Economics

The Elite Stay Elite

The Son Also Rises: Surnames and the History of Social Mobility
Gregory Clark, 2014


I just finished reading a book that claims social mobility in modern America is basically the same as in modern Sweden, and that both are in fact just about the same as in sixteenth-century England. Everywhere, Gregory Clark says, persistence of social status is much higher than we normally suppose. Where most sociologists estimate persistence in the range of 40%, Clark puts it between 75% and 80%. And as mentioned, he says it has never really changed throughout history and that it's the same pretty much everywhere. As a result, the descendants of the victorious Normans  of 1066 are still disproportionately represented in the British Parliament, and the famous but tiny Pepys family has sent many more than its share of young men to Oxford and Cambridge.
 
First, I've gotta say that it doesn't really come as a surprise to me that the elite stay elite or that it can take 20 or 30 generations for a family at the top of the heap to "revert to the mean." Although Clark says it's statistically improbable for the Pepys clan to have continued to send more than its share to the best British schools, I don't think it's socially improbable at all. In fact, it's the outcome I expected.
 
The interesting thing about this book, though, is that Clark posits (without ever really coming right out and saying it) a genetic component to elite status and persistence. Rather than saying that the Pepys boys were accorded special privileges at elite British schools or that the sons and grandsons of hereditary MPs were more likely to be elected to Parliament, Clark says there's something called underlying social competence, and that it is inherited.
 
Hang on, what? Clark says that elite status is in the genes? Well, not exactly. What he says is that there's an unknown cluster of characteristics that, taken together, make a person socially "competent," and that these characteristics seem to be inherited. Although Clark's equation has a term built in for dumb luck, he thinks the randomness is much less than we normally believe it to be. If you're looking for a marriage partner, Clark says, don't trust the status of the individual alone. It might be luck. Look at the status of the whole family, and you'll get an indication of your potential partner's "competence" genes.
 
I haven't been able to find any reviews of this idea by historians (and just a couple by economists), possibly because the book was only published in 2014 and the glaciers of academic reviewing haven't ground it down yet. However, Richard V. Reeves of the Brookings Institution wrote a three-part take-down called "
The Good, the Bad, and the Ugly" in March 2014. Reeves, who also recently wrote a long essay supporting the rags-to-riches perspective of Horatio Alger, says Clark's perspective is racist. Or at least genetically deterministic, which he suggests is basically the same thing. Clark responded that he wasn't being racist, some of the elite groups he tracks in the book are in fact of African descent. But Reeves has a point. "Racism is not History," he says. Yeah, the guy from Brookings is saying the effects of slavery and the rest of America's racist history are still being felt. Wow.
 
Clark's main point isn't really about race, though. He uses adoption and twin studies to suggest that there's an element to life success that isn't explainable by nurture. Even if that effect isn't as complete as Clark implies (I think he brushes by some of the caveats and exceptions in the studies he cites a little to quickly), it's a challenging idea.
 
The problem is, there's not enough to grab onto. The 11 herbs and spices remain secret -- we never find out what mental, emotional, physical, or other characteristics make a person "socially competent." And it's hard to believe that the factors that made people successful in the sixteenth century are all the same as those that make people successful today. Nor is there any real explanation of how particular families got to the top of the heap in the first place. The mobility equation takes center stage, and we don't really get to look under the hood at the social factors that could have led to success and then sustained it. This is unfortunate, because since Clark hasn't really identified the machine working behind the scenes, it's entirely possible that the effects he's measuring to derive the equation are in fact social rather than biological.
 
When Clark says the social mobility in Sweden is as low as in America or early-modern England, he's not saying that inequality is the same. The penalty of being at the bottom in a welfare society like Sweden is obviously much lower than it was in England or is in the US (I wonder if the lesser downside of low social mobility in Sweden doesn't have something to do with it continuing?). Clark does suggest that in a society like the US where Reeves's Horatio Alger dream is pretty much an illusion, we ought to think harder about our safety net.
 
Clark's numbers suggest that a person's status at birth can predict a lot about their life chances. That's a slap in the face to the American Dream. But let's think about it. If he's right at all -- even if we have no idea why he's right and disagree with the theory he advances to explain it -- then we really ought to be doing more to make it less painful to be average or poor in America.

The Growth Economy Begins

Walter LaFeber
The New Empire: An Interpretation of American Expansion, 1860-1898
1963


It’s interesting, given Walter LaFeber’s reputation as a critic of American Empire, that he refaces this book by saying “I have been profoundly impressed with the statesmen of these decades [the last of the 19th century]…I found both the policymakers and the businessmen of this era to be responsible, conscientious men who accepted the economic and social realities of their day, understood domestic and foreign problems, debated issues vigorously, and especially were unafraid to strike out on new and uncharted paths in order to create what they sincerely hoped would be a better nation and a better world” (ix). This sincere appreciation on LaFeber’s part for the people whose decisions he will be criticizing so thoroughly, suggests his story is much more subtle than the standard good guys vs. bad guys approach taken in many texts (and unfortunately, often by critics of the establishment).

Similarly, LaFeber begins his first chapter by debunking the myth of antebellum isolation. “Between 1850 and 1873,” he says, “despite an almost nonexistent export trade during the Civil War, exports averaged $274,000,000 annually; the yearly average during the 1838-1849 period had been only $116,000,000” (1-2). So while it is true, LaFeber admits, that “until the 1890’s the vast Atlantic sheltered America from many European problems,” the fact that we were not drawn into European wars does not mean that many Americans (especially businessmen and financiers) were not intimately connected with the continent. The histories of businesses such as J.P. Morgan's Anglo-American financial empire are ample proof that American businessmen considered themselves players on the Atlantic stage. Even my western New York Peppermint King, Hiram Hotchkiss, made his name by taking his peppermint oil to London's Crystal Palace in 1851 and getting a first prize medallion with Queen Victoria and Prince Albert's images on it! These long-standing connections had important implications in politics and diplomacy, as the twentieth century began.

1851PrizeMedalLabel copy

LaFeber says William Henry Seward “deserves to be remembered as the greatest Secretary of State in American history after his beloved Adams. This is so partially because of his astute diplomacy, which kept European powers out of the Civil War, but also because his vision of empire dominated American policy for the next century” (25). “Grant, Hamilton Fish, William M. Evarts, James G. Blaine, Frederick T. Frelinghuysen, and Thomas F. Bayard assume secondary roles,” LaFeber says (24). He notes also that Seward suggested “Mexico City was an excellent site for the future capital of the American empire” (28). This is interesting, not only because it implies some type of U.S. annexation of Mexico, but because Mexico City has
nearly always been the largest city in the Americas. It was in 1490, and again in 1600, 1800, and 2000. Seward also predicted that “Russia and the United States may remain good friends until, each having made a circuit of half the globe in opposite directions, they meet and greet each other in the region where civilization first began” (30).

LaFeber’s point is that American empire was seen by nearly every influential contemporary as an inevitable result of the economic changes of the late nineteenth century. LaFeber says there was very little pressure to “occupy every piece of available land in the Pacific,” but I’d add there was clearly pressure to
control many of those islands and their resources, as shown by the Guano Islands Act of 1856. There was also a general understanding that “Latin-American and Asian markets were vitally important to the expansive American industrial complex” (416). The machine, late-nineteenth century policy-makers seem to have realized, needed to be constantly fed with both raw materials and new markets. The growth economy had begun.

How Historians and Economists differ

jer_3d
Martin Bruegel
“The Social Relations of Farming in the Early American Republic: A Microhistorical Approach”
Naomi R. Lamoreaux
“Rethinking Microhistory: A Comment”
Journal of the Early Republic 26, Winter 2006


I’ve been reviewing mostly books on this page, which I think is most appropriate since relatively few people have the types of academic access that makes journal articles easy to find and read. But there’s no denying that academics still rely on articles to break new stories and (possibly more interesting) to fight over evidence and interpretation. One of the big battles in Early American History that impacts Environmental History and that has been fought primarily in journals is the question of the “Market Transition,” which at its core may really be a fight over the meaning and importance of Capitalism in American History.

In the first of a recent pair of articles that takes the debate on the market transition to a wider and much more interesting place, Martin Bruegel argues that the economic determinism represented by most business histories can and should be counteracted by a very detailed, microhistorical approach to the tasks and relationships necessary to running an early nineteenth-century farm. Bruegel criticizes histories that simply reduce “the scale of observation to illustrate the local impact of larger processes,” suggesting that they simply “normalize” peculiarities and thus validate the “general hypothesis” held prior to observation (525). In contrast, he says, microhistory “deepens and enriches the analysis of economic transactions” by providing “a more circumscribed, grass-roots focus [that] suggests…the malleability of conventions” (552).

Economic Historian Naomi Lamoreaux responds by suggesting that attempts like Bruegel’s verge dangerously on “antiquarianism” (a term she uses frequently, 555). Speaking for economists, Lamoreaux says she does “not see why making an analysis more complicated should necessarily be considered a good thing” (556). While at first glance, Lamoreaux’s suggestion that historians writing narratives are doing the same thing as economists building models might strike historians as annoying and just, intuitively,
wrong; I think it’s incumbent on historians to think about this and articulate the differences.

Lamoreaux suggests that in order to lead to new knowledge, acts of “complication” must not only show us how the previous “simplification” failed to account for something both real and
important, but they must then arrive at a new re-simplification that incorporates this new insight (557-61). Lamoreaux deploys Paul David’s elaboration of Robert Solow’s famous growth model to illustrate her point, in a way that I think illustrates both the validity of her point, and a fundamental gap between the interests of economists and those of historians. Her point is that economists have recently begun to understand that “Many economic phenomena are…’path dependent’ in that they are conditional on the particular sequence in which events unfolded” (558). This is important, because in addition to what might seem like a belated acknowledgement by economists of contingency and the Second Law of Thermodynamics, it means in Lamoreaux’s words, “that contingency matters—that history matters” (557-8). And maybe it means that economists realize there’s a difference between models and the way things actually work out in the real world. That’s good news for historians who want to work with economists, but Lamoreaux’s argument also highlights the main difference between the two fields.

“The words
exogenous and endogenous are economic jargon,” Lamoreaux says, “but they capture an essential feature of all narratives. There is always an inside and outside to a story; there is always something external to the dynamics of a story that sets its events in motion” (558). This may or may not be true, but I suspect it is nowhere near as relevant to the historian as it seems to be to the economist. Lamoreaux argues that the two important elements of any story are the “equilibrium growth path” and the “external shocks” that can alter it. Shocks are usually big events, occasionally big people. “They are unlikely to be induced by the actions of people who are relatively powerless. If that is the case, however, what is the role for microhistory? What is the role for history written ‘on the ground’?” (559)

I think the answer is obvious to historians. But again, I think we have to spell it out. So here’s my answer, as it occurs to me today at least:

History can’t afford to, and most historians couldn’t bear to, reduce the past to a series of equilibrium growth paths and exogenous shocks. We’ve been in that trap before. The path dependency and contingency we see have infinitely more variables than those sought (and therefore usually found) by economists. Historians should take college-level statistics and econometrics courses, so they can understand the way economic models are constructed. No matter how much they strive to be empirically descriptive rather than normative, the fact that they put the equation at the center means that the assumptions, caveats, exceptions are all pushed to the margins. All of Environmental History, viewed this way, is basically an exploration of things economists have regularly dismissed as “externalities.”

And then there’s temperament. The economist wants to simplify: wants to find rules that can be projected into the future. To predict. Most historians I know would prefer to complicate a picture than to “clean it up.” Sometimes this introduces trivialities—but from whose perspective? Is it fair to say that everybody who fails to be big enough to be an “external shock” is irrelevant? Irrelevant to whom? Most historians, I think, are not interested in returning to a whiggish world where only elite white men have agency. In the end, I think it comes down to two things. Epistemology and markets. What do you think is important in the nature of reality? Waves, or particles? And, who do you think you’re working for?

Hornborg's Power of the Machine

51-mrkgrpvl-_sl250_

The Power of the Machine: Global Inequalities of Economy, Technology, and Environment
Alf Hornborg, 2001

“Like all power structures,” Hornborg begins, “the machine will continue to reign only as long as it is not unmasked as a species of power.”  If only it was so easy.  We may realize that the emperor is naked, and he may be embarrassed. But that doesn’t stop him from being the emperor.

This isn't Environmental History, despite the title. It's more a cross between economics and philosophy. And the argument is not backed up by any historical claims or evidence, it's completely theoretical. But Hornborg went on to write and collaborate on books that do call themselves EnvHist, so I thought I'd look at his argument. Turns out, Hornborg’s analysis is built on two big ideas. The first is his definition of power as “a social relation built on an asymmetrical distribution of resources and risks” (1). When I read this, the image that came to my mind was Beowulf. Risks can either be taken or imposed. When you take a risk, you accumulate honor and become a hero. When you impose a risk on someone else, you accumulate power.

The second is the idea that beyond the cultural construction or idea of “the machine,” there are
actual machines. And Hornborg says “the actual machine contradicts our everyday image of it.” Hornborg believes “the foundation of machine technology is not primarily know-how but unequal exchange in the world system, which generates an increasing, global polarization of wealth and impoverishment” (2). We believe machines embody progress and an escape from Malthusian disaster. But they don't feed themselves: “We do not recognize that what ultimately keep our machines running are global terms of trade. The power of the machine is not of the machine, but of the asymmetric structures of exchange of which it is an expression” (3).

The way machines concentrate resources from the periphery into the center while seeming to be making something out of nothing, is by keeping our attention firmly focused on the spinning gears and flashing lights in that center. To prove his point, Hornborg cites the Second Law of Thermodynamics and Ilya Prigogine’s elaboration of it in his theory of Dissipative Structures. Increases in order, which Hornborg calls negative entropy or negentropy, are only possible locally, and are fueled by energy  taken out of the wider environment. “Any local accretion of order,” Hornborg says, “can occur only at the expense of the total sum of order in the universe” (123). In the case of biomass, the energy to create this order is taken from sunlight by photosynthesis. This isn’t a completely efficient process, but it hardly matters on a human scale (so far). Where the entropy law becomes really important, though, is in the creation of what Hornborg calls “technomass” out of non-renewable resources. This is not only a zero-sum game, Hornborg says, but it has distributional implications that are “systematically concealed from view by the hegemonic, economic vocabulary” (3).

“Industrial technology,” Hornborg says, “depends for its existence on not being accessible to everyone.” Industry presupposes cheap energy and “raw material” inputs and high-value outputs. Entropy insures that there isn’t enough to go around. “The idea of distributing [technology] evenly among all the peoples of the world would be as contradictory as trying to keep a beef cow alive while restoring its molecules to all the tufts of grass from which it has sprung” (125).

What are the historical implications of this bleak argument? Well for one thing, once machines and the exchange relationships they represent “assumed the appearance of natural law…the delegation of work from human bodies to machines introduced historically new possibilities for maintaining a discrepancy between exchange value and productive potential, which in other words means encouraging new strategies for underpayment and accumulation” (13). Why? Because while it is relatively easy to recognize the basic justice that an individual owns his own work, it’s harder to say who should own the work of the machines built with (cheap) resources and (cheap) labor bought far from the high-priced central markets.

This was the thing that Marx missed, either because it was harder to see in his time, or because (as Hornborg suggests) he “fetishized” machines and expected them to solve the historic problem of the proletariat (there’s a whole chapter redefining Marx’s theory of fetishism and applying it, but I'll save that for another time). At some point, Hornborg says (I'd say pretty early on), global growth became primarily based on “
underpayment for resources, including raw materials and other forms of energy than labor.” Hornborg replaces Marx’s labor exploitation with resource exploitation as the central factor in capitalist accumulation. This change is a great bridge from a traditional Marxist critique of capitalism, to a “green” critique. Money values may increase and the illusion of global economic growth may temporarily hide the zero-sum nature of the game, but in the long run “what locally appears as an expansion of resources” turns out to be “an asymmetric social transfer implying a [hidden] loss of resources elsewhere” (59).

Another implication is that, historically and “still today, industrial capitalism is very far from the universal condition of humankind, but rather a privileged activity, the existence of which would be unthinkable without various other modes of transferring…resources from peripheral sectors to centers” (60). This should impact discussions of the “market transition” in history just as it affects our understanding of contemporary economic development.

The other major implication, for me, is that locality is key. In nature, systems tend to regulate themselves. “As long as a unit of biomass is directly dependent on its local niche for survival, there will tend to be constraints on overexploitation and a long-term (if oscillating) balance. Industrial growth, however, entails a
supra-local appropriation of negentropy” (123). The concept of mobile, impersonal capital breaks this local ecology, and creates what Hornborg calls “a recursive (positive feedback) relationship between some kind of technological infrastructure and some kind of symbolic capacity to make claims on other people’s resources” (61). When capital can begin to be accumulated far from its source, we’re on our way to a world where “the 225 richest individuals in the world own assets equal to the purchasing power of the 47 poorest percent of the planet’s population.”

But one could also respond to this by saying Hornborg takes the thermodynamic argument too far. It's a compelling metaphor, but it needs some measurement attached to it. Sure, all order is temporary and a battle against entropy. But we have a more benign name for that than the ones Hornborg uses. We call that life.