[This paper was delivered at the UAH College of Liberal Arts RELACS, Huntsville, March 1999. It was titled “The Myth of Maximizing: Reflections from Seventeenth-Century Virginia.” It was generally well-received by the faculty present but it was at this presentation that I was seriously challenged by two individuals in the Economics Dept. about my whole premise.]
After having attended a few of these RELACS talks, I find that in this fairly informal setting the kind of talks that work best are when the speakers open up a bit and share with you the personal experience of the research they’ve been doing. In that vein, I’d like to open up and share with you my observations on the promise and the problems of a manuscript that I’ve been working on intermittently for the past four or so years.
I’ll begin with the promise of the manuscript. It confronts head-on two pervasive ideas in the social sciences: on the one hand, the Marxian-Weberian idea that based on their economic ideology or behavior one can readily divide people into two camps: traditional or modern, pre-capitalist or capitalist, or what have you. This is an antithesis at the heart of some major debates in the social sciences about the transition to capitalism and the rise of liberalism, but an antithesis that I see rooted more in nineteenth-century American and Western exceptionalism than in hard empirical evidence. On the other hand, my research also challenges the idea espoused by neoclassical economists that people at all times and places are maximizers, maximizing some sort of smooth utility function. I find that both these dubious ideas not only distort our ability to understand other peoples past and present, but also our ability to understand ourselves today. From such a brief description of my manuscript, it might be readily apparent to you what the “problems” with the manuscript might be.
I must admit it was not my original intention to take on such a grandiose agenda. Heaven help me! It was like an uncontrollable force had ahold of me. I guess there’s something you should know about. I think it’s time for me to come out of the closet. Some of you already know this, some of you may have guessed. How do I say this?
You see I am not an historian by birth. No, I was born one of them, one of those people from the other side of campus‑-an engineer! I come from a long-line of engineers, my father, my father’s father, and their fathers’ fathers, back as far as our genealogy will take us. But it wasn’t just my nature, they nurtured me to be an engineer as well. They dangled those little numbers over me as I nursed. I imbibed the second law of thermodynamics with my Captain Crunch.
And I learned my lessons very well. By the time I got to high school I was one of the top math and science students in the state of Texas. I zipped through Texas A&M University in three years, getting a B.S. in Chemical Engineering while working in the summers to pay my way through school, and graduating summa cum laude to boot.
But I wasn’t one of those “academic” engineers, you know all theory and no common sense. I was actually a very good engineer, beginning with my work in a refinery in Houston for three years and then moving on to Alaska for another couple of years where I worked in Anchorage and up at Prudhoe Bay on the North Slope. My specialty was creative problem solving, troubleshooting problems that other engineers were having difficulty solving, ranging from energy conservation to long-range computer planning.
But I had a problem myself. You see, I didn’t really like being an engineer. I don’t know how to explain it. Maybe it was some kind of recessive gene.
You see what I liked was solving problems. I always have. Whether it was figuring out how to keep some old jalopy running or finishing the New York Times Sunday crossword puzzle. But I didn’t want to spend my life doing crossword puzzles. And I wanted to do something more important with my life than make profits for a large corporation. I wanted to solve problems that would somehow make a difference, make the world a better place. I was twenty-five years old and very much the idealist.
I don’t tell you all this because I like talking about myself (which I do). If I really wanted to torture you I would tell you the story about my epiphany, how I discovered the liberal arts and came to see the light. But I wouldn’t do that. That is unless you want me to. No, rather I’m just trying to set up how I got myself caught up in the predicament of this monster of a manuscript. You see it goes back to that damn engineering background of mine which colored all my early attempts to do history.
Now I don’t want to exaggerate the differences between engineers and historians, by say pitting left-brained engineers against right-brained historians. At some level I think all good problem solvers, whether historians or engineers or whoever, do the same thing. We all start with a problem, we gather evidence, we analyze the evidence, we search for possible explanations, we test the explanations against the evidence, we throw out the explanations that don’t work, and we publish the explanations that do work. So there are basic similarities.
But what I have noticed, both with myself and with other engineers I have met who were interested in historical problems, is that engineers do things a bit perversely from an historians’ perspective at every step along the way. They will pick problems an historian would never pick, gather evidence an historian would ignore, search for possible explanations that historians would never consider, and analyze evidence and test theories with tools that historians would never use. Anyway, in retrospect, that’s what happened to me.
It all began when I had to choose a topic for a Master’s Thesis in American Studies at the College of William & Mary. I naturally wanted to do something that would take advantage of and show off my analytical skills as well as my abilities with computer programming and statistical analysis. I hit upon the idea of doing a rigorous statistical analysis of the tobacco economy of the 17th-century Chesapeake Bay colonies (basically Virginia and Maryland).
It wasn’t so long ago that the colonial Chesapeake was a statistical dark age. But Chesapeake scholars in recent years have performed miracles in generating quantifiable data from stingy surviving records. Although we don’t have much individual-level data, I believed we did have enough aggregate-level data‑- annual times series of tobacco imports, population, prices, acreage, etc.‑-from the late 17th century to analyze key aspects of the colonial Chesapeake economy.
The ostensible goal of my Master’s thesis was a fairly straightforward bit of what was called the “new economic history,” applying the rigorous statistical methods of economists to historical data. I was going to use a multiple-regression analysis of tobacco productivity, [pause] demand for labor, [pause] and demand for land as a way to test the two leading interpretations of economic-demographic development in early America: the staples model and the Malthusian-frontier model.
These two models differ on where they locate the central dynamic of early American history. The staples model argues that the export sector played the leading role in the shaping the economy; thus to understand what’s going in the colonial Chesapeake you need to look at the ups and down of the tobacco trade. The Malthusian-frontier model, on the other hand, stresses “internal demographic processes” rather than staple exports. The jist of this Malthusian-frontier model is that, in a place like Virginia, far more important than the ups and down of tobacco were the ups and downs of population growth (due to immigration and natural increase) and the crucial role abundant frontier land played in keeping any Malthusian crisis at bay.
These two models also differed sharply on assumptions about the economic motivation of early Americans. Staples theory suggests that early Americans responded to market forces like neoclassical economic men maximizing profits: thus they responded to higher tobacco prices by increasing demand for the factors of production (labor, land, capital) and thus increasing tobacco production. This is a straightforward extrapolation of a textbook supply-demand diagram. [Overhead #2..Draw forward-sloping curve in red ink] The standard textbook supply diagram shows that higher prices lead to greater supply quantity and lower prices lead to reduced supply quantity, or as economists would say, a forward-sloping curve, positively elastic.
Malthusian-frontier historians reject this assumption of a forward-sloping supply curve. They say it might be justified if planters could readily switch between alternative staples. If there were two staples, say tobacco and wheat, then planters could move into tobacco and out of wheat when the price of tobacco rose and move out of tobacco and into wheat when the price of tobacco fell. That would generate a standard forward-sloping supply curve. But Malthusian-frontier historians stress that 17th-century Virginia was a tobacco monoculture in which there was no other staple but tobacco. Instead the Malthusian-frontier historians suggest that 17th-century Virginians had to maximize tobacco production all of the time, regardless of the price of tobacco, simply in order to survive and raise a family on the rugged New World frontier. This is what economists call an inelastic supply [Overhead #2..Draw inelastic supply in red ink]
Going into this project I honestly thought the staples model had it all over the Malthusian-frontier model and so I thought I was just going to use my technical skills to churn out a quick and dirty verification of the more powerful staples model that would please neoclassically oriented economists and historians.
Instead, my multiple regression analysis yielded evidence of a certain kind of behavior that neither theory would have led me to suspect. I found, contrary to both interpretations, that in the 17th-century Chesapeake, planters responded to higher tobacco prices by reducing their supply of tobacco, what economists call a backward-sloping supply, or negative elasticity. [Overhead #2..Draw a backward-sloping curve in green ink.]
Now any discussion of multiple regression analysis is going to be necessarily very dry and complex and I’m sure you wouldn’t want me to delve deeply into the subject here, so I’ll be brief. My analysis involved a lot of experimentation with variables and combinations of variables in search of a better fit between predicted and actual data. For example, to test the elasticity of tobacco supply I drew on such data as the annual totals of tobacco imports into England, [pause] the size of working population in the Chesapeake, [pause] the price the planters got for their tobacco, [pause] various measures to gauge the availability of shipping, [pause] and proxies of land and labor quality.
[Overhead #2..emphasize backward sloping curve]
On tobacco supply, my multiple regression analysis showed that, a fall in the [5-year] average price of tobacco of a tenth of a penny (say from 1.0 to 0.9 pence sterling) led to an increase in tobacco production per tithable of 387 pounds in the late 17th century. So here we have a classic backward-sloping supply curve. [Point out on overhead] The response was totally reversible. A rise in the average price of tobacco of the same tenth of a penny led to an equivalent decrease in tobacco production per tithable.
[Overhead #3..Figure III]
Figure III graphically illustrates the closeness of the match between predicted and actual measures of tobacco productivity. The smooth line is the predicted outcome of my model and the stars are the actual tobacco productivity figures. The model captured 96% of the variance in tobacco productivity.
[Turn off overhead!!!]
Statistical analysis shows a parallel response in the demand for labor and land. Falling tobacco prices led planters to expand production by acquiring more labor and more land, and rising prices reduced the drive to expand.
Thus, far from what either the staples model or the Malthusian-frontier model would lead me to believe, my data showed that I was not dealing with either neoclassical economic man or industrious frontiersmen. No, I found these 17th-century Virginians acting very “perversely” as economists would say. They didn’t increase production in response to higher prices, they decreased production. They only increased production in response to falling tobacco prices.
I was not at all sure how to understand these findings or what to do with them. When I went down to the University of Florida to work on my doctorate, I originally didn’t have any intention of pursuing the issue any further because for my doctoral dissertation I wanted to undertake a subject that at the time was nearer and dearer to my heart: an analysis of migration in the antebellum South.
However, in seeking to develop a suitable social science framework for analyzing migration I kept coming back to all of the unanswered questions I had left unresolved in the colonial Chesapeake. Consciously and unconsciously I was always looking for an explanation for the perverse type of behavior my statistical analysis had uncovered in the colonial Chesapeake.
As part of my search for possible explanations I did a lot of digging in economic anthropology. I found some very promising ideas in the literature on peasants and Third World development.
But what really opened my eyes was when I started exploring a vast body of literature on the nature of labor supply. I discovered that a very strong case can be made that the supply of labor is universally backward-sloping or negatively elastic.
[Overhead #2..emphasize backward-sloping curve]
To state it another way, much evidence shows that people universally seem to respond to rising wages with reduced labor and responded to falling wages with increased labor.
[Turn off overhead!!!]
Following the seminal statistical work of economist Paul Douglas in 1934, every major study of labor supply, Western or non-Western, whether cross-cultural, cross-class, cross-sectional, or longitudinal, has revealed a significant negative elasticity.
In the industrial West labor supply fell as real wages steadily rose, with reductions in labor supply taken in the form of fewer hours of labor per day, [pause] fewer days per week, [pause] a younger age at retirement, [pause] more holidays and longer vacations, [pause] and an older age of entry into the work force, again all while real wages were steadily rising.
Evidence has also emerged in the last twenty years from experimental and field studies of American farmers, Third World peasants, and business corporations alike. The Western farm and firm are ubiquitously pervaded by what economists call “organizational slack” which only tightens up during recessions, promptly to return again with prosperity.
All of this showed me that what most social scientists consider perverse behavior was actually quite normal, indeed, perhaps universal.
So what was I to do with all this? I tried floating these strange ideas past my fellow grad students and professors and found very little enthusiasm for such theories. The ideas were just too weird. As I kept pondering what to do with these ideas I realized that the work of Thomas Robert Malthus played a vital link in many of the social science theories in which I was most interested, whether they were attacking or supporting him. Recognizing that perhaps I could sell my ideas better to historians if I linked my peasant theories and Malthusian-frontier theory to what Malthus actually said, I started reading Malthus and quickly found that he was much more complex that I had understood; he often seemed to be talking out of both sides of his mouth at the same time. Wanting to understand fully these ideas, I started looking into the literature on Malthus’s predecessors. Before I knew it I found myself immersed in the work of 16th-, 17th- and 18th-century British political economists, from Sir Thomas Smith to Adam Smith.
These English political economists seemed to have no problem explaining the kind of behavior I found in the 17th-century Chesapeake. They believed that only “necessity” (or as we might say, relative poverty, relative deprivation, or a falling standard of living), only necessity could overcome the natural laziness of Englishmen or of mankind in general. This is what they meant when they said “Necessity is the mother of invention,” a proverb that became quite popular in the 17th century. This simple little maxim seemed to capture better than anything the essence of the social science theory that I was looking for to explain the perverse kind of behavior that I found in the 17th-century Chesapeake. I was able to take these English ideas and work them up into an article that was published a couple of years ago in the journal History of Political Economy.
One day it suddenly dawned on me that here was the solution to my problems. I had all along been knocking my head against the wall trying to sell to historians ideas on some fringe social science theory and getting nowhere. What I needed was not better social science theory but to show how the forgotten language and ideas that 17th-century Englishmen used could explain 17th-century English behavior in the Chesapeake better than historians’ models.
So I had my hook! Yet the question still remained why early American historians had completely missed the picture? Looking back it was like we had blinders on. And I mean “we” because I feel like I was as much taken in by these assumptions as other historians. Perhaps it was because we simply had never done the statistical analysis that I did.
But there was a lot of non-statistical evidence staring us in the face that we seemed to ignore. For example, historians had long recognized that tobacco productivity actually rose during the seventeenth century while tobacco prices were falling.
[Overhead #1..Figure I.]
This is a plot of tobacco productivity (in pounds of tobacco per worker) and tobacco prices. The stars are productivity and the diamonds are prices. As you can see, as the price of tobacco went down, productivity rose across the 17th century. The data on this figure are based on aggregate English tobacco imports, but historians have discovered the same trends of rising productivity and declining prices in contemporary literary estimates and analysis of probate records. We’ve all known about this inverse relationship between productivity and price for a long time. The lower the price the more they made.
But how could this be? Don’t the staples historians say that planters would have responded to falling tobacco prices by reducing tobacco production? Don’t Malthusian-frontier historians say that planters would have kept on producing the same amount of tobacco? Needless to say this kind of empirical evidence has caused trouble for Chesapeake historians. So how do they explain this inverse relationship? [point to Figure I again]
[Turn off overhead!!!]
Well the gist of the consensus is the commonsense analogy of an industrious farmer or corporation caught in a cost-price squeeze. No one today has any problem accepting the notion that when faced with hard times even industrious farmers and corporations might have to tighten their belt and knuckle down.
But how do you reconcile this sort of tightening the belt with the assumption that these farms or firms were industrious in the first place? If they were already so industrious, doing all they could to maximize production, where did this additional production come from?
Staples historians seem to be saying that planters increased production when prices fell, but they also increased production when prices rose. So in fact they increased production all the time. They responded to good times and bad times in the same way, with ever-expanding tobacco production every time prices fell or rose, pushed during busts and pulled during booms. For their part, the Malthusian-frontier historians paradoxically suggest that supposedly maximizing planters responded to falling tobacco prices by further maximizing production.
What’s the problem here? Well the problem is not in the analogy that hard times make us tighten our belt and knuckle down. That’s a perfectly fine analogy. Like I said, that’s an idea which has been around a long time and was the idea at the heart of the 17th-century English notion of “necessity” as the mother of invention. “Necessity” or hard times makes us tighten our belt and get down to work.
The problem lies in that we’ve seemed to have forgotten the other part of what 17th-century Englishmen were telling us. That necessity is reversible. Seventeenth-century Englishmen would say that the same farmer who tightened his belt in hard times, didn’t keep tightening it in good times. If you kept that up you’d soon squeeze yourself to death!
Now the reverse analogy is also readily available to us today. The idea of kicking back and enjoying life in good times. But if you think about it, it will probably make you a bit uneasy. Indeed it’s downright perverse. In our society, if I give you greater incentives to work harder (like increasing your pay check), you’re supposed to work harder, not kick back and relax.
The reason we have trouble with this reversibility is because we have trouble with the basic assumption that lies behind it: that people are basically lazy. That’s what 17th-century Englishmen thought but we don’t think that way today. Or at least we’re not supposed to think that way. We don’t have any problem accepting that people tighten the belt and knuckle down in hard times. They don’t have any choice. But to loosen the belt and kick back in good times, that’s a choice they’re making. It’s voluntary. They’re willfully choosing not to be industrious, not to maximize production. And in our age that’s not a good thing. It’s downright un-American!
So we’ve sentenced people to an endless cycle of constantly maximizing, ever tightening the belt, ever putting the nose to the grindstone. As illogical as it may seem, we assume our world is filled with industrious maximizers. And yet, all the empirical evidence available suggests otherwise. We are caught up in what I call “the myth of maximizing.”
[Overhead #1..Figure I.]
The problem historians face in trying to understand 17th-century tobacco planters begins with their a priori assumption that 17th-century Virginians were industrious maximizers. Chesapeake tobacco planters, caught in a cost-price squeeze due to falling tobacco prices, do indeed increase their production of tobacco. That’s quite clear from the readily available data. The notion that those planters might cut back on production is response to higher prices is outside the realm of possibility. Yet that sort of perverse behavior is exactly what I have found.
[Turn off overhead!!!]
I’d like to finish off by exploring a bit how this myth of maximizing originated. I’ve suggested that 17th-century Englishmen tended to accept that necessity was reversible. So where did that little bit of common sense fall by the wayside?
Certainly part of the problem can be written off as American exceptionalism. One can find such exceptionalism prominent among some seventeenth-century Virginia boosters who celebrated the miraculous transformation of lazy Englishmen into industrious planters. Perhaps more directly one can trace this exceptionalism to the highly nationalistic rhetoric following the American Revolution. In particular the idea that the American character was shaped by the pull of abundant Western land was an idea echoed by Franklin, Crèvecoeur, Jefferson, Tocqueville, Emerson, Lincoln, Whitman, and hundreds of other early American thinkers. By the mid-nineteenth century, the belief that the American yeoman was “a different creature altogether” from the European peasant had come to dominate American thought. The American was by definition industrious, whether pushed by the duty of taming a frontier, the irrepressible competition of fellow Americans, and a Protestant work ethic; or pulled by freedom, opportunity, and abundance. These ideas received their “classic statement” in Frederick Jackson Turner’s frontier thesis that has colored so much of twentieth-century historiography.
But clearly American exceptionalism cannot be the sole explanation for this blindspot since historians are always challenging American exceptionalism while I haven’t found one yet who challenges the myth of maximizing.
Rather I believe the myth stems as well from two pervasive ideas in the social sciences, or Western thought if you will. One is the idea of utility maximization so central to neoclassical economics that more often than not gets translated as profit maximization. Since the 1960s economists have begun testing and confirming their model for people in all places and times. In doing so they have encroached on the turf of many competing disciplines (like the “new economic history”) giving rise to charges of “economic imperialism.” Their prominence has been reinforced by similar models of evolutionary biologists and ecologists with their assumptions that humans are driven by the goal of maximizing inclusive fitness.
The other key idea is the Marxian-Weberian idea of a transition to capitalism. Central to Marx’s thinking was the belief in the irrepressible force of capitalism, a Darwinian struggle that relentlessly pushes men under the capitalist mode of production, regardless of the traditional or modern mindset of the individuals or communities involved. To this Max Weber added the idea of a Protestant work ethic which could achieve an equally effective if more fragile push, enough to get the whole process started. But soon, for Weber as for Marx, capitalism became its own driving force, “an immense cosmos into which the individual is born,” governed by the law of maximization.
This view of capitalism was reinforced by the belief emerging in the nineteenth century that led most Western thinkers to conceive of themselves and their world as fundamentally different from anything that had come before or that existed in any other part of the world. What had in earlier centuries been seen as differences in degree among people all sharing a basic human nature began now to be seen as racial differences in kind that sundered any belief in a common human nature. In line with contemporaneous beliefs in Lamarckian evolutionism and recapitulation, traditional people began to be described as a lower, child-like level in the psychic evolution of the human species. Traditional men and societies were custom-bound, instinct-driven, lazy, and had fixed wants. Modern men and societies, on the other hand, were relatively free from custom, rational, industrious, and had infinitely expansive wants.
By the turn of the century when the social science disciplines were establishing their independent status, this traditional-modern dichotomy had become part of the general scholarly consensus. Although the racial element faded over the course of the twentieth century, this antithetical paradigm still reigns supreme in the social sciences today.
What both these two paradigms share, as well as American and Western exceptionalism in general, is the resounding belief that modern man is an industrious maximizer, whether by his very nature, the nature of the world, or both.
But, in fact, we are anything but maximizers and, up until relatively recently in the history of man, no one thought we were and surely never believed we should be. While a perpetual Darwinian struggle might make a good metaphor, humans are simply not the stuff out of which such struggles are initiated and maintained.
I believe the ubiquitous findings on labor supply elasticity even fundamentally challenge the weaker neoclassical economic claim that we are all utility maximizers with some sort of smooth utility function. [Draw utility diagram] Instead, if the utility function has any relevance, people seem to have a kinked utility function centered around some relatively sticky (but not completely static) standard of living that they aim for. Some recent important work in cognitive and social psychology and behavioral economics supports this view. (I’m thinking in particular of Daniel Kahneman and Amos Tversky’s “prospect theory.”) Deviation from this standard of living creates in one direction a condition of deprivation or pressure that promotes increased effort and risk-taking; and in the opposite direction, a condition of satisfaction or well-being that encourages decreased effort and risk-taking. Or, as a seventeenth-century Englishman would have said, “necessity is the mother of invention.”
I concluded that all of these problems with the dominant paradigms should suggest that it is high time we re-examine the implicit assumptions that we bring to our work about the nature of economic motivation and behavior, and recognize how those assumptions distort our ability to understand not only early Americans but also other peoples in the past and present and, indeed, ourselves today.
Well, that was the answer I came up with after seven years of slogging away at what I thought was going to be a very simple little historical problem suitable for a Master’s thesis. Looking back, I still have to say, as I told my committee when I defended the dissertation, that I’m proud of what I did and I’m glad I put it all there in my dissertation even if it never got published. For me, the dissertation captures forever that naive, young creative engineer’s attempt to do history.
But all the things that make the dissertation manuscript a great piece of creative engineering have given me great headaches as I tried to market it as a work of creative history. I picked a problem that an historian would never have picked, I gathered evidence an historian would have ignored, I search for explanations that historians would never have considered, and I analyzed evidence and tested theories with tools that historians would never have used. What is the market for such a history?
Still some like my dissertation committee and a few others along the way have strongly applauded what I did, at the same time recognizing that the manuscript might have difficulties getting published as it stood. I attempted a couple of different versions, one pitched toward an interdisciplinary social science audience in which the Chesapeake was reduced to a test case, another pitched toward the historical debate on the transition to capitalism, but the manuscript hasn’t been accepted yet for publication. I’m still confident it will be published one day, in one form or another.
Stepping out of the highly egocentric world of a grad student totally absorbed with his problem, I’ve grown up quite quickly. For better or worse, I’ve become more of an historian, less of an engineer. I can’t even remember what the second law of thermodynamics is. I now pick more popular historical topics. My latest work is on why those Virginians started dueling. Very popular! And there are no more lonely crusades in quest of some essential truth. I’m fully networked now and constantly getting feedback through conference papers and correspondence with others working in the same area. As for essential truths, I’m just happy anytime I get something published!
Still, even with my dueling research, when I’m sitting there at my desk or my computer, late at night, all by myself, trying to figure out how to make sense of what all these crazy Virginians are doing, I know deep in my heart of hearts that I really can’t escape who I am. You know what they say: once an engineer, always an engineer. You can try to hide it, but it will just make you miserable. Anyway I want to thank for letting me come out like this and I hope you don’t think the worse of me for it. Thank you.