Historians and Economists

This is a short list of book reviews that I think support an argument that I have been making for a while now about the relationship between economic and historical research. 

Oakes, James. "Capitalism and slavery and the civil war." International Labor and Working-Class History 89 (2016): 195 -220.

Coclanis, Peter A. "Slavery, Capitalism, and the Problem of Misprision." Journal of American Studies 52, no. 3 (2018).

Logan, Trevon D. "The Republic for Which it Stands: The United States During Reconstruction and the Gilded Age, 1865–1896. By Richard White. New York, NY: Oxford, 2017. Pp. xx, 94. $35.00, hardcover." The Journal of Economic History 79, no. 1 (2019): 305-308.

Hansen, B.A., 2019. Brahmin Capitalism: Frontiers of Wealth and Populism in America’s First Gilded Age. By Noam Maggor. Cambridge: Harvard University Press, 2017. Pp. ix, 284. $39.95, hardcover. The Journal of Economic History, 79(1), pp.304-305.

Pseudoerasmus recently brought the Oakes review to may attention and spoke very highly of it. I agree that it is an outstanding review. I also think that together with several recent reviews it supports my argument that critiques of historians of capitalism by economic historians are not based on any fundamental methodological difference between economics and history. Instead, economic historians have largely been criticizing historians of capitalism for their failure to follow traditional standards of historical scholarship in their treatment of both primary and secondary sources. The first two are reviews of works by historians of capitalism by historians, who raise many of the same concerns that economists have. The second two are positive reviews by economists of recent work by historians associated with the history of capitalism.

Oakes reviews

Walter Johnson , River of Dark Dreams: Slavery and Empire in the Cotton Kingdom . Cambridge : Harvard University Press , 2013. 561 pp. $35.00.

Edward E. Baptist , The Half Has Never Been Told: Slavery and the Making of American Capitalism . New York : Basic Books , 2014. 528 pp. $35.00.

Sven Beckert , Empire of Cotton: A Global History . New York : Alfred A. Knopf , 2014. 640 pp. $35.00.

Calvin Schermerhorn , The Business of Slavery and the Rise of American Capitalism, 1815-1860 . New Haven : Yale University Press , 2015. 352 pp. $65.00.

Coclanis reviews

Sven Beckert and Seth Rothman (eds.), Slavery’s Capitalism: A New History of American Economic Development (Philadelphia: University of Pennsylvania Press.

Here is Oakes take on Baptist’s claims about the economic impact of slavery.

Baptist's most extravagant and least persuasive claim is that all of the prosperity of the American economy derived from slavery. There's barely a sentence in his book that could justify such a claim, however, and for a very obvious reason: Any study aimed at calculating the impact of slavery for northern economic development would not be a book about slavery at all. It would have to be a book about the North. At the very least, The Half Has Never Been Told would require a second half that examines the process of economic development in the free states and demonstrates precisely when and how that process depended on southern slavery. That will not be easy, at least not based on the extraordinary scholarship of the last generation or two.

Consider the outcome of the debate among scholars that raged through the 1980s over the transformation of the northern countryside. There is now broad agreement that farmers in the northern colonies always produced surpluses for sale although they were careful to limit their market involvement in ways that protected their economic independence. That began to change in the 1790s, when New England farmers found themselves trapped by the competitive demands of a rapidly commercializing agriculture in ways that forced them to steadily increase their productivity. The process spread westward, and the northern countryside was thoroughly transformed by 1845, when wheat farmers began to mechanize production at an astonishing pace.¹⁷Northern agricultural productivity skyrocketed even as the rural economy extruded "surplus" population into cities and factories at a rate that outpaced number of immigrants--who were by then streaming into the North by the millions. Those landless workers were attracted by a new form of free labor that had simultaneously developed in the North in the decades following the American Revolution. Apprentice contracts became wage contracts, indentured servitude disappeared, and slavery was abolished. By the 1820s "a day's pay for a day's work" became the norm--and with it a uniquely mobile population of free laborers was created. Within the space of a single lifetime forms of long-term labor subordination that had existed for centuries, even millennia, were dramatically overthrown. "Thus it was not slavery," Gavin Wright has concluded, "but the post-Revolutionary abolitions and the exclusion of slavery from the Northwest Territory that launched the American economy on its modern trajectory."¹⁸Put these two developments together--the transformation of the northern countryside and the rapidly expanding population of highly mobile wage laborers--and the stage was set for the dynamic interaction of the city and the country that so many scholars have seen as the preeminent characteristic of northern economic development.¹⁹

None of this appears in Baptist's account. Instead, he disinters an older story that told of industrialization "spiraling outward" from the textile mills of Massachusetts and Rhode Island--a story long ago abandoned by most economic historians. Before we revert to this traditional account, however, Baptist will have to explain where historians like Diane Lindstrom went wrong when they adduced evidence that the southern trade was relatively unimportant to the economic development of the Philadelphia. He would have to explain away the evidence that "metropolitan industrialization" overshadowed New York City's ties to slavery, that economic development bound the city much more closely to the wheat and dairy farmers in the Hudson, Mohawk, and Ohio River valleys--as most scholars now believe. He would have to explain away the extraordinary maps in William Cronon's Nature's Metropolis demonstrating the way railroads spread out from Chicago bringing wheat farmers throughout the Midwest into the city's powerful economic orbit--an orbit that reached back to the east coast and all the way to Europe but that barely touched the slave states. In these accounts the history of the northern economy after 1776 is one of growing independence from slavery, a fact of no small significance for the origins of the Civil War.

 In addition to explaining where generations of scholarship on northern economic development have gone wrong, Baptist would have to tell us where he's getting his numbers. He points out that in 1836 cotton production represented about five percent of the gross domestic product. This is a widely accepted statistic, having been calculated in several different ways by a number of different scholars. But its significance is not self-evident. Is five percent a lot or a little? Instead of addressing that question, however, Baptist quickly moves on to the second- and third-order effects of cotton in the larger economy, and here a number of problems arise. To begin with, second-order effects are notoriously difficult to calculate, and by the time you get to third-order effects, you might as well be floating in the clouds. At the very least, such calculations require extensive justification and analytical precision--none of which Baptist provides. In fact, he provides no sources whatsoever for any of his calculations. From his brief description he seems to be adding the proceeds of wealth transfers--such as the sale of slaves--to the figures for output. Finally, having posited suspiciously large second- and third-order effects, he then adds those effects to the original GDP statistic, and suddenly, without explanation, five percent becomes fifty percent. Obviously if you applied the same technique to every other northern enterprise--the granaries of the Midwest, the printing shops of Manhattan, the iron foundries of Pennsylvania, the small manufacturers of Philadelphia, the meatpackers of Cincinnati, the dairy farmers of the Hudson Valley, the wheat farmers along the Erie Canal--you would end up with five thousand percent of the GDP. If Baptist's numbers were even remotely accurate, the abolition of slavery during the Civil War would have been accompanied by a catastrophic collapse of the northern economy.

Baptist takes his title from Lorenzo Ivy, one of the many elderly ex-slaves interviewed by the WPA in the 1930s. Ivy and his mother were originally owned by a "mean" master who broke up families left and right. Ivy told the interviewer that the only good thing his heartless owner ever did, and did unintentionally, was to sell the boy and his mother to his father's owner. This endless buying and selling of slaves--the coffles of chained human beings who passed by Ivy's Virginia home year after year--is the "half" of slavery's history that Baptist claims has never been told. But Baptist himself doesn't tell the other half of the ex-slave's own story. Ivy described his new master as a good man who kept the slave family together, recognized the boy's talent as a shoemaker, sent him off to Lynchburg to learn the trade, and let Ivy hire himself out. Ivy's mistress taught the boy to read. When the Civil War ended, Ivy was sufficiently literate and skilled to set up his own shoemaking shop and attend Hampton Institute. He was at Hampton when his former master died, and Ivy was upset that he was unable to attend the funeral to pay his respects.^20”

This is from near the end of Coclanis’ review

“One assumes that the editors and most of the authors of Slavery’s Capitalism are coming from one or another critical political-economy position, but which one is difficult, if not impossible, to tell.

This would not be the case had the editors and authors engaged more directly with work written before they started scribbling, a point also made by Scott R. Nelson in an important assessment of the NHAC movement. And here I do not just mean theoretical work on the history of capitalism – the huge internal literatures in the Marxist and marxisant traditions, most notably – but the equally large empirical literatures by historians and economists writing about capitalism and slavery within the context of the United States. Since the mid-1950s, “new” economic historians have been wrestling with questions concerned with slavery and capitalism, and the relationship between slavery and capitalism became central to the entire “new” economic history project beginning in the late 1960s and remained so until the early 1990ss. But this seems like ancient history – so yesterday – to many devotees of the NHAC. And American historians, likewise, were wrestling with similar issues at the same time. Not only Eugene Genovese and Elizabeth Fox-Genovese either, but also their students, as well as dozens of other scholars, who came at such issues from a variety of points of view. Here, we can start with names such as Hal Woodman, Jim Oakes, Allan Kulikoff, Lorena Walsh, John McCusker, Russ Menard, Drew McCoy, Laurence Shore, Barbara Fields, Joseph Reidy, Steven Hahn, Rachel Klein, Joyce Chaplin, Lacy Ford, Robin Blackburn, Shearer Davis Bowman, etc. For my part, I wrote an entire book in 1989 wherein I dealt directly with the relationship between slavery and capitalism, and, in so doing, dealt explicitly with matters regarding the definition of capitalism, among other concerns. Now Beckert for one knows all of this. He has previously acknowledged some of the scholars mentioned above – those operating in what he sees as the political-economy tradition – as “distinguished antecedents.” But in Slavery’s Capitalism such acknowledgment is nowhere to be found, lost perhaps in the frisson of excitement that the NHAC initiative has evoked.

All of which brings me to my final points, involving misrepresentation and scholarly comity. As the paragraphs above suggest, neither Slavery’s Capitalism specifically nor the NHAC more generally accurately captures and conveys economists’ and historians’ engagement with the questions treated in Slavery’s Capitalism and the issues of concern to new historians of American capitalism.”

These are essentially the same claims that economists have made about Baptist’s misuse of both the previous literature and primary sources. Oakes also provides the most critical review of Johnson that I have come across. He is, however, not entirely critical of their work. He finds more to value in Baptist than I do. And although he is very critical, his motivation is not just to tear down (I have to admit that when it comes to Baptist, I personally want to not leave a single brick standing). Oakes and Coclanis, on the other seems to want to push the new historians of capitalism in productive directions. Most importantly they want them to integrate their work with earlier work on capitalism, slavery, and its origins. By the way, here is my review of Slavery's Capitalism

Economists Logan and Hansen, in contrast, provide favorable reviews of more recent work by people associated with the history of capitalism. I’m not sure that Richard White is as strongly associated with the New History of Capitalism as people like Beckert, Baptist, Johnson or Levy, but he could make a reasonable claim to having been at it longer. One of the common features of both books are that, in contrast, some of the work criticized by Coclanis and Oakes, both White and Maggor attempt to integrate the work of people, including economists, who have worked in their field. I had previously noted this in regard to one element of White’s book, the evidence on material well-being in the late nineteenth century. Although I disagreed with his conclusion, my argument was based primarily on very recent research. Some of which probably wasn’t even available at the time he was writing. I believe that White was probably using the estimates that were most widely accepted by economic historians at the time he was writing.

The books by White and Maggor are not economic history as economists typically do it now, but each has something interesting to say. Economists and historians do not have to use the same methods or even ask the same questions. What is essential is that where there is overlap we need to honestly acknowledge and address each other’s work. If a historian is interested investment in the west during the nineteenth century, they should at least note what economists have had to say about interregional capital flows, as Maggor does. Conversely, if an economist is interested in the development of state and local institutions intended to promote or regulate these investments, they should read what Maggor says.

Some Recent Economic History of Slavery and Its Political and Economic Legacy

The other day on twitter, Seth Rockman and I were discussing current work on slavery by economic historians. He thought that there was “more energy being spent policing "driving force" claims than in generating new findings about how/where slavery mattered to broader economic transformations.” I told him that refuting claims like those made by Ed Baptist really doesn’t take that much effort, and I suggested a list of people that he might want to look at to see where the energy of economic historians was actually going. This is a much fuller list than I provided in the tweet, and it provides citations and links (wherever possible to ungated versions). There are a couple of papers that go back about ten years, but I think most of the published papers are within the last five years. Some are still working papers.  

As the title of the post suggests the list includes both papers that are directly about slavery and papers that are about the political and economic legacy of slavery. Most are specifically about the U.S. since that is the area I know best, and I tried to stay focused on economic history, i.e. research that is about understanding the past. There is also a large literature that focuses on tracing current conditions to the existence of slavery in the past, see e.g. Nathan Nunn; Yeonha Jung "How the Legacy of Slavery Survives: Labor Market Institutions and Demand for Human Capital." (2018); or Graziella Bertocchi and Arcangelo Dimico. "Slavery, education, and inequality." European Economic Review 70 (2014): 197-209. 

In addition, if you are interested in recent work on the Atlantic slave trade you might start with Warren Whatley and Rob Gillezeau, or work in progress by Ellora Derenoncourt “Atlantic Slavery’s Impact on European and British Economic Development.” Finally, there are other interesting working papers that I know of, but I try to honor the wishes of authors when they request that preliminary work not be cited or circulated. You will have to find those papers yourself.

Bodenhorn, Howard. The color factor: The economics of African-American well-being in the nineteenth-century South. Oxford University Press, USA, 2015.

Calomiris, Charles W., and Jonathan Pritchett. "Betting on secession: Quantifying political events surrounding slavery and the civil war." American Economic Review 106, no. 1 (2016): 1-23.

Carruthers, Celeste K., and Marianne H. Wanamaker. "Separate and unequal in the labor market: human capital and the jim crow wage gap." Journal of Labor Economics 35, no. 3 (2017): 655-696.

Collins, William J., and Robert A. Margo. "Race and Home Ownership from the End of the Civil War to the Present." American Economic Review 101, no. 3 (2011): 355-59.

Collins, William J., and Marianne H. Wanamaker. Up from slavery? African American intergenerational economic mobility since 1880. No. w23395. National Bureau of Economic Research, 2017.

Cook, Lisa D. "Violence and economic activity: evidence from African American patents, 1870–1940." Journal of Economic Growth 19, no. 2 (2014): 221-257.

Cook, Lisa D., Trevon D. Logan, and John M. Parman. "Racial segregation and southern lynching." Social Science History42, no. 4 (2018): 635-675. Summary here.

Craig, Lee A., and Robert G. Hammond. "Nutrition and signaling in slave markets: a new look at a puzzle within the antebellum puzzle." Cliometrica 7, no. 2 (2013): 189-206.

Derenoncourt, Ellora. Can you move to opportunity? Evidence from the Great Migration.

González, Felipe, Guillermo Marshall, and Suresh Naidu. "Start-up nation? slave wealth and entrepreneurship in civil war Maryland." The Journal of Economic History 77, no. 2 (2017): 373-405.

Hornbeck, Richard, and Suresh Naidu. "When the levee breaks: black migration and economic development in the American South." American Economic Review 104, no. 3 (2014): 963-90.

Lander, Kevin, and Jonathan Pritchett. "When to Care: The Economic Rationale of Slavery Health Care Provision." Social Science History 33, no. 2 (2009): 155-182.

Lennon, Conor. "Slave escape, prices, and the fugitive slave act of 1850." The Journal of Law and Economics 59, no. 3 (2016): 669-695.

Logan, Trevon D. Do Black Politicians Matter?. No. w24190. National Bureau of Economic Research, 2018.

Logan, Trevon D. "A Time (Not) Apart: A Lesson in Economic History from Cotton Picking Books." The Review of Black Political Economy 42, no. 4 (2015): 301-322.

Logan, Trevon D., and Jonathan B. Pritchett. "On the marital status of US slaves: Evidence from Touro Infirmary, New Orleans, Louisiana." Explorations in Economic History 69 (2018): 50-63.

Miller, Melinda C. "Land and racial wealth inequality." American Economic Review 101, no. 3 (2011): 371-76.

Miller, Melinda C. "Destroyed by slavery? Slavery and African American family formation following emancipation." Demography 55, no. 5 (2018): 1587-1609.

Naidu, Suresh. Suffrage, schooling, and sorting in the post-bellum US South. No. w18129. National Bureau of Economic Research, 2012.

Olmstead, Alan L., and Paul W. Rhode. "Cotton, slavery, and the new history of capitalism." Explorations in Economic History 67 (2018): 1-17.

Price, Gregory N., William A. Darity Jr, and Alvin E. Headen Jr. "Does the stigma of slavery explain the maltreatment of blacks by whites?: The case of lynchings." The Journal of Socio-Economics 37, no. 1 (2008): 167-193.

Pritchett, Jonathan, and Jessica Hayes. "The occupations of slaves sold in New Orleans: Missing values, cheap talk, or informative advertising?." Cliometrica 10, no. 2 (2016): 181-195.

Sacerdote, Bruce. "Slavery and the intergenerational transmission of human capital." Review of Economics and Statistics 87, no. 2 (2005): 217-234.

Steckel, Richard H., and Nicolas Ziebarth. "A troublesome statistic: Traders and coastal shipments in the westward movement of slaves." The Journal of Economic History 73, no. 3 (2013): 792-809.

Steckel, Richard H., and Nicolas Ziebarth. "Trader Selectivity and Measured Catch-Up Growth of American Slaves." The Journal of Economic History 76, no. 1 (2016): 109-138.

Sutch, Richard C. The Economics of African American Slavery: The Cliometrics Debate. No. w25197. National Bureau of Economic Research, 2018.

Wanamaker, Marianne H. "Fertility and the Price of Children: Evidence from Slavery and Slave Emancipation." The Journal of Economic History 74, no. 4 (2014): 1045-1071.

The Newer History of Capitalism

Robert Wright has a blog post about Why the History of Capitalism Subfield Got Slavery (and Almost Everything Else) so Terribly Wrong His argument is that because history departments abandoned economic and business history, there was no one with expertise in these subjects to guide new scholars when interest in economic issues re-emerged. The evidence that history departments largely abandoned economic and business history is irrefutable, and I certainly wish that they would pursue his remedy of hiring some highly qualified economic and business historians. However, I am not entirely persuaded by his argument. I am not persuaded because I think that the problems he points to arose more from the failure to follow traditional standards of historical research than lack of knowledge in economics. In addition, at least some recent scholars working in “the history of capitalism” subfield seem to have found ways to deal with lack of expertise within history departments.

The problem with the work of people like Baptist and Levy is less the bad economics than the bad history. It is true that Baptist is arrogantly ignorant of economics, but it is not clear that the problem of Baptist’s misrepresentation of the historiography of slavery would have been resolved by a little more knowledge of economics. One only needs access to google to discover that his claim that before him most economists and historians believed that slavery was inefficient was false. His procedure for estimating the economic importance of slave produced cotton is nonsense, but the biggest problem is that he made up the numbers that he used. Even if he had paid attention in Principles of Macroeconomics and used something resembling national income accounting, his calculations still would have produced crap because he think it is okay to just make up evidence rather than deriving it from historical sources. Yes, Baptist does not understand the meaning of the term productivity, but the bigger problem is that he misrepresents the sources that he claims to be using to explain productivity growth. He claims that slaves used the term “pushing system” but it is not in the narrative that he cites or any other source that anyone has presented. He re-wrote the story of the whipping machine from Henry Clay’s narrative to make it fit his argument. Narratives that he relies upon generally paint a much different picture of picking than Baptist. Baptist argues that enslaved people under the force of harsher and harsher pushing were forced to develop techniques to pick more quickly. To explain productivity increases in the antebellum period these techniques can’t be unique to individuals they need to be passed on and further developed. In contrast, slave narratives frequently emphasize inherent dexterity and the age at which one starts picking as determinants of speed; there is no mention of innovations in picking techniques being handed down. Here is a recent post that has links to other posts about the numerous problems in Baptist’s work and here is the post about his rewriting of the story of the whipping machine.

Similarly, Levy’s sloppiness with sources seems to be the cause of his confusion about economics rather than the other way around. Suggesting that modern use of the term risk (and in fact risk itself) only dates to the mid-nineteenth century is a failure historical scholarship not economics. Using George Perkins as his source on the Panic of 1907 without any recognition that many people regarded Perkins as one of the people who had perpetuated the Panic is a failure of historical research not business or economic knowledge. Making Veblen’s work the focus of a paper and then repeatedly cite them incorrectly is less a problem arising from his lack knowledge of economics (most economists don’t know anything about Veblen) than it is a problem arising from his sloppy handling of his sources. Knowing a little more about economics is not going to help someone who does not read carefully enough to know that Veblen was writing about pecuniary magnates not pecuniary magnets. In other words, I do wish that Baptist and Levy and others had tried to learn a bit more about economic and business history before deciding to write about it, but their bad economics is not nearly as much a problem as their bad history.

Here are links to post describing my concerns about Levy’s work about risk and capital.

Economists might still disagree with them, but I don’t think they would express as much hostility toward them if these historians of capitalism had they displayed the skills generally associated with historical training: accurate historiography, and careful and faithful use of their sources.

The good news is that in the last year or so I have read good books by historians, examining subjects that probably fit into the history of capitalism subfield. A partial list of these books would include Noam Maggor’s Brahmin Capitalism, Anne Fleming’s City of Debtors: A Century of Fringe Finance, Josh Lauer Creditworthy, Caitlin Rosenthal Accounting for Slavery, Daina Ramey Berry The Price of Their Pound of Flesh. I’m pretty sure from interaction on twitter that Maggor and Rosenthal identify with “the history of capitalism” label, and Lauer’s book was published in Columbia Studies in the History of U.S. Capitalism series. I did not see in these books the problems that I identified in the earlier history of capitalism. None of these is economic history the way it is typically written by economists now, but the authors appeared to take advantage of the work of people in other disciplines, including economics. Most mentioned at least one economist economic historian in their acknowledgments, Caitlin Rosenthal and Daina Ramey Berry both thank several economists. Even if experts in the field are not in your department, they are out there, and there is a good chance they are willing to help. Keri Leigh Merritt is another example of a historian working on economics related issues who has gone out of her way to interact with economists.  

In short, I am optimistic about the ability of historians who want to write about economic and business history. I wish I was as optimistic about the future of their ability to get good jobs

P.S. Wright also suggests that the work of people like Baptist is driven in part by a desire to provide support for reparations. Actually, it is probably more accurate to say that Wright is suggesting they want to make a show of supporting reparations.

“The general gist of their story is that slavery made America rich so its government ought to make restitution to the descendants of slaves.”

I have to say I have never understood why reparations would need to be justified by a showing of the amount of benefit derived from slavery. In general, the law compensates people for the damage done to injured not the benefit to the injurer.

Women in Economics

Marginal Revolution University is starting a series on Women in Economics. 

It reminded me to post that the St. Louis Federal Reserve (which happens to be the best Fed) already has a podcast series on Women in Economics.

Ayn Rand and American Business History

I saw a celebration of Ayn Rand online the other day (her birthday was Feb. 2). So thought I would post this, though I don't think you can really describe it as being in honor of her birthday.

I don’t like really like Ayn Rand’s fiction. If I just thought it was bad fiction, I would probably ignore it. I usually only criticize fiction when it is masquerading as history. But many people seem to think that Rand’s fiction has important things to say about reality. One of the central messages seems to be that progress depends on the efforts of a few great people. In general, American’s seem to like “Great Man” theories of business history. If you want to sell books write another big biography of J.P. Morgan, Ford, Rockefeller, Vanderbilt, or Carnegie. Rand’s heroes are extreme versions of the great man theory of business history. They tend to start with nothing and struggle ceaselessly against both the government and all of the ignorant, incompetent and just plain lazy people that surround them.

For instance

“Nathaniel Taggart had been a penniless adventurer who had come from somewhere in New England and built a railroad across a continent, in the days of the first steel rails.” “He never sought any loans, bonds, subsidies, land grants or legislative favors from the government.” He never talked about the public good.” “Taggart Transcontinental was one of the few railroads that never went bankrupt and the only one whose controlling stock remained in the hands of the founder’s descendants”

Or consider the story of Henry Reardon

Henry Reardon began working in the Minnesota iron mines when he was 14 and had built a business empire by the time he was 30, struggling constantly against the incompetence of those around him. Of the times that he had worked for others, “All he remembered of those jobs was that the men around him had never seemed to know what to do, while he had always known.” Even after he was the boss, he remembered “the days when the young scientists of the small staff that he had chosen to assist him waited for instructions like soldiers ready for a hopeless battle, having exhausted their ingenuity, still willing, but silent, with the unspoken sentence hanging in the air: “Mr Rearden, it can’t be done—”

The problem is that these stories do not resemble the stories of actual business history.

I have seen it suggested that Nathaniel Taggart was a thinly veiled version of James J. Hill, the Empire Builder, who built the Great Northern across the northern plains without any government grants or assistance.

Hill was a very successful railroad executive, but he did not build the Great Northern without government assistance. First, as John Rea noted years ago the Great Northern was built on the foundation of the failed St. Paul and Pacific Railroad, which had received 3 million acres in land grants (Rae, John B. "The Great Northern's Land Grant." The Journal of Economic History 12, no. 2 (1952): 140-145). One might, of course, argue that Hill and his partners did not directly receive the grants; they had to pay for them when they purchased the bankrupt railroad (though it should be noted that one of Hill’s partners was a lawyer who was also serving as the trustee for the bondholders). So, let’s put those land grants aside.

The sort of subsidies that railroads like the Union Pacific received in which they received large grants of land on each side of the road, were generally not an option when Hill was building the Great Northern. In the 1870s, the federal government had shifted away from providing land grant subsidies. But that does not mean that the Great Northern did not receive any government land. Any incorporated railroad could obtain access to public land for the construction of a railroad and related structures like stations by using the General Railroad Right of Way Act of 1875. We know that the Great Northern used the Act because it went to court to contest the rights that had been granted under the act (Great Northern Ry. Co. v. Steinke and Great Northern Ry. Co. v. United States.)

Unlike the land grant subsidies, the Right of Way Act did not bestow special treatment on particular railroads. Consequently, it might be viewed as another step toward an open access order, like general incorporation and free banking laws. On the other hand, it does not seem reasonable to claim that  being allowed to build on public land is nothing. The federal government had purchased the land in the Louisiana Purchase, and the federal government had driven Native American on to reservations to make way for railroads and settlers.

This is a map showing the general location of Native American tribes in the mid 1800s

Minnesota, North Dakota, Montana, Idaho and Washington, were not un-populated lands waiting for James J. Hill to build a railroad and promote pioneer settlers. They first needed to be depopulated. This was done courtesy of the United States government. These are the locations of Native American reservations when Hill went to build his railroad.

It turns out, however, that even driving Native Americans on to reservations was not enough for Hill, because one of the best routes required going through a reservation. Hill appears to have been able to put aside his aversion to the government to lobby to either have the size of the reservation reduced or be given the right of way to build on the reservation (Smith, Dennis J. "Procuring a right-of-way: James J. Hill and Indian reservations 1886-1888." (1983) see also White, W. Thomas. "A Gilded Age Businessman in Politics: James J. Hill, the Northwest, and the American Presidency, 1884-1912." Pacific Historical Review 57, no. 4 (1988): 439-456.

These are the reservations in 1870

These are the reservations in 1888 (both maps are from Smith, "Procuring Right of Way")

Fans of Hill, like Burton Folsom see only Hill’s business genius: “James J. Hill showed us the right way to build infrastructure. He built slowly and chose the best routes. When Hill learned that the best route west probably lay through the Marias Pass in Montana, he was determined to build his railroad there. The explorers Lewis and Clark had traveled through the Marias Pass and discussed it in their diaries. But in the 1880s, no one knew where it was. Hill’s chief engineer, John Frank Stevens, trekked through the Rockies in Montana with a Blackfoot Indian guide named Coonsah. The pair located the Marias Pass, and Hill used that shorter route to save many miles of construction.” But we should remember that the crossing of the Marias Pass was preceded by the Marias Massacre in which U.S troops killed around 200 Blackfeet men, women and children.

In other words, Nathaniel Taggart and the Taggart Transcontinental are fictions based on myth. 

The self-made man, who not only receives no aid but must constantly battle the weak and stupid people around him, is also not what American business history looks like. Pamela Walker Laird’s Pull picks apart this myth, exploring the many ways in which self-made men like Ben Franklin and Andrew Carnegie actually benefited from the aid of others.

Henry Ford’s “invention of the automated assembly line” depended on the work of Charles Sorensen, Walter Flanders, Clarence Avery, and Ed Martin. Edison worked with the mathematician Francis Upton to develop his version of a light bulb. Mc Donalds is the result of both the McDonald’s brothers’ vision of a fast food restaurant and Ray Kroc’s vision of how far it could be taken.

The story of Ellis Wyatt, who “had discovered some way to revive exhausted oil wells and he had proceeded to revive them” is illustrative. In Rand’s imagination an entire region was revitalized and “One man had done it, and he had done it in eight years.” The process of getting oil out of places that people had thought it impractical if not impossible sounds a lot like fracking. In reality, many people played a role in developing fracking. In 2006, the Society of Petroleum Engineers honored nine people as pioneers in the development of fracking.

To be clear, I do believe that what Schumpeter referred to as the creative response is central to economic growth and development. And I believe that an open access society in which people are generally allowed to pursue these creative actions is likely to be most conducive to human welfare. I am, after all, and economist. I like voluntary exchange in markets and I think people respond to incentives. I just don't believe in the sort of philosophy that regards whatever someone earns as "the fruits of their labor" as if the amount of fruit that you get in life doesn't depend crucially on the society your were born into and you place in it, things that have nothing to do with your labor.    I don't see evidence that the creative response the creative response is the result of a select group of great people struggling against the ignorant and ignoble masses who seek to hold them back. My reading of history suggests  that these creative people depend upon both the help of others, their society, and an effective government. 

But why should I be concerned about an inaccurate picture of business history in a work of fiction? I'll just leave you with this quote. “Any refusal to recognize reality, for any reason whatever, has disastrous consequences.”

Loan Sharks Posts Redux

Blogger tells me that a lot of people are looking at this post on loan sharks from 2017.  That post is mostly about what I regarded as a big problem with Charles Geisst's book on loan sharks. If someone is looking for a more substantial post on loan sharks you should check out this post from 2016. 
It also contains this cool cartoon

Lyra

Since several students asked about my dog, here is a picture of Lyra

Since this blog is supposedly about economics, here is a link to wagaroo a non-profit that helps match people in need of pets with pets in need of people. It was founded by University of Mary Washington econ alum Christine Exley, who went on to earn her Ph.D. at Stanford and is now a professor at Harvard Business School. Here is an interview that Frank Conway did with Christine at Economic Rockstar.

Here is the Fredericksburg SPCA, which is where Lyra came from.

The History of the History of Sears and Jim Crow

After the announcement that Sears had filed for bankruptcy Louis Hyman put out tweet thread about Sears role undermining Jim Crow in the South. The thread got thousands of likes and the story was picked up by The Chicago Tribune, The New York Times, The Washington Post, NPR, and Vox. I have posted a copy of the tweet thread below.

The thread argues that Sears catalogs helped to undermine Jim Crow. To preserve racial control, Southern store owners tried to keep African Americans in the South from using Sears, but Sears responded to this opposition. Sears not only acted to undermine Jim Crow it did so intentionally.  

Scott Cunnigham raised an interesting question to economic historians on twitter about how one might try to estimate the effect of the Sears catalog. So far as I know, no one has yet done that, but Elizabeth Ruth Perlman and Steven Sprick Schuster may be taking a stab at it (see here).

In addition, to the quantitative significance of the catalog, I wondered what sources the story was based upon. The story seems plausible, but what evidence is it based on? Like most people, Hyman doesn’t provide references for his tweets. The video also does not state the sources for the story, and it did not appear to be included in the American Capitalism Reader that he and Baptist put together. I tweeted a reply asking him about it, but it must have been one of the thousands of responses to the thread. 

Although I do not know for certain what source or sources Hyman used, Grace Elizabeth Hale told a similar in her Making Whiteness: The Culture of Segregation in the South, 1890-1940 (1999). Here are excerpts from pages  and  of Making Whiteness.

The story is essentially the same. There is, however one noticeable difference between the two stories in Hale’s version, even though she is writing a book about race, she says that store owners refuse to sell to people who had not paid their accounts. In Hyman's version store owners refuse to sell to people because they are black. In the first, store owners are opposing a competitor regardless of who the customer is. In the second, the refusal is based on race. It is suggested, based upon the statement from the catalog about giving letters and money to the mail carrier, that Sears responded to these actions by the store owners. But the full quote from the catalog was "IF YOU LIVE ON A RURAL MAIL ROUTE, just give the letter and the money to the mail carrier.." The all caps is in the original. The instructions were repeated in Swedish and German.

Not only is the story in Hyman and Hale the same, much of the wording is the same. Both contain the quotes: "just give the letter and the money to the mail carrier and he will get the money order at the post office and mail it in the letter for you" and “these fellows could not afford to show their faces as retailers.” It seems reasonable to infer that either Hale was Hyman's primary source or they both drew from the same sources.

Hale sources are provided in two footnotes.

The first footnote is for the statements that rural storekeepers refused to sell stamps or money orders to some customers who owed on their accounts and the statement from the Sears Catalog about giving the money to your mail carrier. Thomas Clark states that : "Sometimes a customer was brought under control by the merchants refusal to order goods until he had paid his bill (page 73)."  Clark was a prominent historian, but his The Southern Country Store does not provide citations. The other sources in that footnote refer to the catalog statement about giving money to the mail carrier. It is not clear, however, that Sears was trying to counter the actions of store owners rather than simply informing rural residents throughout the country that they could take advantage of rural free delivery and did not actually have to make a trip to the post office.

The  other footnote cites three sources in support of the statements about rumors that Sears was black and the burning of catalogs: Stuart Ewen and Elizabeth Ewen Channels of Desire: Mass Images and the Shaping of American Consciousness published in 1982, Robert Hendrickson The Grand Emporiums: The Illustrated History of America’s Great Department Stores published in 1979, and Gordon L. Weil Sears Roebuck USA: The Great American Catalog Store and How it Grew published in 1977.

Ewen and Ewen say pretty much the same thing that Hale and Hyman did

Ewen and Ewen do not mention the refusal to sell stamps and money orders, but they do have the stories about rumors that Sears and Montgomery Ward were black, including the quote about "these fellows." They also do not cite Hendrickson and Weil.

Hendrickson also tells of rumors about race and catalog burning, but does not mention refusals to sell stamps or money orders:

Weil also describes the opposition of small retailers and their use of racial rumors.

So far the trail of citations has led us to Weil, who largely says the same things that Ewen and Ewen did, but we can see that the quote about "these fellows" not showing their faces isn't actually evidence; it was just Weil’s interpretation.

What sources did Hendrickson and Weil base their interpretations on? Good question. Neither Hendrickson or Weil is an academic history. There are no notes or references. Weil does, however, mention in his introduction that Catalogues and Counters: A History of Sears Roebuck and Company by Boris Emmet and John E. Jeuck was useful. (Seeing it listed on Amazon for $246 makes me feel fortunate to have picked up a copy at the library book sale for $2). 

Emmet and Jeuck also tell the stories about rumors that Sears and Roebuck were black, and the story about small town merchants burning catalogs. Emmet and Jeuck were academics and their massive volume is heavily footnoted. The footnote in regard to the rumors about Sears and Roebuck being black cites an unpublished manuscript on the company's history written by Alvah Roebuck, suggesting that he remembered hearing such rumors as late as the 1930s. The footnotes about catalog burning and other opposition from small town merchants cites page 105 of Asher and Heal Send No Money Asher was a former Sears executive. Like the books by Weil and Hendrickson it does not cite sources. Page 105 does state that "George Milburn, in his book entitled "Catalogue," reveals the whole history of the home dealer's campaign against the mail order houses." George Milburn's Catalogue was a satirical novel about the the effects of the wish book on a small Oklahoma town.

I believe that I have now arrived at the end of the line. The claim about store owners refusing to sell stamps or money orders to blacks does not seem to appear in the previous literature. The claim that store owners refused to provide services to people whose accounts were not up to date appears to rest on Clark's statement in The Southern Country Store, which he does not provide any sources to support. Sears definitely told people they could give their money directly to postal carriers, but I did not find any evidence that they did this because of opposition from country store owners as opposed to just trying to make things easier for their customers. The claim about rumors that Sears and Roebuck were black appears to ultimately rest on the recollection of Roebuck in an unpublished manuscript. I wasn't able to trace the rumor about Ward past Weil and  Hendrickson. The claims about catalog burning appear to be based on a novel.

The bottom line of all this is that we know very little about the impact of Sears in the South or other rural areas, and consequently we no little about its ability to undermine some of the results of Jim Crow. It is quite plausible that Sears provided large benefits like those suggested by Hyman, but we don’t know. It is possible that store owners spread rumors about race, but we have only Roebuck's recollection to that effect. It is possible that they organized catalog burnings, but we do not know. It is possible that some of Sears actions were attempts to counter racism, but we don’t know. 

Hyman’s tweet thread shouldn’t serve as a call to debate whether or not Sears was an example of the positive aspects of capitalism. It should be a call to historians to go out and actually find out what Sears did.