Knowledge that Transforms

Climbing Mount Laurel, authored by a group of sociologists led by Douglas S. Massey, is about the efforts by Mount Laurel Township, NJ, residents to have affordable housing built in their community. From when it was first proposed in 1969 and until the first units were completed in 2000, the project faced extraordinary political opposition, caused a number of landmark court decisions, and motivated affordable-housing legislation by other US states. This review evaluates, from an economics perspective, the lessons learned, as argued by Massey et al., about the impact of affordable housing within the host community and on surrounding communities. (JEL J15, R21, R23, R31, R38, Z13)

Lars Peter Hansen and Thomas J. Sargent's book, Recursive Models of Dynamic Linear Economies, exposits, extends, and applies methods for solution and analysis of dynamic stochastic linear quadratic models. The book, which can be used as a monograph or in a graduate course, integrates theory, econometrics, and computation. This essay provides a summary and offers some mild complaints about material not included in what is already a remarkably comprehensive book. (JEL C32, C61, D40, D50, E10)

Sawhill and Steinberg approach risky behavior among youth from two different angles: Steinberg argues for intervention during the adolescent years to alter behavior in ways that prioritize patience and self-regulation, while Sawhill advocates interventions that mitigate the negative effects of risky behavior. Both argue that disadvantaged youth suffer worse consequences as a result of risky behavior and therefore stand to gain the most from interventions. While the authors develop strong arguments for adolescent interventions, the existing evidence on their effectiveness is less compelling. To reconcile the promise with the reality, I argue that growing up in environments of significant uncertainty reduces the returns to forward-thinking behavior in the daily lives of disadvantaged youths. Interventions to develop adolescent decision-making skills so as to reduce risky behavior will not be effective if they are inconsistent with the incentives generated by a local environment that is often characterized by uncertainty. (JEL J12, J13)

This essay compares the Great Depression to the Great Recession in light of Barry Eichengreen's new book Hall of Mirrors. Eichengreen discusses these two episodes from a historical, Keynesian perspective, and concludes that policies that increase aggregate demand, such as larger fiscal deficits, would have promoted a much stronger and faster recovery from the Great Recession. I review these episodes from a neoclassical approach, which provides a very different perspective on why recoveries from these episodes were so slow and incomplete. I also argue that supply-side policies, rather than demand-side policies, are more likely to restore prosperity today. (JEL E32, E52, E62, F44, G01, N12, N22)

Thomas Leonard's 2016 book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era argues that exclusionary views on eugenics, race, immigration, and gender taint the intellectual legacy of progressive economics and economists. This review essay reconsiders that legacy and places it in the context within which it developed. While the early generations of scholars who founded the economics profession in the United States and trained in its departments did indeed hold and express retrograde views on those subjects, those views were common to a broad swath of the intellectual elite of that era, including the progressives' staunchest opponents inside and outside academia. Moreover, Leonard anachronistically intermingles a contemporary critique of early-twentieth-century progressive economics and the progressive movement writ large, serving to decontextualize those disputes—a flaw that is amplified by the book's unsystematic approach to reconstructing the views and writing it attacks. Notwithstanding the history Leonard presents, economists working now nonetheless owe their progressive forebears for contributions that have become newly relevant: the “credibility revolution,” the influence of economic research on policy and program design, the prestige of economists working in and providing advice to government agencies and policy makers, and the academic freedom economists enjoy in modern research-oriented universities are all a part of that legacy. (JEL A11, B15, D82, J15, N31, N32)

Foragers, Farmers, and Fossil Fuels: How Human Values Evolve is a large-scale history of the world through the different modes of production humanity has adopted over time and their implications in terms of moral values. Morris argues that the predominant value systems of human societies are cultural adaptations to the organizational structures of the societies themselves, their institutions, and ultimately to their modes of production. In particular, the book contains a careful analysis of how the hunting–gathering mode of production induces egalitarian values and relatively favorable attitudes toward violent resolution of conflicts, while farming induces hierarchical values and less favorable attitudes toward violence, and in turn the fossil fuel (that is, industrial) mode of production induces egalitarian values and nonviolent attitudes. The narrative in the book is rich, diverse, and ultimately entertaining. Morris's analysis is very knowledgeable and informative: arguments and evidence are rooted in history, anthropology, archeology, and social sciences in general. Nonetheless, the analysis falls short of being convincing about the causal nature of the existing relationship between modes of production and moral value systems. ( JEL A13, D02, N30, N60, Z13)

In response to the question in the title, Does Altruism Exist?, David Sloan Wilson argues forcefully that altruism exists and that the biological mechanism of group selection is responsible. He argues that group selection should be taken especially seriously for humans, since cultural evolution is especially important for us. Economists' view of basic human motivations should then include altruism. Wilson promotes a strong form of pervasive altruism, which seems bound to be inconsistent with many economic phenomena. Although a moderate version of the position he advocates is not easily dismissed, it is unclear what such an extended theory would look like. (JEL D64, Z13)

Capitalism and law go together in Geoffrey M. Hodgson's comprehensive analysis of the intellectual history and practical development of the capitalist system in Western Europe and North America. Given the breadth and depth of Professor Hodgson's reading in political economy and his reflections on its implications for the present and future of global capitalism, his book deserves to be widely read. Labeling his approach legal institutionalism, he argues that a legal system that supports capitalism and the market is necessary but not sufficient to sustain a fair and efficient economic system. The state makes efficient markets possible, but it must also deal with the inevitable tensions and the fundamental asymmetry between labor and capital. Tensions arise because labor cannot be used as collateral for the loans that are needed for large-scale capitalist enterprise. Hodgson has not developed the political implications of his conclusions in any detail, but his work ought to inspire research that explores the implications of his arguments for ongoing projects of nation building. (JEL D72, K10, O43, P14, P16)

The two books being reviewed are concerned with the importance of slavery in the antebellum US South for the economic development of the Northern states. One (Schermerhorn) deals primarily with Southern financial arrangements facilitating the sales of slaves and cotton. The other (Baptist) presents a broader picture of masters' treatment of slaves, as well as how the incomes of slaveowners spurred the demand for Northern industrial production. The review argues that both books overstate the importance of slavery and cotton production for US economic growth. (JEL J15, N11, N31, N51, P16)

Understanding the nature of capitalism has been a central theme of economics. The collapse of the Eastern Bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism. János Kornai's book Dynamism, Rivalry, and the Surplus Economy: Two Essays on the Nature of Capitalism fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image, socialism. To further develop the themes contained in the book, serious challenges are posed theoretically and empirically, as well as in subjects, such as hybrid capitalism. (JEL L32, P12, P14, P16, P26, P31)