Abstract: The paper discusses some evidence, based on a review of new literature on economic history, about what is referred to as the Sen-hypothesis, that increasing human agency (of both men and women) is a key factor in economic development. It briefly discusses various dimensions of agency (or its absence): slavery (as the absolute suppression of human agency), access to markets, agency concerning marriage, and political participation. This concept perhaps also allows economic historians to move beyond the historical determinism that is central to much recent work in this field.
This paper distributed by NEP-HIS on 2012-01-03 raises a challenge to economic historians: how can we improve our current explanations of differential development and escape the common rhetorical places of path dependency and institutional persistence in our explanations of material stagnation and change? By placing human agency of men and women in the center of our stories, says Jan Luiten van Zanden, in the form advocated years ago by Amartya Sen in his best-selling book Development as Freedom.
It might be useful to remember Sen’s definition of agency, a concept that diverged from the usual meaning of the term in economics:
The use of the term “agency” calls for a little clarification. The expression “agent” is sometimes employed in the literature of economics and game theory to denote a person who is acting on someone else’s behalf (perhaps being led on by a “principal” and whose achievements are to be assessed in the light of someone else’s (the principal’s) goals. I am using the term “agent” not in this sense, but in its older -and “grander”- sense as someone who acts and brings about change, and whose achievements can be judged in terms of her own values and objectives, whether or not we assess them in terms of some external criteria as well. This work is particularly concerned with the agency role of the individual as a member of the public and as a participant in economic, social and political actions (varying from taking part in the market to being involved, directly or indirectly, in individual or joint activities in political and other spheres) (Sen 1999: 18-19, my own emphasis added).
Zanden’s reading of agency in Sen is “the capacity for autonomous decision making” that ultimately drives “economic and social-political change” (Zanden 2011: 4). Agency is also a synonym of “participation, or autonomy” (Zanden 2011: 5). But two questions remain. How does agency affect economic change? How does freedom impact agency? Sen responds:
Expansion of freedom is viewed both as the primary end and as the principal means of development. Development consists of the removal of various types of unfreedoms that leave people with little choice and little opportunity of exercising their reasoned agency. The removal of substantial unfreedoms is constitutive of development (Sen 1999: xii).
Zanden advances the usefulness of Sen’s framework and formulates what he calls the dual Sen hypothesis, this is, if “development is defined as freedom [… that] freedom -or rather -agency- is an important precondition and driver of long-term economic and socio-political change” (Zanden 2011: 5).
The second part of the “Sen hypothesis”, agency as a determinant of historical change, can be tested with proxy variables such as the gross domestic product or the human development index. However, what is behind these indicators? Zanden advances a suggestive explanation drawn from the new growth theory of Paul Romer and Robert Lucas: human capital is the crucial determinant of economic growth and human development. Human capital is embedded in the other variables for “one has to possess the right skills -the human capital- to really participate in markets, political events and the civil society” (Zanden 2011:5).
The author then offers four brief examples of how historical inquiry guided by degrees of agency and human capital might illuminate problems in the past with echoes in the present: slavery, capital markets, patterns of marriage and political participation. In the following lines we will mention some of the arguments Zanden advances about each of these:
- Zanden rightly points out that the impoverishing consequences of slavery were experienced both in the slave-supplying and the slave-demanding regions of the world, “however, the slave trading nations seem to be unaffected by it” (Zanden 2011: 6). A fact that raises a question of method: how can economic historians discount the loss in welfare represented by the human tragedies of slavery in their long-run series of production?
- Zanden states that financial repression and inefficiency account for suboptimal allocation of resources to fund investment and growth. Nevertheless, the experience of fast processes of financial liberalization and subsequent crashes, such as those enacted in Latin American countries in the 1980s, the former Communist bloc countries in the 1990s or the United States and the European Union in the 2000s might help us tone down the discussion on freedom of access to financial markets to study the distributional consequences of the sudden reversal of fortune, that is, who pays for the negative externalities of financial intermediation gone awry?
- The author revisits the marriage pattern of Northwestern Europe after 1300 to identify two positive aspects of autonomy in choosing one’s partner, those being: a) men and women remained single for a longer time before getting married, thus allowing them to achieve an increased level of formation and accumulation of human capital, and b) the decline of the birth rate explained in terms of a shift “from ‘quantity’ to ‘quality’ of offspring” (Zanden 2011: 10) created the incentives to invest more in the human capital of (fewer) children. In Zanden’s example, we might be confronted to a rather traditional explanation for European exceptionalism and the Great Divergence, however, comparing the Northwestern European marriage pattern with other regions of the world depends on reliable demographic series in the long-run, which might not be available either by the scarcity of sources or problems to finance the assembling of reliable databases.
- On the section of political participation and economic development, Zanden explores the problem of specification of the relationship between economic growth and democracy: Does economic growth cause democracy? Is democracy an explanatory variable of economic growth? Or are both economic growth and democracy explained by a third variable, say, the stock of human capital or the participation of the civil society? This has been a fascinating debate “as old and venerable as the social sciences themselves” (Zanden 2011: 11). Van Zanden rescues the role of bottom-up organizations (communes, guilds and parliaments) that acted as countervailing powers to despotic rule and voiced the interests of (mostly wealthy members of) society. Then Zanden revisits the history of apartheid in South Africa, articulating a masterly example of how economic history would look like with full attention to sociopolitical factors.
In his conclusion, Zanden remarks that his is not a full account of the “genesis of global inequality”, but rather a suggestion of what the Sen approach to human development can offer to economic history, for if deprivations explain the level of development in the present, they will be even better to explain the longue durée processes of “economic change and [human] development” (Zanden 2011: 14):
Overcoming [deprivations] is a central part of the exercise of development. We have to recognize the role of freedoms of different kinds in countering these afflictions. Indeed, individual agency is ultimately central to addressing these deprivations. On the other hand, the freedom of agency that we individually have is inescapably qualified and constrained by the social, political and economic opportunities that are available to us. There is a deep complementarity between individual agency and social arrangements. It is important to give simultaneous recognition to the centrality of individual freedom and to the force of social influences on the extent and reach of individual freedom. To counter the problems that we face, we have to see individual freedom as a social commitment (Sen 1999: xi-xii).
Zanden’s paper is a welcome exercise to explore the relevance of our discipline to account for contemporary problems such as poverty, lack of social mobility and unequal distribution of wealth and income. It is indeed a first step towards enriching the new institutional economics paradigm and reintroducing historical contingency in our accounts of the past. However, we must be cautious not to subsume all new historiography in the agency paradigm without being aware of its ideological assumptions. For, as Walter Johnson (professor of History at Harvard University and second chair of the Project on Justice, Welfare and Economics, a research initiative first headed by Amartya Sen) has said with regards to the historiography of American slavery in the 19th century:
The idea of “the agent” as the essential subject of history has habited our history reading with an anachronistic (and generally unarticulated) assumption that beneath all history there lies a liberal individual subject waiting to be emancipated into the precise condition that characterize the lives of the imperial bourgeoisie of the twenty-first century. Pushed to the side has been any genuine consideration of historical subjectivity (Johnson 2011: 26, my own emphasis added).
This is to say, agency and freedom cannot be that easily equated. “Agency is a complex phenomenon” (Zanden 2011: 5). Questions of identity, of historical subjectivity and particularity might be lost if we do not problematize agency in the craft of economic history:
The selective reworking [of agency] has taken on the guise of a substantive account of historical subjectivity, an actually existing thing -the naturally autonomous, and intrinsically self-determining, and properly rights-bearing historical agent striving for “freedom”. Agency has come to serve us not as a container by which disparate versions of historical subjectivity (the terms through which human beings understand themselves as historical actors) might be analyzed and compared to one another but as a crypto-liberal account of the thing itself (Johnson 2011: 25, my own emphasis added).
To talk about individual empowerment is to reassert the importance of social, political and cultural factors on economic change. To speak about agency is to reiterate the pertinence of categories such as class, gender, race, ethnicity, sexual orientation, in economic and historical analysis, notwithstanding our temptation to stylize facts, to simplify and model with parsimony, to reconstruct historical series that might say nothing about differences in social welfare and the distributional aspects of economic growth.
Our discipline would do good to engage in dialogue with political, social and cultural historians who might offer valuable insights on how to approach agency, autonomy and freedom on the individual and the collective level. Economic historians have been heard by economists and other social scientists: it is time to narrow the gap and join the conversation with our colleagues in other historical fields. Then, we will be in even better company.
- Johnson, Walter. “Agency: A Ghost Story” in Slavery’s Ghost. The Problem of Freedom in the Age of Emancipation (Baltimore, MD: The Johns Hopkins University Press, 2011): 8-30.
- Sen, Amartya. Development as Freedom (Oxford: Oxford University Press, 1999).
- Zanden, Jan Luiten van. “In Good Company: About Agency and Economic Development in Global Perspective”. Stellenbosch Economic Working Papers 23/11 (December 2011).