WASHINGTON, DC: In recent decades, economists have been struggling to make use of the concept of human capital, often defined as the abilities, skills, knowledge, and dispositions that make for economic success. Yet those who use the term often assume that to conceptualize a phenomenon is a first step to manipulating it. And, indeed, "human-capital policy is now much in fashion. But what if many of the abilities and dispositions in question are a product of history, capable of being understood and explained but not readily replicated? Simon Kuznets, one of the 20th century's great economists, was a pioneer of human-capital theory. Before he died, Kuznets recommended that a young colleague study the role of Jews in economic life. By and large, economists and other social scientists have neglected the history of Jews and capitalism, for reasons that are understandable, though unconvincing. For most economists, the extent to which modern capitalism has been shaped by earlier cultural predispositions is a source of puzzlement at best, if not merely a factor to be dismissed. Such cultural considerations simply do not fit into the categories in which equation-fixated economists are predisposed to think. When economists examine "human capital, they prefer measurable criteria such as years of schooling. To the extent that human capital involves character traits and varieties of "know-how that are transmitted within the realms of the family and the community, rather than by formal education, it becomes both methodologically elusive and difficult to manipulate by public policy. A look at the historical experience of the Jews shows that while most Jews were mired in poverty at the beginning of the 20th century, over time they tended to do disproportionately well in societies that allowed them to compete on an equal basis. That was the case first in Europe and then in the US. They did particularly well in commerce. In search of economic niches not already occupied by others, Jews frequently created markets for new products and services. They pioneered new retail institutions, from department stores to box stores. The fastest growing sectors of the economy since the late 19th century have been those loosely classified as "service industries, often involving the dissemination of information and entertainment - activities in which Jews have been especially prominent, from publishing to vaudeville and from movies to commercial sports. They also tended to do disproportionately well in the learned professions - such as medicine, law, and accounting - that are so central to modern capitalist society. The fact that Jews were long a minority subject to discrimination is sometimes given as a reason for their tendency to devote themselves to commerce, finance, and the professions. Yet not all minorities long subject to discrimination necessarily succeed under conditions of market competition. There are a number of ways to account for Jews' disproportionate achievement. For one thing, Jews had more experience with commerce than most other groups, and the tacit knowledge of buying, selling, and calculating advantage that was passed on in families with ties to business helps explain why Jews tended to be better at it. Moreover, in much of Europe, Jews had long been excluded from most of the established economy of land ownership, and from many other fields that were reserved for Christians. So they learned to be on the lookout for new opportunities in underserved markets, working as peddlers, for example, or creating new products, or new forms of marketing. Social networks also played an important role. Jews were spread across many countries, but to some extent shared a common language and a sense of common fate. So they were more aware of distant opportunities, had more international contacts, and were disproportionately active in trade. In addition, Jews had a religious culture that promoted universal adult literacy - at least for men - and a culture that respected book learning. Those attitudes and dispositions were transferred from religious texts to secular forms of education. As a result, Jews were highly oriented toward education, and willing to defer current pleasures and income to obtain more of it. Such factors provide a sense of why attention to the history of Jews under capitalism helps us to understand capitalism more generally. It reminds us that much of success in a capitalist society is based on cultural and historical factors that produce qualities such as innovativeness, willingness to tolerate risk, and willingness to defer gratification through savings and education. These cultural traits are difficult to quantify, so economists are uncomfortable in dealing with them. They are often passed down within families, so they elude social policies based on the notion that equality of opportunity can be created by government action. Exploring the economic history of the Jews also reminds us that groups that are disproportionately successful are met by different political reactions. Societies long oriented to economic dynamism tend to welcome the economically successful, viewing them as a source of mutual gains. But cultures that tend to resent the economically successful - either as an affront to equality, or on the implicit assumption that the economic gains of some must be at the expense of others - tend to be more hostile toward Jews and given to conspiratorial theories to explain their economic success. Most societies lie somewhere along a spectrum between these two poles. Some social scientists are wary of calling attention to the reality of disproportionate Jewish economic success for fear of arousing anti-Semitism, or contributing to conspiratorial theories about Jewish economic dominance. No doubt, conspiratorial minds will always find fodder for their obsessions. But the fact that the history of Jews and capitalism calls current social-scientific wisdom and method into question is all the more reason to explore the topic. Jerry Z. Muller is Professor of History at the Catholic University of America, Washington D.C., and author, of Capitalism and the Jews (Princeton University Press). This commentary is published by DAILY NEWS EGYPT in collaboration with Project Syndicate/Institute for Human Sciences (www.project-syndicate.org).
