Joseph P. Ferrie of Northwestern University and NBER reviews “Economics in America: An Immigrant Economist Explores the Land of Inequality” by Angus Deaton. The Econlit abstract of this book begins: “Explores the positives and negatives of economics as both a science and a profession, presenting insights from the author's personal experiences as a naturalized US citizen and academic economist.”

We examine paternalism as an implicit contract in which workers trade faithful service for nonmarket goods. Paternalism reduced monitoring and turnover costs in cotton cultivation in the U.S. South until the mechanization of the cotton harvest in the 1950's. Until then, the effectiveness of paternalism was threatened by government programs that could have substituted for paternalism; but large Southern landowners had the political power to prevent the appearance of such programs in the South. With mechanization, the economic incentive to provide paternalism disappeared, and Southern congressmen allowed welfare programs to expand in ways consistent with their interests.