Saving, Investment, Greed, and Original Accumulation Do Not Explain Growth

McCloskey, Deirdre Nansen (2009): Saving, Investment, Greed, and Original Accumulation Do Not Explain Growth.

Abstract

Thrift was not the cause of the Industrial Revolution or its astonishing follow on. For one thing, every human society must practice thrift, and pre-industrial Europe, with its low yield-seed ratios, did so on a big scale. British thrift during the Industrial Revolution, for another, was rather below the European average. And for still another, savings is elastically supplied, by credit expansion for example (as Schumpeter observed). Attributing growth to investment, therefore, resembles attributing Shakespeare’s plays to the Roman alphabet: “necessary” in a reduced sense, but in fact an assumed background, not the cause in any useful sense. Certainly Europeans did not develop unusual greed, and the Catholics---in a society of bourgeois dignity and liberty---did as well as the Protestants (in Amsterdam, for example). Ben Franklin, for example, was not (as D. H. Lawrence portrayed him in a humorless reading of this most humorous man) “dry and utilitarian.” If capitalism accumulates “endlessly,” as many say, one wonder why Franklin give up accumulating at age 42. The evidence also does not support Marx’s notion of an “original accumulation of capital.” Saving and investment must be used when they are made, or they depreciate. They cannot accumulate from an age of piracy to an age of industry. Yet modern growth theory, unhappily, reinstates as initiating the theory of stages and, especially, capital accumulation. They are not initiating, whether in physical or human capital. Innovation 1700-2010 pushed the marginal product of all capitals steadily out, and the physical and human capital followed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Industrial Revolution; thrift; Europe; capital accumulation; innovation; growth theory; economic history; saving; investment; bourgeois dignity; human capital; physical capital
• Subjects: N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N10 - General, International, or Comparative; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N11 - U.S. ; Canada: Pre-1913; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N13 - Europe: Pre-1913; N - Economic History > N0 - General

References

Augustine, St. 398 AD. Confessions. Trans. F. J. Sheed. New York: Sheed and Ward, 1943.

Bates, Robert H. 1981. States and Markets in Tropical Africa: The Political Basis of Agricultural Policy. Berkeley and Los Angeles: University of California Press.

Boswell, James. 1791. The Life of Samuel Johnson, LL. D. In two volumes. London: J. M. Dent, 1949.

Braudel, Fernand, and Frank Spooner. 1967. “Prices in Europe from 1450 to 1750.” Pp. 378-486 in Rich, E. E., and Wilson, C. H., eds. The Cambridge Economic History of Europe, vol. IV: The Economy of Expanding Europe in the Sixteenth and Seventeenth Centuries. Cambridge: Cambridge University Press.

Cipolla, Carlo M. 1994. Before the Industrial Revolution: European Society and Economy, 1000-1700. 3rd ed. New York: W. W. Norton.

Cowley, Abraham. c. 1665. “Of Avarice.” Pp. 197-202 in The Works of Abraham Cowley. Samuel Johnson, John Aikin, eds., republished 1806, Google books digitized Nov 13, 2006.

Crafts, Nicholas F. R., S. J. Leybourne, and T. C. Mills. 1991. "Chapter 7: Britain." Pp. 109-152 in Richard Sylla and Gianni Toniolo, eds., Patterns of European Industrialization: The Nineteenth Century. London: Routledge, and Fondazione Adriano Olivetti.

Crouzet, François. 1985. The First Industrialists: The Problem of Origins. Cambridge: Cambridge University Press.

Danford, John W. 2006. “’Riches Valuable at All Times and to All Men’: Hume and the Eighteenth-Century Debate on Commerce and Liberty.” Pp. 319-347 in David Womersley, ed. Liberty and American Experience in the Eighteenth Century. Indianapolis: Liberty Fund.

Donaldson, Lex. 1995. American Anti-Management Theories of Organization: A Critique of Paradigm Proliferation. Cambridge: Cambridge University Press.

Dupré, Louis. 2004. The Enlightenment and the Intellectual Foundations of Modern Culture. New Haven and London: Yale University Press.

Earle, Peter. 1989. The Making of the English Middle Class: Business, Society and Family Life in London, 1660-1730. London: Methuen.

Easterlin, Richard A. 2004. The Reluctant Economist: Perspectives on Economics, Economic History, and Demography. Cambridge: Cambridge University Press.

Easterly, William. 2001. The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Cambridge: MIT Press.

Embree, Ainslee, ed. 1988. Sources of Indian Tradition. Vol. 1, From the Beginning to 1800. 2nd ed. New York: Columbia University Press.

Feinstein, Charles H. 2003. “National Income Accounts: Investment and Savings.” In Mokyr, ed., Oxford Encyclopedia of Economic History.

Fogel, Robert W. 2005. “Reconsidering Expectations of Economic Growth after World War II from the Perspective of 2004 .” NBER Working Paper No. W11125

Gerschenkron, Alexander. 1957. "Reflections on the Concept of 'Prerequisites' of Modern Industrialization." L'industria 2. Reprinted as pp. 31-51 in Gerschenkron, Economic Backwardness in Historical Perspective: A Book of Essays. Cambridge: Harvard University Press, 1962.

Gilomee, Hermann. 2003. The Afrikaners: Biography of a People. Cape Town: Tafelberg and Charlottesville: University of Virginia Press.

Goldstone, Jack A. 2009. Why Europe? The Rise of the West in World History, 1500-1850. New York: McGraw-Hill.

Hansen, Alvin H. 1939. "Economic Progress and Declining Population Growth." American Economic Review 29 (March): 1-7.

Hansen, Alvin H. 1941. Fiscal Policy and Business Cycles. New York: W. W. Norton.

Hartwell, R. M. 1961. “The Rising Standard of Living in England, 1800-1850.” Economic History Review, 2nd series, 13:397-416.

Hayek, Friedrich A., ed. 1954. Capitalism and the Historians: Essays by Hayek, T. S. Ashton, L. M. Hacker, W. H. Hutt, and B. de Jouvenel. Chicago: University of Chicago Press.

Heilbroner, Robert. 1953. The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers. 7th ed. New York: Simon and Schuster, 1996.

Hejeebu, Santhi, and Deirdre McCloskey. 2000. “The Reproving of Karl Polanyi,” Critical Review 13 (Summer/Fall): 285-314.

Hejeebu, Santhi, and Deirdre McCloskey. 2003. “Polanyi and the History of Capitalism: Rejoinder to Blyth.” Critical Review 16(1): 135-142..

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

Honeyman, Katrina. 2007. Child Workers in England, 1780-1820. Aldershot: Ashgate.

Hume, David. 1754-1755. The History of England. Vol. VI. 1778 ed. Indianapolis: Liberty Fund, 1983.

Hume, David. 1777 (1987). Essays Moral, Political and Literary. E. F. Miller, ed. Revised edition. Indianapolis: Liberty Fund.

Huppert, George. 1977. Les Bourgeois Gentilhommes: An Essay on the Definition of Elites in Renaissance France. Chicago: University of Chicago Press.

Huppert, George. 1999. The Style of Paris: Renaissance Origins of the French Enlightenment. Bloomington: Indiana University Press.

Innes, Stephen. 1988. “Introduction.” In Innes, ed. Work and Labor in Early America. Institute of Early American History and Culture , Williamsburg. Chapel Hill: University of North Carolina Press.

Innes, Stephen. 1994. "Puritanism and Capitalism in Early Massachusetts." Pp. 83-113 in J. A. James and M. Thomas, eds., Capitalism in Context: Essays on Economic Development and Cultural Change in Honor of R. M. Hartwell. Chicago: University of Chicago Press.

Isaacson, Walter. 2003. Benjamin Franklin: An American Life. New York: Simon and Schuster.

Keynes, John Maynard. 1937. “Some Economic Consequences of a Declining Population.” Galton Lecture to the Eugenics Society. February.

Kritzler, Edward. 2008. Jewish Pirates of the Caribbean. New York: Random House.

Lawrence, D. H. 1923. Studies in Classic American Literature. London and New York: Penguin, 1991.

Lepore, Jill. 2008. “The Creed: What Poor Richard Cost Benjamin Franklin.” The New Yorker Jan. 28: 78-82.

Macfarlane, Alan. 1987. The Culture of Capitalism. Oxford: Basil Blackwell.

Maddison, Angus. 2006. The World Economy. Comprising The World Economy: A Millennial Perspective (2001) and The World Economy: Historical Statistic (2003) bound as one. Paris: Organization for Economic Cooperation and Development.

Marx, Karl. 1867. Capital: A Critique of Political Economy. Vol. 1. F. Engels, ed. Trans. From 3rd German ed. by S. Moore and E. Aveling, 1887. New York: Modern Library, n.d.

Marx, Karl. 1867. Das Kapital. German edition, Zurück zum Gesamtverzeichnis Karl Marx/Friedrich Engels - Werke. Seitenzahlen verweisen auf: Karl Marx - Friedrich Engels - Werke, Band 23, S. 11-802, Dietz Verlag, Berlin/DDR 1962, at: http://www.mlwerke.de/me/me23/me23_000.htm

Mathias, Peter. 1973 (1979). "Credit, Capital and Enterprise in the Industrial Revolution." Journal of European Economic History 2: 121-143. Reprinted as pp. 88-115 in Mathias, The Transformation of England: Essays in the Economic and Social History of England in the Eighteenth Century. New York: Columbia University Press, 1979.

McCloskey, Deirdre N. 1975a. “The Economics of Enclosure: A Market Analysis.” Pp. 123-160 in E. L. Jones and William Parker, eds. European Peasants and Their Markets: Essays in Agrarian Economic History. Princeton: Princeton University Press.

McCloskey, Deirdre N. 1995a. “Allen’s Enclosure and the Yeoman: The View from Tory Fundamentalism.” Unpublished paper, available at deirdremccloskey.org.

McCloskey, Deirdre N. 1995b. “Once Upon a Time There Was a Theory.” Scientific American (Feb): 25 only.

McCloskey, Deirdre N., and John Nash. 1984. “Corn at Interest: The Extent and Cost of Grain Storage in Medieval England.” American Economic Review 74 (Mar): 174-187.

Mill, John Stuart. 1843. A System of Logic, Ratiocinative and Inductive. London: John W. Parker.

Mill, John Stuart. 1871. Principles of Political Economy and Taxation, Books IV and V. Donald Winch, ed. London: Penguin, 1970.

Mitch, David. 1992. Education and Economic Development in England. Princeton, N. J.: Princeton University Press.

Mitch, David. 1999. “The Role of Education and Skill in the Industrial Revolution." Pp. 241-279 in The British Industrial Revolution: an Economic Perspective, edited by Joel Mokyr. Boulder, Colorado: Westview Press. Mitch, David. 2003. “Human Capital.” In Mokyr, ed., Oxford Encyclopedia of Economic History.

Mitch, David. 2004. “Education and Skill of the British Labour Force.” Chp. 12 in Floud and Johnson, eds., The Cambridge Economic History of Modern Britain. Vol. 1: Industrialisation, 1700–1860. Cambridge: Cambridge.

Nee, Victor, and Richard Swedberg. 2007. “Introduction.” Pp. 1-18 in Nee and Swedberg, eds., On Capitalism. Stanford: Stanford University Press.

Novak, Michael. 2007. “Beyond Weber.” Pp. 220-238 in

Nee and Swedberg, eds. On Capitalism. Stanford: Stanford University Press.

Ogilvie, Sheilagh. 2004. "Guilds, Efficiency, and Social Capital: Evidence from German Proto-industry.” Economic History Review 57 (May): 286-333.

Oschinsky, Dorothea. 1971. Walter of Henley and Other Treatises on Estate Management and Accounting. Oxford: Clarendon Press.

Owen, Stephen. 1996. An Anthology of Chinese Literature, Beginnings to 1911. New York: Norton.

Postan, M. M. 1966. “England.” Pp. 549-632 in Postan, ed. The Cambridge Economic History of Europe. Vol. I. The Agrarian Life of the Middle Ages. Second ed. Cambridge: Cambridge University Press.

Rostow, W. W. 1960. The Stages of Economic Growth : A Non-Communist Manifesto. Cambridge: Cambridge University Press.

Roth, Guenther. 1987. “Introduction.” Pp. 1-24 in H. Lehmann and G. Roth, eds., Weber’s Protestant Ethic: Origins, Evidence, Contexts. Cambridge: Cambridge University Press.

Sandberg, Lars G. 1979. “The Case of the Impoverished Sophisticate: Human Capital and Swedish Economic Growth before World War I.” Journal of Economic History 39: 225-242.

Schultz, Theodore W. 1964. Transforming Traditional Agriculture. New Haven: Yale University Press.

Schumpeter, Joseph A. 1926 (1st ed. 1912; trans. 1934). The Theory of Economic Development. Cambridge: Harvard University Press.

Schumpeter, Joseph A. 1939. Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process. New York and London: McGraw-Hill.

Schumpeter, Joseph A. 1954. History of Economic Analysis. Elizabeth B. Schumpeter, ed. New York: Oxford University Press.

Sellar, Walter C., and R. J. Yeatman. 1931. 1066 and All That: A Memorable History of England. (Bound with And Now All This.) New York: Blue Ribbon Books, 1932.

Seneca, Lucius Annaeus. 62-65 C.E. Letters from a Stoic (Epistulae Morales ad Lucilium). Selected and trans. R. Campbell. London: Penguin, 1969.

Siegel, Jacob S. 2002. Applied Demography: Applications to Business, Government, Law and Public Policy. PLACE: Emerald Group Publishing.

Smith, Adam. 1759, 1790. The Theory of Moral Sentiments. Glasgow Edition. Oxford University Press. D. D. Raphael and A. L. Macfie, eds. Reprinted Indianapolis: Liberty Classics, 1976, 1982.

Smith, Adam. Essays on Philosophical Subjects. W. P. D. Wightman and J. J. Bryce, eds. Glasgow Edition. Oxford: Oxford University Press, 1980.

Tronto, Joan C. 1993. Moral Boundaries: A Political Argument for an Ethics of Care. New York, London: Routledge.

Tunzelmann, Nick von. 2003. “Technology.” In Mokyr, ed. Oxford Encyclopedia of Economic History.

Tusser, Thomas. 1588. Five Hundred Points of Good Husbandry. Geoffrey Grigson, ed. Oxford: Oxford University Press, 1984.

Wallerstein, Immanuel. 1983 (1995). Historical Capitalism (1983). Bound with Capitalist Civilization (1995). London: Verso.

Weber, Max. 1905-06. The Protestant Ethic and the Spirit of Capitalism. Trans. T. Parsons 1930 from the 1920 German edition. New York: Scribner's, 1958.

Weber, Max. 1923 (1927). General Economic History [Wirtschaftsgeschichte]. Trans. Frank Knight. Glencoe, Illinois: The Free Press. New Brunswick, NJ: Transaction Books, 1981.