Book Reviews

18 fevereiro, 2010

233) Keynes, truly an optimist...

EH.NET BOOK REVIEW --------------
Published by EH.NET (February 2010)

Lorenzo Pecchi and Gustavo Piga, editors,:
Revisiting Keynes: Economic Possibilities for Our Grandchildren
Cambridge, MA: MIT Press, 2008. xi + 215 pp. $30 (cloth),
ISBN: 978-0-262-16249-4.

Reviewed for EH.NET by Linda Carter, Department of Economics, Baylor University.

John Maynard Keynes’ short essay, “Economic Possibilities for Our Grandchildren,” provides the focal point for this book. In that essay, published in 1931, Keynes looks past the “economic pessimism” of the day and confirms his optimism regarding the long-term prospects of capitalism (p. 17). Despite the economic conditions surrounding him in the midst of a deep recession, he forecasted substantial increases in living standards by 2030 and provided an insightful, modern account of the determinants of the economic growth that was to occur in the interim. Keynes went on to predict that these increases in living standards would herald the end of the economic problem, that his grandchildren would live in a state of abundance, and that the future generations -- once free from the necessity to work and save -- would spend most of their time in leisure, finding ways to “pluck the hour and the day virtuously and well” (p. 25). Following a brief introductory chapter and a reprint of Keynes’ own essay, sixteen contributors, including several Nobel laureates in economics, each react to the essay.

An opening contribution by Fabrizio Zilibotti presents historical trends in economic growth and work patterns that bring some of the questions arising from Keynes’ essay into sharper focus. In particular, he describes world growth patterns, with increases in GDP per capita well beyond Keynes’ predictions, the uneven distribution of growth between OECD and non-OECD countries (an event not anticipated or discussed by Keynes), and the fact that solving the economic problem (and the adoption of the 15-hour work week Keynes predicted) is still a very distant prospect for much of the world. In the next chapter, although Joseph E. Stiglitz notes that Keynes grossly underestimated the economic growth that would occur in subsequent decades, he uses Keynes’ essay as a springboard to consider why developed nations have not taken advantage of the substantial technological progress that has occurred to better our lives to a greater extent. He points toward apparent preferences for quantitative rather than qualitative consumption, the tendency for Americans to work so hard they scarcely have time to spend with family or enjoy other aspects of life, streams of made up “needs” to pursue, and the deterioration of communal life. He then offers various hypotheses to explain why increases in wages might not lead to more leisure (as Keynes had assumed would happen) and might not even lead to increases in well-being. Then, in his essay, Robert Solow turns more fully to the question of distribution. He and many other contributors note how Keynes’ concerns over the lack of purposeful occupation that will exist upon solving the economic problem seem meaningless today, given the vast majority of the world that is still poor and will remain so even in 2030. After giving some historical context for the rise of corporatism in the 1920s, in Chapter 5, Edmund S. Phelps argues that Keynes’ corporatist dissatisfaction with the market and the failure to recognize the satisfaction that accompany economic pursuits (such as entrepreneurship, innovation, etc.) in a capitalist economy are the chief reasons Keynes’ predictions about future work and leisure patterns were so wrong.

In his essay, Lee E. Ohanian takes a substantially different approach by sketching a model that generates predictions of declines in the work week strikingly similar to Keynes’ predictions, which were stated with little explanation of the underlying theoretical basis. Ohanian points out, however, Keynes’ social commentary and especially his predictions about the problems increased leisure would present for a society accustomed to working and saving were based on neither empirical observations nor theoretical foundations, despite related work by his contemporaries that drew strongly on both. In Chapter 7, Axel Leijonhufvud argues that Keynes’ class, as well as the time period in which he lived, account for the strange contrasts between his predictions and the trends we ultimately observed. In the next chapter, Benjamin M. Friedman points out that -- aside from medical progress -- the material progress we have made over the past 75 years may or may not have made us “better off in some fundamental sense” (p. 125). However, he also discusses the positive social and political externalities (such as greater tolerance and a deeper commitment to fairness and democracy), which accompany and reinforce growth. With more relevant timing than he could have realized at the time of writing, Friedman offers his own prediction for Keynes’ “grandchildren” arguing, “If the current stagnation of incomes and living standards for the broad cross section of citizens were to continue, the likely consequence would rather be the re-emergence of familiar social, political and, yes, moral pathologies that have often afflicted economically stagnant societies in the past but have typically atrophied when a clear majority know that they are getting ahead and have confidence that their living standard will continue to advance” (p. 133).

In Chapter 9, Richard B. Freeman offers perspectives that contrast sharply with other contributors who view the observed increases in hours of work and decreases in leisure (despite growing income per capita) as negative or even pathological behavior. He argues that high returns to extra hours of work (e.g., due to incentives in the retirement system, low safety nets, and performance-related compensation), increased ease of working away from a traditional office setting, and the social benefits of work explain much of the observed positive relationship between hourly pay and hours worked. He argues this is not only reconcilable with standard models of economics, but also desirable since “there is so much to learn and produce and improve” (p. 142). Although Keynes dismissed the importance of context in consumption, in Chapter 10, Robert H. Frank provides an interesting discussion of the importance of context that reaches beyond standard discussions of “conspicuous consumption” or “relative needs.” He also hypothesizes that -- if context matters more for demand of some goods than others -- free markets may not generate efficient outcomes.

In a chapter that economic historians will find _disturbingly_ titled “End of (Economic) History,” Jean-Paul Fitoussi implies that Keynes’ essay presents further evidence of his anti-Semitic views. On a similar note, Michele Boldrin and David K. Levine provide a critical assessment of the “classist, sexist, Eurocentric” viewpoint reflected in Keynes’ essay, the disregard for the majority of the world living in poverty, and the “sloppy description of human preferences” underlying his predictions (p. 173). Gary S. Becker and Luis Rayo detail many of the blindspots in Keynes’ analysis that have become clear only with the benefit of hindsight. For example, they argue that Keynes failed to consider the differences in income effects of wage increases for individuals with all wealth in land, assets, etc. (as was the case with the idle rich of Keynes’ era) and individuals with wealth in the form of human capital (as is true in recent decades). In Chapter 14, Leonardo Becchetti draws on the recent economics literature regarding happiness to highlight the part of Keynes’ social commentary that was right, namely the increased value individuals would begin to place on (relatively scarce) immaterial goods as income continues to grow. Finally, a closing chapter by William J. Baumol highlights the “value of erroneous forecasts” by emphasizing the tremendous progress we have made as a society in the past 75 years that is brought into bold relief against the underestimates of economic growth made by an incredibly optimistic individual and brilliant economist (p. 202).

In this review, I’ve focused on some of the unique (or especially thorough) discussions in each contribution, but -- as one might expect in a volume of responses to Keynes’ brief essay -- there is a substantial amount of overlap between the chapters. And, it is far from surprising that some of the contributions are more intriguing and easier to follow than others. Each chapter, however, adds distinct perspectives on Keynes’ work and the whole volume is certainly greater than the sum of the individual contributions. In reacting to Keynes’ essay, several contributors echo the sentiment succinctly expressed by Fitoussi, “What matters is not so much the way Keynes answers the questions he poses but the nature of the questions themselves” (p. 151). I would say the same about this book. Whether one agrees with some (or none) of the contributors’ perspectives, economists -- or indeed any reader with an interest in thinking about catalysts for and impediments to human progress in the long run -- will enjoy pondering the questions each contributor poses while reflecting on Keynes’ essay, as well as the arguments and answers outlined in each chapter. Economic historians, in particular, will appreciate many of the contributors’ efforts to take seriously the historical, institutional, and personal context in which Keynes’ penned his essay and to analyze his predictions within that context. The differences in the contributors’ research backgrounds and disposition toward Keynesian ideas add richness to the analysis as they bring their own perspectives to bear on Keynes’ work and most readers will likely agree that the book could not be more timely. As Keynes wrote while formulating the final draft of his essay, “The fact is -- a fact not yet recognized by the great public -- that we are now in the depth of very severe international slump, a slump which will take its place in history amongst the most acute ever experienced” (Harrod 1972, p. 469, quoted on p. 2). Since this book went to press on the eve of the current recession, the contributors were not in a position to incorporate the events of the past two years in assessing the validity of Keynes’ predictions or soundness of his arguments. As such, the evaluation of Keynes’ work is undertaken through a longer-run perspective than would likely emerge in the current climate of uncertainty. This is perhaps a loss for us, however, since it would have been incredible to hear more from these contributors about the economic possibilities for _our_ grandchildren in the midst of _today’s_ widespread “economic pessimism.”


Harrod, F. R. 1972. _The Life of John Maynard Keynes_. London: Macmillan.

Linda K. Carter is an Assistant Professor of Economics at Baylor University. Her current research examines the rise, diffusion, and impacts of evening schools for working children and immigrants in the late nineteenth-century United States.

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13 fevereiro, 2010

232) The Rise and Fall of Communism - Archie Brown

The un-American way of life
A controversial new history of Communism suggests that most everything we think we know about it is wrong
By Andrew O'Hehir
Salon Books, Friday, Jul 3, 2009

Top: U.S. President Ronald Reagan, left, and Soviet leader Mikhail Gorbachev stand alone during their impromptu walk in Red Square in Moscow, USSR, Tuesday, May 31, 1988. In the background is St. Basil's Cathedral. Bottom: East German border guards look through a hole in the Berlin wall after demonstrators pulled down one segment of the wall at Brandenburg gate in this November 11, 1989 picture.

Most adults now living were born during the Cold War, a 45-year standoff between competing political and economic systems that threatened civilization with nuclear annihilation and asked virtually every human being on earth to pick a side. One of those systems was called Communism, and it cast such a long, dark shadow across the 20th century that it's amazing to reflect how thoroughly it has vanished from the scene and how poorly its history is understood.

Genuine support for Communism -- meaning the Marxist-Leninist governing ideology of the Soviet Union and its allies, as distinct from various flavors of socialism or social democracy -- was minimal in the Western world, despite the United States government's best efforts to uncover it. But you didn't have to endorse Communism to be fascinated by it. Simply the existence of that alternate model, with its claim of scientific inevitability and its alleged utopian aims, had a bizarre, distorting effect on political discourse clear across the ideological spectrum.

Significant sectors of the left were paralyzed by Communism, unwilling or unable to criticize regimes (no matter how nightmarish and autocratic) that nominated themselves as the enemies of capitalism and imperialism and the champions of third-world revolution. Right-wingers became hysterically obsessed by it, finding a creeping Red stain in Hollywood movies, pop music and abstract art (and never realizing how much they were mirroring the paranoia of the Soviet commissars). Eager to prove they weren't closet pinkos, the mainstream liberals of the Kennedy and Johnson administrations launched a disastrous series of overt and covert anti-Communist proxy wars, whose echoes continue to reverberate today. (Osama bin Laden, after all, was a nasty little piece of Cold War blowback.)

Academics pumped out scholarly treatises on the theory and practice of Marxism-Leninism by the yard, and debated the Soviet system's merits and flaws feverishly. Now all those copies of "The Lenin Anthology" and Leszek Kolakowski's "Main Currents in Marxism" are moldering in the garages of former grad students, and our collective memory of the great 20th-century struggle between capitalism and Communism is a series of clichés and blurry newsreel images: Stalin and FDR guffawing as they carve up the postwar world, Kennedy and Khrushchev daring each other to push the button, Soviet tanks rumbling through the streets of Prague, Reagan instructing Gorbachev to "Tear down this wall!"

Archie Brown's whopping study, "The Rise and Fall of Communism," which is modest in tone but comprehensive in scholarship, marks an important effort to dig past those iconic stereotypes and painful memories and figure out what the hell was going on in that 75-year-long failed experiment called Communism. This is still an exceptionally difficult subject for Americans to confront with any clarity, I think. Our political life remains haunted in peculiar ways by the specter of Communism, which has become (to mix metaphors) an all-purpose ideological cudgel to use against one's enemies.

In some quarters, President Obama is denounced as a Leninist for suggesting tepid social-democratic reforms to the healthcare system (which come nowhere near the government-administered programs of Canada or Western Europe). To other critics, Obama is merely a spineless replica of a Cold War liberal, unable or unwilling to stand tall against Mahmoud Ahmadinejad and Ayatollah Khamenei the way Reagan did against the Soviet Union. Or, that is, the way he did in their mythical version of the story.

As Brown sees it, Reagan definitely played a role in the dissolution of Communism, but not the role most Americans think. Brown describes Reagan's confrontational first-term cowboy act, and his "evil empire" rhetoric, as almost entirely destructive, heightening tensions and strengthening the resolve of Kremlin hard-liners. It was in Reagan's second term, under the guidance of his pragmatic secretary of state, George Shultz, that he strolled amicably through Red Square with Mikhail Gorbachev, and negotiated a series of arms-control agreements that ended the threat of nuclear war in Europe.

One might summarize the central argument of Brown's sweeping tome this way: Communism meant different things to different people in different contexts, but the very things that made it successful, at least for a while, also paved the way for its destruction. A professor emeritus at Oxford and perhaps Britain's most prestigious Sovietologist, Brown has crafted a readable and judicious account of Communist history, from its theoretical beginnings in 19th-century Europe to its practical collapse at the end of the 1980s, that is both controversial and commonsensical.

Having served as an informal advisor to Prime Minister Margaret Thatcher during a crucial period in the early 1980s, Brown has anti-Communist bona fides, and does not pretend to be a neutral observer. But given the immense sweep of time, ideology and geography he strives to cover in 600-odd pages -- as Brown observes, almost every one of his chapters could be a book on its own -- "The Rise and Fall of Communism" is a work of considerable delicacy and nuance.

Brown draws an important distinction between upper-case "Communism," to describe states governed by Marxist-Leninist political parties, and lower-case "communism," to describe the classless future utopia imagined by Marx, which no such state ever claimed to have reached. Furthermore, although those countries typically called themselves "socialist," Brown avoids the term. For one thing, Lenin and his followers were trying to steal the word away from the Western social-democratic tradition, which has produced elected leaders in Britain, Canada, France, Germany, Australia and elsewhere. There is an evolutionary relationship between Western socialism and Soviet Communism, to be sure, but their bitter split predates the Russian Revolution, and many of Communism's sharpest critics have been socialists. It is no more meaningful to say that Stalin and George Orwell were both socialists than to observe that Martin Luther King Jr. and George Wallace were both Christians.

There is none of the jingoistic cheerleading in Brown's book that you'd get from an American neocon. He firmly believes that constructive engagement with the Communist world was morally and strategically superior to tough talk and saber-rattling. In fact, between the lines you can read an account of his influence: In 1983 Brown delivered a paper at Chequers, the prime minister's private retreat, that convinced Thatcher to talk directly to the Soviet leadership. In turn, she convinced her good friend Reagan to follow suit. Brown does not see all Communist regimes as identical or uniformly totalitarian -- the notorious police state of East Germany was vastly different from the relative tolerance and openness of Communist Hungary -- and believes they contained the possibility for genuine reform. Indeed, he points out that Gorbachev did reform Communism from within, before deciding to abandon it entirely.

As many anecdotes Brown lifts from recently opened Communist archives reveal, leading officials in the Soviet bloc were keenly concerned with events and perceptions in the outside world. To most ordinary people in the West -- and to many of our politicians, who ought to have known better -- the Soviet bloc looked like an implacable monolith in which a mysterious elite ruled over the terrorized and/or brainwashed masses. Men inside the Kremlin and other centers of Communist power, on the other hand, knew that their own populations were increasingly restive and saw the wealth and might of the "bourgeois democracies" arrayed against them. They understood that their hold on the reins of power was tenuous and contingent.

Brown focuses tightly on a series of factual historical questions as he hopscotches from the Soviet Union and its satellite states through Mao Zedong's China, Fidel Castro's Cuba, Pol Pot's Cambodia and other epiphenomena of international Communism. He pays some attention to significant non-ruling Communist parties -- especially the big ones in Italy, Spain and South Africa -- but his principal concern is the 16 nations that at one time or another were ruled by a Marxist-Leninist party recognized as such by the Soviet Union.

His central questions are these: How and why did Communists come to power in so many different places? How did their authoritarian and manifestly unpopular regimes hold onto power for so long? And why did most of them collapse so abruptly? He also addresses, at the end of the book, what might be called the question of Communist hangover: How have self-described Communist regimes endured in Cuba, North Korea and (at least nominally) China, long after the collapse of the international movement that once sustained them?

For Brown, a Communist system had three pairs of identifying characteristics, all of which have their origins in Lenin's ideology and philosophy. In the political realm, a monopoly of power was held by one party, with most of the power concentrated at the top, and that party operated through the process Lenin called "democratic centralism." That was supposed to mean that open discussion could precede decision-making, which was then administered with unanimity and iron discipline. It usually meant, of course, that decisions were handed down from a dictator or a small circle of oligarchs, and were neither discussed nor questioned. In the economic realm, the state controlled the means of production, and a command economy, rather than a market economy, predominated. In the ideological realm, the declared aim of building communism -- for Marx, the classless, stateless final stage of human development -- was the state's "ultimate, legitimizing goal," and the state belonged to an international Communist movement aimed at moving the whole world toward that future society.

Communism remained a politically effective force as long as these three pillars worked to support each other. While the command economy was notoriously bad at delivering consumer goods and the one-party state offered little room for civil rights or liberties, they did deliver improved healthcare and education and widespread social mobility, along with rapid industrial progress. As long as at least some people in a society truly believed that they were part of a historic and inevitable shift away from capitalism toward something better, the hardships seemed to be worth it. Brown suggests that many people in Communist societies, including their leaders, did believe that until at least the 1960s.

Yet as people in such societies became healthier and better educated, they began to wonder about the massive social costs that "socialist progress" required in the best of times, not to mention the famine, starvation and murder it occasioned at others. They wondered about the police state the ruling party always seemed to require to maintain order, about the fantastical future that seemed to be getting no closer and about the non-Communist world, where higher living standards and greater political and personal freedom seemed to go hand in hand.

According to Brown, Nikita Khrushchev -- probably the last Soviet leader who believed in the future promise of small-C communism -- used to tell a joke in which a party apparatchik delivers a talk at a collective farm deep in the Russian countryside. "Comrades, some of you may doubt that we will ever live under communism," he intones, "but I tell you it lies just beyond the horizon!" An aged peasant sticks up his hand and says, "Comrade Lecturer, what is the horizon?" The lecturer says, "I am glad you asked that, Venerable Comrade. The horizon is the imaginary line where the land meets the sky, which has the unique property of always moving further away as you approach it." The aged peasant replies, "Thank you, Comrade Lecturer. Now I understand completely."

Brown has read virtually every available scholarly work published about the Communist era in either English or Russian, and has studied the now-declassified Soviet archives extensively. Arguably he offers nothing startling or new on such well-rehearsed topics as the October Revolution, the brilliant and ruthless figures of Lenin and Trotsky, and the Stalinist reign of terror that followed. But his arguments are balanced and clear. One doesn't have to excuse the brutality and bloodshed of Lenin's revolutionary regime, for instance, to grasp that he would have been horrified by Stalin's paranoid and murderous expansion of it.

When Brown turns to the long endgame of the Communist era, from Khrushchev's 1956 revelations about Stalin to the long, slow percolation of dissent under Brezhnev and the sudden explosion of perestroika, his account is frequently mesmerizing and leavened with colorful anecdotes. He offers considerable new insight into what leading figures within the Communist bloc were saying and thinking at such critical junctures as the Cuban missile crisis, the Prague Spring of 1968 and the Solidarity uprising in Poland during the early '80s. In all three of those cases, the Soviet leadership tried to walk a fine line invisible to outsiders. They could feel their empire slipping away and sought to preserve it, while also trying to stave off an intra-Kremlin coup by Stalinist hard-liners.

Brown does not believe that Soviet Communism was fated to die because of its economic failures or its autocratic character, nor does he think it was brought down by the arms race or Reagan's muscular rhetoric. If anything, he is a charmingly old-fashioned historian who sees the slow process of social change embodied in individual personalities. He suggests that if either Yuri Andropov or Konstantin Chernenko -- Gorbachev's short-lived predecessors -- had survived a few more years, or if the ruling Politburo had elected any other member as general secretary after Chernenko's death in March 1985, recent history might look very different. Furthermore, if the Politburo members had understood Gorbachev's thinking a little better, they would certainly not have chosen him.

Gorbachev's life experience and philosophy, Brown argues, gave him a mental flexibility and imagination that were unique among leading Communists. He began as leader with the genuine aim of reforming the one-party state, largely by relaxing censorship and encouraging open dialogue. Some of his fellow Communists were ready for this, but few were prepared for Gorbachev's rapid evolution into a social democrat. By 1989 he had decided that it was too late to save Communist rule, and abruptly announced that the party would abandon its "leading role" in society and hold free elections.

This launched a process Gorbachev could no longer control, which included an explosion of nationalist feeling in Russia and the other Soviet republics and the unexpected emergence of a one-time Moscow Communist boss named Boris Yeltsin. In this exciting, pell-mell experiment in democracy -- Brown says 100 million Soviet citizens watched the early legislative sessions on TV -- Gorbachev hoped to preserve the Soviet state, or most of it, while fundamentally changing its character. After the failed putsch by hard-line Communists late in 1991, that was no longer possible. But Brown is always cautious about hindsight, and says only that the question of whether the Soviet breakup could have been avoided is "unanswered and unanswerable."

Brown is a big believer in the idea that history is not carved in stone. If Czechoslovakia had been allowed to become a social-democratic state in 1968, as both its citizens and its Communist leaders wanted, the Cold War might have ended 20 years earlier than it did. On the other hand, if Gorbachev had been ousted by the Politburo in early 1989 and Soviet tanks sent into Poland (as urged by Romanian dictator Nicolae Ceausescu) then the Communist states might not have toppled one after another. As Brown explains it, the now-legendary opening of the Berlin Wall on Nov. 9, 1989, was an accident rather than a policy decision, the result of a careless remark made to Tom Brokaw by a spokesman for the East German Politburo.

One thing was not a historical fluke or accident, though: the fact that a political system based on some half-baked utopian musing by Marx and Engels, and their bogus claims of scientific certainty, was not going to work out well for anybody. There's room for argument about whether it had to turn out quite as badly as it did, and plenty of room for discussing the continuing validity of Marx's insights into capitalism. But there's no denying that the works of a philosopher who championed human creativity became the basis for a social system devoted to crushing it. It's the platonic ideal of historical irony, to which other historical ironies can only aspire, and suggests some very dark possibilities about human nature.

In much of the world, the term "socialism" has been poisoned by its association with Soviet-style Communism; in the United States, it is virtually a term of hate speech. But as Brown (who is certainly no socialist) makes clear, it was socialists who saw the dangers of Communism first and most clearly. In 1918, at the dawn of the Soviet era, Karl Kautsky, who had personally known Marx and Engels in his youth, wrote a diatribe against Lenin's use of the vague Marxist term "dictatorship of the proletariat."

Kautsky insisted it had been meant metaphorically, and that genuine class struggle presupposed genuine democracy. The so-called dictatorship of the proletariat "always leads to the dictatorship of a single man, or of a small knot of leaders" and to a situation where ordinary people "only become instruments for carrying out orders."

Although Lenin was trying to defend the Soviet Union against very real enemies within and without, he took time out to bang out an angry broadside against "the despicable renegade Kautsky," which suggests how much the criticism stung. (With characteristic directness, he described his newborn state as "a machine for the suppression of the bourgeoisie.") Lenin was too intelligent not to understand that there were real dangers in conflating the dictatorship of the proletariat with the dictatorship of those who claimed to know what was best for the proletariat, but he had long since convinced himself that the imaginary ends justified the brutal means. Seventy years later, the last leader of Lenin's party and Lenin's state would decide that Kautsky had been right all along.

10 fevereiro, 2010

231) Technological Innovation in USA

------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (February 2010)

Ross Thomson, _Structures of Change in the Mechanical Age: Technological Innovation in the United States, 1790-1865_. Baltimore: Johns Hopkins University Press, 2009. xiv + 432 pp. $68 (hardcover), ISBN: 978-0-8018-9141-0.

Reviewed for EH.NET by Lisa D. Cook. Department of Economics, Michigan State University.

The author cleaned the Augean stables of historical data related to invention to bring the reader a rich and detailed study of the early development of the American system of technological innovation. The volume starts with a vivid juxtaposition of the antebellum and postbellum economic and inventive environments. Path-breaking inventors in the mid- to late nineteenth century, like Thomas Edison, Joseph R. Brown, and George Corliss, had the advantage of a pre-existing innovation system resting upon the pillars of ideas, markets, institutions, and skilled labor. In the earlier period output was rising because small-scale production was increasing in scale. Yet, technological progress occurred more slowly, because there was no change in techniques. Among the initial conditions were several factors constraining development and adoption of mechanization, including small markets, scarce human and financial capital, and limited technological knowledge. Thomson argues that the innovation system that developed as a result of actions from above -- government -- and below -- among self-interested innovators -- was integral to the success of the American Industrial Revolution.

In Thomson’s view, this new system of firms, individuals, and markets had two critical components. First, knowledge had to be gained and developed. Scientific investigation had to be undertaken (or taken from Britain) and applied. Second, it had to be disseminated and developed further to augment future technological development. He emphasizes important feedback effects throughout the process of innovation and building innovative capacity. Embodied technological progress appeared in machines, which were related or unrelated to a given invention. General purpose technologies were critical for cross-fertilization. Embodied technological progress also appeared in machinists and inventors.

The new innovation system was characterized by two seemingly opposing but intricately intertwined features: structure and change. Structures, like the patent system and scientific institutions, are the midwives that bring to fruition new ideas and technological change. To explain the evolution of structure and change, he organizes chapters chronologically and then thematically.

The significant contributions of this book derive from three sources: the amount and type of data collected and examined, the extension of previous work on major innovators, and the exposition of the relevance of social interactions in innovative systems.

Thomson carefully presents systematic evidence on the emerging innovation system in the mid-1800’s, using data on innovators, firms, industries, patents, and various technologies. One thousand individual innovators and 14 industries are covered in 50 data sets and other primary and secondary sources. The focus of the volume is patented invention. However, like Moser (2005) and a number of subsequent studies, he extends the examination to include exhibits at industrial fairs, including the New York Crystal Palace Exhibition and the New York World’s Fair in 1853 and other unpatented inventions. As a result the data,, and the book more generally, constitute a rich resource for research on innovation during this period.

The research presented on major innovators extends the work of Ciarlante (1978) and Khan and Sokoloff (1993). While he starts from the _Dictionary of American Biography_ (1937) to identify major innovators as do Ciarlante and Khan and Sokoloff, he broadens the scope of investigation by adding those who may not have been as well known or socially connected as those in the _DAB_, e.g., from the _Biographical Dictionary of Civil Engineers_ (1972 and 1991). To demonstrate how learning and dissemination evolved in this innovation system, he provides detailed summaries of data on location, occupation, specialization, educational attainment, and patent usage and commercialization.

Thomson argues persuasively that interactions beyond formal institutions were as important for development of the American system of innovation as those within them. Institutions -- firms, markets, occupations, patenting systems, publications, schools, and civil organizations -- often created asymmetries in knowledge and in its dissemination, and individuals through networks served as a corrective mechanism. He offers science as an illustration of the balance between institutions and individual networks, given its dual focus on institutions and policies and on individuals with respect to integrating science into economic life.

Further, he asserts that technological centers, large groups that played a significant role in processes of invention, diffusion, and development and fostering growth and innovation broadly across the economy, were the locus of networked innovative activity. In particular, he places machinists and the machinery industry and science and the institutions of transmission of scientific output at the epicenter of this innovation system. Using data from the Manufacturing Manuscripts of the Census and the Patent Office, he exposes mobility and linkages across industries and demonstrates that machinists were such industry-spanning technological centers.

One might have three minor quibbles about this volume. First, while the clear intent is to reinforce and provide further support for his thesis, the book is repetitive in places. For those who will use it as a reference and individual chapters by themselves, this feature may be inconsequential, and each chapter being self-contained may be an advantage.

Second, some counterfactual analysis appears in the volume. Nonetheless, more of such analysis would have been helpful to the reader. For example, in Chapter 8, Thomson argues that without distinct knowledge bases, the U.S. “might well have succeeded in some innovations and failed in others. Without science the United States could have developed the sewing machine but not the telegraph ...” (p. 257). Such statements require further probing. International comparisons, particularly to England, are deployed effectively in other places and are desirable here and elsewhere in the book. Are there places where varying innovations emerged in the absence of innovators’ access to many kinds of knowledge? The reader clearly gets the sense that America’s system of innovation was exceptional but is not entirely sure why.

Finally, I believe Thomson misses an opportunity to provide a vivid example of his thesis by repeating the conventional wisdom related to Eli Whitney. A reference to his negative experience with his cotton gin and the patent system is briefly invoked early in the book (pp. 19-20). Lakwete’s (2003) careful research challenges the received wisdom about Whitney and shows that southern machinists and farmers quickly tested and improved his version of the cotton gin. Before Whitney’s patent expired, southern farmers developed incremental improvements and adopted a new gin with circular saw teeth rather than Whitney’s wire teeth, the source of novelty but less of usefulness. This more complete story would have provided clear support for Thomson’s innovative-feedback thesis while acknowledging imperfections in the patent system and its enforcement.

These quibbles notwithstanding, this book accomplishes a Herculean task of data collection and analysis. The antebellum period has been understudied, allowing scholarship on later periods to take the foundations of the innovation system for granted. It is an important work and likely to become required reading for generations of scholars of the innovative process.


_Biographical Dictionary of Civil Engineers_, 2 volumes. New York: American Society of Civil Engineers, 1972 and 1991.

Ciarlante, Marjorie Heins. _A Statistical Profile of Eminent American Inventors, 1700--1860: Social Origins and Role_. Ph.D. Dissertation, Northwestern University, 1978.

Drake, Francis S., editor. _Dictionary of American Biography_. Boston: Houghton, Osgood, 1879.

Johnson, Allen and Dumas Malone, editors. _Dictionary of American Biography_, 21 volumes. New York: Charles Scribner’s Sons, 1937.

Khan, B. Zorina and Kenneth Sokoloff. “’Schemes of Practical Utility’: Entrepreneurship and Innovation among ‘Great Inventors’ in the United States, 1790-1865,” _Journal of Economic History_, 53 (2) June 1993: 289-307.

Lakwete, Angela. _Inventing the Cotton Gin: Machine and Myth in Antebellum America_. Baltimore: Johns Hopkins University Press, 2003.

Moser, Petra. “How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World's Fairs,” _American Economic Review_, 95(4) Sept. 2005: 1214-36.

Lisa D. Cook is an assistant professor in the Department of Economics and James Madison College at Michigan State University. Her research focuses on the economics of innovation and economic growth and development. The subject of a recent article (in the _American Economic Review: Papers and Proceedings_ 2009) is Africa’s growth experience in recent economic history.

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