------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (July 2006)  
  
Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L.   
Olmstead, Richard Sutch, and Gavin Wright, editors, _Historical   
Statistics of the United States, Volume Three: Economic Structure and   
Performance_. New York: Cambridge University Press, 2006. xiv + 831   
pp. $825 (for the five-volume set), ISBN: 0-521-81790-0.  
  
Reviewed for EH.NET by Joseph H. Davis, The Vanguard Group.  
  
  
This volume of _Historical Statistics_ is comprised of nine chapters   
and, in most cases, focuses on annual data and their sources. The   
objective is a straightforward if not ambitious one: provide reliable   
and relevant data that characterize the evolution of the economic   
structure and performance of the United States. Of course, "reliable   
and relevant" are open to interpretation. In my judgment, this   
_Millennial_ volume does a better job than its _Bicentennial_   
predecessor, a noteworthy achievement.  
  
The first two chapters of the volume focus on the prominent   
macroeconomic data on the trend in national output (first chapter)   
and business cycles (second chapter). I wish that I had had Richard   
Sutch's introduction to these two chapters while in graduate school.   
Sutch provides an excellent summary on the history of national income   
accounting and the official NIPA estimates. Along with Paul Rhode,   
Sutch also provides a much-needed summary on the state of affairs   
regarding conjectural real GDP estimates before 1929.  
  
The first chapter also introduces a new annual series on real GDP   
beginning in 1790. Referred to as the Millennial Edition Series,   
Sutch characterizes his real GDP estimates in the footnotes as "a   
pastiche reflecting the work of many contributors," which is no   
exaggeration given the copious series documentation. In effect, the   
real GDP Millennial Edition Series is the result of splicing the best   
available annual interpolators through the best available output   
benchmarks for the pre-Civil War period. However, one criticism of   
this series is that it should be accompanied by more disclaimers, and   
its construction should have been detailed in the introduction   
(rather than delegated to endnotes). Indeed, given the overview of   
the unresolved "excess volatility" debate in the introduction, how   
should this series be viewed? What statistical inferences can (and   
cannot) be drawn? Given the fact that the volume provides _two_   
long-running annual real GDP per capita series dating back to 1790   
(the Millennial Edition Series, and an alternative estimated by Louis   
Johnston and Samuel Williamson for EH.NET using different source   
data), which one is preferred? While I believe that the Millennial   
Edition utilizes more appropriate data in its interpretation   
(disclaimer: some of the data used are my own), I believe that more   
discussion should have been dedicated to its limitations. In my   
opinion, these real GDP data may be used to control for long-term   
trends, but should _not_ be used in testing for structural breaks in   
macroeconomic volatility over time.  
  
As a minor quibble, some of the tables in the first two chapters do   
not include the latest revisions, such as the version of the Davis   
industrial production index used to interpolate the real GDP   
Millennial Edition Series. In addition, the business cycle dates   
presented in the second chapter focus solely on the NBER dates, and   
thus ignore subsequent revisions to the monthly NBER business cycle   
dates for the late 1800s and early 1900s (by Christina Romer), and   
revisions to the annual NBER cycles for the 1800s (by myself more   
recently).  
  
The volume's fourth chapter focuses on popular wholesale and consumer   
price indexes. Christopher Hanes, the chapter's editor, provides a   
fantastic introduction on how price indexes are constructed, the   
general trend in aggregate U.S. price indexes since 1800, and a brief   
history of the most popular aggregate price indexes. Hanes even   
provides tables with examples of how the rate of change in a price   
level can be computed under different techniques, a valuable exercise   
for students. Also noteworthy are Hanes's comments on (and caveats   
about) various index construction methods. Hanes also cautions on the   
usage of the longest historical aggregate price series, particularly   
the annual CPI for all items, which has been linked from various   
sources back to 1774. While available for some time among economic   
historians (and third-party providers such as Global Financial Data),   
Hanes suggests that researchers may wish to use the PPI (as opposed   
to the CPI) when controlling for the price level back through the   
1800s on account of the scarcity of rent data prior to 1913.  
  
Richard Sutch's chapter on savings, capital and wealth should serve   
as must-reading for students of economics and public policy. Of   
particular note is his expert treatment of the oft-confusing   
definitions of various savings measures, and the distinction between   
national and personal savings. The annual data in the chapter include   
updates of many data series derived from the National Income and   
Product Accounts and the Flow of Fund Accounts.  
  
I found the volume's sixth section, entitled "Geography and the   
Environment," one of the most interesting, perhaps because I have the   
least familiarity with this topic. The section discusses and presents   
data on a host of environmental and climate indicators. Certainly,   
the section should introduce an interesting array of time series to a   
broader audience, including annual data on the number of oil spills,   
North American geese population estimates, and the number of forest   
acres damaged by insects. The section also updates important weather   
data, including the annual mean temperature and precipitation from   
various city and climatological stations as early as 1780.  
  
The volume's seventh section is dedicated to science, technological   
change, and productivity. The section's editors, Gavin Wright and   
Stanley Engerman, provide excellent and concise overviews of these   
phenomena, including the U.S. patent system, the rise of organized   
industrial research, productivity measures, and the rise of computer   
technology. The section updates various _Bicentennial_ series,   
including annual patent data, R&D expenditures, and productivity   
indexes. Gavin Wright also assembles valuable statistics on   
computers, including performance indicators of computers and   
transistors beginning in 1946 with the ENIAC.  
  
Naomi Lamoreaux's introduction to the volume's eighth section on the   
dynamics of U.S. business organization is simply excellent, and   
should serve as necessary reading for students of finance and history   
alike.  
  
The volume's final chapter on U.S. financial markets assembles   
various statistics on monetary aggregates, banking, insurance, and   
interest rates. In the end, this chapter will be heavily consulted by   
practitioners and researchers in empirical finance. Michael Bordo,   
the editor of the section, has assembled a solid chapter with the   
assistance of other leading minds in the history and evolution of the   
U.S. financial system. Contributors include Howard Bodenhorn and   
Eugene White on financial institutions and their regulation, Peter   
Rousseau on securities markets, and John James and Richard Sylla on   
debt, the flow of funds, and interest rates. Key financial series   
have been updated, including those for U.S. equity prices (as early   
as 1802), long-term bond yields (as early as 1798), and money market   
rates (as early as 1831).  
  
Like its 1975 predecessor, this reference volume set stands to be   
among the most widely cited works in economic history. The third   
volume updates the most popular macroeconomic and financial data, and   
in most cases does so with the careful assistance of leading   
scholars. Beyond the data, this volume also provides critical   
information as to the data sources, their limitations, and their   
potential implications. Arguably, this context is as important as the   
data series themselves, since this volume will certainly play a role   
in educating the next generation of economists, analysts, and   
historians.  
  
  
Joe Davis is a Principal within both the Investment Counseling &   
Research Department and the Fixed Income Group of The Vanguard Group,   
a mutual fund company based in Valley Forge, Pennsylvania with over   
$1 trillion assets under management. While not currently in academia,   
Davis is a Faculty Research Fellow of the National Bureau of Economic   
Research (NBER).  
  
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