Robert Fogel died a few days ago. He was a prominent figure in the academic economic history profession for five decades, virtually from the time he burst onto the scene with the publication of a polished-up version of his Johns Hopkins Ph.D. dissertation, Railroads and American Economic Growth, in 1964. This book was the most impressive accomplishment to date of the type of research espoused by those who participated in a research program known as the new economic history, econometric history, or cliometrics, which had begun to take shape in the late 1950s. The hallmark of this program was the systematic application of neoclassical economic theory and the methods of statistical inference in the study of economic history.

In his book, Fogel undertook to determine how important the railroads had been as contributors to U.S. economic growth by calculating what he called their “social saving,” essentially the amount by which GDP would have been diminished if they had not existed and Americans had been compelled to use the next best means of transporting goods—by horse-drawn wagons on the land and by canal boats on a national system of canals. His conclusion that the social saving had been equal to less than 3 percent of the national product in 1890 cast great doubt on the beliefs historians had previously held about the railroad’s great importance. Although many objections were raised subsequently to Fogel’s approach, his specification of the no-railroads counterfactual, and his data, the book became an instant cliometric classic.

Having entered the economic history profession at the very top, Fogel then proceeded, along with his Johns Hopkins classmate Stanley Engerman, to tackle the subject of slavery in the United States. This time the target was the widely accepted idea that prior to the War Between the States slavery had been on its economic last legs, and therefore had the war not led to slavery’s destruction, this labor system would have died a natural death before long. In 1974, Fogel and Engerman brought their findings together in Time on the Cross: The Economics of American Negro Slavery, a book that probably made a bigger splash than any economic history book ever published in the United States. The main claims this time were that slavery had been economically thriving on the eve of the war, slave-plantation productivity had exceeded the productivity of comparable free-labor production, slaves had received much better treatment than generally believed, and the system had yielded handsome returns to the slave owners, in most cases at least as great as the returns that feasible alternative investments would have yielded them. The reaction to these findings bordered on academic violence as historians and fellow economists rushed to challenge Fogel and Engerman’s methods, data, and conclusions, and to indict them for omissions and errors of various sorts.

Fogel, who believed that any research project that required less than a decade was scarcely worth undertaking, then spent much of the next decade and a half in accumulating additional evidence and carrying out additional analyses, often in collaboration with colleagues or graduate students, to support the initial findings. The fruits of these follow-up efforts appeared in a two-volume work, Without Consent or Contract: The Rise and Fall of American Slavery, published in 1989.

From the 1980s onward, however, Fogel devoted the lion’s share of his research efforts to work that relates more closely to demographic changes in history than to economic history, although he always maintained that critical interrelations existed, for example, between improvements in nutrition and increases in labor productivity. I did not follow closely the mass of research that emerged from this project, much of it by other researchers in the United States, Europe, and elsewhere. I found that I could stand only a certain number of calculated height-by-age profiles and that I could not always accept the conclusions drawn on the basis of such data. In any event, many publications by Fogel and other economic historians grew out of this project.

Fogel taught mainly at the University of Chicago and, for a few years (1975-81) at Harvard. In 1993, he and Douglass C. North shared the Nobel prize in economics for their work as leaders of the new economic history. Fogel’s work was also recognized by his election to prestigious scientific bodies and by the award of honorary degrees by leading universities in the United States and abroad. Yet he never rested on his laurels and remained engaged in research and writing until the end.

I got to know Bob in the early 1970s. At that time I was carrying out research on what had happened to the U.S. freedmen and their descendants during the half-century after the War Between the States, and I imagined that my book on this subject might be seen as a sequel to Fogel and Engerman’s Time on the Cross. In 1977, Cambridge University Press published my book titled Competition and Coercion. Although it failed to receive anything like the gigantic recognition that Fogel and Engerman’s blockbuster had received, Bob was gracious in his own reception. He rarely wrote book reviews, but he did review my book in 1978 for the Business History Review and gave it high marks. Shortly afterward, he invited me to Harvard to make a presentation at the economic history workshop (where I first met Robert Margo, then a graduate student and later a friend and coauthor of mine), and he and his wife Enid entertained me at their home for dinner with some colleagues from the Harvard Department of Economics. In the late 1970s Bob used to encourage me when I complained that my book had been largely neglected, assuring me that in fifty years, it would still stand up.

Bob never showed any indication that he understood Austrian economics or cared to understand it. He was a Chicago School economist, and he enjoyed immense professional success as such. At Chicago and Harvard he oversaw the training of many excellent graduate students, who are now among the leading economic historians in the world. He had no incentive to cut loose from his Chicago-School moorings, which in his mind were those of science, however much some of his work might now seem to me to be more scientistic than scientific. At a symposium to honor my dear friend Max Hartwell, held at the University of Virginia in 1991, Bob became publicly angry with me for challenging, on Austrian grounds, his computation of “slave incomes.” I left academic employment in 1994 and never had any personal contact with him afterward. He must have got over his pique eventually, however, because in 2011, when I was honored with the Alexis de Tocqueville Award, he sent a very gracious video to be shown at the event in which he recalled my early days in the profession and praised my contributions to it.

It is difficult to imagine what academic economic history might have looked like during the past half-century without Bob Fogel. With the possible exception of only Doug North as a comparably influential figure, he did more than anyone to set the profession’s standards, determine its leading topics and methods of research, and train its most highly regarded practitioners. Especially considering that he had become a Communist during his undergraduate years at Cornell and had worked afterward as a Party organizer for eight years before abandoning communism as an unscientific doctrine, one must say that he had a truly amazing career.

Cross-posted at The Beacon.

Since the earliest stage of human history (say, the time of Cain and Abel), human beings have been homicidal maniacs. Yet, for untold ages, something was missing, something with the capacity to raise their murderous mania to truly magnificent heights. Only very late in human history—perhaps 10,000 years ago or thereabouts—did the long-awaited breakthrough take place: men finally devised the state. By employing its powers of organization, command, violence, and plunder, rulers could finally bask in the glories of heretofore undreamed-of atrocities. No longer did men have to rest content with workaday violence and manslaughter. Now they could achieve vastly more monstrous enormities than the evilest village bully had been able to achieve or even to conceive of previously.

Now human beings could attain real glory for the first time. Now the rise of empires lay within the realm of realistic ambition. Killing by the ones, tens, or hundreds no longer defined the limits of human wrath, because now killing by the thousands and tens of thousands became possible, along with enough rape and pillage to satisfy all but the most twisted psychopath. No longer did a man have to settle for murdering his brother, his wife, or his fellows in the nearby village. Now even huge numbers of remote strangers became fair game. Indeed, thanks to the state’s amazing capabilities, a ruler might now conceive of utterly annihilating an entire society.

No wonder people have looked on the state with such reverence and lavished on it their highest adoration and deepest loyalty. Every thinking man must perceive that without the state, the constricting limits of a man’s malevolence put almost unbearable pressure on his natural desire to slaughter his fellow man and to destroy every speck of his enemy’s property that he cannot loot or hold hostage for the payment of tribute.

With the rise of the state, statesmen became possible—men whose vision embraced truly grand adventures and enterprises in exploitation, oppression, plunder, and mass mayhem. And from the greatest statesmen the greatest empires might spring. What sorrow we must feel as we contemplate the bleak counter-factual of history without the great Roman Empire: we cannot begin to imagine any stateless society able to put even a tenth as many severed heads on pikes along the roads or to nail even a tenth as many men on crosses to endure prolonged suffering before they gratefully expire. Likewise for the great Chinese, Persian, Mongol, Aztec, Inca, and other empires that fill the pages of history, giving vivid color to what otherwise would have been a humdrum human experience of little more than economic, artistic, and literary creativity and peaceful cooperation, spiced with meaningless and petty acts of kindness and compassion toward one another. No individual, no family, and no gang could have wreaked such havoc as the great states and, a fortiori, the great empires. Only man’s ultimate achievement in social organization—the state—could have done the job.

So, the next time you happen across a neocon, a red-white-and-blue jingo, a military Keynesian, or a rock-solid supporter of Barack Obama’s foreign policy, stop and shake his hand. Give him proper appreciation for his service as the living embodiment of the ideology and the institution that finally allowed the human species to break the bonds that had constrained it from time immemorial and hence finally to achieve the greatest heights of atrocity, death, and spoliation. Credit where credit is due, my friends.

Cross posted from The Beacon Blog

In July 1940, when Ludwig and Margit von Mises made their way by bus from Switzerland across German-occupied France [Note: Mises was Jewish], the bus driver had to proceed very carefully and make many detours via back roads to avoid German checkpoints. If you would like to play with a fascinating exercise in counterfactual history, imagine how history would have gone had the Germans arrested Mises and his wife, placed them in indefinite detention, and perhaps ended up killing them in some horrible concentration camp.

Among the many ways in which history would have been different: no works of Rothbard, Kirzner, and Reisman as we have known them; probably no resurgence of the Austrian school of economics as we have seen it during the past forty years or so; no Mises Institute in Auburn or others elsewhere in the world. For many of us, without the great English-language treatise Human Action (1949 and later editions), careers would have taken very different forms and trajectories. In ways too numerous to imagine, the world would have been different — and worse — had Mises not made his way safely across France and Spain to Lisbon, and hence by ship to New York. Perhaps never in history did so much turn on a bus driver’s skills and courage.

Arline Alchian Hoel reports that her father, Armen Alchian, “passed away peacefully in his sleep early this morning at his home in Los Angeles.” He was 98 years old.

Armen Alchian was a major figure in the economics profession for more than half a century. At UCLA, where he spent his academic career as a faculty member in the department of economics, he was a legend to generations of graduate students, who were required to take the price theory course he taught in the first year of the program. He used the Socratic method: he simply walked into the class each day and asked a student a question. From that point, the discussion went back and forth between teacher and students. Woe to any student who had arrived unprepared—and sometimes to those who had prepared. Public embarrassment was the price such students had to pay. But in the end, the students came away from the course with a healthy measure of their teacher’s mastery of applied price theory.

And master he was. Besides having a knack for making sense of countless aspects of economic and social life by viewing them as relative-price problems, Alchian helped to blaze trails toward extremely valuable improvements in microeconomic analysis by bringing into the analysis careful treatments of information, uncertainty, transaction costs, and property rights. For him, little difference existed between micro and macro; both were to be understood by using the same basic economic analysis of individual choice.

Alchian’s textbook, written with Bill Allen, differed from existing texts. It was, for one thing, not dumbed down. In addition, it included many questions at the end of each chapter, some of which were quite difficult. At the University of Washington in the late 1960s and 1970s, we used the Alchian and Allen book at every level: introductory, intermediate, and first-year graduate. The only difference came in the level of sophistication we expected in the answers to the questions. Although Alchian did not lack mathematical skills—from 1942 to 1946 he worked as a statistician for the Army Air Corps—his work did not display much mathematical formality. For the most part, he said what he meant in straightforward English prose, spiced with wit and sparkling asides.

Many of Alchian’s students and friends believed that he well deserved a Nobel prize in economics, but this recognition never came to him. Yet, aside from Ronald Coase, no one had a greater influence in creating and fostering what has come to be known as the New Institutional Economics, one of the most notable improvements in mainstream economics during the past half century. Armen was also a genial and friendly man who loved to play golf. He was always at ease among colleagues and affected none of the arrogance that lesser lights sometimes impose on others. He leaves a rich legacy of grateful students and friends, and a profession substantially advanced in no small part because of his creative efforts.

James M. Buchanan, one of the past century’s most distinguished economists and most compelling champions of free markets, died earlier today at age 93. His professional career spanned more than sixty years, during which he wrote extensively on public finance, economic philosophy, and other topics in related areas. With Gordon Tullock, he founded a new subfield of economics, public choice, which has become established as a flourishing area of research, writing, and teaching. A focus of this scholarship is the journal Public Choice, which was long edited by Tullock. On his own, Buchanan established another subfield, constitutional economics, which might also be considered a subfield of political philosophy. Although it has not caught fire to the extent that public choice has, it has also attracted a substantial amount of scholarly activity. The journal Constitutional Political Economy is one fruit of this effort.

Buchanan’s output as a writer is the stuff of which young economists’ dreams are made. His collected works, published by Liberty Fund, include twenty volumes. Over the years, he wrote probably hundreds of articles, many of which were published in the top journals of economics, philosophy, and other fields, as well as many books. Several foreign universities recognized his accomplishments by awarding him an honorary degree. In 1986, he received the Nobel prize in economics.

I first encountered Jim when he came to Johns Hopkins to present a seminar paper while I was a graduate student there, in 1967, as I recall. He did not make a good impression on me then. His presentation, like all his work, was nontechnical, and Hopkins specialized in a much more formal, mathematical style of economic analysis. When Professor Bela Belassa asked him a technical question, Jim shrugged it off as if its answer didn’t matter much one way or the other. In the grad students’ minds, this attitude toward the very sorts of things we were agonizingly trying to master suggested that he was a lightweight. In this respect, we could scarcely have been more wrong.

Indeed, the hallmark of Buchanan’s work from beginning to end was a deep seriousness of purpose and procedure that not many economists have matched in the past century. Unlike the typical mainstream economist, Jim was never just fooling around, toying with a tweaked model or a trivial, throw-away idea. To a rare degree, he kept his eyes focused on the prize of true economic understanding. When I began to read and ponder his writings seriously in the 1980s, I developed a tremendous respect for his view of what markets are and how they work. A more formally inclined economist would have had great difficulty in achieving his depth of understanding; the math and the technicalities have a way of overwhelming the substance of an economic analysis, and ofttimes of obliterating it entirely. To my knowledge, Jim never committed this professional sin.

I became personally acquainted with Jim in the 1980s. I recall the first time I was invited to lecture at George Mason University’s Public Choice Center, which Buchanan and Tullock headed. Jim sat in the center near the front of the audience, two or three rows back. I had not spoken for more than 10 or 15 minutes before I noticed that Jim seemed to have fallen asleep. Splendid, I thought! My talk is so awful that the great man has simply dozed off. However, after another 10 or 15 minutes had passed, Jim interrupted me to ask a question related to something I had just said. I thereby discovered, as many others did over the years, that this behavior was simply something Jim did to relax. He definitely was not sleeping, but only closing his eyes while his ears remained fully operative.

After Buchanan received the Nobel prize in 1986, I invited him to come to Lafayette College, where I was then a professor, to give some talks to students and faculty. He graciously came, which gave me my first opportunity to spend a substantial amount of time with him, getting to know him better and picking his brain. Later, over the years, I spent much time with him at Liberty Fund colloquiums, conferences, and other professional gatherings, each time gaining a new glimpse into his mind, outlook, and attitudes.

When we established The Independent Review in 1996, Jim agreed to serve on the board of advisers. Later he contributed two articles to the journal. His photograph graces the cover of the summer 2000 issue.

At the University of Chicago, where Buchanan earned his Ph.D. degree in 1948, he was a student of Frank Knight, who was clearly the greatest influence on his thinking from that time forward. Jim was not an Austrian economist, but he had many affinities with the Austrians, especially in his ideas on cost, which he developed in his little bookCost and Choice (1969). He respected Ludwig von Mises and F. A. Hayek, especially the latter. Other Austrians made a less favorable impression on him. In his political philosophy, he was definitely not an anarchist, which put him at loggerheads with Austrians such as Murray Rothbard. In his work in constitutional political economy, Jim was striving to find a structural or institutional means of taming government power and making it truly answerable to the public. It never seemed to occur to him that this goal may be unattainable.

Jim’s work deeply influenced many economists, including me. He gave me a deeper understanding of the market process than anyone else had given me. He raised many worthwhile questions that I continue to ponder. He offered me a shining example of the economist as a serious thinker, not simply an idiot savant fooling with models. My favorite works of his include Cost and Choice and his collection titled What Should Economists Do?, which contains several articles that should be required reading for every graduate student in economics. Jim’s autobiography Better Than Plowing is a good source for gaining an understanding of the sort of man he was—which, in my experience, was unique. Perhaps another such deep, relentless, and sharply focused champion of the free market will come along to contribute to political economy, but I see none such on the horizon at present.

[Cross-posted at The Beacon.]

My greatly esteemed friend Vernon Smith turned 86 years of age yesterday. Vernon is, among other things, the leading figure in the development of experimental economics, for which he shared the Nobel Prize in 2002. For various methodological reasons, I have never been a fan of experimental economics. To me, it represents the sort of positivism that Austrian economists reject for good reason.

However, it has struck me recently that Austrian economics itself may be characterized as a kind of experimental economics in that its basic tool of analysis is the thought experiment—the careful thinking through of hypothetical alternatives. In ordinary experimental science, such as physics, chemistry, and Vernon’s experimental economics, one tests hypotheses (whatever their theoretical or other source and however plausible or fantastical they may bea priori) by observing the relation of changes in X to changes in Y, all other relevant things being held constant. The trouble is that, in all cases, one can never be sure that all other relevant things have been controlled. Hence, every experiment is inconclusive; its findings are only as good as the controls imposed by the latest experimental setup, and an experiment with better controls may overturn one’s current conclusion.

In Austrian economics, in contrast, one deduces the relation of X and Y from first principles so compelling that they are accepted as axioms, especially the Action Axiom (that people purposefully use means to obtain ends desired for the removal of their felt unease). In Austrian thought experiments, all other things whatsoever are held constant by a mental strait jacket that immobilizes them completely. Therefore the deduced relation of X and Y is always as strong as the axioms of analysis, provided that no logical mistakes have been made.

Of course, such thought experiments cannot serve as necessarily effective forecasting devices because the real world is in constant flux—that is, the “other things” are constantly changing. However, no matter how much they might change, the derived relation of X and Y remains an element of the real world’s operation. For example, if the money stock is enlarged, then all other things being equal, the general purchasing power of a unit of money declines. In an empirical situation, the money stock may be enlarged, yet a unit of money not lose general purchasing power because other things (e.g., the public’s demand for money to hold) have changed in an offsetting way. Nonetheless, we may still conclude that in the actual situation we observe, the general purchasing power of a unit of money—whatever it may be—would have been greater had the money stock not risen. Thus, we understand the workings of the world, at least in some part, even if we cannot predict empirically how the world or some specific element of it will change amid its constant flux.

So, all hail Austrian economics—the Queen of the Experimental Sciences. Long live the properly grounded thought experiment!

[Cross-posted from The Beacon.]