Wednesday, January 22, 2014

Lance Davis (1928-2014)

Lance Edwin Davis passed away this week. A renowned economic historian with major contributions in financial history and institutional economics, Davis was a professor at Caltech from 1968 to 2005.

Davis is associated with cliometrics, a quantitative and systematic approach to analyzing economic history. The term cliometrics--combining Clio, the muse of history, with metrics from econometrics--was coined in the 1950s by a group of economic historians and mathematical economists at Purdue University. Davis was a key member of this group, along with Jonathan Hughes and Stanley Reiter. This group obtained funds from Purdue to start a new conference series, originally called the Conference on the Application of Economic Theory and Quantitative Methods to the Study of Problems of Economic History, and later called the Cliometric Conference, or just Clio.

The Cliometrics Conferences helped bring about a renewal in the economic history field. The new generation of economic historians in the 1950s and 60s began integrating economic theory and empirical evidence more rigorously and creatively than before. Often, this involved extensive efforts to uncover and tabulate historical data. Davis and Louis Stettler's "The New England Textile Industry, 1825-60: Trends and Fluctuations" (1966) is an example of this type of work.

Davis' efforts to integrate theory and empirical evidence are particularly valuable in the area of financial history. In "The Investment Market, 1870-1914: The Evolution of a National Market" (1965), Davis notes that the classical assumption of perfect capital mobility implies that rates of return on capital should be equal across regions and industries. Interest rate differentials provide information about the barriers to capital mobility. Davis' paper gathers data on interest rate differentials among six regions of the United States from 1870-1914 and analyzes the institutional innovations that reduced barriers to capital mobility over that period.

The cliometric approach also brought about a new way of thinking about economic institutions and institutional change. Neoclassical institutional theory flourished in the 1960s, led by Davis and Douglass North, who developed a model of the logic and incentives that shape the institutional environment. Davis and North's hugely influential book, Institutional Change and American Economic Growth (1971), outlines their model and applies it to American economic history.

In other work, Davis focuses on British financial markets and British imperialism. He and Robert Huttenback wrote the book Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912 (1986). They examine the economics of imperialism, including the returns on investment in empire-building and the social costs of maintaining the empire. The analysis portrays British imperialism as a mechanism to that transferred income from the tax-paying middle class to the elites.

Among Davis' other works are In Pursuit of Leviathan: Technology, Institutions, Productivity, and Profits in American Whaling, 1816-1906 (1997) with Robert Gallman and Karin Gleiter, and Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1870–1914 (2001) with Robert Gallman.

An interview with Davis in 1998 is full of interesting stories about his life and work, including his naval service in WWII and the Korean War. The interview tells of his role shaping the Caltech social sciences division. He was there when Caltech admitted its first social sciences PhD student, Barry Weingast, in 1974. There is a strong sense of community among economic historians in California, of which Davis was a central part.

6 comments:

  1. Thanks for the introduction to such an interesting figure. I will have to check out some of the work over the next few days.

    Are you connected with his work in any way? Or how did you discover him?

    P.S. You don't mean that metrics comes from econometrics and not the other way around, do you? The parallel structure of that sentence confused me.

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  2. Brian, I learned about his work through my economic history classes at Berkeley and through involvement with the All-UC Economic History Group, of which he was a big supporter.

    I just mean that in the word cliometrics, the "metrics" part of the word comes from econometrics.

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  3. That was a very interesting post. Thanks! When I was a grad student in economics at the University of Washington, I remember Charles Nelson telling a story about Douglass North. The details escape me, but the gist of the story was that Professor North had a close knit circle of Doctoral candidates which he very actively and personally discipled. I thought of this while reading the part of your essay that mentioned the group of scholars at Purdue. This strikes me as the ideal circle of learning. I hope you are experiencing something along those lines during your time at Berkeley.

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  4. I've been reading his work since I entered grad school (in, er, 1969), but until his death I did not realize by how much he preceded my generation of economists. He did a lot of amazing work, and was by all accounts a good mentor and friend to those who knew him. RIP...

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  5. I majored in engineering at Caltech, and his economics class was required. We called him "Light-Emitting Davis", for his initials LED, but his was one of the most interesting classes I ever had.

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  6. Thank you for your post re Lance Davis. I worked with him on In Pursuit of Leviathan; the last time I saw him was at Robert Gallman's funeral. I think his father had been a quantity surveyor in the Northwest. He wrote with a lot of semi-colons, which he said was due to the influence of his mother, who had been a school teacher. He was definitely an original.
    --Karin Gleiter

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Comments appreciated!