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Published by EH.NET (April 2003)
Brian Snowdon, _Conversations on Growth, Stability, and Trade: An
Historical Perspective_. Cheltenham, UK: Edward Elgar, 2002. xvi + 483 pp.
$120 (hardcover), ISBN: 1-84064-995-X.
Reviewed for EH.NET by Christopher Hanes, Department of Economics, State
University of New York at Binghamton (beginning fall 2003).
The first part of this book is a survey of theories of long-run economic
growth, business cycles, monetary policy and international trade and
capital flows, based on the author's lectures at the Newcastle Business
School, Northumbria University (England). The second part is transcripts of
the author's interviews with Ben Bernanke, Jagdish Bhagwati, Alan Blinder,
Nick Crafts, J. Bradford DeLong, Barry Eichengreen, Kevin Hoover, Charles
Jones, Christina Romer and Joseph Stiglitz. Together, the survey and
interviews give a clear view of current work in macroeconomics and its
intellectual background, guided by a knowledgeable man who appears to have
remarkably few axes to grind. Oddly missing is any discussion, beyond a
bare mention, of "New Keynesian" theory -- that is, attempts to understand
the microfoundations of wage and price rigidity and unemployment, and test
implications of the new theories. But there is a lot on growth theory and
monetary policy, two fields that have changed a lot in recent years. A
particular virtue of the book is its emphasis on the interplay between
economic thought, public policy, and economic outcomes.
The book's title isn't accurate, as the book actually _doesn't_ give a
historical perspective apart from its thorough discussion of the Great
Depression and some of the interviews. History comes up hardly at all in
the interviews with Bhagwati, Blinder, Hoover, and Stiglitz, for the
excellent reason that those men have little to say about it (though they
have a lot to say about other things). Mostly, the book guides the reader
expertly through macroeconomics right up to the borders of economic
history, and stops there. With respect to economic growth, for example, the
textbook section explains the Harrod-Domar model, the Solow model, AK
models, etc., and the role of free trade and capital flows, leading right
into fascinating interviews with Jones and Stiglitz. The reader gets the
idea that the important variable is institutions. Jones observes that "it's
not at all clear why some countries are able to adopt institutions which
encourage people to work hard to produce goods and services rather than to
steal from their neighbours, either directly through theft or indirectly
through rent seeking and corruption. The important question is how do you
change those institutions?" (p. 355). "When we start to ask important
questions like why are some countries better at setting up good
institutions, certainly it seems that one needs to have a good
understanding of the system of incentives that is in place at the start.
Maybe it's important to understand where that system came from, in order to
understand where it's likely to go" (p. 366). From this point, the author
could lead us into the economic history literature and describe a few
concrete examples of important or illustrative institutional developments
in this or that time and place. But he doesn't.
My other complaint about the book is that it appears to have come into
print untouched by the hands of editors. There are frequent misspellings
and grammatical errors of the kind that result from a careful author
revising a manuscript himself, with no one else to read over the drafts. It
was an editor's job, left undone, to restrain the author's use of quotes to
make statements that do not require specific cites, like this: "As Easterly
writes, 'When machines are scarce, the additional output from one more
machine will be high. When machines are abundant, additional output from
one more machine will be low'" (p. 74). Some sections of the book give the
impression that the author made, and just barely lost, a bet that he could
write whole paragraphs without using his own words. The staff at Elgar
ought to be ashamed of themselves.
None of this detracts from the usefulness of the book or Snowdon's
achievement in producing it. The first part of the book is meant to set up
the issues that will be discussed in the interviews, but it also
constitutes an extraordinarily good textbook, explaining important ideas
and pointing out connections between them. The interviews reveal the
intelligence and humor of their subjects, and hold a few surprises. One
might recall a recent flap when Stiglitz seemed to say that some fellow
economists in public service were intellectually dishonest shills for Wall
Street -- well, he says it again here (p. 396)! Romer's comments on current
monetary policy issues go against conventional wisdom in important
respects, but are strongly based on practical experience -- the vicarious
experience one gains from studying history. This interview, and the ones
with Bernanke, Crafts, DeLong and Eichengreen show how much historical
knowledge can add to the work of a great economist.
While the book won't tell a macroeconomist what he needs to know about
economic history, it will tell an economic historian much of what he needs
to know about current literature in macroeconomics. I recommend it to
graduate students training in either area. It should be in every library. A
hundred years from now, it will be an important guide to what leading
economists thought they knew, and what they knew they didn't know, as of
A.D. 2002.
Christopher Hanes is the author of "Nominal Wage Rigidity and Industry
Characteristics in the Downturns of 1893, 1929, and 1981," _American
Economic Review_, December 2000, and (with John James) "Wage Adjustment
under Low Inflation: Evidence from U.S. History," _American Economic
Review_, forthcoming.
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Published by EH.Net (April 2003). All EH.Net reviews are archived at
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