Friday, June 17, 2016

Some Random Economic History

The Program of the next meeting of the Economic History Association.

The Economic History Society now has a blog: The Long Run

Pseudoerasmus attempts to describe the essence of Beckert’s argument about economic development in Empire of Cotton

Ed Baptist explains how he was able to misinform so many people.

Jane Humphries examines the role of women in English economic history and gives a lesson in the use of primary sources in economic history.

At Ben Franklin’s World Liz Covart and Zara Anashanslin also discuss the use of primary sources, particularly in reference to Anashanslin’s book  Portrait of a Woman in Silk: Hidden Histories of the British Atlantic World

Saturday, June 11, 2016

Fugitive Slave Ads and the Runaway New History of Capitalism

The OAH recently tweeted about a new post at the Process blog.  The tweet asked if runaway slave ads can change the way we study slavery.The post is authored by Mary Niall Mitchell, Edward Baptist, and Joshua Rothman, and it describes their new project to create a database of digitized fugitive slave ads:

“Most historians of chattel slavery looking for detailed information about individual enslaved people have turned to a familiar constellation of sources: nineteenth-century slave narratives, the Ex-Slave Narratives gathered in the 1930s and 1940s by the Works Progress Administration, plantation records, and legal documents. We hope that this is about to change, by bringing new and existing digital techniques to a type of narrative that ran daily on the pages of American newspapers from the eighteenth century until the Civil War: the fugitive slave advertisement.”

“By 1865, we estimate more than 200,000 such notices appeared.”

It is possible that there are 200,000 such notices. It seems plausible to me, though I would be more willing to accept it if I was not familiar with Ed Baptist’s technique for creating quantitative estimates. He makes them up.

Although they do mention the work of Loren Schweinger and John Hope Franklin on runaway slaves the overall impression that the authors leave is that little has been done to make use of these valuable pieces of evidence. After all, “historians …. have turned to a familiar constellation of sources,” but they “ hope that this is about to change” as a result of their work. It is this implication that they are boldly going where no historians have gone before that is the problem.  There are already a number of extensive collections of digitized fugitive slave ads that, unlike their project, are already available to people. Moreover, historians have long regarded fugitive slave ads as an important source. Some economic historians have created databases including tens of thousands of ads to conduct their research. Bellow I provide a list of some of the digitization projects and historical scholarship related to runaway slave ads.

Can runaway slave ads change the way we study slavery? Yes. I know this because they already have. Why don’t the authors just acknowledge the contributions of the numerous scholars that have already worked on fugitive slave ads? They could simply state that despite all these previous efforts none has yet created a truly comprehensive database that is accessible to everyone. That would be true, and if they were able to create such a database it would be a considerable achievement. But that is not the way of the new history of capitalism. Instead, the approach is to ignore or deny the work of earlier scholars in order to claim false novelty for their own work. 

The North Carolina Runaway Slave Advertisements project provides online access to all known runaway slave advertisements (more than 2300 items) published in North Carolina newspapers from 1751 to 1840. These brief ads provide a glimpse into the social, economic, and cultural world of the American slave system and the specific experience within North Carolina. Working from microfilmed copies of these rare publications, the project team scanned the ads to provide digital images, create full-text transcripts and descriptive metadata, and develop a searchable database. The NCRSA website includes digital scans of the ads, contextual essays to address their historical research value, full text transcripts, an annotated bibliography to aid researchers, and a searchable database.

“The Texas Runaway Slave Project (TRSP) is a database of runaway slave advertisements, articles and notices from newspapers published in Texas. The project has so far documented the names of over 1400 runaway slaves from Texas.

The “Louisiana Runaway Slave Advertisements, 1836-1865” collection is a comprehensive digital collection of advertisements and notices harvested from the newspapers digitized as part of the Digitizing Louisiana Newspapers Project.  In these advertisements people from Louisiana and the Lower Mississippi Valley demonstrate their agency and resistance against the institutions of slavery and indentured servitude.

The project team identified and cropped advertisements directly from the digital newspaper images, and they created full-text transcriptions and descriptive metadata.”

The Documenting Runaway Slaves (DRS) research project is a collaborative effort to document newspaper advertisements placed by masters seeking the capture and return of runaway slaves. Dr. Max Grivno and Dr. Douglas Chambers, lead researchers and faculty members in the Southern Miss Department of History, are focusing their pilot project on Mississippi, but plans are already in place to expand the research to the larger Gulf South, the rest of the southern United States, the Caribbean, and Brazil.

“The Geography of Slavery in Virginia is a digital collection of advertisements for runaway and captured slaves and servants in 18th- and 19th-century Virginia newspapers. Building on the rich descriptions of individual slaves and servants in the ads, the project offers a personal, geographical and documentary context for the study of slavery in Virginia, from colonial times to the Civil War.”

Hodges, Graham Russell, and Alan Edward Brown. " Pretends to be Free": Runaway Slave Advertisements from Colonial and Revolutionary New York and New Jersey. Taylor & Francis, 1994.

Smith, Billy Gordon, and Richard Wojtowicz. Blacks who Stole Themselves: Advertisments for Runaways in the Pennsylvania Gazette, 1728-1790. University of Pennsylvania Press, 1989.
Prude, Jonathan. "To Look upon the" Lower Sort": Runaway Ads and the Appearance of Unfree Laborers in America, 1750-1800." The Journal of American History 78.1 (1991): 124-159.

Dittmar, Jeremiah, and Suresh Naidu. Contested Property: Fugitive Slaves in the Antebellum US South. Working paper, Columbia University (September 2012), 2012. Dittmar and Naidu collected more than 20,000 ads.

Komlos, John. "The Height of Runaway Slaves in Colonial America, 1720-1770." Stature, Living Standards, and Economic Development: Essays in Anthropometric History, ed. John Komlos (Chicago: University of Chicago Press, 1994) (1994): 93-116. Komlos collected more than 10,000 ads.

Tuesday, June 7, 2016

Loan Sharks

(Chicago Tribune Nov. 7, 1897)

Discussion about restricting payday lending has been in the news recently.

We first became interested in how states regulated attempts to collect debts from wage earners because bankruptcy rates look like this (see Hansen and Hansen 2012) Where it is easy to collect a large portion of someone’s wages people are more likely to file for bankruptcy.

As best I can tell, something like payday lending has existed about as long as paydays have existed. And as long as there has been payday lending, people have worried about the negative consequences of it and tried to place restrictions on it. In the late nineteenth and early twentieth centuries, many state legislatures restricted the ability to use garnishment or wage assignment. A wage assignment was a written statement that allowed the lender to collect from your employer if you did not pay. Some states prohibited wage assignments, others required spousal approval, or placed limits on the amount of wages that could be assigned. Some employers also attempted to prevent them. Armour, for instance required employees to sign a statement saying they would not assign their wages.
One problem states faced in regulating small lending was due process challenges. In addition to the due process clause in U.S. constitution many states also have due process clauses in their constitutions. The legal arguments involved substantive due process, which tends to raise fundamental questions about the appropriate role and operation of government. (See Hansen and Hansen 2014 on the evolution of garnishment and wage assignment in Illinois)

Due process clauses tend to say something like “no one may be deprived of life, liberty, or property without due process of law.” The first thing to note is that you can be deprived life, liberty and property. It just has to be done the right way. What does due process mean? There are two aspects: procedural due process and substantive due process. Procedural is what most people tend to think of when they think of due process. Did the state follow the rules? Did you, for instance, have access to an attorney? You will not find substantive due process in the constitution. It is a name given to what courts were doing. Consequently, people can disagree about exactly what it is. The description that best fits cases that I have read is that the court asks if the regulation is a reasonable means to obtain a legitimate public purpose. So, in the case of wage assignment restrictions, there was no question that the rights of the wage earner and the lender were being restricted. The problem to court faced was determining whether the restriction was a reasonable means to obtain legitimate public purpose. Some courts said that there was no state interest in interfering with how a grown man used his wages. Others said that there was a legitimate public purpose because loan sharks impoverished the working poor who then became a burden on the public. Behind the question of whether a regulation of “loan sharks” is a legitimate public purpose is an even more fundamental question: Who decides what a legitimate public purpose is?  Is it the legislature or the court? Courts went back and forth on this until the 1930s. Since the 1930s, courts have made a distinction between what they regard as economic rights and what they regard as civil rights. On economic rights they defer to the legislature. Consequently, cases like Kelo that may surprise the public should not surprise people familiar with American legal history.    I think legislatures are generally less restricted in their ability to regulate small lenders than they were in the early twentieth century. Moreover, the federal government been in the business of trying to eliminate loan sharks at least since the 1968 Consumer Credit Protection Act. 

On the other hand, I don’t think the fundamental economics has changed much. There are three basic problems: low income people often need to borrow money, they have no security for a loan other than their future wages (and sometimes a car), and it is expensive to lend to low income people. As I noted before, the problem is not new. People often focus on the interest rates and suggest that lenders are making extraordinary profits by exploiting the poor. The alternative explanation is that the interest rates are high because the cost of providing such loans is high. I tend to lean toward the second explanation. The primary reason I lean toward the second explanation is that I don’t see substantial barriers to entry in small lending. If a lender is making extraordinary profits by lending at an implicit rate of say 30%, why doesn’t another lender enter the market, charge 28%, attract all the customers, and make a real killing? Why don’t banks enter the market? They have reputation for liking profits. Moreover, why doesn’t someone start a non-profit payday lender? The non-profit should be able to easily cover its costs and provide lower cost loans to people. Actually, people have tried things like this and failed. They found that it was more costly than they anticipated. There are several good reasons why it is costly. First, the loans are small, which means the administrative cost tend to be a large fraction of the loan. Second, unlike banks that lend other people’s money, payday lenders lend their own money, and thus have a lower rate of return on capital.

So, what should be done? I don’t know. What I do know is that getting rid of payday lenders will not get rid of the need that low income people often have to borrow, and the more that you restrict legal options, the more room there will be for illegal options. What we shouldn't do is take away the option without providing an alternative and then pat ourselves on the back as if we solved the problem.

P.S. Usury laws have also restricted the ability to legally make loans to low income wage earners. They existed throughout most of American history (see Rockoff 2003 on the history of usury laws and Benmelech and Moskowitz 2010   on the political economy of usury laws. 

Tuesday, May 31, 2016

Economic and Business History Society

I first presented a paper at EBHS in 1996 in Savannah. My first, publication was in Essays in Economic and Business History. I go to the meeting whenever I can take the train or drive in a reasonable amount of time (say 12 hours or so), and I have published a couple more papers in Essays. EBHS has changed a great deal over the last twenty years. It has become much more international. Many of the members come from Europe, and there is an increasing number from Asia. Every other year the meeting is held outside the United States. This year it was in Montreal. Next year it will be in Oklahoma City, and in 2018 it will be in Finland. The editors of Essays have made it an open access online journal, with an impressive editorial board. What hasn’t changed is that the EBHS meeting always demonstrates that historians and economists (and even some business types) can coexist, not just peacefully, but happily and productively. As long as the methodology seems appropriate for the question, people just want to hear what you have to say. The sessions are well attended, and the questions and comments are thoughtful. EBHS is particularly welcoming of people just starting their academic careers.

This year

Fan Fei won the Lynne Doti award  for the best paper by a graduate student for his work on interstate highways and the decline of general stores. Fei is graduate student in the Economics Department at Michigan. You can find his job market paper here.

Soudeh Mirgashemi won the Fred Batemen prize for the best paper for her work on dams and agricultural development in the West in the early twentieth century.  She did her Ph. D. at Arizona and just finished her first year teaching at Hofstra. Soudeh presented at the same session as Nikola Tynan and Leslie Tomory. Nikola’s paper (coauthored with Brian Beach and Werner Troesken) showed a large drop in typhoid deaths following municipalization of water works in English cities. Leslie presented work on the history of the London water supply. I found it interesting that he said he began the work after he finished a book on the gas industry. Since Werner also started with the gas industry (the Chicago gas trust) it suggests there are economies of scope involved in the study of networks of pipe.   

Brad Sturgill and Dan Giedeman won the James Soltow Award for the best paper published in Essays the previous year.  

Economics still needs better critics

I just got back from the meeting of the Economic and Business History Society in Montreal, and I was going to blog about that, but then someone tweeted about this stupid essay at Evonomics. Eric Beinhocker writes about the problems with traditional economics and the benefits of the new economics. The primary problem with his essay is that his description of traditional economics is what would generally be referred to as bullshit.  He conveniently provides a table from his book, The Origin of Wealth, which I was fortunate enough to have never heard of before.

Pick any element you want. For instance the first one declares that traditional economics assumes that everyone has perfect information. Really? Even principles textbooks cover imperfect information and uncertainty. For Dynamics, he states that traditional economics assumes that the “The Economy automatically goes to equilibrium where social welfare is maximized.” Find me a principles textbook that doesn’t cover externalities, public goods, and monopoly. I like his description of the New Economics even better. “Economy is a highly dynamic system that can go far from equilibrium and become trapped in a suboptimal state.” It can become trapped in a state that is far from equilibrium? Does this guy not know what equilibrium means? Stability is the essential characteristic of equilibrium. In the absence of some sort of shock the situation won’t change. Later he refers to market failures, but he does so at the same time that he declares traditional economics assumes a natural tendency toward efficiency. Market failure is a situation in which the market equilibrium is inefficient. Moreover, equilibrium is a property of models, not reality. Reality is never stable. Equilibrium is nevertheless useful for helping us to consider the direction of change and possible unintended consequences.  In the case of innovation, what he ascribes to new economics is a feature of traditional economics and what he ascribes to traditional economics is not. Traditional economists have long studied the factors that are likely to encourage or impede innovation.

He describes one of the implications of new economic thinking for policy as follows:

Regulators take an action to address a perceived problem, that changes the perceptions and actions of market participants, which in turn creates a new set of problems triggering further regulator actions, and so on. Over time this infinite chase between fallible regulators and equally fallible market participants leaves a trail of rules, structures, and institutions that has a major effect on shaping the evolution of the economy.

Ironically, this is pretty much a description of my paper "LearningTo Tax: The Political Economy of the Opium Trade in Iran, 1921-1941," Journal of Economic History 61(March 2001):95-113. It is ironic because I regard myself as a pretty traditional economist. I see this paper, and most of my work on history and institutions, as building on traditional economics not refuting it.

I have taught pretty traditional principles of microeconomics for more than a quarter century, and I still believe that those simple models provide a great deal of value to students. 

I'll try to write about EBHS and Montreal later today.

Monday, May 23, 2016

Science Fiction and Economics

My friend John McAdams said that he was going to internet stalk me this week. This post is for him.

Random Economic History Stuff

1. I will be in Montreal this week at the meeting of the Economic and Business History Society. Here is the program. I’ll be presenting a paper on “Trust Company Failures in New York State, 1875-1925.”

Despite what appeared to be lax regulation and rapid growth, trust companies rarely failed. These few failures, however, provide a path to understanding the overall success of trust companies in New York in the late nineteenth and early twentieth centuries. Failures played a disproportionate role in shaping the rules and regulations that governed trust companies, and the resolution of each failure provided additional information about how the laws and regulations would be implemented. These failures shed light on issues of corporate governance and financial stability that are still relevant today.

2. This blog made the Intelligent Economist’s list of The Top 100 Economics Blogs of 2016.
Anton Howe’s Capitalism’s Cradle is another economic history focused blog on the list.

3. Pseudoerasmus' blog, which should also be on the list, has some new posts: Did Inequality Cause the First World War?; Inequality and the First Globalization, and Economic History Readings

4. By the way, for those of you who do not know, Pseudoerasmus is the name of a person who blogs and tweets, mostly about economic history and development. Most people seem to assume that that Pseudoerasmus is a pseudonym. Consequently, some people refer to him as an anonymous blogger.
He recently contributed to discussion about the history of capitalism at the Junto and published a long blogpost about the Lenin-Hobson theory of World War I as it appears in Branko Milanovic’s recent book.
Richard Drayton argued with Pseudoerasmus in the comments section over at the Junto. Drayton concluded his part of the exchange with the following:

I’m rather intrigued by a chap, and there’s too much chap coming out of your prose for me to go for gender neutral pronoun, who spends so much of his time writing aggressive anonymous critiques of — and these are only the ones I’ve noticed — David Armitage, Steve Pincus, Ed Baptist, Sven Beckert. These are, or have become, high profile figures, who have produced substantial original work which has been widely received and even often forcefully and critically responded to. Why not publish these pieces with your name behind it? It begins to look rather mean spirited, even envious, and as if you are afraid to defend your position in public, or afraid that somehow whoever you are would diminish the respect with which your opinions are received?

I, on the other hand, am intrigued by a chap who seems so much more concerned with who people are than with what they have to say. The last line is the most intriguing.  Are you “afraid that somehow whoever you are would diminish the respect with which your opinions are received?” What does that mean? Are we absolved from considering the logic and evidence that someone presents if they are not a high profile figure? Or, perhaps he just takes the same approach to argument  that people like Baptist and Cowie do. All you have to do is note that someone is an economist (or a sociologist in the case of John Clegg) before dismissing their argument.

Milanovic’s response to the blogpost by Pseudoerasmus challenging his interpretation of the cause of World War I was to retweet it.