The Good, the Bad, and the Ugly: Slavery's Capitalism

This is not a real review. I think a  real review would spend more time on the Good.  This is  more like my initial responses to Slavery’s Capitalism: A New History of American Economic Development edited by Sven Beckert and Seth Rockman.

The good:

It is a good book. I learned a lot, and the essays raise many interesting questions. Most of the authors use extensive research in primary sources to provide new insights about slavery and American economic development. Bonnie Martin, for instance, uses thousands of mortgage records to illustrate the widespread use of slaves as collateral and the central role of neighbor to neighbor credit. John Majewski examines the Limestone region of the Upper South. He finds that, although the area was very productive and similar to areas in free states just north of it, it exhibited the same low levels of investment in education and relative dearth of innovative activity, as measured by patents, as the rest of the South. The study thus fits in with work of Sokolof and Engerman and Nunn on the negative long term effects of slavery. He also explores the significance of these findings for our understanding of Republican opposition to the spread of slavery.

Many of the essays raise interesting questions when considered together. How does Rood’s picture of an innovative wheat and flour industry in Virginia fit with Majewski’s picture of the South’s lag innovative activity? How does Martin’s picture of lending dominated by personal transactions fit with the accounts by Rothman and Boodry emphasizing more formal and geographically dispersed credit markets?

These are just the first papers that came to mind; there are plenty of other interesting papers in the book.

The Bad:

Bad may be too strong a word, but I’m sticking with so I can stick with the title of this post. Several of the authors run into problems when they try to make claims about the relative importance of slavery to American economic growth. The problems stem from the desire to show that slavery was not just “a” significant or important part of the economy, but was instead “everything” to New England, or “indispensable” to American economic growth. These claims tend to emphasize the role of slavery in international trade, which was large. The problem is that international trade itself was not a large part of the economy. Cotton was more than half of exports, but it was still only about 4-6 percent of GDP. It was thisproblem that led Ed Baptist to tie himself in knots trying to expand its share of GDP.

Doug North’s Economic Growth of the United States (1961) is cited by several of the authors because it emphasizes both international and interregional trade, making cotton exports the driving force behind antebellum growth. It seemed like a reasonable story given the evidence that Doug had collected, but subsequent research generated evidence that contradicted the theory. First, work by a number of economic historians (Gallman, Hutchison and Williamson, and Herbst) found that Doug’s theory tended to underestimate the degree of regional self-sufficiency and overestimate the importance of interregional trade. Second, subsequent work on early industrialization has emphasized the role of intraregional trade. Much of early industrialization appears to have been directed at local demand. Notable contributions on this subject were made by  Diane Lindstrom Economic Development in the Philadelphia Region  and more recently by David Meyer Roots of American Industrialization or see his essay on Industrialization in EH.Net’s Encyclopedia. In short, subsequent research did not support the conclusion that cotton was the driving force behind economic growth. Doug acknowledged the implications of this subsequent research in his later work, such as Growth and Welfare in the American Past.

Personally, I’m fine if you tell me an interesting story. It does not need to be “the” story about “the” driving force behind American development.  But, to the extent that people do want to make such claims, they need to address the work done by economic historians since North’s Economic Growth of the United States. Apparently, at the conference that led to this volume Stanley Engerman raised questions about the extent of the role of slavery in Northern development, but his paper does not appear in the book.

The Ugly:

Hide your straw men; Ed Baptist is back in town.

He seems most intent on defending his indefensible book. In terms of economic history, Baptist made two novel claims in his book: that slavery was “the” driving force behind American growth and that increases in productivity in the cotton South were driven by improvements in coercion, which led to innovation in picking by enslaved people.

I have shown earlier that his attempt at a calculation of the size of cottons role in the economy was nonsense. Fortunately, he does not resurrect it in his essay. Instead, he focuses his energy on defending his argument about productivity growth against the alternative interpretation put forward by Rhode and Olmstead.

For those not familiar with the debate I think I can fairly summarize it as follows

Olmstead and Rhode argue:

Slave holders used physical coercion to force slaves to pick large volumes of cotton as rapidly as possible. To increase the amount of cotton that slaves were able to pick they also sought to improve cotton plants so that a slave working at maximum effort could pick a larger volume of cotton. They provide several types of evidence. First, they use evidence from picking books to show that productivity increased. Second, they provide direct evidence experimenting with seeds that planters worked to create improved varieties of cotton (for example, descriptions of new seed varieties and planter’s records of). Third, they argue that the fact that productivity growth was higher in places where upland varieties were grown than in places where sea island cotton was grown supports their argument because sea island cotton did not experience the same improvements in seed varieties that upland cotton did.

Baptist argues:

Increases in physical coercion generated the improvements in productivity over time. Slaveholders became better at pushing slaves and slaves responded by becoming better at picking.

Baptist, acknowledges that some improvement occurred in seeds but discounts the extent of it. He argues that the difference between sea island and upland varieties is irrelevant because they operated under different labor regimes. Sea island areas tend to use a task system rather than what he refers to as a pushing system. In his essay in the book he reasserts this argument and emphasizes that he believes spotted fundamental flaws in logic of Rhode and Olmstead, Specifically, Baptist argues that the decline in production and productivity after emancipation inconsistent with Olmstead and Rhode, but consistent with his argument, and he claims that the very existence of the picking books refutes Olmstead and Rhode.

Why I Don’t find Baptist Persuasive

Baptist’s claim that the decline in cotton production after emancipation is inconsistent with Rhode and Olmstead is argument by misrepresentation. He is only able to make it by misrepresenting their argument.  For Rhode and Olmstead productivity is a function of a number of things: the quality of the soil, the quality of the plants, weather, and the ability to use violence to force maximum effort from the slaves picking the cotton. Consider the following excerpt from their 2008 paper in the Journal of Economic History (By the way, can anyone tell me why Baptist continues to cite the working paper almost a decade after the paper was published in a journal?)

I think Olmstead and Rhode knew that brutality was an essential part of the planter's recipe for productivity. If you take away any ingredient in that recipe, including the brutality, productivity would tend to fall. The fall in picking rates after emancipation  does not refute their argument, it is perfectly consistent with their argument. 

Baptist employs such argument by misrepresentation througout his essay. He claims that Olmstead and Rhode “uncritically” used the claims of people interested in selling new seeds to support their claim and that the very existence of the picking books refutes Rhode and Olmstead because planters recorded information about slaves and picking not seeds. But, since Baptist claims to have read Olmstead and Rhode, he surely knows that they used a variety of sources, including planter’s diaries that recorded experiments with seeds. In a footnote he claims to refute Ransom and Sutch’s argument that productivity actually increased after emancipation. They arrived at this conclusion based upon their estimates of how much former slaves dramatically reduced labor supply, especially of women and children. Baptist argues they are wrong because photographs and testimony indicate that there were still women and children working in the fields. But, Ransom and Sutch never even remotely suggested that African American women and children joined the leisure class after emancipation. Everybody worked, just not as much as when they were coerced to work, a claim which seems like it should be consistent with Baptist’s own argument. Finally, Baptist spends several pages presenting himself as the defender of slave narratives as a historical source. Who he is defending them from? Slave narratives have long been used by many historians and even by economists like Olmstead and Rhode.

The biggest problem, however, is not the weakness of Baptist’s critique of Olmstead and Rhode, it is his continued failure to provide any evidence in support of his own claim. He provides plenty of evidence that slaves were whipped, as well as tortured in other ways, for not meeting production quotas. He also provides evidence that quotas increased over time. The problem is that we already knew both of those things, and they are both consistent with Olmstead and Rhode’s interpretation: Slaves were forced pick at maximum effort, and the amount of cotton that could be picked with maximum effort increased over time due to biological innovation. The evidence that Baptist needs to support his argument is evidence of innovation in two areas. The first type of innovation is improvements in methods of physical coercion. He provides evidence that slaveholders kept records of daily picking and whipped slaves for failing to meet quotas. But picking books existed from at least the first decade of the nineteenth century. Moreover, whipping was common well before cotton became the primary crop in the South and was common outside cotton producing areas. If you have any doubts about the use of whips outside the Cotton South, look at the runaway slave ads for eighteenth century Virginia, you won't have to look far to find references to a runaway having a back that is “well scarred” or with “many whelks” or “used to the whip.”  Baptist needs to show that slaveholders not only kept records and used physical coercion but that they did these things better over time. And I am not talking about one planter getting better as he becomes more experienced, I am talking about changes over decades, changes that can be passed on from one planter to another.  He dos not show this. Ironically, when he does provide an example of innovation from a slave narrative (the whipping machine) he discounts it, saying he does not believe it was real.

The second type of innovation that Baptist needs to demonstrate is innovation in picking techniques. Again, keep in mind that we are not talking about one person increasing their productivity as they become more experienced, we are talking about increases in productivity that take place decade after decade. Baptist’s argument is not about particular people increasing their picking rates with practice. His argument requires improvements in technique that can be passed on from one generation to another. He does not provide any evidence of this passing on of techniques. Ironically, his argument for the importance of slave narratives as a source conflicts with his claim that innovation in coercion produced innovation in picking. Not only does he not provide examples of narratives describing these innovations in picking technique, many of the most well-known accounts, such as Charles Ball and Solomon Northrup, suggest that picking productivity was largely a matter of practice and innate dexterity. 

In the end, Baptist just throws out strawmen and knocks them down, hoping that you won’t notice that he is not actually providing the evidence that is needed to support his argument. 

Other Things and Stranger Things

The top of this page says that “This is a blog about economics, history, law and other things that interest me.” Anyone who has read the blog knows that I don’t usually write about “other things that interest me.” This blog post is an exception to the rule. The other thing is Stranger Things. I am certainly not the first person to suggest that it is not only one of the best television shows this year, but one of the best ever. Several years ago Salman Rushdie made an argument for the virtues of television as a medium for creative expression. I think Stranger Things supports his argument.

Part of the appeal for me is that I tend to enjoy series that are structured like Stranger Things: there is a story in each episode but each story is part of a bigger mystery. It is essentially the format of the old serials they used to show at movies, or serialized stories even before that. Twin Peaks did it well. Lost probably did it best. Yes, I even liked the finale. Orphan Black may turn out to be the best. We’ll find out next year.

The trouble with these types of series, however, is that they often fall apart the closer they get to the bigger mystery.  Under the Dome, for instance, was fun the first season, but when the closer they got to the bigger mystery the more it turned to crap. Nevertheless, I am hoping for a second season of Stranger Things. I would like to see more of the characters and see more of the bigger mystery resolved. What is the upside down? What is the monster? What is it doing with its victims and those slug things? One option would be for it all to be creations of Eleven’s mind. I don’t mean that it is all in her head like St. Elsewhere. I mean that her mind makes these things real, like characters in Joe Hill’s NOS4A2 or Steven King’s Lisey's Story. I actually hope they don’t take that route. It has been done and it would make Eleven too similar to Vic McQueen (using their powers takes a physical toll on both of them). I think I would prefer if the boys were right about it actually being another dimension. I am hopeful that the Duffer Brothers will not screw it up because they did such a great job with the first season and they appear to have given more than a little thought to the bigger mystery. There is supposedly a 30 page document about the Upside Down. If I were them I would make sure it is not on any device that can be hacked.

The mystery I am most curious about is, What is going on with Hopper? I don’t mean the leftovers and Eggos. Eleven is alive. My guess is that she is hiding in the Upside Down because she knows that Mike is in danger when she is with him. After all, Brenner basically told her they would hurt the boys if she didn’t come with him. I have a hard time believing that he actually betrayed Eleven. It was completely inconsistent with everything we have seen about him. Moreover, asking Brenner for his word when he had to believe that Brenner’s word was worthless also suggests there was something more going on. Something must have happened between Hopper and Eleven that we did not see.

Of course all of the great writing would not amount to much if not for the great acting. The show is set in 1983, and Mathew Modine and Winona Ryder remind us why they became stars back in the ‘80s. That said, Finn Wolfhard, Noah Schnapp, Gaten Matarazzo, Caleb McLaughlin and Millie Brown are what really make the show standout. I think Millie Brown’s performance was particularly important to the success of the show. I told my daughter that it reminded me of Kristen Stewart in Panic Room. I believe Stewart was around the same age Millie Brown is now when Panic Room was filmed. When I first saw Panic Room I was amazed that someone so young could express so much with so few words. Millie Brown has even less less lines, and her performance is even more amazing.

Netflix has not yet announced a second season, but they should probably hurry up and do so while they can still afford the cast. To finish with a little economics, I’ll illustrate the problem with a little supply and demand analysis. I predict that Stranger Things will cause a dramatic increase in demand for Millie Brown. Ceteris paribus, as demand increases from D1 to D2, given that the supply of Millie Brown is fixed at 1, the result will be an increase in the price from P1 to P2. I don’t see any reason to believe that this trend won't continue into the foreseeable future. 

So, I wasn’t even able to get through this post without some economics. And, yes, it is a pretty crappy looking graph for a professional economist, but this is just a blog post about other things.

some economic history stuff

I have not been blogging because I have been busy trying to finish up a paper and prepare for class, but here is some recent economic history stuff.

Some podcasts (I listen to podcasts when I am walking Dodger the Doggy):

David Beckworth at Macro Musings interviews Doug Irwin. The interview covers a number of topics related to trade and American economic history: the costs and benefits of trade, the political economy of protectionism, and the gold standard. Irwin also explains why Ha Joon Chang’s analysis of the role of trade policy in development is at best “superficial.” For those of you who are not familiar with his work, Ha Joon Chang is a professor at Cambridge and one of the sources on economic history most admired by people who don’t know anything about economics or history.

Michael Munger talks about slavery and racism at Econtalk.

There are also a lot of podcasts related to economic issues in early America at Liz Covart’s Ben Franklin’s World, e.g., slavery, Shay’ Rebellion, the Stamp Act riots, and financing military expenditures. Most recently I listened to the interview with Abigail Swingen about her book Competing Visions of Empire; in the podcast she puts the American colonies and the development of slavery in America into the broader context of the British Empire.  

Some other stuff:

You can read Jared Rubin’s forthcoming Rulers, Religion, and Riches: Why the West got rich and the Middle East did not at his website.

Richard Sambisavan asks what we can learn from bond prices in early America.

Mark Koyama examines the decline of the Roman economy and questions the usefulness of the peasant mode of production.

Program of the World Congress on Business History

I am still waiting for my copy of Slavery’s Capitalism, but I intend to write about it as soon as I can.

BTW this is Dodger the Doggy

Inequality in Economic History

I found the initial reactions to Piketty’s Capital interesting because assessments of the empirical analysis seemed to line up immediately on ideological grounds before anyone had a serious opportunity to evaluate so much evidence. People on the right were certain it was wrong; people on the left were sure that it was right. Both were clearly basing their conclusions on what they wanted to be true. This was particularly clear in the uncritical use of his work by the New Historians of Capitalism. See this video (41 minutes in) where Jefferson Cowie says how bad Piketty is as a historian and follows that with how he still uses his numbers blindly. What ever happened to critical evaluation of the evidence? In NHC it has been replaced by the ability to repeat clever phrases like “tyranny of the market” and “cash nexus.”  

Enough of my rant against NHC. Capital was a big book; it takes time to really evaluate the empirical work in such a book. Well, time has passed, and some of that work has now been done. In general, it does not seem to support Piketty.

Richard Sutch challenges the reliability of many of the estimates for the U.S.

Carlos Goes fails to find empirical support for the central hypothesis about inequality and capitalist development.;

Does this mean that Capital was a bad book? I don’t know. Some big idea books are serious efforts to make sense of the available information. Sometimes they turn out to been wrong in fundamental ways. I think examples of this might be Doug North’s Economic Growth of the United States (overemphasis on trade, especially, interregional trade), Fogel and Engerman’s Time on the Cross (underestimated use of coercion and overestimated nutrition), and Pomeranz’s Great Divergence (divergence appears to have started earlier than Pomeranz thought). All of these were reasonable attempts to make sense of the available information, but they prompted a lot of research which ultimately contradicted at least some of their conclusions. All of these authors, while not necessarily accepting all the critiques of their work, acknowledged when subsequent evidence persuasively contradicted their earlier interpretations. The ultimate test for Piketty will be how he responds to the critiques of his work that have provided more evidence on inequality over time.

In any case, if Piketty’s analysis of inequality is flawed, what should you read. I would suggest Lindert and Williamson’s  Unequal Gains: American Growth an Inequality. The book is very dense with descriptions of how the estimates were developed. If you are short on time you can get a preview at VOX or read Vincent Geloso’s review at Essays in Economic and Business History.

Open Access in History and Economics

The Exchange had a post the other day about a special issue of the Journal of the Gilded Age and Progressive Era focusing on the history of capitalism. Several of the papers looked interesting. Unfortunately, I discovered that I only have access to JGAPE with a one year delay. My wife teaches at American University, and their access also has a one year delay. I then took the next step of searching for open access versions of the papers: working papers or papers presented at seminars. I put the title and author of each paper into Google Scholar. I did not find an open access version of a single one of the papers. I then tried the same thing with the first seven papers in the August issue of American Economic Review. Granted, this is a small and unscientific sample. Nevertheless, the result is consistent with the impression that I have had for a while that economics is more open access than history. What I am not sure about is why. I think economists believe that there is no cost to providing open access to working papers, and, as best I can tell, there is not. Do historians believe there is a cost? Is there? I know there are concerns about open access to dissertations reducing the demand for a book derived from that dissertation. Are these concerns well founded? And what about journal articles? 

Women and Econ Blogs

Claudia Sahm blogged about the lack of women among econ bloggers

I looked at intelligenteconomist.com’s list of top economic blogs an only found four (out of one hundred)

Carola Binder

Jodi Beggs at Economists Do It With Models

Lynne Kiesling (with Michael Giberson) at Knowledge Problem

Muriel Niederle at Experimental and Behavioral Economics

Economic History from the Last ASSA

Historical Perspectives on Financial Crisis, Banks and Regulation 
Presiding: Gary Richardson 
Crisis and Collapse in the Long Run: Some Microeconomic Evidence Raghuram Rajan and Rodney Ramcharan
What Ends Banking Panics? Gary Gorton and Ellis Tallman
Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve Mark Carlson and David Wheelock 
Commercial Bank Leverage and Regulatory Regimes: Comparative Evidence from the Great Depression and Great Recession Christoffer Koch, Gary Richardson and Patrick Van Horn 
View Webcast

Critiquing Robert J. Gordon's Rise and Fall of American Growth (Panel Discussion)
Presiding: Robert Shiller
Gregory Clark
Nicholas Crafts
Benjamin Friedman
James T. Robinson
View Webcast

Evononsense and Homo Paleas

I was just looking at Evonomics.com, an important new source of misinformation about economics. Numerous essays there talk about how economic analysis is based on the study of homo economicus, a creature that is only concerned about its own selfish material interest.  

More specifically:

“homo economicus… is the character that inhabits the economics texts, and the computer models that are the silent dictators of analysis and policy. Econ, as I will call him, is a myopic integer of self-seeking, who goes through life with a relentless and unfailing calculus of personal loss and gain. He has no social affinities, is oblivious of social context, and has no capacity or inclination to think of anyone besides him or her self.” (Jonathan Rowe at Evonomics)

It is easy to see how foolish those economists are and what a waste of time economics is. There is only one small problem. The imaginary being is not homo economicus, it is homo paleas. Homo paleas is an imaginary economist created by people who want to criticize economics without having to go to the trouble of studying what economists actually do.

Economists generally do analyze models in which people are assumed to maximize utility, but these people can get utility from anything they like. No real economist says that you can’t get utility from someone else’s pleasure, or, for that matter, someone else’s pain.

What have economists actually said?

Adam Smith wrote in his Theory of Moral Sentiments that

“How selfish soever a man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though h derives nothing from it except the pleasure of seeing it.”

Well, Smith was special. It must have been after him that economists starting studying homo economicus. What did Alfred Marshall say?

Alfred Marshall wrote in his Principles of Economics that

“Thus though it is true that "money" or "general purchasing power" or "command over material wealth," is the centre around which economic science clusters; this is so, not because money or material wealth is regarded as the main aim of human effort, nor even as affording the main subject-matter for the study of the economist, but because in this world of ours it is the one convenient means of measuring human motive on a large scale. If the older economists had made this clear, they would have escaped many grievous misrepresentations; and the splendid teachings of Carlyle and Ruskin as to the right aims of human endeavour and the right uses of wealth, would not then have been marred by bitter attacks on economics, based on the mistaken belief that that science had no concern with any motive except the selfish desire for wealth, or even that it inculcated a policy of sordid selfishness.” (Book I Ch. II).

Okay, it wasn’t Marshall. Maybe economists now think that people can’t care about others.

In 2011, Andersen, Ertac, Gneezy, Hoffman and List explained that

“where economics provides its most basic predictions revolves around how people should respond to changes in incentives—pecuniary or nonpecuniary (Gneezy and Aldo Rustichini 2000)—not whether subjects have fairness, spite, or altruistic proclivities.” (Stakes Matter in Ultimatum Games)

Because they analyze the actions of the imaginary homo paleas rather than actual economists, these critics of economics think they have shown the weakness of economics when they point out that people vote, or give to charity, or are willing to incur a cost to punish economic experiments are concerned with fairness. The trouble is that there is actually nothing in economics that suggests a person cannot care about other people.

Economics theory does not suggest that people should not give to charity. It suggests that people will do it more if you lower the cost by, for instance giving a charitable deduction.

Some New Stuff

Here is the program for the Development of the American Economy section of the NBER summer Institute. There are links to many of the papers.

Here is the program for a conference on the history of capitalism. Although I have been critical of much of what has been labeled the new history of capitalism, there are some interesting looking papers here. I don't plan to go to the conference, but I look forward to seeing Sharon Murphy's work on bank financing and slavery at some time in the future.

Here is Jeffrey Beall blogging about a new paper on open access publishing (particularly the fraudulent form of it) by my colleague Margaret Ray. He provides a link to the paper.

Based upon this tweet, it appears that someone at Cornell's History of Capitalism Camp was talking about Mary Eschelbach Hansen's work on bankruptcy. She is, by the way, my favorite economic historian.

Stanley Fish on Historians Against Trump

The New York Times published a remarkably dishonest essay by Stanley Fish. Fish attacks a group of historians for publishing a statement opposing Donald Trump.

Fish begins by making clear that, while he is specifically attacking these historians, his remarks really apply to all professors. Ironically, the historians make clear in their letter that they are not all professors. Even casual examination of the list of historians reveals that many are not professors. But Fish won’t let details like that get in his way. (quotes from Fish are in bold)

“PROFESSORS are at it again, demonstrating in public how little they understand the responsibilities and limits of their profession.”

Fish claims that

“They suggest that they are uniquely qualified to issue this warning because they “have a professional obligation as historians to share an understanding of the past upon which a better future may be built.”

This is a really nice touch. Fish has taken a quote from the letter, but introduced it with a lie. Nowhere in the letter is it explicitly or implicitly suggested that historians are uniquely qualified. To the contrary, the letter refers to other groups that have already issued similar letters.

This is followed by some more cutting, pasting and inserting by Professor Fish. He is, after all, Professor Fish, which is the reason is being published in the New York Times.

Or in other words: We’re historians and you’re not, and “historians understand the impact these phenomena have upon society’s most vulnerable.” Therefore we can’t keep silent, for “the lessons of history compel us to speak out against Trump.”

I’ll just include this statement about extraordinary hubris for the enjoyment of anyone that knows who Stanley Fish. I wouldn’t be surprised if Fish himself didn’t get a good laugh out of it.

I would say that the hubris of these statements was extraordinary were it not so commonplace for professors (not all but many) to regularly equate the possession of an advanced degree with virtue.

He then returns to his assertion that the historian’s claim to be uniquely qualified.

The claim is not simply that disciplinary expertise confers moral and political superiority, but that historians, because of their training, are uniquely objective observers: “As historians, we consider diverse viewpoints while acknowledging our own limitations and subjectivity.”

In fact, no such claim of uniqueness is made in the letter. They don’t say that all historians oppose Trump and they don’t say that only historians are in a position to evaluate Trump. They simply state that they are historians and that their position as historians has led them to believe that they should oppose Trump.

Historians do have to consider diverse viewpoints and acknowledge their own limitations and subjectivity. They don’t all do it well. I spend plenty of time criticizing bad historical scholarship, but that criticism presumes that historians should consider diverse viewpoints and acknowledge their limitations and subjectivity.

In the interest of acknowledging my own subjectivity, I probably should acknowledge that I hate Trump with the white hot passion of a thousand burning suns. But the evidence that Fish is lying is clear. Simply read the letter.

The Rise and Fall of American Economic Growth

I finally got around to reading Robert Gordon’s Rise and Fall of American Economic Growth. It is an excellent book. Much of the book is essentially an expansion of Lebergott’s Pursuing Happiness. It describes the many ways in which the material conditions of life (what they consumed, how they worked, and their health) were transformed from 1870 to 1970. Gordon argues that economic growth this period essentially created modern economic life: comfortable homes with electricity and clean water, cars parked out front, and all of this purchased with less labor hours and less onerous labor. 

Much of the attention the book has received has focused on Gordon’s argument that current innovations in information and communication are not transforming life the way the earlier changes did and that the rate of growth is unlikely to return to the rapid pace experienced for most of the twentieth century. This argument actually occupies a relatively small part of the book. I also found this part of the argument to be somewhat more cautiously stated than I think it has been in the popular press and in blurbs for the book. While Gordon argues that some of these innovations were uniquely transforming and points to specific factors that he believes are likely to slow growth (e.g. demographic change, education, inequality), he also has suggestions for policy changes which might mitigate some of these headwinds (e.g. reducing excessive regulation, policies to reduce inequality). In other words, he doesn’t appear to believe that the current course is inevitable. He also acknowledges that any attempts to make predictions about future innovations are somewhat speculative.

His analysis of the causes of the “Great Leap Forward” also seems reasonable, though I think he gives too much credit to Alex Field for pointing out the technological innovations that took place during the Great Depression and not enough to Michael Bernstein, who emphasized these changes long before Field.

I do tend to disagree with Gordon and others who underplay the transformation brought about by information technology. You can say that it is only entertainment and communication but my children ages 17, 23 and 27 are never without their phones. They use social media, they watch movies and tv shows. They listen to an incredible variety of music. When I was a teenager you pretty much had to pick one kind of music: heavy metal, or punk, or disco. My kids listen to everything. They listen to podcasts on soccer, cooking, politics, etc. They can’t get lost. A map is no further than the phone. Maybe it is just entertainment and information, but it is a world of information and entertainment in their hand.

I agree with Gordon that attempts to make predictions about future innovations are speculative, but I tend to be somewhat more optimistic than he is. In part, my optimism stems from the dismal performance of dire predictions about the future. Read Jevon’s on the Coal Question, or Alvin Hansen on secular stagnation.

Part of my optimism is also related to what I think might be the chief weakness of the book. It tells the story strictly from an American standpoint. The problem with this is that the same things happened in many other countries. The United States is not the only wealthy country. One of the things that I believe I learned from John Nye (listen to John’s Econ Talk on the Great Depression, Political Economy and the Evolution of the State) is that you might want to occasionally look outside of particular area to see if the same thing is happening in other places. If it is, you might want to ask what are the broader forces at work. I think that if innovations can travel across borders and innovation is not isolated to Americans there are some good reasons to be optimistic. Increased economic freedom and access to education in Asia have the potential to dramatically increase the pool of innovators. I don’t think that economic freedom is firmly enough established to feel completely secure about this, but I think the potential is great.

Robin Hanson on Slavery

Robin Hanson and Bryan Caplan were having an argument about something called “Em.” I have no idea what Em is so I am not writing about that. But the argument had something to do with slavery, and it prompted Hanson to do a quick review of the literature and write up a summary on his blog overcoming bias. I’m afraid that Hanson’s quick review of the literature was a bit too quick. Some of the statements are simply wrong and others can reasonably be contested. I posted these responses on his blog, but it did not seem to keep the links. Consequently, I'm posting it here as well.

He states that

Historically, even when slaves were common, they were usually a minority of the population. (Beware, the term “slave” is used in different ways.) About 10% in the Roman Empire and US south.

This statement is simply incorrect. Slaves accounted for substantially more than 10 percent of the population of the South. Slaves were as much as 57 percent of the population (South Caroline) and at least 25 percent (Tennessee). See, for instance, Jenny Wahl. Or you can check at the Historical Census Browser at UVA

He states that

(The sex story is overrated, as only 1-2% of slave babies were fathered by white men.)

The first thing to note is that, unlike population, the number of children born to slave mothers and white fathers is difficult to estimate. Some estimates put it as low as 1-2 percent, but Stephen Crawford found that in ex-slave interviews, by the WPA and Fisk University, as many 10 percent of slaves reported that their father was white. The 10 percent figure was when the interviews were done by African –American interviewers. In other words we don’t know. It may be possible use genetic studies to produce a more accurate estimate, but I don’t know of such a study. There is also the question of “How large is large?” Stating that “the sex story is overrated” suggests that 1-2 percent is somehow not important. Given that the vast majority of enslaved people in the South lived on plantations of 15 or more people, even 1 or 2 percent could be consistent with a relatively large percentage of slave owners fathering an enslaved child (or a smaller percentage fathering numerous children). It is not obvious to me that 1 or 2 percent is small in this case.      

He states that

Sometimes people sold themselves into slavery for a limited time, as with indentured servitude.

This is just kind of odd. It may be that he is using a definition of slavery that makes this make sense, but I don’t know of any historian who regards slavery and indentured servitude as equivalent.

Finally, he states that

Slaves weren’t converted into debt perhaps because of credit market failures, or more plausible because the full control approach was especially productive on plantations.

I’m not entirely clear about what this means, but it does not sound consistent with current understanding of slavery in the United States. Historians have devoted considerable attention to the well developed credit markets that facilitated slave purchases. See for instance, recent work by Bonnie Martin, John Clegg, Calvin Schemerhorn, Kathryn Boodry, and Gonzalez, Marshall, and Naidu.

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. 

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. 

North Carolina Runaway Slave Advertisements 1751-1840

“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.”

Texas Runaway Slave Project

“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.”

Louisiana Runaway Slave Advertisements

“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.”

Documenting Runaway Slaves

“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

“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.

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. 

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.

Science Fiction and Economics

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

The Relationship Between Science Fiction and Economics

A List of the 50 Essential Science Fiction Books