Published by EH.Net (December 2022).

Michele Alacevich. Albert O. Hirschman: An Intellectual Biography. New York: Columbia University Press, 2021. xvi + 332 pp. $26 (paperback), ISBN: 978-0231199834.

Reviewed for EH.Net by Adrian Darnell, retired Professor of Economics, Durham University.

Albert Otto Hirschman was a complex man whose early years were difficult, to say the very least. Born in Germany in 1915, he was the only son of an assimilated Jewish family. In 1933 and not 18 years old he was leaving Berlin in the first exodus of Germans fleeing Nazi oppression. His father, a neurosurgeon, had died just days earlier, and the young Hirschman began studies in Paris. By the time he was 30 had lived in seven different countries on three continents and could write and converse in five languages. He never studied for a higher degree yet went to hold major positions at a dozen elite institutions. To gain an understanding of the details behind these rather bald statements you simply have to read this fascinating book and its more than fascinating subject.

Hirschman’s work as a social scientist is best known in the field of development economics, yet his entrée to the field was more accident than planning. Having fought on the front of the Spanish Civil War in 1936, he decided not to join the International Brigades in Madrid but travelled to Trieste to join his sister, Ursula (who had married Eugenio Colornio, the Italian philosopher and anti-fascist activist). Colornio was an important mentor to Hirschman (so much so that Hirschman dedicated his book Exit, Voice, and Loyalty, 1970, to Colornio\’s memory). Hirschman recommenced his studies, graduated from Trieste in 1938, and later wrote a thesis on the franc Poincaré (even though doctoral programmes did not then exist in Italy). His studies were then interrupted again by war – the Second World War – and he proceeded to help refugees flee Europe through Marseille. When that became too dangerous for him, he left for the USA. From 1941 to 1943 he was a Rockefeller Fellow at the University of California, Berkeley, and from 1943 to 1946 he served in the United States Army.

From 1946 to 1952 he was the Chief of the Western European and British Commonwealth Section at the Federal Reserve Board. In this role he published analyses of the European postwar reconstruction and the newly created international economic institutions. And it was his time at the Fed that led him into development economics. Columbia had established a new planning council on the recommendation of the World Bank, and the Columbians asked for an economist who could help them. Alexander Stevenson, then at the Bank and formerly one of Hirschman’s colleagues at Berkeley, recommended Hirschman and so he began to work in the field of development.

To complete the potted statements of his career, he held a succession of academic appointments in economics: Yale from 1956 to 1958, Columbia  from 1958 to 1964, and at Harvard for 10 years (1964–1974). He worked for the Institute for Advanced Study from 1974 until his death at 97 in 2012 (just months after the passing of his wife of over seventy years, Sarah Hirschman).

Perhaps one of the most pervasive of his legacies is the concept of ‘linkages’. Not exactly entirely novel, but in Hirschman’s sharp analyses he was able to articulate how an economic activity encourages new activities to produce inputs to the former (‘backward linkage’) while the outputs of the primary activity themselves become inputs to other processes, thus stimulating and facilitating the production of other goods upstream (‘forward linkage’). While such linkages are readily recognised as input-output constructs, they proved most useful as a general framework within which to construct development strategies (but not as a tool for determining whether to proceed with any one development investment).

Hirschman’s work straddles disciplines, and his development work exemplifies his attempts to intertwine economics and political science. He himself preferred to speak of one interpretative social science. His attempts to integrate distinct social sciences into one, and his attempt to ground that one science in ‘reality’, did however generate some tensions of which he seems to have been oblivious (or perhaps deliberately chose not to dwell on). Indeed, his biographer, Alacevich, does not always spell out all the contradictions in Hirschman’s approach, but rather leaves it to the reader to tease out all the consequences and contradictions. I will confine myself in this review to just a couple.

As is well recognised, a model, by setting to one side several ‘realities’, is designed from the outset as an abstraction. Assumptions are made for various reasons, but one is to simplify the ‘real world’, and a great advantage of such simplifications is that the resulting model is applicable to wide range of circumstances. Models, by their very construction, are not ‘particular’. Hirschman’s work ‘was always occasioned by specific problems to which he hoped to contribute with useful ideas. No ivory tower intellectual, Hirschman was solidly down to earth’ (p xiii). But his very ‘groundedness’ in ‘reality’ meant that much of his work was so particular, so relevant only to the problem at hand, that it was not transferable to similar, but different, problems. His approach to project appraisal illustrates this perfectly. Expressing a dissatisfaction with cost-benefit (CB) analysis he argued for something he described as ‘simpler’, namely ‘judgement in the weighing of alternative objectives and in the trade-off between them’ (Hirschman, 1967, p. 179, here at p. 125). This rejection of CB analysis is one example of Hirschman’s unorthodox approach, but his alternative was seen by the World Bank as, not surprisingly, at total variance to their research agenda; one senior officer was moved to observe that Hirschman’s work contained no useful operational analysis (Demuth to Asher, 1966). Hirschman’s approach may well be a helpful adjunct to more orthodox methods, but it could hardly be described as “simpler” because it is non-operational.

As another example of the internal contradictions in his approach to development planning, Hirschman promoted the idea of not looking at any one issue or project individually but rather constructing what he called a ‘comprehensive plan’. Alacevich describes how Hirschman identified the advantages of such an approach: ‘a plan, because of the large financial commitment involved, would prove a useful ‘tactical weapon’ for policy makers, attempting to stop pressures for additional uncoordinated and haphazard expenditures. A comprehensive plan would help policy makers define a perimeter dividing two huge groups of policies and problems – namely those to be addressed now (within the perimeter of the plan) and those that must be postponed (outside the perimeter).’ (p. 105). In Hirschman’s hands, the concept of a ‘comprehensive plan’ becomes both highly conditional and elastic: the plan is as ‘comprehensive’ as its designers choose. But perhaps effectiveness, as measured in the most direct of economic terms, was not its purpose. As Alacevich notes, as ‘pointless and rigid as a comprehensive plan seem when the question is how to induce economic entrepreneurship, it turned out to be a rich and flexible instrument when the question was how to advance political decisions’ (p. 106).

One of the powerful and recurring themes through Hirschman’s large body of work is the need to understand political processes and decision-making. In Strategy (1958) Hirschman offered a critique of theories of balanced growth and proposed his theory of unbalanced growth, where imbalances created by the growth process can be used to identify areas where policymakers might intervene; he argued that the most critical of shortages in developing countries was often not capital or any other physical asset but actually the capacity to take decisions. In Journeys (1963) the core issue he addressed was ‘the investigation of the behaviour of public decision-makers in problem-solving situations’ (p. 4, here at p. 109). I found the many passages dealing with uncertainty in decision-making most thought-provoking. Hirschman, in Development Projects Observed (1967), introduced the notion of the ‘Hiding Hand’ (dismissed at the time by one senior officer at the Bank as ‘a bit thin, particularly with respect to relevant guidance for those who must decide whether to undertake, continue, or complete a proposed project’ (Asher, 1966, here at p. 122). The Hiding Hand concerns the ‘underestimation of problems [which] induces the implementation of projects which, had all the difficulties been foreseen, would never have been initiated in the first place’ (p. 122). He then argued that problems, when they occur, become the triggers for the construction of creative solutions, leading to their ultimate solution. This idea was later articulated by Hirschman as seeking ‘to prove Hamlet wrong’ to show ‘that doubt could motivate action instead of undermining and enervating it’ (Hirschman 1995, pp.118-9, here at p. 249). Hirschman later suggested that the Hiding Hand was not operationally useful; but as Alacevich seeks to interpret and give meaning to the concept, it ‘was not intended to be a policy tool. It was a way for Hirschman to elaborate on the need to include uncertainty and limited rationality in the [World] Bank’s epistemology’ (pp. 122, 3). To this reviewer the Hiding Hand looks very like a manifestation of the old (Platonic) adage ‘necessity is the mother of invention’.

Hirschman’s innate complexity is well reflected in this dense and compelling biography. His long and varied life, best known amongst development economists but in fact much wider, is excellently told in this volume and its reading will reward anyone interested in Hirschman directly and more generally anyone interested in intellectual history.

References

Asher, Robert E., to Hirschman, Albert O. World Bank Group Archives, May 27, 1966.

Demuth, Richard H., to Asher, Robert E. World Bank Group Archives, September 13, 1966.

Hirschman, Albert O. The Strategy of Economic Development. New Haven, Connecticut: Yale University Press, 1958.

Hirschman, Albert O. Journeys toward Progress: Studies of Economic Policy-Making in Latin America. New York: Twentieth Century Fund, 1963.

Hirschman, Albert O. Development Projects Observed. Washington, D.C.: The Brookings Institution, 1967.

Hirschman, Albert O. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, Massachusetts: Harvard University Press, 1970.

Hirschman, Albert O. A Propensity to Self-Subversion. Cambridge, Massachusetts: Harvard University Press, 1995.

Adrian Darnell retired as Professor of Economics at Durham University in 2017. He has published extensively on econometrics and its history and regularly contributes to contemporary economic and political debate in The Guardian, The Observer, and The Daily Telegraph.

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