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Inventing the Economy Or: How We Learned to Stop Worrying and Love the GDP

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Inventing the Economy Or: How We Learned to Stop Worrying and Love the GDP Inventing the Economy Or: How We Learned to Stop Worrying and Love the GDP by Daniel Abramson Hirschman A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Sociology) in the University of Michigan 2016 Doctoral Committee: Associate Professor Greta Krippner, Chair Associate Professor John Carson Professor Gabrielle Hecht Professor Mark Mizruchi Professor Jason Owen-Smith For Mom, Dad, Sam, & Jen. ii Acknowledgments In the Fall of 2008, I walked into Greta Krippner’s office with a question. I had just read Timothy Mitchell’s Rule of Experts and I didn’t know what to make of his claim that “the economy” was somehow new to the 20th century. Greta encouraged me to spend some time trying to figure it out and, after seven years, this dissertation is the result. I thank Greta, Gabrielle, Mark, Jason, and John for overseeing its completion. Along the way, I have received generous feedback and assistance from too many people to list. I do want to specially acknowledge two of my co-authors: Elizabeth Popp Berman and Isaac Reed. Many of the ideas that informed my approach in this dissertation were worked out in conversation with them, and I am thankful for their constant support and sheer intellectual firepower. About halfway through the process, I was fortunate enough to find another source of constant support and intellectual firepower: Jamie Budnick. Thank you for copyediting my prospectus, reviewing my job market paper the night my first application was due, and agreeing to marry me. This dissertation is dedicated to my family. I can’t imagine going through this without you. I am who I am because you are who you are. iii TABLE OF CONTENTS Dedication ....................................... ii Acknowledgments ................................... iii List of Figures ..................................... vii Chapter 1 Introduction ..................................... 1 1.1 Inventing the Economy...........................1 1.2 Formation Stories in Sociology.......................4 1.3 Learning from the Formation of the Economy...............8 1.3.1 Making Performativity Macro...................8 1.3.2 Policy Devices, Styles of Reasoning, & Regimes of Perceptibility 11 1.4 Data and Methods.............................. 13 1.5 Preview of Coming Attractions....................... 16 1.6 References.................................. 19 2 From Economic Life to Macroeconomy ...................... 22 2.1 Introduction................................. 22 2.2 The 18th Century Economy?........................ 24 2.3 The 20th Century Economy?........................ 27 2.4 The Economic Sphere and the Economy.................. 30 2.5 Studying Economic Discourse....................... 35 2.6 Economic Discourse 1890-1960...................... 38 2.6.1 The Economy............................ 39 2.6.2 Macro Before Macro........................ 42 2.6.3 The Growth of Growth....................... 45 2.6.4 Textbook Economics, 1890-1960................. 46 2.7 Discussion and Conclusion......................... 51 2.8 References.................................. 53 2.9 Appendix: Introductory Textbook Sample................. 57 2.9.1 Analytical Scheme......................... 57 2.9.2 Textbook Sample.......................... 58 3 How the Economy Got its Size ........................... 60 3.1 Introduction................................. 60 3.2 The Growing Calculability of Economic Life............... 62 iv 3.2.1 The Rise of the Large Corporation................. 64 3.2.2 Wage Labor............................. 65 3.2.3 Administrative Capacity...................... 66 3.2.4 Mass Income Taxes......................... 67 3.3 Why National Income?........................... 68 3.3.1 Inflation and Business Cycles................... 69 3.3.2 NBER and National Income.................... 71 3.4 Making it Official: The 1934 US National Income Statistics........ 75 3.5 Early Uses of National Income Statistics.................. 79 3.6 National Income Goes to War........................ 82 3.7 Aftermath.................................. 85 3.8 Conclusion................................. 87 3.9 References.................................. 88 4 Managing the Economy in Real Time ....................... 93 4.1 Introduction................................. 93 4.2 The Role of the State in Economic Life................... 98 4.3 Analytical Strategy............................. 105 4.4 1890-1910: Tariffs, Trusts, and the Money Question............ 106 4.5 1910-1929: Unemployment, Public Works, and the Fed.......... 112 4.6 1929-1946: From Pluralist Planning to Macroeconomic Management... 118 4.7 1946-1964: Stability & Growth....................... 126 4.7.1 Coda................................ 130 4.8 Discussion and Conclusion......................... 130 4.9 References.................................. 134 5 How Much is a Housewife Worth? ......................... 138 5.1 Introduction................................. 138 5.2 Data & Methods............................... 140 5.3 The Rise of National Income, 1920-1947.................. 141 5.4 The Institutionalization of National Income, 1947-2015.......... 150 5.5 Discussion & Conclusion.......................... 153 5.6 References.................................. 155 6 Rediscovering the 1%: Economic Expertise and Inequality Knowledge ................. 158 6.1 The Surprising Growth of the Top 1%................... 159 6.2 Perceiving Economists’ Influence...................... 163 6.3 Analytical Strategy............................. 166 6.4 Establishing the Regimes.......................... 167 6.4.1 Factor Shares in Macroeconomics................. 170 6.4.2 Gaps in Labor Economics..................... 174 6.4.3 From First Priority to Orphan Estimates.............. 181 6.5 The Stylized Facts of Inequality...................... 184 6.5.1 Krugman and the 1992 Presidential Election........... 187 v 6.5.2 Rediscovering the 1%....................... 190 6.6 Discussion.................................. 194 6.6.1 Modeling Economic Influence................... 194 6.6.2 Ignorance and Sustained Attention................. 198 6.7 Conclusion................................. 200 6.8 References.................................. 201 7 Conclusion ...................................... 206 7.1 “You Can’t Feed a Family with GDP”................... 206 7.2 Multiplying Economies........................... 211 7.2.1 A Different GDP.......................... 212 7.2.2 The Economy, But Not As We Know It.............. 214 7.2.3 Long Live Economic Life!..................... 215 7.2.4 Embeddedness Forever....................... 216 7.3 Limitations................................. 216 7.4 Learning to Love the GDP......................... 218 7.5 References.................................. 218 vi LIST OF FIGURES 2.1 The relative frequency of 12 phrases, as a percentage of research articles in JSTor 1890-1960. Note that the vertical axes vary; the intent of the figure is to show relative, not absolute, trends......................... 40 2.2 The relative frequency of the phrase “American Economy” in English-language books, 1800-1960................................. 41 2.3 The relative frequency of the phrase “commercial crisis” in English-language books, 1800-1960................................. 43 2.4 The relative frequency of the phrase “economic growth” in English-language books, 1800-1960................................. 45 4.1 From Romer and Bernstein 2009......................... 95 4.2 A photo of MONIAC from Fortune Magazine (1952)............... 104 4.3 “America leads Russia, but will the gap narrow?” From Samuelson (1961), also cited in Levy and Peart (2009)........................ 128 5.1 From NBER 1921, the first national income estimate of the value of housework. 146 6.1 Piketty and Saez’s (2003:12) famous chart showing the growth of top incomes in the 1980s-1990s................................. 161 6.2 Kuznets’ (1953:33) less famous chart showing the downward trend of top in- comes in the 1930s-1940s............................. 161 6.3 A 1921 estimate of the income received by the top 5% of income earners based on tax data (NBER 1921: 116).......................... 168 6.4 A graphical representation of the distribution of pre-tax income in the United States in 1950 (BEA 1953: 4)........................... 182 6.5 Three-year moving average of the percentage of all research articles in JStor’s Data For Researchers database that mention “income inequality” or “income distribution” and also “top 1%”, “top one percent” or “top 1 percent” from 1973–2012. The data are noisy — not every reference to the “top 1%” will refer to the growth of top incomes — but suggestive of a slight, temporary increase in 1992 followed by a large increase post-2000............. 190 6.6 Stylized facts mediate the link between observations and theories. 197 6.7 A more complex model highlighting the direct influence of observations and stylized facts on policy............................... 197 vii 6.8 This model highlights how causal theories and policies together produce regimes of perceptibility, including institutionalized policy devices for seeing, that in- fluence which observations are made and how those observations are com- bined into stylized facts.............................. 197 7.1 From New York Times (2014)........................... 207 viii CHAPTER 1 Introduction 1.1 Inventing the Economy Before the 1930s, the economy did not exist. In this dissertation, I explore what it means to make a claim that the economy
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