Category Archives: Miscellaneous

Paul Romer: the view from Economic History

In this post I write about the connections between Paul Romer’s work, which is essentially applied theory, and the empirical work on long-run economic growth done by economic historians. How was Romer influenced by the work of economic historians? has he influenced economic history? and have his theories been confirmed by the recent work of economic historians? (preview: I will argue that the answers are: yes; not much; and no).

Addendum shortly after publishing: my point above is not that Romer is wrong in general; in fact some of his ideas *about ideas* are fundamental for us to think about growth in the past. (Read on if this isn’t clear yet.)

Paul Romer’s was a well-deserved and long-anticipated prize. Many predicted he would eventually win, including myself in my very first academic article, written when I was a undergradute and published in 2008. (alternatively, click here for an ungated version). I now find it mildly amusing how assertive I was when I wrote: “Paul Romer is going to win the Nobel Prize in economics”. I continue to believe that this was a good choice.

Many have written about the nature of his main contributions, all of which, as I have said, have been on applied theory; see for instance, see the posts in Dietrich Vollrath’s blog, here and here, or in Paul Romer’s own blog.

Romer’s work had some influence on economic history, but not much. There is, for instance, a 1995 article by Nick Crafts which looks at the Industrial Revolution from a New Growth perspective, but it is fair to say that economic historians were perhaps not quick to pick up the New Growth theory train. Part of this was surely because its implications seemed to apply mostly to frontier economies and did not seem to apply to much of human history, a limitation which Unified Growth Theory would later attempt to overcome.

And yet, Romer himself has often spoken about economic history and relied on the data of economic historians. He now seems to have won mostly due to his 1990 article, but his earlier work on increasing returns (ungated version here) had a graph from Maddison, for instance (he discusses how Maddison influenced him here). And the process of growth itself was documented by economic historians using graphs such as the following; as my friend Max Roser tweeted:

(as a side note: Max, the source for this is not the Bank of England; it is Broadberry, Campbell, Klein, Overton, and van Leeuwen; empirical work is very demanding, so citations need to be fair with the people who did the hard work in putting these figures together).

One of the most empirical papers Romer has written is “Why indeed in America?”,  which was the culmination of much of what he had done before. It was also one of the last papers he wrote before entering a writing hiatus. In this paper he explicitly argues for the complementarity of economic history and growth theory. He argues that the USA achieved economic supremacy after 1870 due to having the largest integrated market in the world. He writes:

“differences in saving and education do not explain why growth was so much faster in the United States than it was in Britain around the turn of this century. In 1870, per capita income in the United States was 75 percent of per capita income in Britain. By 1929, it had increased to 130 percent. In the intervening decades, years of education per worker increased by a factor of 2.2 in Britain and by a nearly identical factor of 2.3 in the United States. In 1929, this variable remained slightly lower in the United States. (Data are taken from Angus Maddison [1995].”

Notice that there are three empirical statements here. Romer’s story builds on these facts, so if the facts change, the story must too. Theory depends on facts.

The first fact (according to Romer) is that the US only converged to British per capita GDP levels after 1870. Second, that this was not due to matters such as education or savings. Third, the reason was market size. As economic historians, we have made much progress in measuring each of these matters since 1995. Let me consider each in turn.

Timing of convergence of the USA to Britain

The important thing to keep in mind here is that it is by no means certain that the USA had not catched up earlier. The methodological issues are complicated and in fact today’s other (and equally deserving) Nobel prize, Nordhaus, wrote a fascinating paper about the problems involved in these types of measurements. (A popular description of this work can be read here.) As far as USA vs Britain is concerned, though, Marianne Ward and John Devereux summarize the debate as follows:

“Prados De la Escosura (2000) and Ward and Devereux (2003, 2004, 2005) argue for an early US income lead using current price estimates. Broadberry (2003) and Broadberry and Irwin (2006) defend the Maddison projections while Woltjer (2015) hews to a middle ground. The literature has recently taken an unexpected turn as Peter Lindert and Jeffrey Williamson, Lindert and Williamson (2016), find a larger US lead before 1870 and one that stretches further back in time than claimed by either Prados De la Escosura (2000) or Ward and Devereux (2005).”

Comparative levels of education

Recent evidence suggests that the average years of post-primary education actually declined in Britain after about 1700. (ungated version here). This was not the case at all in the USA, where it is well-known that the state invested in high schools, so it seems unlikely that average human capital grew at similar levels in the latter part of the 19th century, as Maddison/Romer claimed.

Addendum: minutes ago when I first posted, I initially wrote “post-secondary” where I meant to write “post-primary”

Market size

I used to believe this part of Romer’s story. That was until I read this brilliant paper by Leslie Hannah: “Logistics, Market Size, and Giant Plants in the Early Twentieth Century: A Global View”. (Ungated version here). Notice that Hannah does not refer to Romer’s argument or even cite him. What he does instead is he destroys the commonly held idea that USA’s market size was larger that Europe’s already before the Great War (aka World War I). It is true that the USA had more railroads, but it also had much longer distances. In Northwestern Europe, transportation by a mix of ships, trains and horses was cheaper, especially once we consider the much denser (and highly urbanized) population. It is important to remember that prior to WWI, Europe was living the “first age of globalization”, with high levels of integration and relatively low tariffs.

So, this part of Romer’s story cannot be right.

Conclusion

In conclusion, what does this all mean? will these new facts affect where growth theory will go? only time will tell, and growth theory itself is by no means moving much these days, as Paul Romer himself has addmited in recent interviews. What these facts suggest, though, is that other things must have mattered.

As I said in the beginning, I believe that Paul Romer’s applied theory work is important (as it is that of others that might have won, such as Aghion and Howitt). The natural complementaries between the work of economic historians and applied theorists suggest that we need to listen to each other in order for science to move forward. Hopefully, new generations of economists will do a bit of both, as have some people who now work on Unified Growth.

But in the future, it is fair that the Nobel committee gives more prizes to empirical work as well. Because theory can’t live without facts, but economics Nobels have been highly biased towards theorists (whether pure or applied).

Final addendum, about one hour later than the original post: Max Roser read this post and has now corrected the citation. This is not the first time I give him a slap on the wrist about this sort of thing, but I know that Max, who is a friend and a promoter extraordinaire of this sort of work, is well-intentioned. Yet it is crucial that we insist on this being done fairly everytime, because if even Max occasionally does this wrong, that shows that this is the sort of thing that easily happens. The root cause is indirect citations, i.e. citation of someone who cited the data instead of citing the original work. Doing this takes credit away from those who did the basic empirical work, even when that is unintentional. So we all need to be careful to cite those who produced the original data.

 

 

 

 

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Call for papers: Revista de Historia Económica-Journal of Iberian and Latin American Economic History, Special Issue on Portuguese Economic and Social History

Revista de Historia Económica-Journal of Iberian and Latin American Economic History Fast Track Meeting: Special Issue on Portuguese Economic and Social History17 November, 2018, Lisbon

Submissions are welcome for a Fast Track session to be held during the 2018 APHES meeting in Lisbon. All papers must be submitted in English and cover some aspect of Portuguese economic history, including the former colonies (prior to independence; e.g. a paper can be about Brazil, but only prior to 1821). Comparative papers are welcome.

Anyone is free to submit, but submissions from young scholars are particularly welcome. Revista de Historia Económica-Journal of Iberian and Latin American Economic History will publish a special issue on Portuguese economic and social history based on some of the papers presented in this fast track sessionThe scientific commitee will then send the best papers to be refereed but a decision will be taken within without a long delay and articles will appear in print within a relatively short time.  

The scientific committee will be composed of Blanca Sánchez Alonso (Universidad San Pablo-CEU Spain and RHE-JILAEH chief editor), Nuno Palma (University of Manchester, UK) and Jaime Reis (ICS, University of Lisbon). 

Nuno Palma (University of Manchester, UK) will serve as the guest editor for the special issue. 

Those interested should submit their papers to RHE-JILAEH via the manuscript central system no later than 15th October 2018 https://www.cambridge.org/core/journals/revista-de-historia-economica-journal-of-iberian-and-latin-american-economic-history. When submitting through manuscript central, please mention in the cover letter that you would like your paper to be considered for Fast Track. The most promising papers will be selected for the Fast Track Meeting. Authors will be informed whether their paper will be selected to present by November 1, 2018.

Best Regards,

Blanca Sánchez Alonso (Universidad San Pablo-CEU, Spain and RHE-JILAEH chief editor)

Image result for revista de historia económica

New job! University of Manchester

Starting in September, I will become a Lecturer (Assistant Professor) at the Department of Economics of the University of Manchester.

I will greatly miss Groningen, where I have spent 2 wonderful years and shall leave many happy memories and friends behind.

But on the upside, it will be great to teach economic history in the city which witnessed the birth of the industrial revolution!

Where can you study for a Masters in Economic History?

If you are interested in why some countries became rich and others stayed poor, then a Masters in Economic History could be the degree you are looking for.

While development economics and development studies study poverty today, much (but by no means all) of economic history concerns why some countries managed to escape poverty (all countries started off poor in absolute terms) and others didn’t. This too has important lessons for poor countries today.

There are other reasons to study economic history, and the field is about other things, too. But to stay focused let’s discuss this one. When undergraduate students tell me that they would like to study more economic history, this is the usual reason they point out. It was also what attracted me to the field from the start.

This post is written for all students who wish some guidance in this matter, and possibly for some teachers who may wish to direct them as well. There is an earlier list by eh.net but it is rather incomplete insofar as European schools are concerned, seems to be outdated, and does not distinguish MSc from PhD programs (that is, many of the schools it lists are US schools that do not offer a terminal MSc degree).

Employers tend place good value in masters in economic history, which they see as presenting a good balance between the quantitative skills of economics and the essay-writing craftsmanship of history.

Of course, a Masters in Economic History can be also a good entry point for a PhD in economic history itself, or one in economics, in history, or in related fields such as political science.

My review below will be centered on good schools in Europe. My choice of which schools are included was inevitably somewhat arbitrary and by no means are all good programs included. Most of the programs below are taught in English. (Though I should write here as a disclaimer that anything they announce is their responsibility!)

Note that in the USA students in economics-related fields go straight to PhD and there is no emphasis in independent masters in such areas. My list is based on schools and programs I have had some sort of direct or indirect contact with. The list below is in no particular order –any of these programs should give you a good education.

Jan_Brueghel_the_Elder-Great_Fish_market.jpg

In the United Kingdom there is a lot on offer:

Several universities in Spain have departments of economic history and offer such masters. Here I list three:

In Sweden, there are also several departments of economic history.

Again, let me emphasize that I am not endorsing any of these programs; this list is just to get you started. Many things vary here, including cost. If your favorite school or program isn’t listed, that doesn’t mean that it’s not good. I welcome further suggestions to be added.

Bear in mind that if you want to do a PhD in Economics at a top school, a Masters in Economics is a better bet from a technical perspective, even if you later want to specialize in economic history (of the cliometric kind), despite the fact that an MSc in Economic History would expose you to a different set of ideas and methods. If your first degree is from a North American institution, then know that for PhDs in economics at top US schools, a background in maths or computer science may be more appropriate than even an economics first degree.

A Masters in Economic History may also not be the best entry point for a PhD in History itself either, since not many (“pure”) history departments are friendly towards the quantitatively-inclined methods of modern economic history, though there are exceptions (or better put, there are history departments where some faculty members will be exceptions).

Nonetheless, some economics departments do offer degrees where you can take a graduate course in economic history, and this may be the right balance you’re looking for. For instance, in my own department at the University of Groningen, many students do a research masters in economics while specializing in economic history, and they sit in a graduate course called “Economic Growth in History” (just like this blog).

Other European places have a concentration of economic historians, despite (to my knowledge) not offering MSc degrees in economic history; but you would certainly be taught by some of them if you take a masters in economics or history; examples include the Historical Economics and Development Group of the University of Southern Denmark, the Center for economic history of Queen’s university, Belfast, and, last but certainly not the least, Utrecht has an important cluster of people working on Economic and Social history.