Tuesday, July 15, 2014

Clark, 2007, A Farewell to Alms: A Brief Economic History of the World (political economy)

Gregory Clark is Chair of Economics at UC Davis, and an economic historian rather like Acemoglu and Robinson, but his explanation of why nations fail is at odds with theirs. In a 1999 article co-authored with Susan Wolcott, he compared textile production in Japan and India 1890-1938. Japan grew, but India stagnated. Their explanation prefigures the theme of Farewell to Alms.  Wolcott and Clark argue that it was not management decisions (good in both cases) but the relatively better culture of industry in Japan that made the difference.  The comparative method is similar to the approach by Acemoglu and Robinson, but the conclusion from a long slice of economic history is different. Acemoglu and Robinson (Why Nations Fail) settle on institutions, while Clark opts for culture. Industrial revolution England figures heavily as a reference point in both works, and since it has also been used by Allen (2012) The Institutional Revolution, and by Barrington Moore (1966) The Social Origins of Dictatorship and Democracy, along with a lot of other big-picture arguments, we are well placed to triangulate the use of available evidence.  If there’s one thing we can probably agree on, it is that monocausal explanations are inadequate. With that as a starting point, what do the different approaches tell us?

There is a good potted history of world economics in Figure 1.1, marking the sharp increase in income per person that arose with the industrial revolution. The book is then divided in two parts: the Malthusian trap describes the primitive economies before 1800, and part II, the industrial revolution, describes the world after 1800.  Some of this is good history  - fertility, life expectancy, and technological advance are well covered. On the nature of institutions, however, Clark should be read in parallel with Allen, on the institutional revolution, and Acemoglu and Robinson (2006) on the economic origins of dictatorship democracy. Institutions did change both prior to, and with the evolution of the industrial revolution. The idea that cultural evolution was important is not incompatible with the idea that institutions evolved fundamentally with the Glorious Revolution of 1688 (Acemoglu and Robinson’s argument) or that measurement and bureacratization played a key role (Allen). But the idea that the British and Japanese were simply more modern and more industrious than Indians or Chinese, absent any influence of institutional incentive structures, doesn’t pass muster. 

This is an excellent summary of the economic history of the world, for the many detailed tables and graphs that describe the time series of economic history: production efficiency by decade, income per person over time, output and capital per worker. It is a rich presentation of data, with technical appendices and equations, but in the end, the Samuelson approach doesn’t provide a convincing answer, because all the data and utility curves can’t explain why the changes occurred. Acemoglu and Robinson, Douglas Allen, and Heilbroner have come much closer to doing so. So if you’re teaching economic history or political economy, borrow Clark’s tables and charts, but rely on Acemoglu and Robinson’s explanation.
David Last, April 7, 2014

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