Capital Ideas - Summer 2013 - page 39

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Capital Ideas |
Summer 2013
37
I
t did not require the invention of national income
accounting to demonstrate that the United States
was becoming increasingly well-to-do. The expan-
sion of the United States geographically from its origi-
nal location between the Alleghany mountain range
and the Atlantic Ocean to a continental power was
obvious. And the growth of the US population from
just a few million at the time of the Revolution to more
than 100 million people early in the twentieth
century was also obvious.
Nor did the numerous technological inno-
vations, which drove the American economy
and society forward and transformed Ameri-
can culture, escape notice. Indeed, the com-
missioner of the 1850 census waxed lyrically as
he recounted the technological advances of the
previous decade: the vast expansion of the rail-
road system, the fleet of steamboats that plied
our inland waterways, the rapid spread of the
telegraph network, and the growth of large-
scale plants manufacturing cotton textiles and
iron. These technological advances were so re-
markable, he concluded, that they could not be
matched again in the next decade.
A similar theme was struck by the commissioner
of the 1900 census, who reviewed the progress of the
preceding half century, which included the laying of
the Atlantic cable, electric lights, shortwave radio, au-
tomobiles based on internal-combustion engines, the
completion of the national railroad network, elevators,
typewriters, photographic film, diesel engines, foun-
tain pens, the gramophone, escalators, and motion
pictures. He also believed that this collection of ad-
vances was so spectacular that it could not be repeated
in the twentieth century.
During the decade following World War II, when
Simon Kuznets began to lay out his research agenda
for studying and explaining the high, long-term rates
of economic growth, he was aware of the persistent
tendency of keen observers to underestimate the ca-
pacity for continuing technological advances. Half a
century after the dire forecasts of stagnation, techno-
logical advances not only continued but likely had also
accelerated. Developments in urban sanitation and
food processing and the substitution of automobiles
for horse-drawn vehicles had led to dramatic declines
in the prevalence of deadly infectious diseases. Vac-
cines, penicillin, and other powerful medicines were
widely available to deal with once-fatal diseases. The
country had been largely electrified, and a host of
household appliances was available to improve the ef-
ficiency of home production (refrigerators, washing
machines, vacuum cleaners) and to provide low-cost
entertainment (radios, phonographs, televisions).
In the election of 1928, Herbert Hoover had made
the extravagant promise that, if he was elected presi-
dent, there would be a chicken (the most expensive
meat at the time) in every pot and an automobile in
every garage. Yet, by 1955, advances in animal feeds
had turned chicken into the cheapest meat, and there
were about as many cars as households.
Nevertheless, in the 1950s, the specter of the Great
Depression still haunted economists and policymak-
ers, who worried that the postwar boom would peter
out, like air escaping from a balloon, and the country
would be returned to the clutches of secular stagna-
tion. That fear was not cast out of professional and
public discourse during the 1950s. The topic continued
to be vigorously debated into the 1960s and beyond.
As early as 1949, Kuznets was one of a relatively few
economists who thought that the Great Depression
was the exception and that strong, long-term growth
was the rule. What was needed was not another (more
optimistic) speculative theory to confront the plethora
of pessimistic theories but a careful study of history
that might yield an empirically warranted theory.
But how to proceed? How to organize research into
long-term trends of economic growth? One issue was
the unit of observation. Should it be individual entre-
preneurs? Climate zones? Ethnic subgroups? Econom-
ic social classes? Religious denominations? Kuznets
rejected all these options in favor of the nation-state
because the available data were organized and main-
tained by sovereign states. Moreover, he believed that
the political system governing the operation of a par-
ticular nation-state might turn out to be an important
variable in explaining economic growth.
Kuznets’s plan to use national income measures to
describe and explain the long-term economic trends of
the industrial nations was formulated in the late 1930s.
However, the execution of that plan was delayed by US
involvement in World War II and Kuznets’s duties as
the chief statistician at the War Production Board. In
September 1943, when it was clear that peak wartime
production goals had been attained and planning had
turned to the transition back to a peacetime economy,
Kuznets wrote to Wesley Mitchell, laying out his re-
search plans for after his return to civilian life.
Mitchell was not enamored of a project that aimed
to quantify the similarities and differences in the long-
term growth patterns of a score of industrialized na-
tions. He doubted the reliability of the data available
Political
Arithmetic: Simon
Kuznets and
the Empirical
Tradition in
Economics
by Robert W. Fogel,
Enid M. Fogel,
Mark Guglielmo,
and Nathaniel
Grotte, University
of Chicago Press:
2013.
Footnotes
How Simon Kuznets codified
modern economic growth
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