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Published by EH.NET (September 2003) 
 
J.W. Drukker. _De Revolutie die in Haar Eigen Staart Beet: Hoe de Economische Geschiedenis
onze ideeën over Economische Groei veranderde_. Utrecht: Lemma Publications, 2003. 345 pp.
42 Euros, ISBN: 90-5931-141-8.
 
Reviewed for EH.NET by Joel Mokyr, Departments of Economics and History, Northwestern
University.  <[log in to unmask]>
 
 The title of this book translates as "The revolution that bit its own tail: how economic
history changed our views of the process of economic growth." It is, however, more than
that: Jan Willem Drukker, a distinguished Dutch cliometrician best-known for his work in
anthropometric history, has summarized the history of cliometrics and the "new economic
history" over the past fifty year. He has done so in style: he writes with grace and wit,
and is enviably well versed in the literature of our profession. This is a user-friendly
book and the audience is primarily undergraduates and non-specialists. At one point, he
apologizes for the "inhospitality" of a Cobb-Douglas production function -- most of the
papers published today in _Explorations in Economic History_ or the _Journal of Economic
History_ have considerably more complex mathematics than that. It is, in fact, so well
done and eloquent that this reviewer heartily recommends a translation of the Dutch text.
Like every good Dutch academic, Drukker knows his languages, and long discussions of texts
in four languages are ornamented with clever puns and juicy Dutch expressions which this
reviewer cannot hope to render in English without doing violence to the original
(translating "free rider" as klaploper will raise a smile on all Dutch-speaking readers).
The last chapter, which harks back to the West Lafayette roots of the New Economic
history, is entitled "À la recherche de l'histoire économique Perdue." Lance Davis once
wrote that the "new economic history will never be literature" -- he had not heard of Jan
Willem Drukker. Yet this book is also quite erudite, and the clever chapter on the history
of the French Annales school, though not wholly pertinent to the main thrust of the book,
is a testimony to Drukker's learning.
 
Many of the contributors to the literature of economic history -- including, in the
interest of full disclosure, this reviewer -- will find their work discussed and
summarized in this book. Drukker, however, is not content with a "history of thought"
piece. Instead, he has a particular point of view which explains the somewhat odd title of
the book. Drukker maintains that the New Economic history intended from the outset to
explain economic growth using a neoclassical production function: capital and labor
together led to an increase in output. The unexplained residual, argues Drukker, is an
illustration of the failure of simple neoclassical theory to explain differences in
economic performance. Corrections in measured input and output, à la Griliches-Jorgenson,
have succeeded in reducing the residual somewhat, but have not eliminated it. In Drukker's
view, this is the "tail-biting" part: the revolution that started to apply neoclassical
production theory to economic history found that it was inadequate in explaining economic
growth and in the end had to return to the concepts and notions it started off attacking,
such as culture and institutions. Hence the importance of those new economic historians
such as Douglass North, who emphasized the role of institutions and Peter Temin who has
declared it "kosher" to speak of culture.
 
Much of the book aptly describes the internecine wars among cliometricians, and the extent
to which they criticized one another more effectively than "old" economic historians ever
did. Drukker's book will not be entirely immune to such critique. The definition that
Drukker employs of "neoclassical economics" is minimalist and seems to be confined to
general equilibrium models of perfect competition. In his view, game theory and public
choice theory, for instance, are not part of neoclassical economics because free riding
and the prisoners' dilemma are incompatible with neoclassical economics. Moreover, the
relation between cliometrics and the history of economic growth is actually more subtle
than Drukker lets on. For decades, the New Economic History was not really engaged with
explaining economic growth, as opposed to describing, quantifying and decomposing it.
Indeed, as I showed in Mokyr (1998), there is no single cliometric explanation of the
Industrial Revolution.
 
Cliometricians usually focused on specific, well-described problems, and eschewed the
really Big Questions for which tightly specified and estimable models could not be
estimated. It is undeniable that the New Economic History has been deeply concerned with
computing and analyzing total factor productivity, and that nobody has quite been able to
demonstrate precisely what the residual consists of. But beating up on the residual, as
Drukker himself demonstrates, has not been the main concern of the Cliometric Revolution,
and the inability of production function analysis to fully explain the growth of GDP in
the twentieth century is not really a "black hole" in the theory as Drukker puts it.
Cliometricians would indeed have been surprised if there had been no Solow residual (or
Abramowitz residual, as Drukker prefers to call it). After all, ever since Kuznets and
Rostow it has been realized that improved knowledge and technology are increasingly major
factors in determining the rate of growth; since these phenomena are essentially
unquantifiable, they will show up in the residual. While Drukker realizes this (p. 220),
he still feels that a growth accounting exercise that takes into account human capital and
capital age should have taken care of most technological progress -- and yet even taking
those into account the residual does not disappear. Drukker brilliantly characterizes the
method of Cliometrics as "Socratic" -- economic historians were very good at demolishing
conventional wisdom, exposing the frailty of implicit assumptions and unwarranted
inferences. It was much less effective in pointing to a persuasive explanation of why
economic growth occurs in the first place. Economists know that if technological progress
occurs, economic growth is likely to ensue; but the New Economic History never had a
coherent view of why technological creativity and success occur in the first place.
 
It is therefore possible to criticize Drukker's view that cliometricians had "explained"
the rise of the modern economic world on the "neoclassical" basis of market growth and
integration, and yet that their theories failed to explain why such markets did not arise
in poor countries. Arguably, cliometrics had never held a strong position on the Rise of
the Modern World, a question it left to less quantitatively-inclined economic historians
such as David Landes, Eric Jones, or Nathan Rosenberg in whose work Drukker seems less
interested. It was usually concerned with smaller micro questions such as why one mode of
transportation was used over another, or what the effects of a tariff were. In fact, it is
probably not easy to say what the "main concern" of the New Economic History has been,
except to bring the insights of the economist's training and more formal models to bear on
historical questions, whether those involve game theory or Bayesian econometrics. To be
sure, the New Economic History was (and to a lesser extent, still is) fascinated by
markets, as well it should be. In its early stages, as William Parker once put it, the
hallmark of the New Economic History was that the "market did it again." But every
economist knows that technology by being non-rival and to a large extent non-excludable is
a prime example of market failure. Apart from arguing that the market usually saw to it
that rational economic agents chose the "best" technique available, the New Economic
History has had relatively little to say on the process of technological change. Insofar
that modern economic growth is driven by technological progress, then, the ability of
market analysis to explain is a priori limited. The perfectly competitive model, indeed,
cannot easily generate technological progress except perhaps as a by-product of production
and learning-by-doing. But neoclassical economics can readily expand to models of
imperfect competition that are perfectly capable of generating it (Baumol, 2001). And some
cliometricians !
 have mad 
e a serious argument that market analysis is not quite as incapable of explaining
technological progress as is often believed (e.g., Khan and Sokoloff, 1998).
 
Drukker's review of Paul David's or Nelson and Winter's work as anti-neoclassical might
have emphasized that this work was really orthogonal to much of the work done by early
cliometricians. An orthodox neoclassical economist could well respond that if
technological progress was an evolutionary or path-dependent process, so what? The
conflict really arose in the context of technological lock-in caused by some form of
network externality. David's QWERTY paper has been interpreted as arguing that even in the
presence of markets, economies might choose the "wrong" technique (in the sense that
another, superior, technique is available). On this he was taken severely to task by
Liebowitz and Margolis (1990), a paper not cited by Drukker and one that might have
further tempered his judgment that David's paper provided the dagger that destroyed
neoclassical theory as a universal explanation of economic growth. This is not to say that
neoclassical theory -- whatever precisely is meant by that -- has such an explanation, but
rather that path-dependence and technological lock-in are in and of themselves not
inconsistent with it and surely do not wipe out standard "neoclassical" accounts of
economic growth except perhaps by an excessively narrow definition of neoclassical
economics. Furthermore, he seems at times to equate "economic growth" with "gaps between
rich and poor" assuming implicitly that the basic factors that made Luxembourg richer in
2003 than it had been in 1800 are the same that explain why Luxembourg today is richer
than Zimbabwe. But that conclusion seems at least open to question.
 
Drukker believes the black holes are to be filled (if that is not an oxymoron) by
institutional analysis and the understanding of the growth of useful knowledge --
conclusions that surely will not be challenged by this reviewer. He is, of course, correct
in pointing out that after half a century economic historians are coming back to the study
of institutions because there is no other way to explain why Liberia or the Philippines or
Paraguay are poorer than Switzerland or South Korea. He is also correct that it was the
wisdom of Douglass North that drove this point home to them. In that sense, the snake is
biting its own tail, since -- as has been pointed out often -- North's recommendation does
take economic history full circle back to its nineteenth century institutional origins.
Regrettably, he does not mention in detail the pioneering work of economic historians
inspired by North in trying to understand institutional change using another tool taken
from the economist's toolbag: formal game and contract theory (e.g. Greif, 1994).
 
These nitpicks should not detract from a learned, provocative, and yet engaging book that
is as much fun to read as the author visibly had in writing it.
 
 References: Baumol, William J. 2002. _The Free-Market Innovation Machine: Analyzing the
Growth Miracle of Capitalism_. Princeton, N.J.: Princeton University Press.
 
Greif, Avner. 1994. "Cultural Beliefs and the Organization of Society: A Historical and
Theoretical Reflection on Collectivist and Individualist Societies," _Journal of Political
Economy_, Vol. 102, No. 5. (Oct.), pp. 912-950.
 
Khan, B. Zorina, and Kenneth L. Sokoloff. 1998. "Patent Institutions, Industrial
Organization, and Early Technological Change: Britain and the United States, 1790-1850."
In Maxine Berg and Kristin Bruland, eds., _Technological Revolutions in Europe_, pp. 292-
313. Cheltenham, Eng.: Edward Elgar.
 
Liebowitz S.J. and Margolis, Stephen E. 1990. "The Fable of the Keys." _Journal of Law and
Economics_, Vol. XXXIII, pp. 1-25.
 
Mokyr, Joel. 1998. "Editor's Introduction: The New Economic History and the Industrial
Revolution." In Joel Mokyr, ed., _The British Industrial Revolution: An Economic
Perspective_. Second edition, Boulder: Westview Press, pp. 1-127.
 
 Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of
Economics and History at Northwestern University and President Elect of the Economic
History Association. His most recent publications are _The Gifts of Athena: Historical
Origins of the Knowledge Economy_ (Princeton University Press, 2002) and _The Oxford
Encyclopedia of Economic History_ (editor), 5 volumes, 2003. He is currently writing _The
Enlightened Economy: An Economic History of Britain, 1700-1850_ for the New Penguin
Economic History of Britain.
 
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