1 From ‘The First Book, Entitled Clio,” The History of Herodotus, trans. George Hawlinson (New York: D. Appleton and Company, 1882), 1:121, 122.
2. Irving B. Kravis et al., A System of International Comparisons of Gross Product and Purchasing Power (Baltimore and London: Johns Hopkins University Press for the World Bank, 1975), especially p. 8.
3. New York: Collier, 1962, p. 476 (6th ed., London: J. Murray, 1872). For an analysis of the power of theories, see Anatol Rapoport, “Explanatory Power and Explanatory Appeal of Theories,” Synthese 24 (1972):321-42.1 am thankful to Russell Hardin for advice on the power of theories.
4. The Philosophy of Inductive Sciences (New York: Johnson Reprint, 1967), 2:65 (3rd ed., London: Parker, 1858); see also Paul R. Thagard, “The Best Explanation: Criteria for Theory Choice,” Journal of Philosophy 75 (February 1978):76-92. I am thankful to Daniel Hausman for calling the concept of consilience to my attention and for his penetrating criticisms of an earlier draft of this book, and to Stephen Brush for providing helpful references on this subject.
1. Cambridge: Harvard University Press, 1965, 1971. The 1971 version differs from the first 1965 printing only in the addition of an appendix. Some readers may have access to the first paperback edition published by Schocken Books (New York: 1968), which is identical to the 1965 Harvard version. Readers whose first language is not English may prefer Die Logik des Kollektiven Handelns (Tubingen: J. C. B. Mohr [Paul Siebeck], 1968), or Logique de l Action Collective (Paris: Presses Universitaires de France, 1978). Translations in Japanese (from Minerva Shobo) and in Italian (from Feltrinelli) are forthcoming.
2. There is a logically possible exception to this assertion, although not of wide practical importance, that is explained in footnote 68 of chapter 1 of The Logic, pp. 48-49.
3. David J. McDonald, Union Man (New York: Dutton, 1969), p. 121, quoted in William A. Gamson, The Strategy of Social Protest (Home wood, 111.: Dorsey Press, 1975), p. 68.
4. The Logic, p. 85.
5. This means in turn that sometimes individual corporations of substantial size can be political combinations with significant lobbying power. On less than voluntary corporate contributions, see J. Patrick Wright, On a Clear Day You Can See General Motors (Grosse Pointe, Mich.: Wright Enterprises, 1979), pp. 69-70.
6. The Logic, pp. 132-67.
7. Erik Lindahl, “Just Taxation—A Positive Solution,” in Richard Mus-grave and Alan T. Peacock, eds., Classics in the Theory of Public Finance (London: Macmillan, 1958), pp. 168-77 and 214-33. In a Lindahl equilibrium, the parties at issue are each charged a tax-price for marginal units of the public good that is equal to the value each places on a marginal unit of the good. When this condition holds, even parties that have vastly different evaluations of the collective good will want the same amount. It would take us far afield to discuss the huge literature on this matter now, but it may be helpful to nonspecialists to point out that in most circumstances in which the parties at issue expect Lindahl-type taxation, they would have an incentive to understate their true valuations of the collective good, since they would get whatever amount was provided however low their tax-price. There is an interesting literature on relatively subtle schemes that could give individuals an incentive to reveal their true valuations for public goods, thereby making Lindahl-eqüilibria attainable, but most of these schemes are a very long way indeed from practical application.
8. See my primitive, early article, “The Principle of ‘Fiscal Equivalence,”’ American Economic Review, Papers and Proceedings 59 (May 1969):479-87.
9. See, for a leading example, Martin C. McGuire, “Group Segregation and Optimal Jurisdictions,” Journal of Political Economy 82 (1974): 112-32.
10. See most notably Wallace Oates, Fiscal Federalism (New York: Har-court Brace Jovanovich, Inc., 1972).
11. For very early work on the limited information voters may be expected to have, see Anthony Downs’s classic Economic Theory of Democracy (New York: Harper, 1957).
12. I am indebted to Russell Hardin for calling this point to my attention. For a superb and rigorous analysis of the whole issue of collective action, see Hardin’s Collective Action (Baltimore: The Johns Hopkins University Press for Resources for the Future, forthcoming).
13. There is another consideration that works in the same direction. Consider individuals who get pleasure from participating in efforts to obtain a collective good just as they would from ordinary consumption, and so are participation altruists (described in the first footnote in this chapter). If the costs of collective action to the individual are slight, the costs of consuming the participation pleasure or satisfying the moral impulse to be a participant are unlikely to prevent collective action. With the diminishing marginal rates of substitution that are described in the footnote, however, the extent of collective action out of these motives will decrease as its price rises.
14. The Logic, pp. 5-65.
15. The assumption that there are two firms that place an equal value on the collective good is expositionally useful but will not often be descriptively realistic. In the much more common case, where the parties place different valuations on the public good, the party that places the larger absolute valuation on the public good is at an immense disadvantage. When it provides the amount of the collective good that would be optimal for it alone, then the others have an incentive to enjoy this amount and provide none at all. But the reverse is not true. So the larger party bears the whole burden of the collective good. (The party that places the larger value on the collective good has the option of trying to force the others to share the cost by withholding provision, but it is also at a disadvantage in the bargaining because it will lose more from this action than those with whom it is bargaining.) Thus a complete analysis of the likelihood of collective action must consider the relative sizes or valuations of the collective good of the parties involved as well as the size of the group; see the references in the next note on “the exploitation of the great by the small” and other consequences of intragroup variations in valuations of collective goods.
If the corner solution with the larger party bearing all the burden does not occur, and both firms provide some amount of the collective good under Cour-not assumptions, then the two firms will tend to be of exactly the same size, as in the example chosen for expositional convenience in the text. Assume that each firm has to pay the same price for each unit of the collective good and that they have identical production functions for whatever private good they produce. Since they must, by the definition of a pure collective good, both receive the same amount of it, they can both be in equilibrium under Cournot assumptions only if their isoquants have the same slope at the relevant point. That is, the isoquants describing the output that results from each combination of the private good and public good inputs for each of the firms must have the same slope if the two firms enjoying the same amount of the collective good are each purchasing some of it at the same time. Under my identical production function and factor price assumptions, the two firms must then have exactly the same output or size.
Similarly remarkable results hold for consumers who share a collective good. Either the consumer that places the higher absolute valuation on the public good will bear the entire cost or else they will end up with equal incomes! When both consumers get the same amount of a collective good, they both can be continuing to purchase some under Cournot behavior only if they both have the same marginal rate of substitution between the public good and the private good, and thus (with identical utility functions and prices) identical incomes. Unless the two consumers have identical incomes in the beginning, there is inevitably exploitation of the great by the small. One possibility is that the richer consumer will bear the whole cost of the collective good. The only other possibility with independent adjustment is that the public good is so valuable that the richer consumer’s initial purchases of it have such a large income effect on the poorer consumer that this poorer consumer ends up just as well off as the initially richer consumer, so both buy some amount of the collective good in equilibrium. I have profited from discussions of this point with my colleague Martin C. McGuire. For a stimulating and valuable, if partially incorrect, argument along related lines, see Ronald Jeremías and Asghar Zardkoohi, “Distributional Implications of Independent Adjustment in an Economy with Public Goods,” Economic Inquiry 14 (June 1976):305-08.
16. The Logic, pp. 29-31, and Mancur Olson and Richard Zeckhauser, “An Economic Theory of Alliances,” Review of Economics and Statistics 47 (August 1966):266-79, and my introduction to Todd Sandier, ed., The Theory and Structure of International Political Economy (Boulder, Colo.: Westview Press, 1980), pp. 3-16.
17. No strategic interaction is observed among firms in perfectly competitive industries or among buyers of automobiles, for example. In such situations no one finds that his own interests or choices depend on the choices of any other individual in the group or industry, so they have no incentive to bargain with one another. A sufficiently large subset, if it could obtain the collective good of a bargaining organization for the subset, would have an incentive to bargain with others in the group. But when genuinely large groups are at issue, the size of the subset that is large enough to have an incentive to bargain is itself so large that the collective good of the bargaining organization for the subset cannot be obtained without selective incentives. Another way of stating the point is to say that the bargaining costs of getting the bargaining organization for the subset are themselves prohibitive, so that any further bargaining costs are irrelevant when group size increases still further, i.e., to the point that a still bigger subset would be needed. This indicates that approaches to genuinely large or “latent” groups that focus on bargaining costs and strategic interaction are not getting at the essence of the matter.
1. Niccolo Machiavelli, The Prince, trans. George Bull (Baltimore: Penguin Books, 1961), p. 51.
2. Edward Shorter and Charles Tilly, Strikes in France, 1830-1968 (London and New York: Cambridge University Press, 1974), pp. 154-55.
3. Max Weber, Theory of Social and Economic Organization, trans. Talcott Parsons and A.M. Henderson, ed. Talcott Parsons (New York: Oxford University Press, 1947), p. 318.
4. 1 am thankful to Peter Murrell for help on this point.
5. Gordon Tullock and Anne Krueger are to the best of my knowledge the pioneers in this literature. For reprints of their initial articles and especially pertinent articles by Keith Cowling and Dennis Mueller, Richard Posner, and Barry Baysinger, Robert B. Ekelund, Jr., and Robert D. Tollison, plus other useful papers, see James M. Buchanan, Robert D. Tollison, and Gordon Tullock, eds., Toward a Theory of the Rent-Seeking Society (College Station, Tex.: Texas A. & M. University Press, 1980).
6. A measure that would reduce economic efficiency if introduced in a Pareto-efficient society could conceivably increase efficiency in a society with prior distortions. See R. G. Lipsey and R. K. Lancaster, “The General Theory of the Second Best,” Review of Economic Studies 24, no. 63:11-32.
7. One of the questions left aside was raised by the concept of “mass movements” fashionable among sociologists in the 1950s and 1960s. This concept emphasizes that membership in organizations that are smaller than the state (and presumably small or subdivided enough so that there is social interaction among members) can reduce alienation and increase social stability. In my judgment there is an important element of truth in this concept, and I have found it useful in some of my own writings, particularly those cited in note 21 below. But this element of truth is more than offset in many societies by the contribution these organizations make to divisiveness and ungovernability, as is explained in the remainder of the discussion leading to Implication 4. The prospective publications that will relate the point from the literature on mass movements to the argument in this book, and the reasons that integration is omitted from this book, are set out in note 21.
8. Again, this qualification is introduced because of the possibility of “second-best” problems. It is, for example, possible that the monopolization of a previously competitive but highly polluting industry could increase economic efficiency if there were no effluent fee on the pollution. In this example, the logic is quite simple: the industry when competitive had an output that was inefficiently large because the social cost of its pollution is neglected by the competitive firms. Since monopolists have an incentive to restrict output, the loss from pollution would be reduced by monopolization, and if the pollution were serious enough this could be of greater value than the market output forgone.
9. Arnold Harberger, “Monopoly and Resource Allocation,” American Economic Review 44 (May 1954):77-87. See also Harvey Leibenstein on X-efficiency, Inflation, Income Distribution and X-Ejficiency Theory (London: Croom Helm; New York: Harper and Row, Barnes and Noble, 1980).
10. To the best of my recollection, in a guest lecture at Princeton University in the 1960s.
11. See Dennis C. Mueller’s concluding essay in the book he edited on The Political Economy of Growth (New Haven: Yale University Press, 1983).
12. Kenneth Arrow, Social Choice and Individual Values, 2d ed. (New Haven: Yale University Press, 1963). For a more accessible proof of Arrow’s theorem and a survey of related issues, see Dennis Mueller, Public Choice (Cambridge: At the University Press, 1979).
13. See, for example, Morris Fiorina, “The Decline of Collective Responsibility in American Politics,” Daedalus 109 (Summer 1980):25-46; this issue has the title The End of Consensus. See also the writings of E. E. Schatt-schneider, Party Government (New York: Farrar and Rinehart, 1942), Politics, Pressures, and the Tariff: A Study of Free Private Enterprise in Pressure Politics, As Shown in the 1929-1930 Revision of the Tariff (Hamden, Conn.: Archon Books, 1963), The Semisovereign People: A Realistic’s View of Democracy in America (New York: Holt, Rinehart, and Winston, 1960), and The Struggle for Party Government (College Park, Md.: University of Maryland, 1948).
14. See note 12 above.
15. ‘ ‘How Are Cartel Prices Determined?” Journal of Industrial Economics 5 (November 1956): 16-23.
16. Industrial Market Structure and Economic Performance (Chicago: Rand McNally, 1970), p. 161. I am thankful to Jean-Frangois Hennart for calling this and the previous reference to my attention.
17. M. A. Adelman of M.I.T. made this type of argument in a seminar a few years ago at Resources for the Future in Washington. Of course, Adelman recognized that some nations with their own nationalized oil companies were not covered by the argument.
18. William Baumol, John C. Panzar, and Robert Willig, Contestable Markets and the Theory of Industry Structure (San Diego: Harcourt Brace Jovanovich, 1982); see also Baumol’s “Contestable Markets: An Uprising in the Theory of Industry Structure,” American Economic Review 72 (March 1982):1-15.
19. See Avinash Dixit, “A Model of Duopoly Suggesting a Theory of Entry Barriers,” Bell Journal of Economics 10 (Spring 1979):20-32, and “The Role of Investment in Entry-Deterrence,” Economic Journal 90 (March 1980):95-106.
20. See Richard Schmalensee, “Economies of Scale and Barriers to Entry,” Journal of Political Economy 89 (December 1981): 1228-38.
21. “Rapid Growth as a Destabilizing Force,” Journal of Economic History 23 (December 1963):529-52; “Agriculture and the Depressed Areas,” Journal of Farm Economics 46 (December 1964):984-88; “Economics, Sociology, and the Best of All Possible Worlds,” The Public Interest 12 (Summer 1968):96—118; and the introduction and epilogue (coauthored) to The No Growth Society, edited with Hans Landsberg (New York: W. W. Norton, 1974).
One reason that I have not in this book gone into the social costs that unprecedented rapid growth can sometimes have is that it would make the present theory much more difficult to refute. The theory here makes predictions about economic growth as it is conventionally defined and (for recent periods) measured in the national income statistics issued by the governments of most developed countries. I argue in “The Treatment of Externalities in National Income Statistics” (in Lowdon Wingo and Alan Evans, eds., Public Economics and the Quality of Life [Johns Hopkins University Press for Resources for the Future and Centre for Environmental Studies, 1977], pp. 219-49) that the national income statistics often do not properly take account of various environmental and social side effects. These statistics nonetheless offer an objective and generally unbiased test of the present theory and in addition provide far better insight into the progress of societies and the well-being of people in them than many people realize.
Another reason why I have omitted the social disruptions that rapid economic growth can occasionally cause, and the contributions (discussed in note 7 above) that some special-interest groups can sometimes make to social stability, is that the accumulation of these groups in the long-stable societies that are a principal focus here creates the ungovernability discussed in connection with Implication 4 and also decidedly destabilizing frustrations, as more and more people come to realize that their societies are very far from being as productive (or as fair) as they could be. Thus the inclusion of the matters I have omitted does not lead to any major change in any of the conclusions here.
A final reason for excluding these matters is that I have discussed most of them elsewhere, in the publications so tediously cited above, and I will relate these and other issues to the present argument in forthcoming books. The sometimes disruptive effects of rapid growth and the relation of the economy and economic theory generally to social, political, and environmental issues will be discussed in “Beyond the Measuring Rod of Money;” this is a book that I very nearly decided to publish in the 1970s, but I decided this subject was so vast that it needed years of additional thought—I hope to finish revising it soon after this book is published. The relationship between the development of special-interest groups and other institutions and the development of stability in less developed countries will, if all goes well, be the subject of still another book. This last will be an expansion of an unpublished paper I wrote and circulated in the early 1960s under the title “Economic Growth and Structural Change” (and more recently in a revised form under the title “Diseconomies of Scale in Development”). It will emphasize the special problems of instability and inefficiency of large-scale organizations in poor societies, both now and before the Industrial Revolution.
I apologize for leaving out certain considerations that some readers may feel would affect their assessment of the importance of the theory in the present book, but surely this book is sweeping enough as it is.
22. Even if the innovation in this firm is a labor-saving innovation, a sufficiently powerful union could in principle take advantage of it to make all workers better off; it could appropriate a portion of the savings from the innovation for the workers and offer as much of this portion as was needed as an inducement to the number of workers who were no longer needed to seek employment elsewhere. The workers might do still better if the innovation in the firm were a capital-saving innovation, like the less expensive but superior computers that have been developed recently. Workers as a whole could lose from an economy-wide labor-saving innovation. The fact remains that a sufficiently powerful union could, if bargaining costs and delays are ignored, serve its members’ interests by encouraging the firm with which it bargains to adopt any innovations that increased the total surplus available for profits and wages in the aggregate.
23. This special case occurs when there is such an underutilization of labor in relation to the amount of other factors that the average product of labor would increase if another laborer were added. But the profit-maximizing firm could never be in this range.
24. Sir John Hicks, “Structural Unemployment and Economic Growth: A ‘Labor Theory of Value’ Model,” in Mueller, The Political Economy of Growth.
25. Strictly speaking, Hicks’s proof applies only to a two-sector economy with labor as the only factor of production. The essence of this argument is, however, applicable to economies with any number of industries and factors of production.
26. To avoid complications with income effects that are of no importance here, I assume that we are speaking of an income-compensated demand curve.
27. They would not, however, necessarily want the number of workers or other sellers to fall below the point where the average product of the factor was at a maximum.
28. I am thankful to Christopher Clague for emphasizing the magnitude of the other factors involved here. These are illustrated by the endogamous rules of some groups that have average or below-average levels of wealth, power, and prestige.
29. Charles Schultze, The Public Use of Private Interest (Washington, D.C.: The Brookings Institution, 1977).
30. Morris Fiorina and Roger Noll, “Voters, Legislators and Bureaucracy—Institutional Design in the Public Sector,” American Economic Review, Papers and Proceedings 68 (May 1978):256-60.
1. Gustav Stolper et al., The German Economy, 1870 to the Present (New York: Harcourt Brace and World, 1967), pp. 258-61.
2. Richard E. Caves and Masu Uekusa, Industrial Organization in Japan (Washington, D.C.: The Brookings Institution, 1976).
3. I am grateful to Gudmund Hernes for educating me on the substantial significance of the encompassing of special-interest organizations in postwar Germany.
4. For a good description and analysis of French growth from a more orthodox perspective, see J.-J. Carre, P. Dubois, and E. Malinvaud, La Croissance Eranqaise, which is also available in English translation as French Economic Growth, trans. John P. Hatfield (Stanford: Stanford University Press, 1975). I am grateful to Edmond Malinvaud for taking an early, primitive version of the present argument quite seriously and offering a severe criticism of it. I do not think Malinvaud’s criticisms apply to the present book.
5. The need to draw also upon another part of the present theory to explain French experience is evident from the useful criticism of an early version of the present argument written by J.-C. Asselain and C. Morrisson, “Economic Growth and Interest Groups: The French Experience,” in Dennis C. Mueller, ed., The Political Economy of Growth (New Haven: Yale University Press, 1983). Asselain and Morrisson show that instability and invasion by themselves are not nearly sufficient to explain the whole story of the evolution of special-interest groups and growth rates in France. Valuable as Asselain’s and Morrisson’s criticism is, I do not think it does full justice to the extent to which instability, invasion, and ideological division have slowed the development of French labor unions, and since the largest part of the national income is paid in wages to labor, this is quantitatively very important. There is much to be said for Asselain’s and Morrisson’s emphasis on how economic adversity can facilitate special-interest organization; but recessions also can weaken special-interest organizations, as the recent experience of American and British labor unions shows, and boom conditions are often periods of exceptional growth of such organizations (e.g., the growth of American labor unions in both world wars). In view of the generally ambivalent relationship between economic progress or retrogression and special-interest organization, I would continue to attribute a significant role to instability and invasion—and the wide ideological divisions that go with them—in retarding the development of special-interest organizations. It is difficult to see how any French economic organization with a massive clientele would not have been cowed by, say, the Nazi hegemony and occupation, or that any such organization would not have been handicapped at times by the intense ideological divisions in French society.
6. See, for example, M. W. Kirby, The Decline of British Economic Power Since J870 (London: George Allen and Unwin, 1981).
7. Relative rates of growth must be used in this argument because the rates of growth of the slowest growing and the fastest growing countries alike were faster in the 1950s and 1960s than in any previous period, and far higher than during the Industrial Revolution. One explanation of this is the apparently increasing pace of scientific progress in the modern world. This progress is essentially exogenous to a single national economy like the British economy; it depends on the advance of science over the world as a whole rather than in any single country. Many advances in basic science in any case may often be largely independent of current economic developments and of the institutions on which the present theory focuses. In view of the importance of developments like the world’s rate of basic scientific advance that are exogenous to my theory, it does not predict absolute rates of growth. Since all countries have access to essentially the same basic scientific knowledge, the relative rates of growth of different countries in any one period can depend to a great degree on the institutions and policies of that country, so the present theory can therefore generate predictions about relative rates of growth.
8. Verlag Dokumentation (Pullach bei Munchen, 1973).
9. Peter Murrell, “The Comparative Structure of the Growth of West German and British Manufacturing Industry,” in Mueller, The Political Economy of Growth.
10. Some observers are taken by the idea that Germany and Japan have grown so rapidly since World War II because, it is supposed, they were fortunate to have their existing factories and machines destroyed by bombing and other combat, and therefore had no choice but to invest in the most modern plant and equipment. Britain, by contrast, is supposed to have been cursed with a large inheritance of capital that was not up-to-date. A moment’s reflection will, however, make it clear that a profit-maximizing firm that owns plant and equipment that is not up-to-date will be either better off for owning the old capital or alternatively no worse off than if it had no capital left at all. If the use of the old capital will generate receipts in excess of average variable costs, the firm will profit from using the old capital and be better off than if it did not own this capital. Should the use of the capital not generate a return above average variable costs, the profit-maximizing firm will not use it, and will be in essentially the same position as it would have been had this old capital been destroyed. The most that bombing of old capital could do is to save a country some wrecking costs of capital goods it needed to tear down, and this hardly could be quantitatively important. Everyday observation also confirms that it is not an advantage to be forced to start from scratch. The poorest developing countries certainly do not have a lot of old machinery and factories, yet most of them are not growing very rapidly. Germany and Japan invested so heavily in the 1950s and 1960s as compared with Britain that they must have more outdated capital goods than the British do, but yet they continue to grow faster than the British. Thus nations are not being irrational when they regard the bombing of their industry as a hostile act and try to defend themselves against such bombing.
11. If we assume that the percentage of income saved rises with income, and that there are no inflows or outflows of capital, a country with a hardworking population will save and invest more than a country that is identical to it in everything except industriousness. It will accordingly grow faster. I am thankful to Tatsuo Hatta and I. M. D. Little for calling this and other possible connections between industriousness and growth to my attention.
12. Samuel Brittafi, “How British Is the British Sickness?” Journal of Law and Economics 21 (October 1978):245-68.
13. Ibid., table 9, p. 254.
14. David Smith, “Public Consumption and Economic Performance,” National Westminster Bank Quarterly Review, November 1975, pp. 17-30.
15. David S. Landes, The Unbound Prometheus (Cambridge: At the University Press, 1969), pp. 39-122. These quotations are taken from widely scattered sections of chapters 2 and 3.
16. I am grateful to Daniel Patrick Moynihan for reminding me of the purpose Smith had when using this expression: “To found a great empire for the sole purpose of raising up a people of customers, may at first sight appear a project only for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers” (Wealth of Nations [New York: Modern Library, 1937], p. 579).
17. Christopher Hill, The Century of Revolution, 1603-1709 (New York: W. W. Norton, 1961), and J. H. Plumb, The Growth of Political Stability in England, 1675-1725 (London: Macmillan, 1967).
18. See chapter 4, “Orthodox Theories of State and Class,” in The Logic, pp. 98-110.
19. See, for example, Mancur Olson, “The Principle of Fiscal Equivalence,” American Economic Review, Papers and Proceedings 59 (May 1969):479-87 and Martin C. McGuire, “Group Segregation and Optimal Jurisdictions,” Journal of Political Economy 82 (January/February 1974): 112-32.
20. Cambridge: At the University Press, 1981.
21. One need not agree with George Bernard Shaw “that all professions are conspiracies against the laity” (The Doctor’s Dilemma, 1906), for one to believe that the honored place held by the professions in modern society, and
the fact that most intellectuals are in the professions, lead many to neglect their cartelistic aspects.
22. The ruptures of medieval class patterns and barriers that apparently have been due to the sweeping changes in technology and modes of life since the onset of the Industrial Revolution suggest an intriguing extension of the present theory. If there are sufficiently drastic and rapid changes in an economy, so that utterly new industries, occupations, and modes of living rapidly arise, the existing distributional coalitions (which make decisions in the relatively slow fashion described in Implication 6) may find the new activities beyond their scope and control. Peter Murrell’s finding that new industries are less likely to be controlled by distributional coalitions than old ones also calls attention to this possibility. Thus when economic growth is not only rapid but also characterized by large discontinuities, it could tend to bypass existing special-interest groups and leave them relatively less important in the society than previously. This could in the extreme even offset the accumulation of the distributional societies described in Implication 2; drastic economic instability as well as political instability can at times weaken special-interest organizations. Although extremely rapid and discontinuous growth introduces some of the social costs discussed in notes 7 and 21 in chapter 3, it is nonetheless worth looking into the possibility that public policies occasionally could be designed to promote exceptionally discontinuous and rapid growth partly because this would reduce the significance of distributional coalitions and the social rigidities they help to engender. Such policies would most often be feasible for poor developing societies that can transform their technologies by borrowing those already developed in more prosperous societies. Eventually, if time permits, I hope to examine this possible extension of the theory in a detailed way, or alternatively to provoke others to do so. The importance of this extension is due partly to the possibility that it could illuminate a way of introducing an economic and possibly quite desirable form of instability that could delay or prevent the development of institutional rheumatism.
23. The evidence that there is greater sensitivity to certain class or group distinctions and barriers in Britain than in various comparable societies is unfortunately mainly informal and anecdotal rather than quantitative. But there are mountains of casual evidence on this point, and the evidence and perceptions of British observers appear to be in close accord with those of foreign visitors to Britain. One interesting example of this is the distinctive response of British commentators on the earliest versions of the present argument, written before the implications of the theory for class and group barriers were apparent to me. Most British commentators, however generous they might be, were quick to point out that my argument did not take account of the special characteristics of one or another of the British social classes, such as the alleged bloody-minded-ness of the British working class or the allegedly aloof and anticommercial
attitudes of the British upper classes, or of the British class system as a whole. At first I resisted these criticisms as only ad hoc arguments; I foolishly overlooked the fact that not a single commentator from anywhere made any similar comments about any other country, and even somehow neglected memories from my own time as an American undergraduate at Oxford—which memories strongly supported my British critics’ contentions that the British class system was distinctive and harmful to British economic growth. Finally I realized that, if my argument was right, the British critics who pointed out that one had to take account of the class system also had to be right, and I then generalized my theory. Once the theory was generalized to cover social rigidities, it was almost inevitable that the additional application of it that is set out in chapter 6 would come to mind. If my theory as generalized has any value, much of the credit is due to my many British friends and critics.
Massive and consistent as the casual evidence that there is a distinctive class system in Britain seems to me to be, it is nonetheless useful to seek quantitative and systematic evidence as well. A consensus among observers obviously has meaning, but the perceptions of casual observers do not have the precision and ready comparability that is desirable. On the other hand, quantitative evidence of an incomplete or inadequate kind should not necessarily be given more weight than a vast amount of casual evidence.
Unfortunately, the types of quantitative studies that are now available do not provide appropriate tests of the hypothesis about social exclusion that my theory generates. One reason is that this hypothesis relates to social exclusion or discrimination but does not claim to explain any correlation between the status of parents and children that is due to different-sized legacies of human and other capital. As the application of the theory in chapter 6 should make clear, my theory, if correct, explains any systematic tendency to exclude, or to discriminate against the actual capabilities of any group or class of adults in a society; it does not, however, explain any differences in capabilities that are due to differences in upbringing and educational opportunities, except to the extent that these differences in turn are explained by the impact of the distributional coalitions in the parents’ generation on the distribution of income. The quantitative studies of social mobility that exist now relate the social prestige of the occupations of fathers to the social prestige of the occupations of their sons. To the extent that the social prestige of the occupations that sons practice is due to the amount and kind of human capital they acquired, it is generally not explained by my theory.
A second reason why the existing quantitative studies do not provide a good test of my argument about social involution is that these studies consider social mobility from one generation to another, and the majority of the distributional coalitions in Britain and other Western countries are not strictly multi-generational. That is, most of them do not restrict membership in the coalition to their own offspring. The Indian and South African distributional coalitions considered in chapter 6 do this; so do some European coalitions such as the nobility and certain labor unions, but so far they appear to be less common in the West than single-generation coalitions. To the extent that membership in distributional coalitions is not passed from one generation to another, the exclusion and discrimination inherent in these coalitions will not be captured by studies of the degree of association between the occupational prestige of fathers and sons.
A third reason why the studies of the association between the occupational prestige of fathers and sons do not offer a sufficient test of the present theory is that they leave out so much: differences in accent, dress, or style across different social groups; the role of inherited fortunes and titled aristocracies; the degree of resentment faced by uninvited entrants to established occupations or industries; the extent to which people are conscious of or sensitive about their social or class position; attitudes toward business; and attitudes toward en-trepreneurship (which probably leads to the most dramatic changes in so-cioeconomic position). One measure of the significance of some of these variables that the existing quantitative studies leave out is the degree to which class and social position are correlated with allegiance to political party. Here it is significant that the association between socioeconomic status and adherence to the Labour and Conservative parties in Great Britain has been very much stronger than the corresponding association between socioeconomic position and affiliation with the Democratic and Republican parties in the United States (see Reeve D. Vanneman, “U.S. and British Perceptions of Class,” American Journal of Sociology 85:769-90). It might be objected that this British-American difference is due to the different nature of the political parties in the two countries rather than to any differences in the social structure, but since the political parties are in turn partly a reflection of the socioeconomic situation, and have the policies they do partly because of their desire to attract support, this objection is not convincing.
Although the existing types of quantitative studies of social mobility are by no means sufficient to test the present theory, they are nonetheless extremely useful for a variety of purposes. They also seem to show faint traces of the involutional process that my theory describes. Donald J. Treiman and Kermit Terrill, in “The Process of Status Attainment in the United States and Great Britain” (American Journal of Sociology 81 [November 1975]:563—83), find the rate of social mobility marginally lower in Britain than in the United States. Similarly, the data in papers by Robert Erikson, John Goldethorpe, and Luciene Portocarero (”International Class Mobility in Three Western European Societies,” British Journal of Sociology 30 [December 1979]:415-41; “Social Fluidity in Industrial Nations: England, France, and Sweden” [mimeo]) suggest that Sweden (whose more encompassing coalitions have a smaller incentive to exclude than their narrower counterparts in Britain) has somewhat more social mobility than England.
I am grateful to Otis Dudley Duncan, John Goldethorpe, Robert Hauser, Keith Hope, Donald Treiman, and Reeve Vanneman for helpful conversations or correspondence about social mobility, but it should not be assumed that they are in agreement with what I have said.
24. In Mueller, The Political Economy of Growth.
25. On Swedish economic history and policy, see Assar Lindbeck, Swedish Economic Policy (Berkeley and Los Angeles: University of California Press, 1974); for a discussion of the advocacy or adoption of policies consistent with growth, see especially pp. 24, 229-30, and 246.
26. I am thankful to Sten Nilson of the University of Oslo for this suggestion, and for letting me see his draft on “Organizations in Norway after 1955;” see also Lindbeck, Swedish Economic Policy, especially p. 6.
27. This paper on the Scandinavian experience is being prepared in collaboration with Gudmund Hernes of the University of Bergen.
28. The Logic, chapter 3.
29. On emulation and the desire for large scale in relatively undeveloped countries, see Alexander Gerschenkron, Economic Backwardness in Historical Perspective (Cambridge: Harvard University Press, 1962), pp. 5-30.
30. See Jeffrey G. Williamson and Peter H. Lindert, American Inequality (New York: Academic Press, 1980) and Allen Kulikoff, “The Progress of Inequality in Revolutionary Boston,’1 William and Mary Quarterly 28 (July 1971):375-412.
31. Williamson and Lindert, American Inequality.
32. See Richard Nisbett and Lee Ross, Human Inference: Strategies and Shortcomings of Social Judgment (Englewood Cliffs, N.J.: Prentice-Hall, 1980), especially chapter 3.
33. Kwang Choi, “A Study of Comparative Rates of Economic Growth” (forthcoming, Iowa State University Press) and Kwang Choi, “A Statistical Test of the Political Economy of Comparative Growth Rates Model,” in Mueller, The Political Economy of Growth.
34. Spearman rank correlation coefficients between years since statehood and LPI, PN, and per capitaLPI, PN were respectively -.52, -.67, -.52, and -.52, and the correlation coefficients were in every case significant.
35. Farm organization membership need not be correlated with union membership, but farm groups focus almost exclusively on the farm policies of the federal government, and any losses in output due to them must fall mainly on consumers throughout the United States, rather than in the state in which the farmers are organized, so farm organization membership probably should not be included in tests on the forty-eight contiguous states. By contrast, the victims of any barriers to entry or restrictive practices by unions or professional organiza tions are likely to be disproportionately from the area in which the special-interest organization operates.
36. Choi, “A Study of Comparative Rates of Economic Growth.”
37. C. Vann Woodward, The Strange Career of Jim Crow, 3rd rev. ed. (New York: Oxford University Press, 1974).
38. If all goes well (it rarely does), I shall devote my presidential address to the Southern Economic Association to this question; it will be published in the Southern Economic Journal in early 1983.
39. I am thankful to Ed Kearl for help on this point.
40. I am grateful to Moses Abramovitz, Geoffrey Brennan, and Simon Kuznets for giving me a fuller appreciation of the salience of this distinction.
41. “Thoughts on Catch-Up,” October 1978, manuscript distributed to the conference on “The Political Economy of Comparative Growth Rates,” University of Maryland, December 1978.
42. See Moses Abramovitz, “Notes on International Differences in Productivity Rates” in Mueller, The Political Economy of Growth.
43. As I argued earlier, differences in per capita income induce migration that tends to eliminate the differentials. Thus within any country with freedom of movement the model here should be tested on changes in total rather than per capita income. The significance of migration is shown by the fact that the catchup hypothesis performs much better with per capita than with total income as the dependent variable; indeed, it then decisively outperforms the independent variables suggested by our model.
44. America s Third Century (New York: Harcourt Brace, 1976), pp. 72-74.
45. Choi, “A Study of Comparative Rates of Economic Growth,” and “A Study of Comparative Rates of Economic Growth among Large Standard Metropolitan Statistical Areas” (unpublished manuscript, 1979).
46. Peter Murrell, “Comparative Growth and Comparative Advantage: Tests of the Effects of Interest Group Behavior on Foreign Trade Patterns,” Public Choice 38 (1982):35-53, and “The Comparative Structure of Growth in the Major Developed Capitalist Nations,” Southern Economic Journal 48 (April 1982):985-95.
1. Edwin M. Truman, “The European Economic Community: Trade Creation and Trade Diversion,” Yale Economic Essays 9 (Spring 1969):201-51; Mordechai Kreinen, Trade Relations of the EEC: An Empirical Investigation (New York: Praeger, 1974), pp. 25-55. See also John Williamson and Anthony Battrill, “The Impact of Customs Unions on Trade in Manufactures,” in Melvyn G. Krauss, ed., The Economics of Integration (London: George Allen & Unwin, 1973).
2. Bela Balassa, “Trade Creation and Trade Diversion in the European Common Market,” Economic Journal 11 (March 1967): 17.
3. Fernand Braudel, Capitalism and Material Life, trans. Miriam Kohan (New York: Harper and Row; London: George Weidenfeld and Nicolson, 1973), pp. 439-40.
4. M. J. Daunton, “Towns and Economic Growth in Eighteenth-Century England,” in Philip Abrams and F. A. Wrigley, eds., Towns in Societies (Cambridge and New York: Cambridge University Press, 1978), p. 247.
5. Charles Pythian-Adams, “Urban Decay in Late Medieval England,” in Abrams and Wrigley, Towns in Societies, pp. 159-85.
6. Domenico Sella, Crisis and Continuity, The Economy of Spanish Lombardy in the Seventeenth Century (Cambridge: Harvard University Press, 1979), p. 136. On these matters see, for example, Jan De Vries, The Economy of Europe in an Age of Crises (Cambridge: At the University Press, 1976); Dudley Dillard, Economic Development of the North Atlantic Community (En-glewood Cliffs, N.J.: Prentice Hall, 1967); Henri Pirenne, Economic and Social History of Medieval Europe (London: Routledge and Kegan Paul, 1936); and Douglass C. North, Structure and Change in Economic History (New York and London: W. W. Norton, 1981).
7. Braudel, Capitalism and Material Life, pp. 404-05.
8. Herbert Kisch, “Growth Deterrents of a Medieval Heritage: The Aachen Area Woolen Trades before 1790,” Journal of Economic History 24 (December 1964):517-37.
9. Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, ed. R. H. Campbell, A. S. Skinner, and W. B. Todd (Oxford: Clarendon Press, 1976), p. 146.
10. See, for example, Christopher Hill, The Century of Revolution, 1603-1709 (New York: W. W. Norton, 1961), and J. H. Plumb, The Origins of Political Stability in England, 1675-1725 (Boston: Houghton Mifflin, 1967).
11. I am grateful to Jan De Vries for helpful conversations about the Dutch Republic as well as other matters. See, for example, William Doyle, The Old European Order, 1660-1800 (Oxford: Oxford University Press, 1978), p. 31; Richard W. Unger, Dutch Shipbuilding before 1800 (Amsterdam: Van Gorcom, 1978); and Robert DuPlessis and Martha C. Howell, “Reconsidering the Early Modern Urban Economy: The Cases of Leiden and Lille,” Past and Present 94 (February 1982), pp. 49-84.
12. See, for example, Charles Cole, Colbert and a Century of Trench Mercantilism (New York: Columbia University Press, 1939), especially volume 1, chapter 7, and volume 2, chapter 12; Doyle, The Old European Order, map 7, p. 401; Pierre Goubert, Cent Mille Provinciaux Au XVIIe Siecle: Beauvais et le Beauvaises de 1600 a 1730 (Paris: Flammarion, 1968).
13. I am grateful to Wolfgang F. Stolper for calling this expression to my attention.
14. In Dennis C. Mueller, ed., The Political Economy of Growth (New Haven: Yale University Press, 1983).
15. White Plains, N.Y.: International Arts and Sciences Press, 1973. On similar findings on growth and protection in developing countries see Ian Little, Tibor Scitovsky, and Maurice Scott, Industry and Trade in Developing Countries, A Comparative Study published for the Organization for Economic Cooperation and Development by Oxford University Press, 1970.
16. See Dumas Malone, ed., Jefferson and His Times, 2:166; see also Thomas Jefferson’s letter to James Madison in which he says, “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical,” quoted in Merrill Peterson, ed., The Portable Thomas Jefferson (New York: Viking, 1975), p. 417. I am thankful to Connie Schulz for help at this point.
17. Charles P. Kindleberger, Europe’s Postwar Growth (Cambridge: Harvard University Press, 1967).
18. For a related argument about “contradictions,” see Samuel Brittan, “The Economic Contradictions of Democracy,” British Journal of Political Science 5:129-59, reprinted as chapter 23 of Brittan’s Economic Consequences of Democracy (London: Temple Smith, 1977).
1. Max Weber, The City, trans, and ed. Don Martindale and Gertrud Neuwirth (New York: Collier Books, 1962), pp. 95-96.
2. David B. Weisberg, Guild Structure and Political Allegiance in Early Achaemenid Mesopotamia (New Haven: Yale University Press, 1967); Isaac Mendelsohn, “Guilds in Babylonia and Assyria,” Journal of the American Oriental Society 60 (1940):68-72, and “Guilds in Ancient Palestine,” Bulletin of the American Schools of Oriental Research 85 (1942): 14-17.
3. See, for example, Theodore W. Schultz, Transforming Traditional Agriculture (New Haven: Yale University Press, 1964).
4. London: Longmans, Green, 1909; reprint ed., Taipei: Ch’eng-wen, 1966, p. 24. See also John Stewart Burgess, The Guilds of Peking (New York: Columbia University Press, 1928; reprint ed., Taipei: Ch’eng-wen, 1966); Peter J. Goles, “Early Ching Guilds,” and Sybille Van Der Sprenkel, “Urban Social Control,” in G. William Skinner, ed., The City in Late Imperial China (Stanford: Stanford University Press, 1977), pp. 555-80 and 609-32, respectively.
5. Morse, The Guilds of China, p. 21.
6. Ibid., pp. 21, 27, and 11.
7. “Chinese Guilds or Chambers of Commerce and Trades Unions,” Journal of the [North] China Branch of the Royal Asiatic Society 21 (1886):141.
8. Ibid., pp. 182-83.
9. Shannon R. Brown, ‘The Partially Opened Door: Limitations on Economic Change in China in the 1860's,” Modern Asian Studies 12 (1978):187.
10. Ibid., and Shannon Brown, “The Ewo Filature: A Study in the Transfer of Technology to China in the 19th Century,” Technology and Culture 20 (July 1979):550-68; “Modernization and the Chinese Soybean Trade, 1860-1895,” Comparative Studies in Society and History 23 (July 1981):426-42; “The Transfer of Technology to China in the Nineteenth Century: The Role of Direct Foreign Investment,” Journal of Economic History 39 (March 1979): 181-97; and Shannon R. Brown and Tim Wright, “Technology, Economics, and Politics in the Modernization of China’s Coal Mining Industry, 1850-1895,” Explorations in Economic History 18 (January 1981):60—83.
11. “More than any other mature non-Western state, China has seemed inadaptable to the conditions of modern life,” in John K. Fairbank, Trade and Diplomacy on the China Coast (2 vols., Cambridge: Harvard University Press, 1953; reprint ed. in one vol., Stanford: Stanford University Press, 1969), p. 4.
12. Alvin Rabushka, Hong Kong: A Study in Economic Freedom (Chicago: University of Chicago Press, 1979).
13. See, for example, Susan B. Hanley and Kozo Yamamura, Economic and Demographic Change in Preindustrial Japan, 1600-1868 (Princeton: Princeton University Press, 1977).
14. Milton Friedman and Rose Friedman, Free to Choose (New York: Avon Books, 1981).
15. In this account of Japan, I have drawn particularly on conversations with my friend Yasukichi Yasuba of Osaka University, who may not, however, necessarily agree with my argument. I have also been particularly helped by William Lockwood’s The Economic Development of Japan (Princeton: Princeton University Press, 1968); Johannes Hirschmeier, The Origins of Entrepreneur ship in Meiji Japan (Cambridge: Harvard University Press, 1964); W. G. Beasley, The Meiji Restoration (Stanford: Stanford University Press, 1972); and John W. Hall and Marius B. Jansen, eds., Studies in the Institutional History of Early Modern Japan (Princeton: Princeton University Press, 1968).
16. Angus Maddison, Class Structure and Economic Growth (New York: W. W. Norton, 1971), p. 43.
17. Ibid., pp. 22-23.
18. Jewaharlal Nehru, The Discovery of India, ed. Robert I. Crane (New York: Anchor Books, Doubleday and Company 1946, 1960). The quotes are from widely scattered sections of the book, and presented in a different order here than they are in the book. I believe that they nonetheless fairly represent Nehru’s views on these matters.
19. W. H. Hutt, The Economics of the Colour Bar (London: Merritt and Hatcher Ltd. for The Institute of Economic Affairs Ltd. by Andre Deutsch Ltd., 1964).
20. Ibid., p. 62.
21. Ibid., p. 69.
22. There is the possibility, mentioned in the last chapter, that exporters would want a tariff in order to engage in price discrimination. On the politics of the discrimination against rural export industries in many developing countries, see the works of Robert H. Bates, especially Markets and States in Tropical Africa (Berkeley: University of California Press, 1981). I am grateful to Barry Weingast for calling Bates’s work to my attention.
23. Washington, D.C.: The Brookings Institution, 1975.
24. Introduction, Mancur Olson, ed., A New Approach to the Economics of Health Care (Washington, D.C.: American Enterprise Institute, 1982).
25. Actually, as the “Cambridge controversy” shows, there is the possibility of paradoxical results when dealing with capital in the aggregate. Strictly speaking, I should have said, “the price of each type of machine or other capital good will tend to fall as more of each is accumulated.”
26. Mancur Olson and Richard Zeckhauser, “The Efficient Production of External Economics,” American Economic Review 60 (June 1970):512—17; Mancur Olson, “The Priority of Public Problems,” in Robin Marris, ed., The Corporate Society (London: Macmillan, 1974), pp. 294-336; “The Principle of Fiscal Equivalence,” American Economic Review: Papers and Proceedings 59 (May 1969):479-87; “The Treatment of Externalities in National Income Statistics,” in Lowdon Wingo and Alan Evans, eds., Public Economics and the Quality of Life (Baltimore: Johns Hopkins University Press for Resources for the Future and the Centre for Environmental Studies, 1977), pp. 219-49; and U.S. Department of Health, Education and Welfare, Toward A Social Report (Washington, D.C.: U.S. Government Printing Office, 1969), written with others.
27. I have been working off and on since the early 1960s on “Diseconomies of Scale and Development”—that is, on the special problems the less developed countries have in creating stable and effective large-scale institutions, and on similar problems that the European societies also faced in prein-dustrial times. My hope is that eventually that argument, in combination with the present theory, would help us understand this problem.
28. Friedman, Free to Choose, pp. 49-55.
29. See, for example, the next chapter of this book, and also my article with Martin J. Bailey and Paul Wonnacott, “The Marginal Utility of Income Does Not Increase: Borrowing, Lending, and Friedman-Savage Gambles,” American Economic Review 70 (June 1980):372-79. See also Mancur Olson and Martin J. Bailey, “Positive Time Preference,” Journal of Political Economy 89 (February 1981):l-25.
30. Friedman, Free to Choose, p. 49.
31. See, for example, Vera Anstey, The Economic Development of India, 4th ed. (London: Longmans, Green, 1952), pp. 107-14 and 345-63. The extreme laissez-faire character of British policy in India is evident even in articles concerned with the exceptions and inconsistencies in it; Sabyasachi Bhattacharya quotes British officials ruling out progressive taxation for India on the noninterventionist principle that it was “no part of the functions of fiscal arrangements to equalize the affairs of men.” (See his “Laissez Faire in India,” Indian Economic and Social History Review 2 [January 1965]: 1-22.)
32. Alvin Rabushka, Hong Kong: A Study in Economic Freedom (Chicago: University of Chicago Press, 1979).
1. In “Beyond the Measuring Rod of Money,” (book, forthcoming), and in “Environmental Indivisibilities and Information Costs: Fanaticism, Agnosticism, and Intellectual Progress,” American Economic Review, Papers and Proceedings 72 (May 1982):262-66, and (quite unsatisfactorily) in “Evaluating Performance in the Public Sector,” in Milton Moss, ed., The Measurement of Economic and Social Performance: Studies in Income and Wealth, vol. 38, National Bureau of Economic Research (New York: Columbia University Press, 1973), pp. 355-84.
2. That is one reason why I believe there can be no satisfactory mono-causal theory.
3. The General Theory (London: Macmillan and Co., 1945), scattered quotations from pp. 5-15.
4. Ibid., pp. 262-67.
5. See, for example, Edmund S. Phelps, ed., Microeconomic Foundations of Employment and Inflation Theory (New York: W. W. Norton, 1969).
6. Money, Employment, and Inflation (Cambridge: At the University Press, 1976), p. 6.
7. In “Alternative Approaches to Macroeconomic Theory: A Partial View,” Canadian Journal of Economics 12, no. 3 (August 1979):342.
8. See Owen Gingerich, “Crisis versus Aesthetic in the Copernican Revolution,” in Arthur Beer and K. A. Strand, eds., Vistas in Astronomy, vol. 17 (Oxford: Pergamon Press, 1975), pp. 85-95; Thomas S. Kuhn, The Copernican Revolution (Cambridge: Harvard University Press, 1957); Kenneth F. Schaffner, Nineteenth-Century Aether Theories (Oxford: Pergamon Press, 1972); Lloyd S. Swenson, Jr., The Ethereal Aether (Austin: University of Texas Press, 1972).
9. Challenge Magazine 22 (1979):67.
10. Martin J. Bailey, Mancur Olson, and Paul Wonnacott, “The Marginal Utility of Income Does Not Increase: Borrowing, Lending, and Friedman-Savage Gambles,” American Economic Review 70 (June 1980):372-79.
11. See the anthology cited in note 5 above and Edmund S. Phelps, Inflation Policy and Unemployment Theory (New York: W. W. Norton, 1972).
12. In “What Macroeconomic Theory Is Best,” a paper read at a session I organized at the Southern Economic Association meetings in New Orleans, November 1981.
13. Note that the argument speaks of “points on the marginal revenue curves” rather than of such curves or aggregations of such curves. The MRP curve of a firm is not the demand curve for a factor when there is more than one variable factor. A change in the price of a factor affects the demand for it not only through substitution and output effects, but in other ways as well. For an analysis of some of the complexities of this relationship, see Charles Ferguson, “Production, Price, and the Theory of Jointly Derived Input Demand Functions,” Económica 33 (November 1966); “'Inferior Factors’ and the Theories of Production and Input Demand,” Económica 35 (May 1968); and The Neoclassical Theory of Production and Distribution (London: Cambridge University Press, 1969), chapters 6 and 9.
14. Edmond Malinvaud, The Theory of Unemployment Reconsidered (Oxford: Basil Blackwell, 1977).
15. Ibid., p. 102.
16. Recent Inflation in the United States, Study Paper no. 1, Joint Economic Committee of the U.S. Congress (Washington, D.C., 1959).
17. I am thankful to Peter Murrell for calling this point to my attention.
18. Phillip Cagan, The Hydra-Headed Monster: The Problem of Inflation in the United States (Washington, D.C.: American Enterprise Institute, 1974). Also in Cagan’s Persistent Inflation (New York: Columbia University Press, 1979).
19. F. M. Scherer, Industrial Market Structure and Economic Performance (Chicago: Rand McNally, 1970), p. 291.
20. I am thankful to Michael Parkin and Robert Barro for impressing me with the importance of the point that coalitions would in many circumstances have an incentive to index agreements, and to Stanley Engerman for reminding me of the debate about whether there was really inflation in the 1950s and early 1960s.
21. Robert W. Clower, “The Keynesian Counterrevolution: A Theoretical Appraisal,” in F. H. Hahn and F. P. R. Brechling, eds., The Theory of Interest Rates (London: Macmillan; New York: St. Martin’s, 1965).
22. Malinvaud, The Theory of Unemployment Reconsidered, p. 31.
23. Monthly Labor Review, April 1977. The inflation rates cited in the next paragraph are from Arnold Harberger and Sebastian Edwards, “International Evidence on the Sources of Inflation,” unpublished manuscript.
24. See, for example, Erik Lundberg, “Fiscal and Monetary Policies,” in Walter Galenson, ed., Economic Growth and Structural Change in Taiwan (Ithaca: Cornell University Press, 1979), pp. 263-307.1 am especially thankful to Howell Zee for help on this issue.
25. Cagan, Persistent Inflation. The quotation is from scattered sections of Cagan’s essay.
26. Jeffrey Sachs, “The Changing Cyclical Behavior of Wages and Prices: 1890-1976,” American Economic Review 70:78-90.
27. A Monetary History of the united States, 1867-1960 (Princeton: Princeton University Press, 1963), p. 299.
28. Peter Temin, The Jacksonian Economy (New York: W. W. Norton, 1969), table 5.1, p. 157.
29. Did Monetary Forces Cause the Great Depression? (New York: W. W. Norton, 1976), p. xi.
30. E. P. Thompson, The Making of the English Working Class (New York: Pantheon, 1964), p. 776, n. 2. I am grateful to Peter Murrell for this reference. The word unemployed goes much further back, and was used, for example, to describe fallow land; note this passage from Paradise Lost: “Other creatures all day long rove idle unimploid, and need less rest” (iv, 617).
31. See John A. Garraty, Unemployment in History (New York: Harper and Row, 1979), p. 4.
32. America s Greatest Depression, 1929-1941 (New York: Harper and Row, 1970), p. 226.
33. See E. E. Schattschneider, Politics, Pressures, and the Tariff (New York: Prentice-Hall, 1935) and E. Pendleton Herring, Group Representation Before Congress (Washington, D.C.: Brookings Institution, 1929), especially p. 78.
34. Chandler, America’s Greatest Depression, p. 230. I have also been greatly helped on the NRA and the history of the Great Depression by reading an unpublished paper by Martin N. Baily and chapter 9 of Friedman and Schwartz, A Monetary History of the United States, 1867-1960.
35. As quoted in Chandler, America’s Greatest Depression, p. 231.
36. Ibid., p. 232.
37. “An Evolutionary Approach to Inflation and Stagflation,” in James H. Gapinski and Charles E. Rockwood, eds., Essays in Post-Keynesian Inflation (Cambridge, Mass.: Ballinger Publishing Company, 1979), pp. 137-59.
38. “On Getting Really Full Employment without Inflation,” in David C. Colander, ed., Solutions to Inflation (New York: Harcourt Brace Jovanovich, 1979), pp. 183-87; and “'Incentives-Based’ Stabilization Policies and the Evolution of the Macroeconomic Problem” in Michael P. Claudon and Richard R. Cornwall, eds., An Incomes Policy for the United States: New Approaches (Boston, The Hague, and London: Martinus Nijhoff, 1981), pp. 37-77. The latter paper is in large part the same as the one cited in n. 37.