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Second Thoughts: Myths and Morals of U.S. Economic History.

This collection of twenty-four essays by a variety of authors is aimed, according to its editor, at debunking commonly accepted wisdom about our economic past and policies. The vehicle is a "historical economics," said to date from 1957, that is not anti-economics but offers "the humanism of history without sacrificing the real gains of economic science" - but, indeed, often looks like the selective application of neoclassical economic reasoning, which is itself selective.

The essays, divided into six groups, are wide-ranging. Those on international relations and foreign affairs challenge ideas on Third World development, immigration, and the relative costliness of imperialism and of military mobilization. The last two illustrate a frequent problem: the analyst's substituting his or her preferences and conceptions for those of actual economic actors and processes - to wit, largely excluding the (nonmaterial) considerations that have led to empire building and military mobilization (though saying so does not mean that I would accept their rationales).

The second group, on workers and employment, deals with worker compensation and workplace safety, agricultural policy, and displaced workers. The third group, on women and minorities, takes positions on black economic progress and the Equal Rights Amendment. The fourth group, on government and the economy, examines beliefs about the gold standard, the trade deficit, the Great Depression, the income tax, government land Homestead Act give-aways, and "big government." The essay on the gold standard, by Barry Eichengreen, and that on big government, by Jonathan Hughes, conflict with the antigovernment, noninterventionist tone of many of the other essays. The former emphasizes that the operation of the gold standard, so far from being automatic, "required painstaking management by central banks," and the latter that the American people wanted, not noninterventionism, but an activist government, perhaps especially for redistributive purposes.

The fifth group, on regulation, deregulation, and reregulation, examines banking, price controls, and the Securities and Exchange Commission. The final group, on technology and competitiveness, examines efforts to monopolize, telecommunications policy, Teapot Dome, technology policy, competitiveness, and Big Science in relation to economic development. The stories told in these essays are often insightful. But they are by no means conclusive, either as interpretation or as policy analysis. Hence the general themes advanced by Donald McCloskey in his introduction, concerning, for example, unintended consequences and the inability to predict, and his view that "History is the best path to wise policy," are pregnant but overdrawn.

All of the stories could be told quite differently with different premises and conceptions of the world. They all deal with problems, but problems can be variously identified, and their solutions yield both advantages and disadvantages. Depending on what problem definition and which plus or minus one emphasizes as the basis of evaluation and judgment, one will tell a different story. Implicit in most if not all of these stories, in other words, is some benefit-cost analysis, in which individual authors identify and weight benefits and costs quite selectively. The reality of scarcity and therefore of opportunity costs means that there are always negatives which, when given selective privileged status, can be deemed to signify inefficiency or foolishness. Judgments as to what is "best" are always presumptive; so too such arguments that something as vast and complex as the Great Depression was due to the failure of government to manipulate confidence.

How far do McCloskey (and the several authors) think their conclusions go? The introduction, which is a paean to "historical economics," has the rhetorical tone of being the last word and offers historical economics as a philosopher's stone by which to determine correct policy. Although several essays say or imply quite the opposite, many perpetuate the false impression of a dichotomy between government and market, whereas the arguable truth of the matter - at least another story - is that markets are what they are largely because of government, and vice versa; that normative premises are inevitable (history is not enough, and in any ease history is subject to interpretation); that there is no unique policy solution, and so on.

As suggestive and constructive insight into a number of areas, even myth-debunking or questioning, this book is splendid; the world often is different, or differently interpretable, than ideology, wishful thinking, or politics would lead us to believe. As either a calculus of policy analysis or a moral exercise (see the subtitle), however, it is by no means conclusive.

Warren J. Samuels is professor of economics at Michigan State University. He is the author of numerous books and articles on the history of economic thought and on the economic role of government. A five-volume collection of his work was published in 1992. He is currently working on a study of the use of the concept of the invisible hand.
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Author:Samuels, Warren J.
Publication:Business History Review
Article Type:Book Review
Date:Jun 22, 1994
Words:784
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