New Perspectives on the Late Victorian Economy: Essays in Quantitative Economic History, 1860-1914.

Quantitative economic history, or cliometrics, remains one of the most vibrant and productive fields of economics, and British cliometricians have been particularly prolific in recent years. These scholars have addressed issues vital to the understanding of British economic developments (leading first to great success and, more recently, to relative decline), and the work generally has been of first-rate quality. The papers in this edited volume continue the tradition. The volume brings together papers delivered at two Quantitative Economic History conferences supported by the Economic and Social Research Council. The papers focus on the late Victorian and Edwardian economy, a time period during which Britain reached the height of its economic and political powers, but which, according to many commentators, also contained the seeds of later relative economic decline, made evident so tragically in the interwar period and still lingering today. Was British industry losing its competitive and technological edge during the period under discussion? Were the fruits of success spread too unevenly to be sustained? Did British monetary and banking policies fail to promote stable economic growth? These are some of the crucial questions addressed in the volume.

The first chapter contains an excellent introductory essay by the editor. Foreman-Peck not only summarizes the findings of the papers, but also puts the work into a larger context, including discussions of overall economic growth, demography, and foreign trade during the period. The papers that follow are organized into three topical sections: technology and industrial organization, distribution, and the monetary system and monetary policy.

The first section contains four papers. John Cantwell uses patent data to construct indexes of "revealed technological advantage" by sector, which he then uses to examine British industrial potential across industries, between countries, and over time. He argues that invention is fundamentally a cumulative process and that Britain found itself "locked in" to industries using more mature technologies, which explains in part disappointing productivity performance. James Foreman-Peck examines again the issue of the social saving of railways. Although a total factor productivity index reveals that efficiency growth in British railways was only half that of U.S. railways, the calculated static social savings were large by the end of the nineteenth century, and when the likely indirect dynamic effects are considered, the impact of railways probably was substantial. Bob Millward uses the concept of "contestable markets" to examine the emergence of gas and water monopolies in the nineteenth century. When other methods of regulation failed, authorities turned to municipalization to exert control. Whether or not this was the best solution remains a heated political and economic issue. Stephen Nicholas tests the managerial failure hypothesis by estimating a model of British multinational investment. He found that before 1914 there was little evidence that British multinationals invested in "soft" Empire markets at the expense of the rest of the world and concludes that the case against British multinationals has not been proved.

The second section contains three papers on distribution. Charles Feinstein continues his painstaking efforts to refine and improve the data used to evaluate the period. Here he offers a new estimate of the cost of living from 1870-1914. Feinstein revises Bowley's index by adjusting expenditure weights and using a wider array of prices. The new index falls less severely than Bowley's from the mid 1870s to the mid 1890s and rises slightly less from the mid 90's to 1914. When combined with a nominal wage index, the revision converts a slight fall in employment real income during the Edwardian period into a slight rise and is more consistent with output indexes. Humphrey Southall uses Poor Law statistics to examine the spatial distribution of economic distress during the period, especially in rural versus urban areas. This supplements, and generally is consistent with, his previous work using trade union unemployment statistics. John Treble uses sophisticated models of collective bargaining and game theory to examine the operation of conciliation boards in the coal industry, the dominant form of bargaining in this crucial industry from the 1890s to 1914. He makes a persuasive argument that these boards were efficient bargaining institutions.

The final section contains three papers on money and monetary institutions. Forrest Capie, Terence Mills, and Geoffrey Wood construct a four equation macroeconomic model of changes in output, the interest rate, the price level, and money from 1870-1913. They focus on the impact of changes in the quantity of money on aggregate economic variables with special interest in explaining the Gibson paradox (the positive association between the nominal interest rate and the level of prices). They conclude that money influenced prices (rejecting the notion that changing agricultural prices were the key influence) and confirm Irving Fisher's explanation for the Gibson paradox. Paul Turner seeks to identify instruments that were close money substitutes in the late nineteenth century, an issue affecting the ability of monetary policy to control the economy. He concludes that commercial bills were not close substitutes for money but that non-bank financial intermediary deposits were. This leaves open the possibility that monetary policy could be frustrated during the period, but this notion is not subjected to a direct test. Finally, Tessa Ogden examines Bank of England discount policy. Although the Bank made no formal policy announcements during the period 1870-1914 (and Bank records are devoid of policy discussions), Ogden attempts to deduce policy by identifying periods of heavy discounting (using residuals from a regression). She identifies far more points of tension than can be linked with known financial crises. Her model also incorporates a dummy variable identifying "strong" Governors of the Bank. Since the coefficient is significant, she argues that the personality of the Governor had an impact on Bank policy. As Foreman-Peck argues in his introduction, "the Victorian economy continues to exercise powerful influences, both open and concealed, over economic policy and attitudes, as well as through the legacy of economic structure". This volume adds to our understanding of those influences.

William J. Hausman College of William & Mary