other went cultural. After Fogel and
North won the 1993 Nobel Memorial Prize in Economic Sciences, the
economic historian Claudia Goldin remarked on the extinction of economic
history from history departments, worrying that the prize served as a
kind of elegant epitaph for an alliance that once crossed disciplinary
boundaries. "The new economic historians," she noted, "extinguished the
other side"—a side that had moved on of its own accord. By the turn of
the millennium, what we got was a de facto agreement for each side to
bask in the glow of its unexamined assumptions about the other.
There is always, of course, more to the rise and fall of academic fields
than their internal history. So much of what economic history had become
was, in fact, attached to the capitalism question. Capitalism, in
postwar economic history, was the present industrial stage in nations’
grand and irreversible march through time. It was also communism’s evil
twin; the term "capitalism," after all, was coined by late-19th-century
socialists to name the enemy. In a sense, economic history thrived as
long as there were rivals to capitalism.
The question of the "origins of capitalism" was so hotly debated in part
because so many historians—and not just the Marxists among them—were
concerned with the threats it faced. Rostow’s Stages of Economic Growth,
an unapologetic defense of capitalism, laid its cards on the table with
its subtitle, A Non-Communist Manifesto. It was a manifesto precisely
because it claimed to distill what we knew about how capitalism could
(as befitted the jet age) "take off" and bring abundance to all. This
was especially relevant in 1960, when much of the third world was up for
ideological grabs and listening to the siren calls of socialism and
revolution. Rostow himself would soon leave the halls of MIT for the
White House, carrying his lessons from economic history to the defense
of the free world.
As the romance with revolution wore off, so did the urgency to
understand the mystique of capitalism. By the time Francis Fukuyama’s
The End of History and the Last Man (Free Press, 1992) declared the
triumph of liberal-capitalist democracy over all possible alternatives,
many people had lost interest in capitalism’s origins and consequences.
Questions gravitated to what kind of capitalism rather than how or why.
Big books in post-Cold War economic history, like David Landes’s The
Wealth and Poverty of Nations (W.W. Norton, 1999), read like the rise of
the capitalist West and the travails of the catching-up rest. The story
line had a moral: Nations that do not conform, whether to the narratives
of economic historians or to the dictates of the 1990s Washington
consensus, were doomed to misery.
It did not help that economics, the discipline tasked with giving us the
clues to understand the economy, was moving further and further from
reach, not just from historians but also from the rest of the social
sciences, let alone the broader public. Many veteran economists today
complain that they can’t fathom the math of their younger colleagues.
Increasingly, technical economic history follows the cues (not to say
the incentives) of its master discipline to simulate natural
experiments, relying upon the narrowest of behavioral assumptions about
homo economicus, mining data excavated and stylized from the past.
Without historians in their midst, the new new economic historians were
unaccountable to those who shared different understandings of what a
preference is. Political or personal choices were siphoned as the
outcomes of a timeless economic calculus. Some have taken matters a step
further to make the case for the application of game theory, as if
traditional narratives were simply "facts arranged chronologically."
Since this type of social scientist doesn’t write for historians, even
if they wring them for data, historians’ basic assumptions about the
contested nature of narratives, and the craft that must go into
constructing them, do not get through. No wonder, then, that many
historians take one look at what passes for cutting-edge economic
history, shrug, and move on.
Then came 2008. With the crisis, pessimism about capitalism’s present
and future came storming back, and the topic returned center stage to
American history departments.
As the pie shrank, the publishing world was flooded with big,
noise-making books. Histories of financial crises, like Carmen M.
Reinhart and Kenneth Rogoff’s This Time Is Different (Princeton
University Press, 2009), became best sellers. As the fate of the
American middle class became more uncertain, as Europe entered fiscal
crisis, as China took over the solar-panel business, and as some parts
of the world seemed to fall into a tailspin, liberal capitalism seemed
less assured and its history more confusing—or, as historians like to
say, more "contingent."
Grand narratives of the rise of the West have continued to appear, Daron
Acemoglu and James Robinson’s Why Nations Fail (Crown Publishers, 2012)
chief among them. But the tone is altogether different. Divides,
disparities, and divergences have elbowed aside miracles, takeoffs, and
growth. Acemoglu and Robinson’s choice to swap out the 20th-century
obsession with growth for the 21st’s fixation on failure is a giveaway.
As a couple of historians interested in the economy, we’re happy to see
American history departments welcome the topic of capitalism back into
the fold. (Outside the United States, subfields didn’t fork in such
opposite directions, so the rift has been less of a problem.)
Our joy might seem out of place amid so much economic gloom, but the
trend was evident even before the recession. Globalization and
competition were already bringing to the fore economic factors in daily
life. Consider Kenneth Pomeranz’s The Great Divergence: China, Europe,
and the Making of the Modern World Economy (Princeton University Press,
2000). Pomeranz asked an old question—why did the Industrial Revolution
happen first in Europe and not Asia? To answer it, he appealed to
multiple spatial scales, above and below nation-states, from regions to
empires. He employed numbers, but for the purpose of old-fashioned
counting, not modeling, and he made those figures part of the story.
Furthermore, by pointing to the ecological windfall of New World
frontiers, Pomeranz enlisted a sibling field, environmental history.
Finally, while his account was primarily about causality, he nodded to
an array of historical processes and showed sensitivity to the
perspectives of the diverse participants in his tale. As Westerners grew
nervous about the rise of China, and the hegemony of the West seemed
less given, the global dimension of The Great Divergence struck a nerve.
While economic history’s stock rose with globalization, the new economic
history’s stock fell because of doubts about its behavioral assumptions.
Even before the recession, the heroic figure of the utility-maximizing
homo economicus appeared less infallible. Rational actors? Not even the
Federal Reserve’s chairman at the time, Alan Greenspan, could find them.
Irrationality, passion, and greed stormed the stage. Subprime mortgage
loans, hedge-fund quants’ calculations, moral hazards, tech start-up and
IPO crazes made for much better drama.
To their credit, some economists and other social scientists had already
recognized the problem, as evidenced in Amartya Sen’s 1977 paper
"Rational Fools: A Critique of the Behavioral Foundations of Economic
Theory" and Albert O. Hirschman’s "pendular" man, swinging between
self-interest and concern for others.
But those were the exceptions. Daniel Kahneman, the behavioral
psychologist known for his studies of decision making, was shocked to
discover that "the agent of economic theory is rational, selfish, and
his tastes do not change." He added: "My economic colleagues worked in
the building next door, but I had not appreciated the profound
difference between our intellectual worlds. To a psychologist, it is
self-evident that people are neither fully rational nor completely
selfish, and that their tastes are anything but stable."
Historians were no less shocked. Cultural historians for decades had
been writing about "market cultures" and what they called
"subjectivity." But because they no longer imagined themselves in
conversation with economists in the building next door, they had no
chance to be heard. Lately, though, historians have explored the
cultures around money, statistics, and finance, to take just a few examples.
The production, distribution, and consumption of value are common
descriptors of what constitutes the economy, with economists normally
treating value as synonymous with prices. But market prices can’t be the
only gauge of value, as demonstrated by a recent spate of philosophical
books, among them Debra Satz’s Why Some Things Should Not Be for Sale
(Oxford University Press, 2010) and Michael Sandel’s What Money Can’t
Buy (Farrar, Straus and Giroux, 2012). Historians have a lot to
contribute to such discussions—now that they realize they’re a part of them.
Even the very idea of "the economy" is the source of revitalized
attention. Instead of isolating variables, we can tell the histories of
variables and categories of economic life. We can give homo economicus a
real, historically conditioned life. It’s the equivalent of turning a
computer-modeled Pinocchio into a real boy. This does not mean being
antiquantitative, or anticausal, but it does mean understanding that the
numbers and agents live in time, and, by implication, that socioeconomic
trends are open to intervention and change.
What’s the evidence behind our optimism? The first is the rekindled
interest in the history of economic ideas. No longer a subset of
intellectual history engrossed in controversies over, say, whether Adam
Smith had a concept of marginal utility, the history of economics has
found kinship with the history of science and politics. Albert Hirschman
and Emma Rothschild have worked to place political economy back into the
tapestry of discussions of human nature and the pursuits of power and
wealth. More recently, historians like Mary Morgan have charted how
political economy evolved from a verbal science, steeped in rhetorical
traditions as a branch of literature, to a model science, grounded in
reasoning tools that render the subject into a manipulable object that
can be simulated, graphed, and spliced into separable equations. From a
subject that could be understood through a few general, usually hidden
laws, the economy, she argues, became an amalgamation of discrete,
increasingly ornate, miniaturized models.
The work of Timothy Mitchell and others has already demonstrated that
the economy is not a thing waiting out there to be measured by
economists (or economic historians), but the result of a long historical
struggle over warfare, empire, and welfare. Indeed, the idea of the
calculable economy, like the offshoot capitalism, is a
Johnny-come-lately, forged by national and international statecraft and
polished only in the 20th century. Its origins extend at least as far
back as William Petty’s attempt in 1665 to enumerate the incomes and
expenditures of England and Wales, in preparation for war against the
Netherlands. Petty anticipated the 20th-century quest for national
accounting systems, which culminated in the invention of the statistical
aggregate of gross domestic product in 1941, in the midst of another war.
The postwar world demonstrated that this intellectual history was
inseparable from the manufacture of economic structures themselves. So
much of the development-economics enterprise after 1945 was about
creating an economy out of what was seen as a tapestry of loosely
strung-together pre-market patches. This attitude saturated the World
Bank’s catalog of "missions" (the evangelical tone is hard to miss) to
the newly branded third world to forge a modern economy out of the
fragments of "backwardness" and "inertia." Behind Rostow’s manifesto was
a mental concept.
Now it is the economy that needs explaining. Economic concepts and tools
appear less as a framework for analyzing history than the other way
around. We might call this inverted relationship between the economy and
history not economic history, but the history of economic life.
Rather than an economic history that takes for its object a timeless
given, divorced from other domains of life, a history of economic life
historicizes the economy itself, in part by attending to the fuzzy and
shifting boundaries between the economic and noneconomic. Rather than
confining our studies to market prices and production determined by
assumptions about rationality, we can treat these activities across a
variety of scales, from the intimate to the global, and through a
variety of structures, from the contingent to the durable, and within a
broader context of subjectivities and values.
The global dimension is crucial. The trajectories of the production of
wealth and of social disparities were global long before capitalism;
some might say they laid the groundwork for capitalism. The most recent
and intense global turn has disrupted the history of capitalism in at
least two ways. First, narratives about the triumph of the West now seem
relics of a more confident era. That’s one reason Niall Ferguson’s
recent Civilization: The West and the Rest (Penguin, 2011) struck many
critics as, well, quaint. Seen over the long run, systems come and go;
so do their geographic bearings.
Moreover, seen globally, the economy is the product of more than just
the attributes of one particular place (the West) or time (the modern
age). Recent and pipeline works will push historians of American
capitalism to think in more global, transnational, and comparative
terms, and to be mindful that what appear today to have been outdated,
precapitalist formations—slavery, household economies, ennobled
magnates—had essential places in the story and have not faded away so
easily or tidily. In some cases, as anyone attentive to current social
inequality can attest, they acquired a new lease on life.
The study of capitalism requires scope and imagination. It needs an
economic history reconnected to the broad trunk of history and the
humanities. Then, who knows—rather than historians imitating economists,
perhaps we’ll see the reverse.
Jeremy Adelman is a professor of history and director of the Global
History Lab at Princeton. His forthcoming book, Latin America: A Global
History, will be published by Princeton University Press. Jonathan Levy
is an associate professor of history at Princeton University and the
author of the forthcoming book Ages of American Capitalism, to be
published by Random House.
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