Several of her examples deal with public policy and are likely to be of great interest to readers of this blog. The Fannie Mae and Freddie Mac loans aimed to promote better access to housing for those unable to meet prevailing standards to obtain mortgages. This misguided attempt to assist the disadvantaged helped to bring on a severe financial crisis. Foreign aid to Africa has served to entrench tyrants in power. More generally, various altruistic measures have led to a massive government deficit with dire consequences to come.

Oakley also gives examples of the baneful effects of pathological altruism in personal contact. These effects are not confined to the intended beneficiaries or to third parties; the altruist may also in certain cases suffer personality damage. Oakley’s discussion of these various effects  is informed by an extensive knowledge of the literature of evolutionary psychology and other relevant disciplines. She calls for more research on pathological altruism but suggests that such research will confront obstacles. Researchers tend to be sympathetic to altruistically motivated conduct, even if it has bad effects,and as a result studies that challenge such conduct tend to be viewed with disfavor. People who criticize accepted ideas tend to have great difficulty in gaining an audience for their views. This suppression of research into the malign effects of altruism is itself an expression of pathological altruism. Oakley calls for a new research paradigm that will put an end to the harmful taboos that constrain the study of altruism.

In fact, there is one anarchist who could be considered influential in Washington, but he wasn’t among the activists who participated in the Occupy movement—he died nearly twenty years ago. His name is Murray Rothbard, and, among small-government Republicans, he is something of a cult hero. He was Ron Paul’s intellectual mentor, which makes him the godfather of the godfather of the Tea Party.

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.

Now, though, Japan is leading the way. The recently elected prime minister, Shinzo Abe, has embarked on a crash course of monetary easing, public works spending and promotion of entrepreneurship and foreign investment to reverse what he has called “a deep loss of confidence.” The new policies look to be a major boon for Japan. And what happens in Japan, which is the world’s third-largest economy and was once seen as America’s fiercest economic rival, will have a big impact in the United States and around the world.

In 1995 Higgs’s “Austrian Economics and the New Economic History” in Austrian Economics Newsletter vol. 15, no.1, (available here pages 2 and 3) offered a well thought out assessment of what cliometrics might offer “of value to the Austrian economist.” After stating, “At first glance one might well answer no”, he argues, “Upon closer inspection, one may revise this assessment. Austrain economists do sometimes write economic history… .”  Thus, “Austrians engaged in historical interpretation can sometimes benefit from some cliometric work.”

It is two pages well worth keeping accessible for any Austrian researcher “practicing their own disticntive style of interpretative economic history.”

It was advice I tried to keep in mind for my own research and teaching.

Wapshott describes Hayek, author of “Why I Am Not a Conservative,” as a “conservative saint” and calls Abba Lerner, one of Fogel’s teachers, an “Austrian School economist.” Fogel’s cliometric approach is described as a “data mining,” a somewhat loose term that generally applies to inductive analysis, not the kind of hypothesis testing associated with cliometrics. Wapshott takes time to praise Simon Kuznets, “whose pioneering work in econometrics led to the accurate measurement of economic growth.” Kuznets’s work was certainly pioneering, as in novel, but no respectable development economist thinks GDP is an “accurate” measure of national well-being, let along economic welfare, and its limits are well known in the growth accounting literature.

The funniest line, however is this: “Fogel was one of the best sort of economists, like Milton Friedman and Anna Schwartz, devoted to determining cause and effect through a meticulous study of the facts.” Only the most naive empirical social scientist — or journalist without any actual research experience — could believe that causality emerges from “studying the facts.” To be sure, modern empirical economics is obsessed with causal inference, but no skilled econometrician thinks that the various popular identification techniques “determine” cause and effect. The so-called identification revolution is not without critics, and many practitioners worry that it has gone too far.

(Click on the image for a sharper picture.)

Roosevelt had only been in office for 101 days and while there was broad bipartisan support for inflationary policies in Congress, it’s safe to say that most of those who voted for FDR never expected him to confiscate private holdings of gold coins, bullion, and certificates. Roosevelt called the measure a temporary one (it wasn’t), and he followed it up by invalidating gold clauses in private contracts that obligated payment in gold dollars, which had the effect of devaluing the assets of bond and contract holders. Many of these hoarders and slackers purchased gold as a hedge against the (Fed-fueled) inflationary boom of the 1920s and then hung on to it during the Hoover years when his crazed and unprecedented interventions in wages and prices caused a normal market correction to devolve into a depression. Why would they trust Roosevelt any more?

They were smart not to. By January 1934, Roosevelt increased the dollar price of gold from $20.67 to $35, thus devaluing the dollar by 70 percent while increasing the value of gold that the government now owned.

Gold flowed to the United States because the new price exceeded the world price, causing Fort Knox to become, well, Fort Knox. Since the Treasury was authorized to maintain the new dollar-gold exchange rate, it increased the money supply accordingly. Over the next three years, M2 increased by an average of 13.4 percent a year. Congress and the president with strong ties to Wall Street got the inflation they wanted.

Queue the tape: “Happy Days Are Here Again.”

A major constraint on the federal government’s ability to spend had been lifted, and by the end of the decade the balance of political power had shifted from the states and the cities to Washington, D.C. It remains to be seen whether inflating the money supply will have any different effect in the 2010s than it did in the 1930s.

Gary Gorton’s view of bank runs has already filtered down to students. Sam Williams won first prize at the ASSC in February with the paper The Return of the Bank Run: How the Financial Crisis of 2007-2008 was a Next Generation Bank Run