“With impressive erudition and verve, Boldizzoni laments that much economic history has become a mere handmaiden of neoclassical economics. He seeks to reinvigorate its classic focus on how the economy unfolds in its social and cultural setting. Drawing on sophisticated and subtle European historiography such as the Annales school, he makes a vivid, detailed, and persuasive case. I highly recommend this sweeping and provocative study.”–Mark Granovetter, Stanford University

“Boldizzoni has written a powerful polemic that combines an impressive survey of a great deal of recent cliometric economic history writing with an impassioned plea for the revival of the European social-science tradition. The theme, simply stated, is the erroneous and irrelevant character of most economic history writing. It is a book that needed to be written.”–Harold James, Princeton University

“I am struck by the immense and impressive range of The Poverty of Clio. Few works in historiography can muster the scope and learning of this book, which will make it attractive not just to economic historians but to sociologists and historians of culture more generally.”–Frank Trentmann, author of Free Trade Nation

“With impressive erudition and verve, Boldizzoni laments that much economic history has become a mere handmaiden of neoclassical economics. He seeks to reinvigorate its classic focus on how the economy unfolds in its social and cultural setting. Drawing on sophisticated and subtle European historiography such as the Annales school, he makes a vivid, detailed, and persuasive case. I highly recommend this sweeping and provocative study.”–Mark Granovetter, Stanford University

“Boldizzoni has written a powerful polemic that combines an impressive survey of a great deal of recent cliometric economic history writing with an impassioned plea for the revival of the European social-science tradition. The theme, simply stated, is the erroneous and irrelevant character of most economic history writing. It is a book that needed to be written.”–Harold James, Princeton University

“I am struck by the immense and impressive range of The Poverty of Clio. Few works in historiography can muster the scope and learning of this book, which will make it attractive not just to economic historians but to sociologists and historians of culture more generally.”–Frank Trentmann, author of Free Trade Nation

Francesco Boldizzoni is research fellow in economic history at the University of Bari and a life member of Clare Hall, University of Cambridge. He is the author of Means and Ends: The Idea of Capital in the West, 1500-1970.

THE POVERTY OF CLIO

RESURRECTING ECONOMIC HISTORYBy Francesco Boldizzoni

PRINCETON UNIVERSITY PRESS

Copyright © 2011 Princeton University Press
All right reserved.
ISBN: 978-0-691-14400-9

Contents

Preface…………………………………………………………………ixChapter 1 Truth on the Cross Science and Ideology…………………………..1Chapter 2 Economics with a Human Face?……………………………………..18Chapter 3 The Fanciful World of Clio……………………………………….54Chapter 4 The World We Have Lost Microeconomic History………………………87Chapter 5 The World We Have Lost Macroeconomic Perspectives………………….120Chapter 6 Building on the Past The Creative Power of History…………………138References………………………………………………………………173Index…………………………………………………………………..209

Chapter One

TRUTH ON THE CROSS

Science and Ideology

In Greek mythology, Clio is the muse of both history and epic poetry. The verb kleio means to celebrate or extol, while historia means inquiry or investigation. In Herodotus, the combination of fabulous elements and concrete facts still reflects this ambiguity. Thucydides broke more decidedly with the traditional view by delivering a style of investigation that we today would call “positivistic,” even though he did not really consider himself as a historian but as a sort of political scientist.

Time in antiquity passed at a somewhat slow pace, so that half a millennium later the Syrian-born Lucian could refer to Thucydides as if he had been a contemporary. His pamphlet How to Write History is probably the first work on historical method to come out of the Greek cultural world. Lucian was reacting to the rather mediocre literature that had arisen in celebration of the victories of the Romans against the Parthians (A.D. 161–66). As the army of Lucius Verus gradually advanced in the Middle East, it found new adulators ready to manipulate the truth as it suited them. They produced accounts that were so improbable as to seem grotesque, and they even distorted the Greek language, cramming it with pointless Latinisms. Hence, it was necessary to reestablish the rules of Thucydides:

Here is then what the historian should be like: fearless, incorruptible, free, genuinely truth-loving, one who calls a fig a fig and a boat a boat, as that comic playwright used to say; someone who does not pass judgment motivated by hatred or withhold it out of compassion, deference, or shame. An impartial judge, well disposed to all, but never to the point of conceding to anyone more than his due, who when he writes has no fatherland, no city and no sovereign; one who does not calculate what will please this one or that, but reports what has happened. (How to Write History 41, my translation)

Lucian uses forceful adjectives and alludes to renunciation, the voluntary renunciation that is required of the historian as the price of objectivity. When he operates, the historian has to be like a foreigner (xenos) without a city (apolis) and without a sovereign (abasileutos). For modern scholars to adhere to these precepts means coming to terms with membership of a community and avoiding the often unconscious influence that it exerts on their way of thinking. It means shunning power (not only political power) and giving up the advantages that it offers to whoever submits to it. But Lucian also warns against following fashions and conforming to trends; otherwise historiography becomes an exercise in serial imitation.

The Roots of Economic History

Before considering how Clio comes into this book, we need to introduce the main character: economic history. As in all stories worthy of the name, one cannot guess the direction in which someone is heading without knowing where they started from. The tale of Little Red Riding Hood opens in the mother’s kitchen and finishes in the wolf’s stomach. The perils of the wood would be difficult to imagine without the prior experience of the reassuring peace of the village.

In the first place, economic history has not always existed. During the Renaissance, nobody would have found it of very great interest to deal with the economies of the past. When in the 1510s Machiavelli wrote his Discourses on Livy, his concerns were the structure of republics, warfare, and leadership. Machiavelli would enter his study dressed in “regal and courtly” attire, as he told Vettori, to converse with the ancients, the great statesmen now departed, and they could respond to him precisely because they knew how to write. He would ask them about “the reason for their actions” (1513, p. 142) and not about what they produced or how their fellow citizens made a living.

Two centuries later, Edward Gibbon (1776–89) did not find it beneath him to deal with manners and customs as long as it could be useful for understanding the political collapse of an empire. Nowadays it would be considered as coming within the domain of social and cultural history. Yet the economic past started to become a matter for investigation precisely at that time. Gibbon’s contemporaries sensed that the economy was changing irremediably and that new values were coming to the fore. Even when they are not historical works, historical references abound in the writings of Smith, Malthus, or Marx. One of the first cases in which the elevated term “history” is applied to a subject that is anything but elevated is the History of the Cotton Manufacture written by Edward Baines (1835), a forerunner of David Landes’s triumphalistic account Unbound Prometheus (1969)!

However, only when economics became a deductive science, and one prone to universalize particular, culture-specific patterns of behavior, did economic history acquire its own identity. This transition was completed in the final quarter of the nineteenth century and was not entirely unexpected.

As early as the 1840s, the German economist Friedrich List, who was heir to the cameralist tradition, had targeted the theories of the British classical economists. Because he also questioned their policy views, his attack had obvious practical implications. List criticized the “prevailing theory” for the way it hastily generalized conclusions drawn from observing the first industrial nation and mistaking them for laws of nature. “Not considering historical facts, except so far as they respond to its particular tendencies,” he maintained, “it knows not or disfigures the lessons of history which are opposed to its system” (1841, p. 65). Hence, Smith overlooked the importance of the nation as an economic actor, while Ricardo interpreted rent as the price of the natural fertility of land and based his whole political economy on this principle:

An excursion into Canada would have afforded him proofs, in every valley and on every hill, that his theory was built upon sand. But having only England in view, he falls into the error of supposing that the English fields and meadows, the apparent natural fertility of which produces such large returns in the shape of rent, have been always the same. (List 1841, p. 335)

Richard Jones (1831), the Englishman who opposed Ricardo, had been motivated to investigate comparative economic systems by considerations of a similar tone.

But these were relatively minor sins. Despite the shortsightedness of their insular perspective and their inclination to overgeneralize, the classics in any case started from an analysis of social aspects: this involved in Smith’s case the separation of the public from the domestic sphere and in Ricardo’s a theory of the conflict between classes and groups. In the late nineteenth century, on the other hand, the unit of analysis adopted by marginalism was disembedded individuals who lived by maximizing their own gratification and monetary income. In the most extreme version of this approach, known today as neoclassical economics, one presumes the agents are aware of the rules of differential calculus and how to apply them to all the possible combinations of goods and production choices that exist. Marginalism spread to Britain, Austria, Switzerland, and the United States, while France and Italy were only mildly affected. Germany remained practically immune until World War II.

The great dispute on method, the Methodenstreit, broke out in the 1880s. On one side was Gustav Schmoller (1883), the leader of the German school, in whose view one could not formulate any economic theory that was not based on the historical analysis of society. On the other side was the Austrian Carl Menger (1884), who maintained that it was possible to know the principles of economic behavior of individuals a priori. Similarly in Britain, William Cunningham (1892) argued against Alfred Marshall, but the outcome of the controversy was less fortunate, one reason being that Marshall had embraced marginalism only very tentatively (Hodgson 2001, p. 107). Arnold Toynbee (1884) also devoted himself to the study of the “industrial revolution” (he actually popularized this expression) motivated by the wish to reject theoretical commonplaces such as the universal benefits of free trade.

Once it had entered through the back door into the pantheon of history, which Edward A. Freeman, a contemporary of Cunningham’s and Regius Professor at Oxford, used to define as “past politics” (Bentley 2005, p. 192), the study of the economic past made great advances after the 1920s. In this difficult conjuncture, the Great Crash, the instability of the interwar period, and increasingly complicated industrial relations made a deep impression on public opinion and reminded contemporaries of the need to look back into the past.

But as the “civic” significance of economic history made headway, it became more and more divorced from economics. Berlin ceased to be the intellectual heart of the Western world, and the model of historical-institutional economics that the Germans had exported to some extent everywhere soon lost ground. In the postwar period, John Maynard Keynes, the second antagonist of neoclassical theory was no longer. He had conceived economic knowledge as an art that was supposed to guide “practical men.” His intuition, with its far-reaching import, that disequilibrium was the rule in capitalist economies and equilibrium the exception, was ably neutralized in the classrooms of MIT, following a famous article by Hicks (1937).

Having abandoned the ambition of formulating grand theories based on empirical evidence, economic historians dedicated themselves entirely to the interpretation of the latter. “History for its own sake” might be the most suitable motto to describe this new phase. The change of direction certainly brought with it some positive aspects, because economic history was worthy of a professional body of devotees, but it also left open a latent conflict with the discipline it had separated itself from, namely economics.

The Crisis of Economic History

Today economic history is going through a deep identity crisis brought about by the development of a movement founded in the United States at the end of the 1950s and known as “new economic history” or “cliometrics.”

History is normally expected to improve our understanding of the past. It is probably agreed that what distinguishes good historical research is its capacity to throw light on the workings of societies that differ to varying degrees from our own. On the other hand, the (unconfessed) aim of cliometrics is not to increase our knowledge of the past. It is to create narratives of the past compatible with neoliberal economics, and often it is a highly ideological exercise to endorse specific worldviews, theories, and policy recommendations.

Until relatively recently, European economic historians tended to ignore this phenomenon, and starting a dispute with cliometricians was considered a waste of time, because, it was said, “they do not form part of the historical profession.” As long as these scholars were operating in the United States and dealing mainly with American history, they were no great menace. But nowadays this line is no longer tenable. Two decades ago one might have smiled at McCloskey’s claim that the new economic history had “won the West,” imposing a “Pax Cliometrica” (1987, p. 77), but in the 2010s the risk appears to be more real. In twenty years there has been a burgeoning of armies of American-trained PhDs on European soil, and even if they are still a minority, it is a very aggressive minority. Moreover the cliometricians use increasingly sophisticated tools of persuasion, and their works are sometimes taken to be reliable by historians who are specialized in other fields and who are not familiar enough with economics to be able to form an independent judgment. Cliometricians occupy a large share of the publishing market in the English-speaking world and enjoy great visibility. This “literary genre” now covers the history of all five continents, and its timeline stretches from antiquity to the present day.

But in the meantime dissatisfaction has been building up not only among historians but also among dissident economists. Writing from a neo-Schumpeterian perspective, Freeman and Louçã, for example, have called for “remarrying economics and history as an alternative strategy to that of cliometrics” (2001, p. 39). Their appeal for a “reasoned history” recalls that of Fritz Redlich, who was one of the first critics of the new economic history: “In my opinion,” he wrote, “the future belongs to both analytical qualitative and quantitative economic and social history” (1968, p. 96). At the time, “analytical” history meant problem-oriented history, an approach that was as much against narrative history as against cliometrics.

The problem is to define what the “alternative strategy” is today. There still seems to be general confusion about the nature of the “new institutionalism,” which Freeman and Louçã themselves see as a break with neoclassical economics. It is in fact an attempt at product differentiation with deference to the mainstream and is dictated solely by the requirements of academic politics. Its invention became indispensable the moment Douglass North realized that the application of neoclassical models to history was something “that quickly runs into diminishing returns and leaves the economist with the conviction that we are marginal if not dispensable to the profession” (1978, p. 78). He has recently acknowledged that in the 1970s “economists came to see economic history as a luxury rather than as adding a new dimension to economics…. The result was that the demand for economic historians decreased…. The new institutional economics inspired by Ronald Coase’s work was a consequence” (2008, p. 211).

What was needed was a formula that differed from neoclassical theory just enough not to become an identical copy or to contradict its basic principles; it also had to sound familiar to the dominant orthodoxy. The new institutionalists collected the accusations of unrealism that had tormented neoclassical theory since its beginnings and exploited them to their own advantage. They patiently subjected it to a patching-up operation and then presented themselves to mainstream economists as the ones who could save them from the attacks of historians, sociologists, anthropologists, and the like; and this way their chairs were kept safe.

Chapter 2 gives a detailed analysis of the new institutional paradigm and its strange alliance with rational choice theory. The most recent developments of American-style economic history are discussed in chapter 3. The second part of the book presents an alternative way of practicing economic history that developed mainly in Europe in the postwar period. Chapter 4 is dedicated to microeconomic history, while chapter 5 covers macroeconomic issues. The potentialities of these approaches are highlighted in the light of recent theoretical results in fields such as economic sociology and anthropology. Chapter 6 is a manifesto for the reconstruction of economic history and calls for a new pact between history and the social sciences in order to counter the way economists have abused the past.

The main point being made here is that we need a different paradigm of historical research that is not subject to economic theory but contributes toward renewing it. If theory is to be based on facts, it makes sense that history should correct theory and not vice versa. It is not a question of inventing this paradigm out of nothing but of learning from the lessons of certain innovative economic historians of the twentieth century. They suggest a third way between a narrative type of history and one reduced to applied social science.

It is important to avoid a possible misunderstanding from the outset. Given the target of my criticism, some may be tempted to think that this book wishes to offer up a “progressive” reading to set against a “neoliberal” reading. The stereotype of the Rive Gauche intellectual looking down on economic activity and conceiving the market as grubby and immoral is so deeply rooted that some have even felt the need to write books to defend “bourgeois virtues” (McCloskey 2006). I am convinced that ideology of any type taints the work of the historian, and in this book a special effort has been made to avoid it. The unnatural effort at alienation that Lucian demanded would certainly be hard for anyone, but constantly striving toward such an objective is what distinguishes honest historical research (Cipolla 1991, p. 66). Thus, if the neoliberal drifts are the subject of this book, this is only because they reflect recent developments in the discipline; the same thing could have been said about certain forms of Marxism, if that did not now belong to another phase.

(Continues…)

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