Economic History Association

Bionomics: The Inevitability of Capitalism. by Michael RothschildReview by: Joel MokyrThe Journal of Economic History, Vol. 52, No. 2 (Jun., 1992), pp. 524-525Published by: Cambridge University Press on behalf of the Economic History AssociationStable URL: http://www.jstor.org/stable/2123166 .Accessed: 21/05/2012 08:58

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524 Reviews of Books

income tax is characterized as burdensome, but it is unclear in what manner. Veseth does not offer any quantitative evidence, but a casual inspection of government data reveals that the income tax was rarely more than 20 percent of the central government's budget and usually closer to 10 or 15 percent. Furthermore, the income tax was overwhelmingly borne by the wealthy (at quite low rates) at a time when most other revenue sources were quite regressive. Third, Veseth notes a bias in the Victorian income tax: depreciation was not tax deductible and therefore might have provided an incentive to hold on to older equipment. This is an interesting point but here, as with the expenditure biases induced by Florence's catasto tax reform, the issue is not the potential bias but the actual effect. Given the low rates of the British income tax, it is quite possible that the effect of the bias was trivial. Thus, I remain unconvinced that Victorian tax and debt policies provide an important explanation of late Victorian growth problems.

In Veseth's analysis of the post-World War II U.S. economy, he brings to bear a wider reading of the relevant literature and more evidence than he did in his treatment of Renaissance Florence and Victorian Britain. Yet-considering the detail and depth of his secondary sources-his descriptions of the demographic, financial, technical, and communications structural changes are distressingly vague. For example, according to his own methodology it should have been possible to carefully detail the links between the evolving structural shifts of the 1960s and 1970s and the appearance of federal deficits in the late 1970s; but there is no such careful mapping. He is best on his home ground: delineating the achievements and problems of recent reforms of the Social Security system. Still more interesting in his use of the ideology and political economy of California's Proposition 13 referendum to explain the curious economics and politics of Reagan's federal tax reforms of the early 1980s, which accelerated the federal deficit to unprecedented peacetime levels.

In the end, though parts of his analysis of public finance in the 1980s are insightful, Veseth's reading of economic history is too narrowly focused and empirically imprecise. If the longer-term movement of economic history is to have a usable present, it can only come from careful specification of the experiences to be studied, a thorough immersion in the literature of the period, and a precise detailing of the chains and webs of historical developments.

MICHAEL EDELSTEIN, Queens College and The Graduate School, CUNY

Bionomics: The Inevitability of Capitalism. By Michael Rothschild. New York: Henry Holt, 1990. Pp. xv, 423. $24.95.

When outsiders venture into well-trodden intellectual fields, two responses often occur: the insiders latch on to the lack of formal training to dismiss the work of laypersons as the trivial product of an interloper or a crackpot; or, less frequently, they acknowledge that the newcomer has brought a breeze of fresh air into old debates that have gone stale, and then go about their business. It is rare indeed that scholarship is transformed by total outsiders-the sociology of science and indeed human nature itself are pitted against it.

This is a book on economics by an outsider. It is wide-ranging, bold, and original. Michael Rothschild (not to be confused with the well-known theorist by the same name) is a lawyer and businessman, who has ventured into economic theory and economic history to offer a new interpretation of practically everything: markets, competition, technology, economic development, poverty, the roles of bureaucracies and corpora- tions-everything is fair game. Compared to the ambition and sweep of Rothschild, Douglass C. North and Eric L. Jones look like obscurantist antiquarians.

Yet the overall message of this iconoclastic book is worth listening to, because what it proposes is a truly historical view of economics. The key to understanding how an

Reviews of Books 525

economy operates, Rothschild maintains, is an understanding that it is an evolving system ruled by Darwinian selection processes. He rejects the mechanical analogies of neoclassical economics as irrelevant, and instead searches for a metaphor that will help him to understand long-run historical economic change. He has found that metaphor in biology. The economy, in Rothschild's view is an "ecosystem" in which the rate of change is directly related to the degree of diversity present. Technological change is envisaged using niche theory, and institutions are expected to survive depending on their relative contribution to economic performance or "fitness" (hence the subtitle). The dynamics of this ecosystem is represented by punctuated equilibria, which was recently developed by evolutionary biologists and system analysts. This approach, if adopted widely, could yield rich insights in the understanding of economic institutions and technological progress. An evolutionary approach, by showing how the present is shaped from the past by a combination of accidental innovations and selection mechanisms, can come to grips with the problems of chance versus destiny and path dependency versus choice under constraints in the development of technology and institutions. In point of fact, many scholars agree on this-and Rothschild is less lonely than he supposes. Economists such as Jack Hirshleifer, Douglass North, Paul David, Geoffrey Hodgson, and Richard Nelson have for a long time been advocating this approach, and a brand new journal, The Journal of Evolutionary Economics has appeared, dedicated to the pursuit of this analogy.

Rothschild has read an enormous amount and educated himself in a host of unrelated fields, especially in biology and business. Readers of this Journal will scarcely have to be persuaded that a thorough knowledge of economic history is essential to anyone who wants to take economics out of the fetters of static analysis. It is therefore unfortunate that Rothschild's knowledge of history and economic history is highly deficient, a weakness that blunts the attacks that this otherwise thoughtful and knowledgeable author launches against economics. Unkind critics might exploit some of the more egregious errors to discredit the entire approach as the work of a dilettante. Most Englishmen around 1700, maintains Rothschild, led lives of "perfect stability" without travelling more than a few miles from their homes and in abject poverty. "Progress [before the Industrial Revolution] was a spiritual matter, not a practical one" (p. 20). The statement that "except for Gutenberg's invention of movable type, scant scientific or technological progress had been made since the decline of Greece 1700 years earlier" (p. 8) would be grounds for academic dismissal at my institution, as is the startling statement that Marx and his followers accepted Malthus's predictions (p. 184).

Yet such howlers are but superficial blemishes on a serious idea, and it would be a pity if the book were to be dismissed for frivolous reasons. It is full of provocative and interesting insights. The author's description of technological change at Darwin chicken farms, and his emphasis on inter-firm cooperation and cross-fertilization makes for compelling reading for anyone interested in the history of technology. Beyond that, the plea to introduce an explicit evolutionary dimension into economics to make it better in coping with non-market phenomena is surely timely, even if it is not as revolutionary as Rothschild supposes. Yet the conditio sine qua non of an evolutionary approach to economics is to know and use more history. Just as one cannot study evolutionary biology without knowing something about fossils, evolutionary economics is by definition historical and requires a full and detailed knowledge of history. By not living up to that requirement, Rothschild has weakened his case. Others, however, will pick up the story where he left off, and help create the new economics about which he and many others dream.

JOEL MOKYR, Northwestern University

Letters of Eugene V. Debs (3 volumes). Edited by J. Robert Constantine. Urbana: University of Illinois Press, 1990. Pp. lxxxvii, 591.

For most Americans living at the turn of the twentieth century, Eugene Victor Debs was "Mr. Socialism." During the three decades between 1895 and 1925, the period