Development of the American Economy

 The NBER  Development of the American Economy Summer Institute is currently taking place. 

There are links to some of the papers here

and you can watch on YouTube

Robert Allen on Arabian Economic History

 Sean Kenny has a new episode of The Economic History Podcast with Robert Allen. 

From the Sand Up: How the Natural Environment shaped the Arabian Economy

Prof. Robert Allen discusses how the desert environment led to a unique economic structure-"from the sand up". Bob takes us through the economic implication of communal lands and describes the differences between the nomadic (Bedouin) and oasis economies. He suggests that religious structures were convenient in eventually consolidating various regions/tribes in the form of states. We also consider the incentives for a unique type of slavery, that arose from the nature of date farming/pearl diving in contrast to the Caribbean sugar plantation experience. 

They also talk about how Allen go into economic history and his advice on doing economic history. 

Overlooked Commodities in American Economic History

 

New NBER working paper today

Firewood in the American Economy: 1700 to 2010.

Nicholas Z. Muller

 

Despite the central role of firewood in the development of the early American economy, prices for this energy fuel are absent from official government statistics and the scholarly literature. This paper presents the most comprehensive dataset of firewood prices in the United States compiled to date, encompassing over 6,000 price quotes from 1700 to 2010. Between 1700 and 2010, real firewood prices increased by between 0.2% and 0.4%, annually, and from 1800 to the Civil War, real prices increased especially rapidly, between 0.7% and 1% per year. Rising firewood prices and falling coal prices led to the transition to coal as the primary energy fuel. Between 1860 and 1890, the income elasticity for firewood switched from 0.5 to -0.5. Beginning in the last decade of the 18th century, firewood output increased from about 18% of GDP to just under 30% of GDP in the 1830s. The value of firewood fell to less than 5% of GDP by the 1880s. Prior estimates of firewood output in the 19th century significantly underestimated its value. Finally, incorporating the new estimates of firewood output into agricultural production leads to higher estimates of agricultural productivity growth prior to 1860 than previously reported in the literature.

 

And if you haven’t already read it take a look at

Ron, Ariel. "When hay was king: Energy history and economic nationalism in the nineteenth-century United States." The American Historical Review 128, no. 1 (2023): 177-213.

What is normal?

 

This week the Washington Post ran an article declaring High interest rates, rising inflation: The economy still isn’t normal. 

But what is normal?

This is 30 year mortgage rates since the 1970s

Here is the inflation rate since the 1950s

Here is the unemployment rate since the 1950s

At 3.8 percent the unemployment rate is at levels that we had not seen since the late 1960s. The rate of inflation of 3.5% is also low in comparison to much of recent economic history. 

When I first began to study economics in the 1980s the combination would have been regarded as miraculous. Even after people believed the Volcker had beaten the inflationary expectations out of people, no one was predicting a such a low combination of unemployment and inflation. 

Even interest rates, which have increased in recent years in response to Federal Reserve policies, look relatively low compared to the late 20th century.

I have to admit it does appear that current economic conditions are not normal. Perhaps we should be grateful.

 

Updates on UMW Econ Alumni: Christine Exley

 Christine Exley graduated from UMW in 2009. She went on to earn a Ph. D. in economics from Stanford University. She taught for several years at Harvard Business School and is currently associate professor in the Department of Economics at the University of Michigan.

Christine has published extensively in the top journals in economics.

Examples of recent work include

The Gender Gap in Confidence: Expected But Not Accounted For

and 

Nonprofits in Good Times and Bad

Updates on UMW Econ Alumni: Sierra Latham

 Sierra Latham graduated from UMW in 2009. Since then she has earned masters degrees as Georgetown University and University of Chicago, worked at the Urban Institute and for the City of Alexandria. She is currently a Senior Research Analyst at the Federal Reserve Bank of Richmond.

Here is some recent work she has done on 

Measuring Poverty 

and

Regional Housing Supply

Updates on UMW Econ Alumni: Alli Baranski

 Alli graduated in 2018 and is currently an assistant manager at the Federal Reserve Bank in Kansas City. 

Here is a recent article she coauthored on small business lending.

What fraction of output was produced by enslaved people?

 

Paul Rhode has an important new paper in the January issue of Explorations in Economic History ("What fraction of antebellum US national product did the enslaved produce?." 2024. Explorations in Economic History 91). Rhode frames the argument against Ed Baptist’s claim that “almost half of the economic activity in the United States in 1836, derived directly or indirectly from cotton produced by the million-odd slaves…”, which has been not just repeated but exaggerated by others. It was easy to show that Baptist’s claim had no foundation in either theory or evidence and was purely a creation of Baptist’s imagination (see here), but the question of how large a fraction of output was produced by enslaved labor remained unanswered.

 

I have for years suggested that the place to begin an answer to this question is the labor supply. Begin with the percentage of the labor supply accounted for by enslaved people and then ask why the percentage of output would be either higher or lower than the percentage of labor (see for instance here in my thoughts on Stelzner and Beckert’s attempt to answer the question). I was too lazy to do the work, but fortunately for us Paul Rhode was not.

He estimates that the percentage of output was probably about the same as the percentage of the population, around 12 percent. He also does a series of robustness checks using alternative assumptions that raise or lower the estimate a little bit. As with all such estimates people will be able to quibble, but I think he makes a pretty strong case that it is difficult to produce an estimate that is much larger than the percentage of the population.

Rhode’s conclusion is not just important because he debunks Baptist. The flaws in Baptist’s work were so obvious that only people so enamored with his conclusions that they were willing to completely disregard all evidence continued to support his work. Rhode’s estimate is important because, like recent work by economists Hornbeck and Logan and the economic historian Joe Francis, it lays waste to a tradition rooted in the work of Fogel and Engerman. In Fogel and Engerman, slavery, although morally repugnant, was not just profitable it was efficient and highly productive. Later economists, including Engerman and Sokolof, would argue that despite its productivity slavery had negative long run consequences (see here for instance). But this recent work says that slavery did not just have negative long -term consequences, it was a massively inefficient misallocation of resources while it was taking place. Rhode’s conclusion that the fraction of output produced by enslaved labor was about the same as the fraction of the population accounted for by enslaved people means that the fraction was much less than the percentage of the labor force accounted for by enslaved people, about 22 percent in 1860.