Category: Books

Hamilton “Was the Clear-Eyed Apostle of America’s Economic Future”

(p. 344) The American Revolution and its aftermath coincided with two great transformations in the late eighteenth century. In the political sphere, there had been a repudiation of royal rule, fired by a new respect for individual freedom, majority rule, and limited government. If Hamilton made distinguished contributions in this sphere, so did Franklin, Adams, Jefferson, and Madison. In contrast, when it came to the parallel economic upheavals of the period–the industrial revolution, the expansion of global trade, the growth of banks and stock exchanges–Hamilton was an American prophet without peer. No other founding father straddled both of these revolutions–only Franklin even came close–and therein lay Hamilton’s novelty and greatness. He was the clear-eyed apostle of America’s economic future, setting forth a vision that many found enthralling, others unsettling, but that would ultimately prevail. He stood squarely on the modern side of a historical divide that seemed to separate him from other founders. Small wonder he aroused such fear and confusion.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

Lincoln Defended Innovative Rail Against Incumbent Steam

(p. A15) “Lincoln’s Greatest Case” convincingly shows that 1857 was a watershed year for the moral and political questions surrounding slavery’s expansion to the west, something that Jefferson Davis’s preferred railroad route would have facilitated. Mr. McGinty’s discussion of Lincoln’s philosophy and the career-making speeches he would develop in the late 1850s allows us to see the transportation disputes in light of the political and cultural dynamics that would lead to the Civil War. The book is also a case study of discomfort with new technology–and the futility of using a tort suit to prevent the adoption of inevitable innovation.
The book ends on an elegiac note, with steamboats making their inevitable passage into the mists of history. The rails, which could operate year-round through paths determined by man, not nature, would reign supreme, thanks in part to the efforts of a technophile future president.

For the full review, see:
MARGARET A. LITTLE. “BOOKSHELF; When Steam Was King; A dispute over a fiery collision pitted steamboats against railroads and the North against the South. Lincoln defended the rail.” The Wall Street Journal (Mon., Feb. 23, 2015): A15.
(Note: the online version of the review has the date Feb. 22, 2015, and has the title “BOOKSHELF; Technology’s Great Liberator; A dispute over a fiery collision pitted steamboats against railroads and the North against the South. Lincoln defended the rail.”)

The book under review is:
McGinty, Brian. Lincoln’s Greatest Case: The River, the Bridge, and the Making of America. New York: Liveright Publishing Corp., 2015.

Homer Spoke from a “Vengeful, Frighteningly Violent Time”

(p. 17) The Homeric epics are long, contradictory, repetitive, composite works, riddled with anachronisms, archaic vocabulary, metric filler and exceedingly graphic brutality. Over the millenniums, Nicolson asserts, they have been cleaned, scrubbed and sanitized by generations of translators, editors, librarians and scholars, in order to protect readers from the dangers of the atavistic world lurking just below the surface of the words. He writes that everyone from the editors at the Ptolemaic library in Alexandria to the great 18th-century poet Alexander Pope wished to civilize or tame the poems, “wanted to make Homer proper, to pasteurize him and transform him into something acceptable for a well-­governed city.” Part of Nicolson’s objective is to follow the poems back to the vengeful, frighteningly violent time and culture from which they came, and to restore some of their rawness.

For the full review, see:
BRYAN DOERRIES. “Songs of the Sirens.” The New York Times Book Review (Sun., DEC. 28, 2014): 17.
(Note: ellipses added.)
(Note: the online version of the review has the date DEC. 26, 2014, and has the title “‘Why Homer Matters,’ by Adam Nicolson.”)

The book under review is:
Nicolson, Adam. Why Homer Matters. New York: Henry Holt and Co., 2014.

In American Political System “It Will Be far More Difficult to Undo than to Do”

(p. 330) Jefferson traced the formation of the two main parties–to be known as Republicans and Federalists–to Hamilton’s victory over assumption. For Jefferson, this event split Congress into pure, virtuous republicans and a “mercenary phalanx,” “monarchists in principle,” who “adhered to Hamilton of course as their leader in that principle.”
Why did Jefferson retrospectively try to downplay his part in passing Hamilton’s assumption scheme? While he understood the plan at the time better than he admitted, he probably did not see as clearly as Hamilton that the scheme created an unshakable foundation for federal power in America. The federal government had captured forever the bulk of American taxing power. In comparison, the location of the national capital seemed a secondary matter. It wasn’t that Jefferson had been duped by Hamilton; Hamilton had explained his views at dizzying length. It was simply that he had been outsmarted by Hamilton, who had embedded an enduring political system in the details of the funding scheme. In an unsigned newspaper article that September, entitled “Address to the Public Creditors,” Hamilton gave away the secret of his statecraft that so infuriated Jefferson: “Whoever considers the nature of our government with discernment will see that though obstacles and delays will frequently stand in the way of the adoption of good measures, yet when once adopted, they are likely to be stable and permanent. It will be far more difficult to undo than to do.”

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
(Note: italics in original.)

Disclosure Regulations Often Have Unintended Consequences

(p. B5) . . . , some disclosure works. Professor Levitin cites two examples. The first is an olfactory disclosure. Methane doesn’t have any scent, but a foul smell is added to alert people to a gas leak. The second is A.T.M. fees. A study in Australia showed that once fees were disclosed, people avoided the high-fee machines and took out more when they had to go to them.
But to Omri Ben-Shahar, co-author of a recent book, “More Than You Wanted To Know: The Failure of Mandated Disclosure,” these are cherry-picked examples in a world awash in useless disclosures. Of course, information is valuable. But disclosure as a regulatory mechanism doesn’t work nearly well enough, he argues.
First, it really works only when things are simple. As soon as transactions become complex, disclosure starts to stumble. Buying a car, for instance, turns out to be several transactions: the purchase itself, the financing, maybe the trade-in of old car and various insurance and warranty decisions. These are all subject to various disclosure rules, but making the choices clear and useful has proved nigh impossible.
In complex transactions, we then must rely on intermediaries to give us advice. Because they are often conflicted, they, too, become subject to disclosure obligations. Ah, even more boilerplate to puzzle over!
And then there’s the harm. Over the years, banks that sold complex securities often stuck impossible-to-understand clauses deep in prospectuses that “disclosed” what was really going on. When the securities blew up, as they often did, banks then fended off lawsuits by arguing they had done everything the law required and were therefore not liable.
“That’s the harm of disclosure,” Professor Ben-Shahar said. “It provides a safe harbor for practices that smell bad. It sanitizes every bad practice.”

For the full review, see:
JESSE EISINGER. “In an Era of Disclosure, an Excess of Sunshine but a Paucity of Rules.” The New York Times (Thurs., FEBRUARY 12, 2015): B5.
(Note: ellipsis added.)
(Note: the online version of the review has the date FEBRUARY 11, 2015.)

The book under review is:
Ben-Shahar, Omri, and Carl E. Schneider. More Than You Wanted to Know: The Failure of Mandated Disclosure. Princeton, NJ: Princeton University Press, 2014.

“The Most Celebrated Meal in American History”

(p. 328) If we are to credit Jefferson’s story, the dinner held at his lodgings on Maiden Lane on June 20, 1790, fixed the future site of the capital. It is perhaps the most celebrated meal in American history, the guests including Jefferson, Madison, Hamilton, and perhaps one or two others. For more than a month, Jefferson had been bedeviled by a migraine headache, yet he presided with commendable civility. Despite his dislike of assumption, he knew that the stalemate over the funding scheme could shatter the union, and, as secretary of state, he also feared the repercussions for American credit abroad.
Madison restated his familiar argument that assumption punished Virginia and other states that had duly settled their debts. But he agreed to support assumption–or at least not oppose it–if something was granted in exchange. Jefferson recalled, “It was observed… that as the pill would be a bitter one to the southern states, something should be done to soothe them.” The sedative measure was that Philadelphia would be the temporary capital for ten years, followed by a permanent move to a Potomac site. In a lucrative concession for his home state, Madison also seems to have extracted favorable treatment for Virginia in a final debt settlement with the central government. In return, Hamilton agreed to exert his utmost efforts (p. 329) to get the Pennsylvania congressional delegation to accept Philadelphia as the provisional capital and a Potomac site as its permanent successor.
The dinner consecrated a deal that was probably already close to achievement. The sad irony was that Hamilton, the quintessential New Yorker, bargained away the city’s chance to be another London or Paris, the political as well as financial and cultural capital of the country. His difficult compromise testified to the transcendent value he placed on assumption. The decision did not sit well with many New Yorkers. Senator Rufus King was enraged when Hamilton told him that he “had made up his mind” to jettison the capital to save his funding system. For King, Hamilton’s move had been high-handed and secretive, and he ranted privately that “great and good schemes ought to succeed not by intrigue or the establishment of bad measures.”

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
(Note: ellipsis in original.)

Italian Traditional Family Stunts Individual Enterprise

(p. 15) Hooper’s book, both sweeping in scope and generous with detail, makes persuasive arguments for how geography, history and tradition have shaped Italy and its citizens, for better and sometimes for worse. Roman Catholicism, for example, has indelibly conditioned Italian society, even as the Vatican’s restrictions are widely ignored. Catholicism’s great allowance for human frailty has translated into a great propensity for forgiveness, as evinced in the Italian justice system, but also resistance to the notion of accountability. It’s a word, Hooper adds, that has no counterpart in the Italian language.
. . .
There’s . . . mammismo, the propensity of young Italians to remain too closely tied to the maternal apron strings. But while “the traditional family has been at the root of much of what Italy has achieved,” Hooper writes, dependence on the family can infantilize, and lack of individual enterprise has held the country back. Indeed, various sections of Hooper’s book return to Italy’s economic decline and its underlying causes.
He notes that the paperwork and formalities of Italy’s cumbersome bureaucracy rob the average Italian of 20 days a year. And he wonders what other country could ever have had a Minister for Simplification to deal with its plethora of often conflicting laws and regulations.
Circumventing some of that bureaucracy partly answers another common question: Why is Italy so prone to corruption? After all, Italians are masters at sidestepping regulations, or, as the saying goes, “Fatta la legge, trovato l’inganno” (“Make the law, then find a way around it”). It’s no wonder foreign investment in Italy is so low.

For the full review, see:
LISABETTA POVOLEDO. “Under the Italian Sun.” The New York Times Book Review (Sun., March 1, 2015): 15.
(Note: ellipses added; italics in original.)
(Note: the online version of the review has the date FEB. 27, 2015, and has the title “‘The Italians,’ by John Hooper.”)

The book under review is:
Hooper, John. The Italians. New York: Viking, 2015.

In Hamilton’s Financial System the “Cogs and Wheels Meshed Perfectly Together”

(p. 302) Much later, Daniel Webster rhapsodized about Hamilton’s report as follows: “The fabled birth of Minerva from the brain of Jove was hardly more sudden or more perfect than the financial system of the United States as it burst forth from the conception of Alexander Hamilton.” This was the long view of history and of many contemporaries, but detractors were immediately vocal. They were befuddled by the complexity of Hamilton’s plan and its array of options for creditors. Opponents sensed that he was moving too fast, on too many fronts, for them to grasp all his intentions. He had devised his economic machinery so cunningly that its cogs and wheels meshed perfectly together. One could not tamper with the parts without destroying the whole. Hamilton later said of this ingenious structure, “Credit is an entire thing. Every part of it has the nicest sympathy with every other part. Wound one limb and the whole tree shrinks and decays.”

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
(Note: italics in original.)

Federal Government Main Cause of 2008 Financial Crisis

(p. A11) How much did the federal government contribute to the financial crisis? The question is quantitative, and the answer requires the kind of number crunching and careful thinking than cannot fit into an op-ed or television interview. Peter J. Wallison ‘s “Hidden in Plain Sight,” is the book that answers the question most meticulously of any written since 2008.
At this point, seven years on, most readers of this newspaper will recognize that the federal government’s role has been to force American taxpayers to subsidize trillions of dollars of risky lending. But each reader of Mr. Wallison’s book will come away a bit embarrassed at having neglected or forgot about one or more of Washington’s many contributions to the financial crisis.
. . .
In my opinion, a financial crisis is not only a likely consequence of implicit subsidies for risky lending but a necessary one because that is when implicit guarantees ultimately become real-life bailouts and trigger the taxpayer payments necessary to fund Washington’s longstanding lending goals. Mr. Wallison gives taxpayers the inside story of how housing policy was like a siphon hidden inside their wallets–and why it hurt so much.

For the full review, see:
CASEY B. MULLIGAN. “BOOKSHELF; Capitol Hill Pickpockets; Risky loans made by Fannie and Freddie were the biggest factor that led to the financial crisis–and the direct result of federal policy.” The Wall Street Journal (Weds., Feb. 25, 2015): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date Feb. 24, 2015.)

The book under review is:
Wallison, Peter J. Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again. New York: Encounter Books, 2015.

“He Used the Rich for a Purpose that Was Greater than Their Riches”

(p. 299) Hamilton’s interest was not in enriching creditors or cultivating the privileged class so much as in insuring the government’s stability and survival. Walter Lippmann later said of Hamilton, “He used the rich for a purpose that was greater than their riches.”

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

Railroad Regulation Helped Kill Passenger Service

(p. 1179) By 1970, passenger service was a not only losing money, but had deteriorated to such an extent that it was no more the elegant transportation mode as it once was. No more were the Hollywood stars long distance rail passengers. No more movies like “North by Northwest,” which featured the New York Central’s Twentieth Century Limited service from New York to Chicago. The book highlights the factors causing the decline of private rail passenger service and the creation of AMTRAK. The authors cite ICC regulation, the growth in alternative modes, which were heavily subsidized, the mix of freight and passenger service on the same lines, and public policy, which favored the airline industry.
. . .
One public policy that government got right is deregulation. This started with the 3R Act, then the 4R Act and then the Staggers Rail Act of 1980, which had a massive impact on the industry. Deregulation culminated in the ICC Elimination Act, in which the ICC was replaced by the Surface Transportation Board–or STB–with substantially diminished regulatory power. Gallamore worked in government when much of this legislation was passed and gives a firsthand account of the debates that took place in Congressional (p. 1180) hearings and the discussions in and out of government on the merits of deregulation.
In the concluding chapter of the over 500-page book, entitled “Decline and Renaissance of American Railroads in the Twentieth Century” the authors provide a summary of the history of the railroads and the lessons for public policy in the future. This chapter is such a great summary, that the reader may be best off starting with it, before reading the book. But don’t forget the afterword, which provides the authors’ recommendations for future U.S. policies for the railroads. It is a very insightful chapter.
. . .
American Railroads should be on the reading list of economists interested in transportation and logistics, economic historians, government officials, and rail fans who would like to know more about the history of the railroads in the twentieth century, and are interested in understanding the economics of the industry and the problems of government regulation. Gallamore and Meyer, at the end of the book, sum up why it should be read:

This book’s authors love railroads because they have a great history, fascinating operations, intriguing technology and untold opportunity for the future, but we also love them because no other enterprises illustrate elegant economic principles quite so well (p. 435).

For the full review, see:
Pagano, Anthony M. “American Railroads: Decline and Renaissance in the Twentieth Century.” Journal of Economic Literature 52, no. 4 (Dec. 2014): 1178-80.
(Note: ellipses added.)

The book under review is:
Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.