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The military origins of industrialisation and international trade rivalry
Book reviews
233
It is impossible to assess the importance of law and economics without specifying the purpose at hand. For the academic lawyer in the United States, the interest in economics had its genesis in the agenda of legal realism.9 If the purpose of legal scholarship is to understand the social effects of law, then a study of the economic effects of law is important. If, on the other hand, the purpose of legal scholarship is to report on the activity and pronouncements of judges, economics has little role to play. For the practising lawyer, economics is important if it is of concern to the law-maker. If, for instance, the judges are influenced by their understanding of the economic effects of the rules they interpret and enforce-as the judges in the United States are-then economics is important for the practising lawyer. It is impossible to predict what the importance of law and economics will be in the future without making predictions about broader movements in legal scholarship and jurisprudence. Edmund W. Kitch Center for Advanced Studies University of Virginia REFERENCES 1. Richard
A. Posner,
AND NOTES
Economic Analysis oflaw,
Little Brown (2nd ed.-1977). and Continuous Disciplines,’ (1970) 7 J. Legal Stud. 201, was in part a response to Posner. This reviewer’s thoughts on these issues can be found in Edmund W. Kitch, ‘The Intellectual Foundations of Law and Economics,’ (1983) 33 J. Legal Ed. 184. Set out in Richard A. Posner, ‘Observation: theEconomic Approach to Law,’ (1975) 53 Tex L. R. 757. For information on many of the central figures see Edmund W. Kitch (ed.), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932-1970,’ (1983) 26 J. Law and Econ. 163. E.g., Ronald H. Coase, ‘The Marginal Cost Controversy,’ (1946) 13 Economica 169 41; Ronald H. Coase, ‘The Federal Communications Commission,’ (1959) J. Law and Econ. 1. Richard A. Posner, ‘Natural Monopoly and Its Regulation’, (1969) 21 Stan. L. R. 548; Richard A. Posner, AnM-ust Law: An Economic Perspective, University of Chicago Press (1976). For a view informed by closer experience see Olimpiad S. Ioffe, ‘Law and Economy in the USSR,’ (1982) 95 Harv. L. R. 1591. Donald N. McCloskey, ‘The Rhetoric of Economics,’ (1983) 21 J. Econ. Lit. 482 (1983); Ronald H. Coase, ‘How Should Economists Choose. 3’, the Warren G. Nutter Lectures in Political Economy, American Enterprise Institute (1982). See Kitch, supru, note 4.
2. Ronald H. Coase, ‘Economics
3. 4. 5. 6. 7. 8. 9.
G. Sen, The Military Origins of Industrialisation and International Trade Rivalry, London: Frances Pinter, 1984. 277 pp. This book is based on a doctoral dissertation. It considers two issues: first, the causes of disputes over international trade, particularly since the late 1960s; second, government responses to these disputes and their reluctance to abolish the liberal trading arrangements of the post-war period. The author rejects both neo-classical trade theory and Marxist explanations: it is suggested that they cannot explain international trade disputes over the same products between several countries simultaneously. The alternative theory proposes that the take-off stage of industrialization in all capitalist
234
Book reviews
nations is dependent upon the state’s role in developing a core of industrializing industries. These are similar between nations and are strategically important for military production. The state is reputed to play a crucial role in guaranteeing the economic viability of this group of industries which are viewed as vital to maintaining a nation’s position in the international power struggle. Military capability determines international power and such capability depends on the level of industrialization. Chapter 1 presents international evidence on similarities in the industrial pattern of economic growth, based on the work of Chenery. The analysis uses input-output data tested against forward and backward linkages, the degree of triangularization of the matrices and the similarity between corresponding input coefficients in different matrices. Efforts are made to identify the leading industries for economic development based on criteria of scale economies, linkages and growth performance. Six industries form the strategic set: iron and steel, chemicals, textiles, machinery, paper and paper products and transport equipment, all of which are capital goods, heavy industries, excluding consumer goods producers. It would have helped if evidence had been presented on the relative economic importance of these industries, namely past trends in, and current size of, output and employment. Chapter 2 outlines the relationship between the leading industries, national defence and the role of military capability in international rivalry. The leading industries are asserted to be necessary for maintaining a defence capability. However, little empirical evidence is presented to support this hypothesis, although the author recognizes that textiles and paper industries have no direct significance for defence capability. Nor is sufficiently detailed analysis given to the possible jobs, advanced technology and balance of payments arguments often used to explain general government industrial and manpower policy (e.g., competition policy, nationalization, preferential purchasing, regional aid, subsidies, tariffs, etc., which are not restricted to the strategic industries). Instead, it is asserted that ‘the primacy of national defence considerations is indisputable’. Chapter 3 considers the influence of military need on the form and pace of industrialization, without implying any causal relationship. Military demand for equipment provides a powerful stimulus for the strategic industries; it influences the organization of production (e.g., mass production), promotes technical change and provides a disciplined labour force. Examples are provided from the industrialization of the UK, France, Germany, Italy, Japan, the USA, Brazil and India; but the illustrations are too general and need to be subject to more rigorous empirical testing (e.g., does the analysis apply to Israel?). Nor is any consideration given to the newlyemerging ‘knowledge-based’ industries (e.g., is information technology a new strategic industry?), their impact on the next industrial revolution and on the military, and the effects of nuclear weapons on traditional notions of maintaining production capacity for a war economy. More recently, some critics have argued that defence expenditure has had an adverse effect on economic growth, a view which is not considered in the book. The remaining chapters deal with state intervention in latecomer countries, the response of the state to changes in world market shares and the role of transnational corporations. References are made to the ability of multinationals to influence public policy but, generally, the book neglects the public choice approach and fails to consider the role of bureaucracies, interest groups and lobbying in policy formulation. Also, in view of the book’s emphasis on the period since the late 196Os, surprisingly little attention is given to evidence on recent trends in the level and composition of defence expenditure in major nations (cf. Japan). No mention is made
Book reviews
235
of the costs of nationalism and the impact on military capability of buying weapons from abroad. Strategic industries are also defined broadly, although at one point a modern sub-set is offered, namely, electrical and electronics, chemicals, drugs and petroleum, aircraft, motor vehicles, ships and other transport, metals, together with instruments and machinery: is this the new industrializing core? In total, the author is to be commended for setting an ambitious target, but he never really gets to grips with the central theme of the military origins of industrialization and international trade rivalry, especially since the late 1960s. There is scope for much more analysis, empirical work and critical evaluation. Keith Hartley
IRISS University of York Alvaro Pinter,
Cencini, Time and the Macroeconomic 1984. 233 pp.
Analysis of Income, London:
Frances
This book argues that the national income identities of Keynes’ General Theory are logically related to the concepts of quantum time, and that all other interpretations are illogical and inconsistent. The contributions of such economists as Hansen, Hicks, Leijonhufud, and Samuelson are thus rejected. The basis for this rejection is provided by the concepts of quantum time and quantum events. ‘A quantum event is an instantaneous creation whose result is given as a whole. Accordingly, the time dimension of this event is also a quantum, i.e., a finite and indivisible period of time’ (p. 121). These concepts may be illustrated using an example provided by the author. Let us consider for example, the transport by rail of a person from London to Paris. The service given by the railway is nil, inexistent, as long as the destination has not been reached. At the instant the train stops in Paris the journey is perceived in its indivisible unit, as a quantum, so that the time of the journey is itself an indivisible quantum (p. 121). Presumably a person on the same train who alighted at Dover would, similarly, have perceived his journey from London to Dover as a quantum event at the instant the train stopped in Dover station and the time of his journey would also have been an indivisible quantum, although a smaller quantum than that for the journey to Paris? No doubt different goods and services do take different time periods for their production (it takes longer to build a power-station than a three-bedroomed house), and no doubt abstract macroeconomic models pay scant attention to such details. But what is to be gained by arguing that a good is inexistent until it is completed and that when it is completed it is created in an ‘instantaneous event which quantises time’ (p. xix) and that this ‘positive and indivisible period of time : a quantum of time’ (p. xix) can be of different calender time for different goods? I must admit that after reading this book I am unable to see the relevance of the concepts it introduces for the analysis of macroeconomic activity. After a foreword by Meghnad Desai and the author’s introduction, the book consists of four chapters. The first deals with the definition of national income and the interpretation of the identity between savings and investment. The second deals with the multiplier analysis. The traditional view of the multiplier is totally rejected, which is not surprising since the author is not willing to accept the usual distinction between comparative static and dynamic analysis or between ex-post or actual and ex-
233
It is impossible to assess the importance of law and economics without specifying the purpose at hand. For the academic lawyer in the United States, the interest in economics had its genesis in the agenda of legal realism.9 If the purpose of legal scholarship is to understand the social effects of law, then a study of the economic effects of law is important. If, on the other hand, the purpose of legal scholarship is to report on the activity and pronouncements of judges, economics has little role to play. For the practising lawyer, economics is important if it is of concern to the law-maker. If, for instance, the judges are influenced by their understanding of the economic effects of the rules they interpret and enforce-as the judges in the United States are-then economics is important for the practising lawyer. It is impossible to predict what the importance of law and economics will be in the future without making predictions about broader movements in legal scholarship and jurisprudence. Edmund W. Kitch Center for Advanced Studies University of Virginia REFERENCES 1. Richard
A. Posner,
AND NOTES
Economic Analysis oflaw,
Little Brown (2nd ed.-1977). and Continuous Disciplines,’ (1970) 7 J. Legal Stud. 201, was in part a response to Posner. This reviewer’s thoughts on these issues can be found in Edmund W. Kitch, ‘The Intellectual Foundations of Law and Economics,’ (1983) 33 J. Legal Ed. 184. Set out in Richard A. Posner, ‘Observation: theEconomic Approach to Law,’ (1975) 53 Tex L. R. 757. For information on many of the central figures see Edmund W. Kitch (ed.), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932-1970,’ (1983) 26 J. Law and Econ. 163. E.g., Ronald H. Coase, ‘The Marginal Cost Controversy,’ (1946) 13 Economica 169 41; Ronald H. Coase, ‘The Federal Communications Commission,’ (1959) J. Law and Econ. 1. Richard A. Posner, ‘Natural Monopoly and Its Regulation’, (1969) 21 Stan. L. R. 548; Richard A. Posner, AnM-ust Law: An Economic Perspective, University of Chicago Press (1976). For a view informed by closer experience see Olimpiad S. Ioffe, ‘Law and Economy in the USSR,’ (1982) 95 Harv. L. R. 1591. Donald N. McCloskey, ‘The Rhetoric of Economics,’ (1983) 21 J. Econ. Lit. 482 (1983); Ronald H. Coase, ‘How Should Economists Choose. 3’, the Warren G. Nutter Lectures in Political Economy, American Enterprise Institute (1982). See Kitch, supru, note 4.
2. Ronald H. Coase, ‘Economics
3. 4. 5. 6. 7. 8. 9.
G. Sen, The Military Origins of Industrialisation and International Trade Rivalry, London: Frances Pinter, 1984. 277 pp. This book is based on a doctoral dissertation. It considers two issues: first, the causes of disputes over international trade, particularly since the late 1960s; second, government responses to these disputes and their reluctance to abolish the liberal trading arrangements of the post-war period. The author rejects both neo-classical trade theory and Marxist explanations: it is suggested that they cannot explain international trade disputes over the same products between several countries simultaneously. The alternative theory proposes that the take-off stage of industrialization in all capitalist
234
Book reviews
nations is dependent upon the state’s role in developing a core of industrializing industries. These are similar between nations and are strategically important for military production. The state is reputed to play a crucial role in guaranteeing the economic viability of this group of industries which are viewed as vital to maintaining a nation’s position in the international power struggle. Military capability determines international power and such capability depends on the level of industrialization. Chapter 1 presents international evidence on similarities in the industrial pattern of economic growth, based on the work of Chenery. The analysis uses input-output data tested against forward and backward linkages, the degree of triangularization of the matrices and the similarity between corresponding input coefficients in different matrices. Efforts are made to identify the leading industries for economic development based on criteria of scale economies, linkages and growth performance. Six industries form the strategic set: iron and steel, chemicals, textiles, machinery, paper and paper products and transport equipment, all of which are capital goods, heavy industries, excluding consumer goods producers. It would have helped if evidence had been presented on the relative economic importance of these industries, namely past trends in, and current size of, output and employment. Chapter 2 outlines the relationship between the leading industries, national defence and the role of military capability in international rivalry. The leading industries are asserted to be necessary for maintaining a defence capability. However, little empirical evidence is presented to support this hypothesis, although the author recognizes that textiles and paper industries have no direct significance for defence capability. Nor is sufficiently detailed analysis given to the possible jobs, advanced technology and balance of payments arguments often used to explain general government industrial and manpower policy (e.g., competition policy, nationalization, preferential purchasing, regional aid, subsidies, tariffs, etc., which are not restricted to the strategic industries). Instead, it is asserted that ‘the primacy of national defence considerations is indisputable’. Chapter 3 considers the influence of military need on the form and pace of industrialization, without implying any causal relationship. Military demand for equipment provides a powerful stimulus for the strategic industries; it influences the organization of production (e.g., mass production), promotes technical change and provides a disciplined labour force. Examples are provided from the industrialization of the UK, France, Germany, Italy, Japan, the USA, Brazil and India; but the illustrations are too general and need to be subject to more rigorous empirical testing (e.g., does the analysis apply to Israel?). Nor is any consideration given to the newlyemerging ‘knowledge-based’ industries (e.g., is information technology a new strategic industry?), their impact on the next industrial revolution and on the military, and the effects of nuclear weapons on traditional notions of maintaining production capacity for a war economy. More recently, some critics have argued that defence expenditure has had an adverse effect on economic growth, a view which is not considered in the book. The remaining chapters deal with state intervention in latecomer countries, the response of the state to changes in world market shares and the role of transnational corporations. References are made to the ability of multinationals to influence public policy but, generally, the book neglects the public choice approach and fails to consider the role of bureaucracies, interest groups and lobbying in policy formulation. Also, in view of the book’s emphasis on the period since the late 196Os, surprisingly little attention is given to evidence on recent trends in the level and composition of defence expenditure in major nations (cf. Japan). No mention is made
Book reviews
235
of the costs of nationalism and the impact on military capability of buying weapons from abroad. Strategic industries are also defined broadly, although at one point a modern sub-set is offered, namely, electrical and electronics, chemicals, drugs and petroleum, aircraft, motor vehicles, ships and other transport, metals, together with instruments and machinery: is this the new industrializing core? In total, the author is to be commended for setting an ambitious target, but he never really gets to grips with the central theme of the military origins of industrialization and international trade rivalry, especially since the late 1960s. There is scope for much more analysis, empirical work and critical evaluation. Keith Hartley
IRISS University of York Alvaro Pinter,
Cencini, Time and the Macroeconomic 1984. 233 pp.
Analysis of Income, London:
Frances
This book argues that the national income identities of Keynes’ General Theory are logically related to the concepts of quantum time, and that all other interpretations are illogical and inconsistent. The contributions of such economists as Hansen, Hicks, Leijonhufud, and Samuelson are thus rejected. The basis for this rejection is provided by the concepts of quantum time and quantum events. ‘A quantum event is an instantaneous creation whose result is given as a whole. Accordingly, the time dimension of this event is also a quantum, i.e., a finite and indivisible period of time’ (p. 121). These concepts may be illustrated using an example provided by the author. Let us consider for example, the transport by rail of a person from London to Paris. The service given by the railway is nil, inexistent, as long as the destination has not been reached. At the instant the train stops in Paris the journey is perceived in its indivisible unit, as a quantum, so that the time of the journey is itself an indivisible quantum (p. 121). Presumably a person on the same train who alighted at Dover would, similarly, have perceived his journey from London to Dover as a quantum event at the instant the train stopped in Dover station and the time of his journey would also have been an indivisible quantum, although a smaller quantum than that for the journey to Paris? No doubt different goods and services do take different time periods for their production (it takes longer to build a power-station than a three-bedroomed house), and no doubt abstract macroeconomic models pay scant attention to such details. But what is to be gained by arguing that a good is inexistent until it is completed and that when it is completed it is created in an ‘instantaneous event which quantises time’ (p. xix) and that this ‘positive and indivisible period of time : a quantum of time’ (p. xix) can be of different calender time for different goods? I must admit that after reading this book I am unable to see the relevance of the concepts it introduces for the analysis of macroeconomic activity. After a foreword by Meghnad Desai and the author’s introduction, the book consists of four chapters. The first deals with the definition of national income and the interpretation of the identity between savings and investment. The second deals with the multiplier analysis. The traditional view of the multiplier is totally rejected, which is not surprising since the author is not willing to accept the usual distinction between comparative static and dynamic analysis or between ex-post or actual and ex-