An Economic History

The Economist has a review of the upcoming book Grand Pursuit: The Story of Economic Genius. By Sylvia Nasar which included an unfortunate sentence:

And how best to cope with the booms and busts that have been capitalism’s peculiar contribution to human life?

I've heard this statement before - that capitalism is uniquely typified by booms and busts and that it's a feature of the system. There are certainly exceptions. Communism and fascism are typified by unrelenting, grinding poverty for the majority of people under them. But booms and busts did not begin with capitalism. They exist in agriculture, for example, except there the busts are called "famine." The unique advantage of capitalism is that trade and liquid markets means the consequences of busts are not so severe.

The review picks up with this nice passage:

In Marx’s view the capitalist system, for all its ability to unleash productive power, was haunted by a contradiction: the drive to increase profits would immiserate the poor and lead to crises of overproduction. But Marshall demonstrated that capitalism advances not by immiserating the poor, but by boosting productivity. Factory owners make relentless small improvements that allow them to produce both higher wages and lower prices, thereby spreading the gains of material progress throughout society. Schumpeter further expanded the idea of productivity increases. The economy doesn’t simply get bigger and bigger. It goes through a constant process of discombobulation as entrepreneurs invent new products and processes. Marx got it upside down: capitalism’s recurrent crises actually make it stronger.

It's a point worth remembering. In the recent financial crisis many people have resorted to the tired calls of a "crisis of capitalism." In our economy's current absence of hope,we should remember that there have been bad times before and the system has continued, in unexpected ways which have created more wealth than ever before.

The Dissertation

The most distinctive aspect of graduate school, is of course the dissertation. The ordeal of entering the community of scholars by producing your own original research and then defending it against your own hoped-to-be peers. Anyone who has been through it knows how grueling of a process it can be. But unlike law school or medical school, which one can graduate from in a set time simply by taking a series of courses, there are no guarantees with a dissertation. If your experiments don’t happen to work out, or someone publishes your idea before you, then too bad. This uncertainty and doubt can be an emotional killer. No one who’s done it will ever forget it. And no one who’s finished would wish to go back. Therefore, I found it fascinating to hear it described in William Deresiewicz’s semi-autobiographical book A Jane Austen Education. He writes:

     I spent most of my time slaving away at, procrastinating on, whimpering about, and otherwise slogging through my dissertation. There’s nothing quite like writing a dissertation. You’ve gone through almost twenty years of school, including your first few years as a graduate student, and you’ve always had someone there to tell you what to do: take these courses, do this reading, answer these questions. You’ve also always had other people around to share the experience with – sit next to in class, bitch to about your teachers, study with for exams.

     Then, all of a sudden, you’re on your own. It’s like being left in the woods without a map. Good luck, sucker. Drop us a line if you make it out alive. All you know is that you have to go off by yourself for four or five or six years and write what amounts to a book. You’ve never written a book, you have no idea how to write one, and no one, you quickly realize, is going to teach you, because the only way to learn is just to do it. Plus, you have to make up your own topic. And, oh yes, it has to be completely original.