Political Arithmetic; Simon Kuznets and the Empirical Tradition in Economics

by Robert William Fogel

National Bureau of Economic Research Series on Long-Term Factors in Economic Development
More info at:
http://papers.nber.org/books/foge12-1
http://press.uchicago.edu/ucp/books/b...

Genres: Economics

168 pages, Hardcover

First published January 1, 2013

Reviews

[Nils · Rating 3 out of 5]

A brief intellectual biography of Nobel prize winning economist Simon Kuznets, who essentially invented national income estimates and the quantitative study of the history of economic growth and income distributions, by his most well known student, fellow Nobelist, Robert Fogel.

It is best on the rise of the National Bureau of Economic Research in the 1920s, emphasizing the crucial role of the first world war in creating awareness among US government officials of the need for much better data about the economy, in order to be able to marshall that economy for the purposes of total war. The leadership of the NBER came from Irving Fisher and Wesley Clair Mitchell, who was at pains to insist that as an institution it would have no opinion on social issues and would be considered entirely objective and apolitical. The book emphasizes the role of philanthropies (the Rockefeller Foundation especially) in funding the NBER.

This increasing use of economic data naturally led to the empowerment of those with the technical training to interpret and manipulate the data, e.g. disciplinary economists. In this account, no one did more to create the solid, archival based longitudinal data sets upon which economics is based, and therefore the prestige of economists is based, than Simon Kuznets. As an assembler of data sets, Kuznets was also far more sensitive to the limitations of these data, and of the importance of hedging any conclusions derived from them — a prudence not always heeded by later consumers of the data.

Fogel gives particular prominence to the role of Herbert Hoover in driving the use of government statistics, particularly starting with his role as the head of the food administration During World War I, which along with the price fixing committee, represented the first efforts by the government to really control the US economy in detail. As commerce secretary during the 1920s, Hoover would continue these efforts to use data to drive policy.

This leads to a contradiction between the claims about periodization and the claims about Kuznets’s role. In the effort to rehabilitate Herbert Hoover from his posthumous ignominy, the book emphasizes the 1920s as the growth period in the use of government data and the expertise of economists. Quite clearly however it was only under FDR that academics entered the inner circle of government and the technical use of economic data really took off. Likewise, if you make Kuznets the prime mover, that also must date the key period to the 1930s, when Kuznets begins to publish, rather than the 1920s.

The book also gives short shrift to the crucial role of economists in the war mobilization of WWII, as well as the planning and assessment of the strategic bombing campaign, and completely bypasses how these successes led to the establishment of the Council of Economic Advisors in 1946, an organization with which Kuznets was not affiliated. This was the moment when economics really begins its ascent to hegemony within the social sciences.

There are also a few other periodization howlers in here, as when the text claims that the Committee on Economic Growth at SSRC “was born from President John F Kennedy’s concern over the amount of gold at the United States was sending overseas to countries that were experiencing tremendous growth over the 1950s.” This is bizarre, given that the CEG was established in 1949, when Jack was a junior congressman and his eventual presidency was still only a twinkle in Daddy Joe’s eye.

[Jeffrey Sylvester · Rating 3 out of 5]

Fogel, Guglielmo and Grotte’s Political Arithmetic provides a synopsis of how economic and quantitative analysis grew in importance within the public policymaking circles of Western governments during the early 20th century. Much of this book also includes a focus on the academic contributions made by the economist Simon Kuznets in this regard.

On the one hand, Kuznet stressed the need for verifiable empirical-based research but also maintained a need for critically and historically contextualizing that research in order to more meaningfully develop or confirm the general theories used to inform public policymaking. Kuznet also challenged the worth academics placed on critiquing the a priori assumptions of each other when designing studies as opposed to focusing on whether the methods used were congruent with the methodology chosen. Assuming that process sound, Kuznet believed critics should instead focus on examining the results of the study to determine whether the findings are of any practical use given the a priori assumptions made (the limitations). In other words, Kuznet believed that a sound methodology and associate methods would enhance the ability of other researchers to replicate and compare studies, and thereby refine any inductive findings or deductive rules that emerged.

With respect to the historical context provided, Political Arithmetic begins by explaining the shocking lack of quantitative information available to Western governments prior to World War I. This lacuna made it difficult for governments to gauge domestic and enemy productivity levels and to decide how to distribute scarce resources to enhance efficiencies. However, after the war the level of quantitative data available exploded enabling governments and the private sector to more effectively gauge the correlation between inputs and outputs in political and economic systems. During WWI the resulting efficiencies were a saving grace but after the war even more so for both capital and labour.

Following the Great War and Depression, big business tycoons began to develop philanthropic social science research organizations to better understand economic welfare. For example, the research that emerged brought to light the resource distribution imbalance that existed between upper and lower classes which led to legislative victories for labour including contract unionism and the development of the public institutions designed to protect it. On the business side, researchers sought to establish the factors responsible for the accelerated growth and recessionary effects of business cycle swings. The findings that resulted eventually supported the conclusion that government intervention during recessions was necessary to shorten and alleviate the ill effects and to stabilize market democracies.

By the end of this book several conclusions were drawn regarding the factors generally responsible for growth and contractions, the seeds of which were sown by Kuznet and his academic contemporaries. But beyond those lesser known contributions Kuznet is best known for developing national accounting policies and criteria better known as Gross Domestic Product (GDP), GNP and the various human welfare indexes used by the United Nations and similar organizations.

One drawback of this book is that it is quite dry. And this doesn’t stem from the subject matter but rather the manner in which it is written. The authors also seem to subscribe to “trickle-down” laissez-faire economics, which is considered somewhat passé, and is arguably what led to the 2008 global recession. However, given the subject matter, the extent to which that matters is debateable.

3 stars for Fogel and company!

[Liam · Rating 3 out of 5]

"A century ago, the typical household head had to labor 1,800 hours to acquire the family's annual food supply. But, by the end of the twentieth century, that task required just 260 hours. ... Food, clothing, and shelter, which used to account for three-quarters of consumption, now account for just 12 percent. On the other hand, leisure has risen from 18 percent of consumption to 67 percent. There has also been a vast increase in expenditures for health care and for education." (5)

"The 'Wisconsin Idea,' as LaFollette called it, for a partnership between academic and political reformers was duplicated in other states." (Wisconsin Idea terminology, 16)

"The SSRC was founded in 1923, with representatives from the American Political Science Association, the AEA, the ASA, and the American Sociological Society to encourage coordination and collaboration among the social sciences. ... It s goal 'was a social science capable of the kind of analysis "so common in the natural sciences where the same subject is attacked by a variety of research workers simultaneously from different angles, where the same question is subjected to repeated investigations, and where comparative studies are the order of the day."'" (quoting Alchon 1985 114-16, 46)

"By epochal innovations, Kuznets meant not only major advances in technology that provided the essential basis for rapid economic growth but also changes in society and human institutions that are conducive to the exploitation of the new technology." (71)

"Kuznets feared that such formalization of theory was becoming increasingly sterile, partly as the result of overinvestment in it. ... To avoid sterility, hypothetico-deductive modeling had to be intimately connected with, and regularly infused by, findings from empirical, experimental, and clinical research, as they normally were in the natural sciences." (105)